Buying property as an investment is an opportunity to build a retirement for yourself and your family though real estate. Investment properties begin at single units (like condos or single family dwellings) all the way up to 100+ apartment buildings.
There are two categories of investment properties. Those that are considered under residential guideline (1-4 units) and those considered under commercial ones (5+). There are however exceptions for 5 or 6 unit properties that can still qualify under residential rules with certain lenders.
The main difference between the two guidelines is as follows:
Under residential guidelines, the primary factor is the borrower/buyer’s credit bureau. Then is their income followed by the property itself. The qualification is identical to buying a home except that there is an additional revenue stream from the apartments that are leased that gets added to your overall income. That being said, the qualifying ratios still have to be met. Please contact us for more information.
Unless the property you are buying is going to become owner occupied, you will need to put down 20% of the purchase price as a down payment. If your intention is to live in the property, you will need to put 5% of the purchase price as down payment for single family homes and duplexes and 10% down payment for triplexes and fourplexes. It should be noted that although some 5 & 6 unit properties can be treated as residential, the minimum down payment must be 20%.
Because personal qualifying ratios are considered under residential, there is a limit to how many properties you can own which is directly tied to the borrower’s income.
Under commercial guidelines, the criteria changes whereas the most important factor is the building itself (see MUR criteria below). Then the borrower/buyer is looked at. Ideally if the property pays for itself, there is no limit as to how many properties you can own.
Definition can vary. Most lending institutions classify buildings of 7 or more residential units in this category. Some allow a small commercial component as well.
Lenders deal with single-family and small rental properties in their residential mortgage programs. Qualifying criteria, application process, due diligence, costs, mortgage rates and terms differ from those applicable to residential. Some of these differences are discussed in more detail below:
Qualifying criteria focuses on the ability of the real estate security to service the mortgage debt. This is known as debt service coverage (DSC).
Example: Net operating income (NOI) $100,000 / annual payment $75,000 = DSC 1.33.
Note the NOI calculation and the DSC requirement can vary from lender to lender. A minimum of 1.3 is not unusual.
Application process requires lender’s analysis of the real estate performance. Current rent roll and operating (income and expense) statement for the property, and usually 2 year’s history of operation are required. If you are purchasing (as opposed to refinancing) the property, you should be verifying these in any case for your own benefit. Financial information regarding the individual(s) or company applying for financing will also be required. And be prepared to discuss your ability to personally manage the real estate, or your plans to engage professional management services.
Due diligence, in addition to the lender’s analysis, may include third party reports such as property appraisal, environmental risk assessment (ESA) reporting, and building condition assessment (BCA). In some cases a lender also requires that a lawyer acting solely on behalf of the lender be engaged. In others, the borrower’s lawyer may be allowed to act for both parties. In most cases all third party reports and legal fees are at the expense of the borrower.
Costs, rates, and terms are obviously of concern to the applicant. Establish early in the negotiation what lender and third party fees will apply and at what stage of the process they become payable. Ask about the formula for establishing the interest rate and when it may be locked in. Terms such as portability and annual penalty-free prepayment privileges applicable to residential mortgages seldom apply to MUR mortgages. Be sure to understand the privileges your mortgage will include.
CMHC Insurance coverage makes it possible to borrow up to 85% of property value, vs maximum 75% on a conventional (uninsured) loan. Even if you borrow 75% or less, you may wish to insure the loan because this could qualify you for a lower interest rate. Insurance premiums are graduated relative to the loan to value ratio, and can be added to the mortgage amount rather than paid “up front”. Ask your lender whether it is to your advantage to insure the mortgage.
Very important – choose a lending representative that is familiar with this type of financing. A specialist in MUR financing can keep you informed through the process, and greatly simplify and expedite the approval of your application. A lending institution generalist or a residential mortgage representative works only rarely on this type of file and may not provide the expertise and quality service you need and deserve.
For more information, contact us at 514-667-5015 or email@example.com
Some conditions may apply.
Rates are subject to change without notice
Vantage Mortgage & Realty Group
8250 Decarie Blvd, suite 150, Montreal
Quebec, Canada H4P 2P5
"Thank you Sid for all your great advice and help in all the work you have done. It was a pleasure to talk to you and I appreciate your kindness and patience in answering my questions. I will certainly recommend anyone who is in need of getting a mortgage. Thank you!"
"Hi Sidney, I wanted to take a moment to thank you for all that you did on my behalf for the renewal of my mortgage. I really appreciated your professionalism and follow through, even when I was not always the quickest getting back to you! Thank you and have a wonderful day, "
"We are extremely happy for having a professional agent like Atosa. Thanks Atosa for your efforts to find the best condo with the best price for our family.We love our new condo and really enjoy it. We are pretty sure that you can be one of the best agents in Montreal with the huge positive energy and the knowledge that you have. We hope to see you soon. "
"I would like to thank the Vantage Group,special" Mme.Atousa Tangestani far "in particular, for helping me with our first real estate purchase.Thanks so much"
"It has been a great experience; starting with the home staging step and working with an agent well organized and knowing the real value of the market at St-Laurent city. The following was great and the final result has been excellent.Best regards Leon"
"Dear Hagai, how can we ever thank you for all that you did to make sure we purchased the house of our dreams. The former owners told us it was because of your enthusiasm that they accepted our offer. As you promised us, you held our hand right to the end, knowing it was a very emotional time for us. Thank you from the bottom of our hearts! You're the best!????"
"Vantage group are experts in real estate. From Mortgages or properties they always had the right answers. They offer an amazing service by qualified people. . Thank you Sidney Zvi Hagai and Marc. "
"My family and I would like to thank Hagai Brener and Zvi Marmor for all the help they provided for us. This was our first home, and we could not have asked for a better team. Zvi helped us walk through the banking aspect of the process. While Hagai was with us every step of the way, in finding a home. We found the perfect place for our family, and we could not have done it without Hagai and Zvi. Please accept our deep gratitude for making a dream come true for the de Souza family."
"Thank you Sidney!! I want to thank you for all your help you made our dream become reality where no one else could. "
"We would like to thank the Vantage Group, Sidney in particular, for helping us with our first real estate purchase. We appreciated their outstanding professionalism as our experience definitely surpassed our expectations. We were properly advised and guided throughout the entire process which allowed us to make an informed decision. Thank you for taking such good care of us. "
"We are extremely happy with all the effort from Sidney. He went well above and beyond to make sure we happy with our transaction. Thank you very much for all your hard work."
"Dear Hagai Brener, I want to take a moment and thank you Haguy for your care and attention to detail in the sale of my house.My wife and I have bought and sold 3 properties and have dealt with different realestate agents but our experience with you and your firm was an impecable one,your ability to problem solve and make this deal happen was a credit to you and my wife and I really appreciate everything you did for us. I will be very happy to refer you to all my contacts as well as recomend to anyone who is looking to purchase or sell that Haguy Brener is the agent of choice. We thank you again Ilan & Laurence "
"Just a few words to express how satisfied I was with your service. You and your team were very professional, ethical, reliable and always available to answer our needs and of course assure the sell of our home in a very short time. The professionalism of your team and particularly M Hagai Brenner was of very high standards , Hagai is very attentive to details, very knowledgeable in the real estate market and a real pleasure to work with. I wish you and your team our best wishes and continued success! Rony Attar "
"Dear Hagai Brener, Please accept my sincere thanks for all the help you offered during selling of my house at 5579, Av. Robinson in Cote St.Luc. During the entire period of listing it was a pleasure to work with you as you always exhibited a sense of ownership to the project added with a lot of enthusiasm ans optimism. I believe that your professional approach really helped us when we had some initial difficulties and then we made some modifications to meet the customers' needs. Your advise really helped us in preparing our home for the customers' needs and tastes and get it sold within a short period once the modifications suggested by you were made. It was definitely a pleasure to work with you. Regards, Makarand Deshpande, President "
"Dear Hagai Brener, Melanie and I would like to thank you for your help and support in the purchase of our new home. As first time buyers we were almost clueless of the real difficulties you can face while trying to find a house for the first time. With your knowledge and expertise you helped us finding our first house at the right price and in a lovely neighbourhood. We specially appreciated the fact that you made yourself available at the craziest hours, days, nights and weekends to accompany us in the numerous visits or to help us understanding fine prints in legal papers. We were ready to settle for a townhouse or a condo but you were able to help us find a single unit bungalow with a nice garden, at an even cheaper price than what we were already comfortable to pay. The special touch we will always remember is when at the notary you noticed we were being charged more than what we agreed to pay for the house. Legal paperwork’s can be very tricky but you went above and beyond what one could expect from a real estate agent in order to make sure we would LOVE our new house...and believe me, we do. So once again thank You Hagai for all your help. Merci / Thanks Luc and Melanie "
"Hi Mr.Hagai Brener Hope all is well with you. Just wanted to say thank you for making the sale of my St.Laurent property a success. It was great to deal with an agent who is as well organized as yourself. Your attention to detail when putting together my listing was much appreciated. I also want to thank you for arranging as many viewing as you did which allowed me to maximize on my offer to sell price. Thanks again Frank Merovitz "