Build Your Team and Set Your Financial Limits

Investment decisions move quickly, but the most expensive questions are often outside a realtor's scope. Assemble the professionals you may need before an offer deadline appears.

• · Mortgage broker or lender familiar with rental properties
• · A REALTOR® familiar with Guelph investment properties and comparable rents
• · Real-estate lawyer
• · Accountant or tax professional
• · Home inspector
• · Insurance broker
• · Contractor or renovation estimator
• · Property manager, if you will not self-manage
• · Planner, designer, engineer or building-code consultant for conversions

Questions to ask a lender

• · What down payment will this occupancy and property type require?
• · How much existing or projected rental income can be used to qualify?
• · Will the lender require signed leases or an appraiser's market-rent opinion?
• · How are property taxes, heat and condominium fees treated?
• · Are the rate and underwriting different for owner-occupied and non-owner-occupied properties?
• · What proof is required for a secondary suite or multiple units?
• · How would renovation financing work?
• · What happens if the appraisal is below the purchase price?
• · What are the prepayment restrictions and renewal risks?

Do not rely on a generic pre-approval. A lender may approve you personally but still reject a particular property, rental configuration or appraisal.

Know your limits before the property chooses them for you

A purchase ceiling is not the same as an investment ceiling. Your limit should reflect the cash required to close, realistic operating deficits, immediate repairs and the reserve you still hold afterward.

Cash required may include

• · Down payment
• · Ontario land transfer tax
• · Legal and registration costs
• · Inspection and specialist reviews
• · Appraisal and lender charges
• · Immediate repairs
• · Renovation or conversion costs
• · Utility and tenant adjustments
• · Initial insurance costs
• · Operating and emergency reserves

A low down payment is not the same as low risk. The smaller your equity and reserve cushion, the more exposed you are to vacancy, repairs, appraisal shortfalls and rate changes.