Options and Considerations While Buying Investment Properties in Vancouver
Investment Properties In Vancouver
When an individual or couple decides that it’s time to acquire two homes instead of just one, it’s something to be celebrated. Trying to secure the future for ones loved ones is always an honorable goal. However, before a person or couple rushes into this decision (especially those who are new home buyers), there are a variety of things that should be taken into account depending on which type of second property they’re looking to take ownership over.
Second Property With Intention To Rent
Buying a house can be expensive and some traditional lenders might not be willing to lend money on a house that will be rented out. There are certain factors you need to consider when buying a property for the purposes of renting it out:
- The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.
- Only a portion of the rental income can be used to qualify and determine how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income and subtract your expenses.
- Interest rates usually have a premium when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.
Vacation Property
While buying a vacation property may not be the absolute perfect investment … these popular options are for those who want to get away from it all, and make memories in! If you’re motivated to head down this adventurous road, buying a vacation property is similar to purchasing another home.
If you are thinking about buying a unit within a hotel as a vacation spot (specifically termed “fractional ownership”), it is important to note that if there is any mention of using your vacation home to provide rental income it will be treated like an investment property.
Secondary Property
Most people are trained to not get into debt, but they tend to ignore the capacity of their secondary properties or rent them out. If you’re using equity from your primary home to find a place for secondary property then keep in mind that the taxes used on interest when investing in real estate have a tax advantage since it is for an appreciating asset, not one that will depreciate over time. And speaking of appreciation – don’t forget that purchasing an appreciating asset versus stocks is far less risky, as well as a great way to quickly create wealth!
Who Is A Good Candidate?
You might be surprised to learn that you don’t need a six figure salary to get in the game. All you really need is a little smarts with your down payment. Before taking on a second property, keep in mind that the minimum down payment for first-time buyers is 5% of the purchase price – or 20% if you intend to rent.
When looking for a secondary property, one has a wide variety of places to choose from including vacation homes and investment properties. As the mortgage broker your real estate agent may work with, we can find the best solution according to your unique needs.
AIR BNB On Your Mind?
More and more Canadians are looking to make some extra money by renting out their places to tourists through Air bnb. This is a great way to earn pocket-change, but before you decide to rent out your space, there are a few things you might want to keep in mind:
- Check strata/city bylaws
- Contact your insurance provider to get correct coverage
- Talk to your mortgage broker to see if a short-term income property can affect your approval
- Consider tax implications, and talk to an accountant.
The more services you provide as a host, the greater the chance that your rental operation will be considered a business.
What are some other factors that you should consider?
Before you invest in properties as an investment for future income, it is always good to work with specialist mortgage brokers in your area for more options.
Concept One Financial Group (Powered by Dominion Lending Centres) is a team of mortgage professionals work for our customers – not the lenders – to ensure our customers receive the best rates and products available in today’s marketplace. Whether they are looking to purchase their very first homes or upgrade to a new home, mortgage renewal, refinance for equity take out, purchase investment properties.
Our lending solutions are catered for the conventional, self-employed, new immigrant, and non-resident; residential and commercial mortgages; Insurable and uninsured. As is customary in the field of Canadian mortgages, we deal with big banks, smaller lending institutions and private lenders. Each client’s financial needs differ, which is why we work with a variety of lenders.
