How do you get into Property?

Whenever your buying a home, most banks request that you make a down payment. Regardless of the intention of what your going to use that property for.

So if you do plan on buying a home for 100,000 and decide to put 20,000 as a down payment, the bank will give you a mortgage of 70,000. That being said you can still make a profit if you charge rent higher than the total cost that is required by that property example: mortgage, condo fees, property tax and hydro.

Even if your fees down quite get paid by the rent you charge, your still profiting because the value of the home will most likely increase, and money is being out towards a long term asset.

 

Before the internet came about you could really swindle some yokels out of their land for cheap, but those days are long gone unfortunately.

 

I've been told that for a second property (i.e. not the house you're planning to live in) a bank requires a higher down payment. So for a 200,000 dollar house, you're probably going to need more like 40,000 for the down payment. And then you can buy the house with the loan and use the rent you receive to pay back the rest of it.

Be careful though, because its risky business and while a lot of people have made a lot of money that way, a lot of people have also gone bankrupt that way. You're dependent on the renters actually paying their rent, and on someone renting out the house, both of which are out of your control.

My husband and I have plans to do this in the future, and personally, I think the safest route to go (aside from just saving up money and buying the whole property without a loan... that would be safest) would be to make sure that you can feasibly pay both mortgages (the rental property mortgage and your home mortgage/rent for wherever you're living) if you needed to. That way, if something happens and the rental isn't being rented or the people living there aren't paying you and you need to evict them, you wont be sitting in hot water. You can cover the rent yourself for a while until you get another renter.

 

But I would say if you're in the early stages of considering this, the first place to start would be to become completely debt free and try to pay off your own house (assuming you have one) as quickly as possible and saving up as much money as you can. That's our plan. We are going to pay off our house and then get a rental. because at that point, if we needed to pay the rent on the rental or if repairs or whatever other landlord-duties come up, we will totally have the money to do that. Essentially, I'm very wary of the idea of having two substantial loans at the same time. Sometimes that works out great for people, but sometimes its the risk that ends up completely ruining them, financially.

 

Very true. You have to be very careful of the location your renting. I know in the states you guys have a lot of neighborhoods that have houses that depreciate and take a very long time to sell, hence cheaper houses. Here in Canada we have the opposite problem... it's a sellers market. Houses are ridiculously expensive but they appreciate like crazy. You could sell a house as soon as you put it up for sale, within like hours.

I'm not sure of how the rules works in the states but here we have first time home owners can buy a house with as little as 5% down payment. second house is 20%

 

Also another tip would be to obviously look at the market and buy low so you can sell (or rent) high, and also to never buy the nicest house on the street. Basically if you buy the least nice house on the street, the other houses around it will sort of beef up its worth, but if you buy the nicest house on the street, it will do the opposite. Nobody who is looking for, say, a 300,000 dollar house is going to want to buy the one that's surrounded by 150,000 dollar houses. They're going to look for something in a nicer neighborhood.

That mostly applies to buying and selling, but I think it could also make sense for renting as well.

And speaking of buying and selling, theres a show called Buying and Selling with The Property Brothers, and that has given me some useful insight into the process. And any other shows like that are somewhat helpful, but that one I think talks about that stuff the most

 

Hi Jack,

If you’re looking to do “buy and hold” real estate then there are a couple of things I recommend doing.

• Create a Real Estate Holding LLC
• Learn about acquiring business credit.
• 
  
• Look for single family homes that will provide you a good ROI (Return on Investment)

Morris Invest with Clayton Morris is definitely one of the people I’m hoping it invest with. He not only finds single family homes but rehabs them and then sells them at a price where your rents will actually make you money. Not only that but he supplies a property management team which is a huge asset to have when investing in rental properties.

So here are some of the take aways:

1. Create a business entity the protects you legally from lawsuits and gives you tax benefits.
2. Use business credit which doesn’t go against your own personal credit score nor do you have to be rich in order to acquire it and use it to purchase property.
3. Look for homes that will give you a good ROI. As you start growing in your knowledge look into HELOCS.