When financing investment properties most investors make the same mistakes. This is  important and it is the most common situation beginning real estate investors get  themselves in. You go out and get pre-approved by your mortgage broker for an  investment property mortgage in Canada. They give you the thumbs up and tell you to  go out and purchase your first investment property. You are excited that you have  begun your wealth creation journey. And you should be...real estate is a proven vehicle  to build wealth. You then go and find a Real Estate Agent that knows something about  investing in real estate, you spend weeks finding the perfect property and you finally  make the purchase.



Then it happens…



Closing day approaches and your mortgage broker rings you up with something like  this...



“Hey, I’ve got some updates. Apparently, I can’t actually get that mortgage program  that we spoke of a few weeks ago. Don’t worry, you will still be able to purchase the  investment property, but you’ll need to put down 10% instead of 5% and the interest  rate on the mortgage is going to be 7.8% instead of 5.9%.”



Now you’ve got problems. You need to magically come up with more cash, your Return  on Investment will change drastically and your monthly cash flow on the property will go  from a positive to a negative.



Let the scrambling begin!



You call your agent, who will likely not have many options for you, you call another  broker, who doesn’t have enough time before closing to save you and you then call your  mom asking to borrow money to save this deal from falling apart.



Not fun, not funny.


 

Financing Investment Properties - The Questions To Ask To Get  the Critical Financing Details

Here’s what you should know about financing investment properties...

1. First off, always ask your friendly neighborhood mortgage broker how many  investment properties they have actually closed on. You are looking for  experience. Let someone else work in a beginner. Not you, it’s not worth your  time or your money.


2. Second, ask the mortgage broker to send you the fine print.


Ask for the details of the mortgage program for financing investment properties.  Check that the interest rate on the mortgage program doesn't have any clauses  about increasing the interest rate based on your down payment amount.


There are mortgage brokers who offer mortgage programs without fully  understanding the program. You should know that these mortgages for financing  investment properties are hyped and sold to the brokers just like anything  else...with salespeople and marketing flyers. Some of the marketing material  may highlight a certain interest rate. But the fine print may state that your credit  score must be above 650 AND the down payment must be 15% to qualify, not  10% as you anticipated.

Now let me be clear, I don’t think there's any malicious intent in these situations.  There’s fine print in every deal, whether it be a car purchase or a commercial  lease or financing investment properties. However, if your banker or mortgage  broker hasn’t been through any investment mortgages they may be totally  unaware of these critical points. So, take it upon yourself and ask them to email  or fax you the details of the mortgage program.


 

3. Lastly, know your credit score. You can pull your credit score from Transunion or  Equifax, and it will not affect your score. When you pull your credit score yourself  it's called a 'soft pull'. Your credit score plays an integral part in getting any  mortgage and it’s amazing how many people don’t know their own score. You  may think you have perfect credit, but, maybe you forgot to pay a $20 VISA card  bill 6 months ago and your score drops from 660 to 610 and you now no longer  qualify.

 

Real Estate Investing is a real business. Treat it as such. Know you broker’s  background, know the details of financing investment properties, know your credit  score, ask questions!

 

It will save last minute panic attacks two days before closing. You can focus on making  money instead of spending more of your own. Now go forth and take some action! 

 

If you or anyone you know is interested in becoming a real estate investor, whether you  are looking to buy, fix and flip, or buy, fix and hold, or any other type of real estate related  investment opportunity, please give me a call at  905-683-7800 and I’ll be more than  happy to answer any and all of your questions.





 

Thanks for reading today’s BLOG!!!

Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com

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