One of the herdles that investors have to get over to begin buying rental properties is finding down payments! Here are 7 options for you to consider to get those funds:
- 1. Liquid Assets
- 2. Real Estate equity
- 3. High-ratio insured Mortgages
Up until 2006 The Canada Mortgage and Housing Corporation (CMHC) was the only mortgage insurer who would insure rental properties. AIG United Guaranty entered this market in late 2006 and targeted the residential market coming up with 90% financing for investment properties. As well GE Financial entered the market and matched any service AIG would offer. Then in August of 2007 a rumbling from a hedge fund in France led to an avalanche called the "sub-prime crisis." As a result GE and AIG both withdrew from the market of residential rental properties in Canada even though Canada was relatively impervious to the sub-prime crisis.
In April 2010 bowing to the concerns that the Canadian housing market had not only recovered from the recession, but was in fact getting overheated once again, the government stepped in and annouced further changes. They simply eliminated any CMHC-insured high-ratio mortgages for real estate investors with less than 20% down.
- 4. Sub-prime Mortgages
Ever since the sub-prime crisis virtually no lendersare active in this market. The few that remain will go up to 85% but that changes every month depending on market conditions.
- 5. Private Money
Don't confuse private with a zero-down option. Just because the money comes from a private source and not a bank doesn't mean that the lender doesn't worry about risk. Some private lenders worry more about security than the banks.
- 6. Vendor take-back mortgage
- 7. Joint Venture partners
I hope you have found this information informative. Finding a good rental property includes using a good Realtor. Please contact me if you are considering buying rental property in my area!
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