Owner occupancy question...

[Jamesg711 0]

Two topics:

 

I want to get into rental property by buying a multi-unit property, maybe a small apartment building, and then living in one of the units. Would I qualify for owner occupancy? Is the rental income from the units considered income when applying for a loan? What is a standard down payment in this situation?

 

Also, can I be a very successful real estate investor outside of hyper appreciation areas such as California? What are the benefits of real estate investment outside of these areas? It seems like you need at least 40% down to have positive cash in these expensive areas and only 10% in lower appreciating areas. This seems like a benefit. Is my assumption correct? Thanks in advance.

[Doug Pretorius (ON) 9]

Might not be that useful to you but... here in Canada you can get residental mortgages for up to 4 units (sometimes 5, depending on the lender) beyond that it's all commercial mortgages, and according to a friend of mine who has owned many multi's over the years, it's nearly impossible to get commercial mortgages for anything under 20 units. So there's a huge lack of funding for 5-20 unit buildings.

 

As for your second question: You may need a huge down payment to cash flow a rental but you can usually solve that problem by selling on some sort of owner-financing. In my area I can get much more cash flow (upwards of 25%) from a contract for deed or even a lease option than I could ever get from a straight rental.

 

Take a look at the numbers again, but base it on a 2-4% interest rate spread, instead of rent rates, and you'll see the difference. Then simply put an ad in the paper to test what the market will bear in terms of price and interest rate mark ups.

[Guest Darryl Sandoval]

Doug Pretorious, I have a question.

 

 

Can you invest creativley in Canada using techniques such as:

 

Subject 2, Lease Options etc?

 

 

 

Darryl Sandoval

[Doug Pretorius (ON) 9]

Darryl, if you're asking if it's legal to use those techniques, the answer is yes. I haven't had much success buying creatively, but selling works great!

[-Tony- 0]

I want to get into rental property by buying a multi-unit property, maybe a small apartment building, and then living in one of the units. Would I qualify for owner occupancy?

Okay in the US I think it is 4 or less units for owner occupied.

 

Is the rental income from the units considered income when applying for a loan?

I am not sure on this one

 

What is a standard down payment in this situation?

Depends If there are to many variables...you could make the other units for the elderly and handicapped...or...lower income and get goverment subsidized with a low interest rate with 0 down. There are so many ways you could do it even conventional with 0 down and roll the closing cost into the loan (104%) it has a higher interest rate but if you can live there for fee what the heck. you could also finance 80% of the loan amount convince the owner to take a second for the other 20% at a low interest rate. My favorite is L/P it with $1.00 down.

 

Also, can I be a very successful real estate investor outside of hyper appreciation areas such as California?

yes....You First need to deal with motivated sellers. Divorce, relocating, 4closure, bankruptcy, And what has been working for me properties that the owner can't pay for the repairs to sell....to name a few.

 

What are the benefits of real estate investment outside of these areas?

OK, Mr. homeowner lives in a area that has a 3 % appreciation. But no one is buying. So 3% means nothing to him. Nowt, He has lived in the house for 5 yrs refinance 2 yrs ago for 4% interest rates and now just needs out He paid 100k for the house with 10% down (90k loan). So you come along to solve his problem and L/P his house for say 90k it is worth 115k and your payment is his PITI. Lets look at what we have:

Buy

90k house with a payment of less than $600

Sell on l/p

118k house with a payment (if amorterized at todays rate) of more than $850.

 

Oh and trust me you can find t/b to fill the house, thats the easy part

 

It seems like you need at least 40% down to have positive cash in these expensive areas and only 10% in lower appreciating areas.

Or no money down and take control

 

Hope it helps

[lacashman 0]

and then living in one of the units.  Would I qualify for owner occupancy?

 

If less than 4 units, Yes

 

Is the rental income from the units considered income when applying for a loan?

 

Yes but lenders also know about vacancies and repairs. So they give a credit of 75% or the rent.

 

What is a standard down payment in this situation?

 

20% but you can get in for as low as 5%. The less you put down the higher the rate. 10% down gets you a decent rate.

 

It seems like you need at least 40% down to have positive cash in these expensive areas and only 10% in lower appreciating areas. This seems like a benefit.

 

This really comes down to the questions of, What are your goals? And how much risk are you willing to take? If you need income now and your investing for cash flow. Then that may be the way to go. But if you want the property to go up in value but you don't need cash flow you may come out better in the highly appreciating areas.

 

Where I live I can buy houses for $35,000 and rent them for $450/month. They are in crappy areas and will not go up much in value.