Thornhill Wealth Forum
General Real Estate Investment Questions
Q. I am purchasing a property for $ABC. What will my closing costs be?
A. Closing costs are typically 2% of the total purchase price. They include land transfer tax, legal fees, as well as possible mortgage fees (CMHC/GE), realtor fees, and Appraisal costs.
Q. How and where do I locate potential tenants?
A. Local newspapers (they may be looking for a place or you can run an ad)
Q. What information should I request when I meet with the owner of a prospective investment property?
Q. What are the ways to finance a property?
Q. Should I use a real estate broker? How do I find one?
Using a real estate broker is a good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighbourhood, traffic volume, and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.
Q. In addition to the mortgage payment, what other costs do I need to consider?
A. Well, of course you'll have your monthly utilities. If your utilities have been covered in your rent, this may be new for you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you might have homeowner association or condo association dues. You'll definitely have property taxes, and you also may have city or county taxes. Taxes normally are rolled into your mortgage payment. Again, your broker will be able to help you anticipate these costs.
Q. So what will my mortgage cover?
A. Most loans have 4 parts: principal (the repayment of the amount you actually borrowed); interest (payment to the lender for the money you've borrowed); homeowners insurance (a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders); and property taxes (the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year). Most loans are for 30 years, although 15 year loans are available, too. During the life of the loan, you'll pay far more in interest than you will in principal - sometimes two or three times more! Because of the way loans are structured, in the first years you'll be paying mostly interest in your monthly payments. In the final years, you'll be paying mostly principal.
Q. I have a property I want to sell. What steps do I take?
Q. How can I buy a property with no money down?
Q. How do I buy real estate with poor credit?
A 1. Know your credit score. Your mortgage broker will use your social security number to obtain your credit score. It may not be as bad as you think.
2. Clean up. Although paying back old debt and eliminating mistakes on your credit score will not impact your ability to purchase a home on the spot, it is a good idea for the future. Some brokers and federal programs will overlook credit issues if you provide an explanation or if the credit issue was not your fault. When you refinance your loan in a year's time, your credit will again play a factor, so clean up!
3. Seek financing from a private party. In some instances you can seek a loan from a private company or a family member. As long as the seller of the property is okay with this arrangement, and he may not be in most instances, you can buy the home.
4. Seek financing from the seller. In some instances, particularly if the seller knows you and trusts that you can pay back the debt, he or she will finance your loan. Instead of paying the bank each month, you send a check to the seller for an agreed-upon amount. They will charge interest on your loan, but it may be a more attractive rate than any conventional mortgage you could get.
5. Large down payment. Your ability to get a loan depends on a few things, including your credit, your debt and ability to pay it off, your employment, or cash in, and the amount you will be putting down towards purchase. The higher this amount, the lower your financing rate will be. If you can borrow money or get money gifted to you several months before you think you will be making a purchase, do so. Most banks will not consider gifted money part of your loan package unless it is gifted several months prior to your offer and purchase.
6. Investigate Federal Mortgage Programs. CMHC loans are available for buyers with bad credit and/or limited funds. In some instances the government may help, not a private bank, will fund you. The rates and points can be lower if you do receive this type of loan, because unlike a conventional loan, Federal/provincial loans do not place the highest premium on excellent credit. Unlike conventional loans you may be gifted an amount for your down payment from a family member or non-profit organization.
7. Get a co-signer. If your credit is poor, you can find a co-signer with good credit to co-sign. By agreeing to sign, the co-signer is both vouching for your ability to pay the loan, and sharing the responsibility. Should you fail to pay back the loan the bank can go after your co-signer.
8. Compare rates. It is always recommended that you compare rates with several banks and lending institutions. Inquire about special programs for people with mending credit reports. Banks that cannot serve you may be able to refer you to another bank or association that will gladly work with you.
Q. I am purchasing a property for $ABC. What will my closing costs be?
A. Closing costs are typically 2% of the total purchase price. They include land transfer tax, legal fees, as well as possible mortgage fees (CMHC/GE), realtor fees, and Appraisal costs.
Q. How and where do I locate potential tenants?
A. Local newspapers (they may be looking for a place or you can run an ad)
- Contact property management companies (yellow pages)
- Advertise on a rental website
Q. What information should I request when I meet with the owner of a prospective investment property?
- Reason for selling
- Property tax information
- Utility information
- Tenant/rent information (if lease in place, obtain copy of leases)
- Are they willing to hold financing (VTB)?
- Mortgage information (is it assumable?)
Q. What are the ways to finance a property?
- Conventional Mortgage
- Unconventional Mortgage
- Vendor Take Back/Seller Financing
- Private Lending Institutions
- Refinance a Current Property
Q. Should I use a real estate broker? How do I find one?
Using a real estate broker is a good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighbourhood, traffic volume, and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.
Q. In addition to the mortgage payment, what other costs do I need to consider?
A. Well, of course you'll have your monthly utilities. If your utilities have been covered in your rent, this may be new for you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you might have homeowner association or condo association dues. You'll definitely have property taxes, and you also may have city or county taxes. Taxes normally are rolled into your mortgage payment. Again, your broker will be able to help you anticipate these costs.
Q. So what will my mortgage cover?
A. Most loans have 4 parts: principal (the repayment of the amount you actually borrowed); interest (payment to the lender for the money you've borrowed); homeowners insurance (a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders); and property taxes (the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year). Most loans are for 30 years, although 15 year loans are available, too. During the life of the loan, you'll pay far more in interest than you will in principal - sometimes two or three times more! Because of the way loans are structured, in the first years you'll be paying mostly interest in your monthly payments. In the final years, you'll be paying mostly principal.
Q. I have a property I want to sell. What steps do I take?
- Determine what price you’re looking for and how much you’d like to make (factors to consider are realtor fees if using realtor (5% + GST), capital gains if for investment (consult accountant), closing costs – legal fees, advertising costs (varies), repairs/staging for sale (varies))
- Selling on own or with a realtor
- If selling on own, determine how much advertising you’d like to do and costs of different types of media (i.e. newspaper, lawn sign, websites, flyers,
- If selling with a Realtor, visit our list of agents on the Resources page.
Q. How can I buy a property with no money down?
- Have you completed a credit report? If your credit is good, you can contact banks to see how much they will lend you. If your credit is not good, you can consult private lenders. (Contact Mortgage Broker)
- You can also search for government grants and loans depending on your situation (the property and your qualifications).
- You can also ask the seller if they will provide financing (VTB)
Q. How do I buy real estate with poor credit?
A 1. Know your credit score. Your mortgage broker will use your social security number to obtain your credit score. It may not be as bad as you think.
2. Clean up. Although paying back old debt and eliminating mistakes on your credit score will not impact your ability to purchase a home on the spot, it is a good idea for the future. Some brokers and federal programs will overlook credit issues if you provide an explanation or if the credit issue was not your fault. When you refinance your loan in a year's time, your credit will again play a factor, so clean up!
3. Seek financing from a private party. In some instances you can seek a loan from a private company or a family member. As long as the seller of the property is okay with this arrangement, and he may not be in most instances, you can buy the home.
4. Seek financing from the seller. In some instances, particularly if the seller knows you and trusts that you can pay back the debt, he or she will finance your loan. Instead of paying the bank each month, you send a check to the seller for an agreed-upon amount. They will charge interest on your loan, but it may be a more attractive rate than any conventional mortgage you could get.
5. Large down payment. Your ability to get a loan depends on a few things, including your credit, your debt and ability to pay it off, your employment, or cash in, and the amount you will be putting down towards purchase. The higher this amount, the lower your financing rate will be. If you can borrow money or get money gifted to you several months before you think you will be making a purchase, do so. Most banks will not consider gifted money part of your loan package unless it is gifted several months prior to your offer and purchase.
6. Investigate Federal Mortgage Programs. CMHC loans are available for buyers with bad credit and/or limited funds. In some instances the government may help, not a private bank, will fund you. The rates and points can be lower if you do receive this type of loan, because unlike a conventional loan, Federal/provincial loans do not place the highest premium on excellent credit. Unlike conventional loans you may be gifted an amount for your down payment from a family member or non-profit organization.
7. Get a co-signer. If your credit is poor, you can find a co-signer with good credit to co-sign. By agreeing to sign, the co-signer is both vouching for your ability to pay the loan, and sharing the responsibility. Should you fail to pay back the loan the bank can go after your co-signer.
8. Compare rates. It is always recommended that you compare rates with several banks and lending institutions. Inquire about special programs for people with mending credit reports. Banks that cannot serve you may be able to refer you to another bank or association that will gladly work with you.
