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Category Archives: Rental Investment Properties

Financing Existing Student Rentals: Challenges That Can Be Overcome

 

Financing existing student rentals: Challenges that can be overcome

An area of mortgage expertise I focus on is financing and refinancing rental properties. As a rental property owner myself, most clients appreciate the first-hand knowledge on the pros and cons of owning real estate as an investment.  I have made some great decisions with real estate and also some bad ones.

Student rentals are popular in Guelph since it’s a university town. But they’re becoming more challenging to get good mortgage financing on because of the perceived risk lenders have. As a Mortgage Broker, we have access to many sources of financing. I’m finding that most mortgage-lenders are not offering competitive mortgage financing on student rentals.

Here are some things that you need to be aware of when buying a student rental or refinancing it to access the equity for future investments:

In most cases the finance company will approve the mortgage based on the borrower qualifications. Where I’ve seen problems arise is through the appraisal of the property.  Lenders are now conditioning appraisals on almost all conventional mortgage loans.  Although you may have been pre-approved or approved for the mortgage loan, the student rental property will be an issue with most traditional mortgage lenders.  If you’re buying a new student rental be sure to have the appraisal completed before the financing condition is up.  This can save you a lot of last minute problems on the closing day.
For those mortgage lenders who will finance a student rental, you may be required to put up to 35% as a down payment versus 20% which is typical on a regular residential rental property.
If your son or daughter will be living in the property while they are going to school, these properties are viewed differently than a student rental property purely for investment purposes. Your mortgage professional should be able to give you advice on how to structure the mortgage loan to benefit you financially. Also seek the advice of an accountant to discuss the capital gains implications once you sell the property.

I’ve rented to students and I find most are respectful of the property and make good tenants.  As an investor, student rentals typically have good cash flow. The rent is traditionally charged per student per month and in Guelph the rent per month per student is about $500 to $700 per month.

When you buy a student rental ensure you work with a mortgage professional that has experience financing them and can take you through the process so that you get a mortgage approval, with a competitively priced mortgage.

If you’d like to discuss your own mortgage situation, I would welcome your call or e-mail!
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Sandra Lastovic
Senior Mortgage Agent

Opportunities for real estate investing

According to Canada Mortgage Housing Corporation (CMHC) despite slightly rising vacancy rates, Guelph will continue to have one of the tightest rental markets in Ontario. How can real estate investors tap into this market? Demand for rental accommodation will be supported by fewer households moving to ownership, younger and older households, and relatively stable student… Read More

Buy a house or rent a room?

If you are sending your children to a university this year, I am sure you are thinking about all the expenses you will be incurring over the next few years. Sending a child to university is very expensive, and one important thing that parents need to think about is the place for their child to… Read More

Financing student rentals: lenders see them as “the plague” of properties

An area of mortgage expertise I focus on is financing and refinancing rental properties. As a rental property owner myself, most clients appreciate the first-hand knowledge on the pros and cons of owning real estate as an investment.  I have made some great decisions with real estate and also some bad ones.   Student rentals… Read More

Here’s one way to pay-off your mortgage if you have rental properties

This week I met Sam who has been an astute real estate investor over the last 7 years. He’s been strategic about his real estate purchases, focusing on good locations and positive cash flow. Although he’s retired, Sam still has a significant mortgage of $250,000 on his primary residence and carries a secured-line-of credit (SLOC) of $70,000.  Don’t be… Read More

Buying a rental property for the wrong reasons…

One of my specialities is helping people build their their real-estate-investment portfolio. Because I’m in the business of owning and managing rental properties myself, most of my clients appreciate the fact that I have first-hand experience of what to do (and what not to do).  I’ve made several mistakes over the last ten years where… Read More