Buying a place to rent out

[photon]

You need mortgage insurance if you are putting less than 20% (used to be 25%) down, your lender should have already gone over that part and included that for you (i.e. let you choose to either pay the mortgage insurance up front or roll it into the mortgage). That's just insurance for a high ratio mortgage, and it's for the lender not you.

Actual insurance for the property (against damage, theft, fire, elephants, etc) you have to get from a 3rd party insurance provider, same kind of place you get your auto insurance from.

You can also get a kind of life insurance with your mortgage (ie if you die your mortgage is paid off), but that's usually very expensive and you're better off just getting a good life insurance plan.

[Red]

Not sure if you are aware that you are unlikely to get a mortgage for more than 75% of the house if it's not your primary residence. A rental property requires you to have 25% down because that's what the bank will give you. The first time buyer government insurance won't cover you in this case....there may be some loopholes, but I'd make sure you're fully insured for whatever may happen.

[photon]

There are a lot of mortgage products out there for less than 25% down for rental properies, I just got one from CIBC recently actually.

The mortgage insurance companies are facing increased competition from new players in the market and are having to add products for real estate investors to their portfolios.

With the recent tightening of the lending rules though a few products have gone away (ie I think there was even a 100% mortgage for rental properties that's not being offered anymore).

But they are still out there.

[Wookie]

Yeah, I'm buying it as my residence. Just not moving into it yet. I don't think I'm financing it as a rental.

I think the broker has already incorporated my insurance into my mortgage as well as the CMHC charges because it's below 20%.

I guess I'll have to go looking for the insurance photon mentioned. Although I have an X who's going to look into it for me and said she'd be able to get me a deal (hopefully).

Next since it's a condo I think I'm going to have to see what their specific requirements and insurance covers.

[photon]

CMHC charges are for the mortgage insurance (CMHC provides mortgage insurance). That should be the only insurance from your mortgage broker, the lender might offer life insurance with their mortgage but like I said I'd decline that and get a better life insurance for a lot less from a normal life insurance seller.

For a condo, you don't really need insurance for the building; your condo fees pay for that. And you won't need content insurance because your stuff won't be there (as an aside, require that any tenant living there has content insurance, have them fax you a copy of their insurance to confirm it, helps get good tenants and covers your butt).

I think we have some insurance on our condo anyway just in case the tenant damages something inside like an appliance or breaks the granite or something.

[Wookie]

Originally Posted by photon

CMHC charges are for the mortgage insurance (CMHC provides mortgage insurance). That should be the only insurance from your mortgage broker, the lender might offer life insurance with their mortgage but like I said I'd decline that and get a better life insurance for a lot less from a normal life insurance seller.

For a condo, you don't really need insurance for the building; your condo fees pay for that. And you won't need content insurance because your stuff won't be there (as an aside, require that any tenant living there has content insurance, have them fax you a copy of their insurance to confirm it, helps get good tenants and covers your butt).

I think we have some insurance on our condo anyway just in case the tenant damages something inside like an appliance or breaks the granite or something.

a) yeah, I think you're right - that's the only insurance that's spread out with my amortization.

b) nope, I don't think they've offered any life insurance.

c) my friend, the insurance broker was bringing up some interesting scenerios that seemed to be leaning in the favour of extra insurance. Like a huge deducatble if the place burns down, the the condo board wouldn't cover. She also used to sell condo's. Said that there are some situations where the replacement (owner out of pocket expenses) costs will end up being astronomical for things like fires etc.

d) content insurance. Yeah there is one I don't need

3) them having insurance, great idea!

[Wookie]

Originally Posted by fotze

I echo that sentiment, can almost guarantee that you are getting ripped off if the lender is offering the insurance. Also, if you have any other life insurance the mortgage insurance may not even pay out. Some sort of double dipping clause.

Also, life insurance gives you the amount you take it out for, mortgage only covers the mortgage amount, that will be going down every month.

MMMMmmm, double dipping! Yeah I have zero insurance! Well car insurance, but no life or anything. Again, just me to worry about right now - no wife, kids, dog, cat, g/f (debatable ), etc.

[Locke]

Well, from a totally different point of view, keep all the paperwork.

With a rental property there are alot of taxable implications. These can work for or against you. I would suggest you talk to your accountant (Or PM me) about what sort of things you should be looking out for.

This has to do with including the rent you receive as part of your yearly income and claiming it on your 2007 Income Tax return as well as balancing that income out with expenses incurred. Furthermore there are alot of considerations to be had with respect to capital gains upon sale, as your 3 options stated in your first post.

Other than that, congrats on dipping into a very lucrative market and good luck to you.

Locke.

[Wookie]

Originally Posted by Locke

Well, from a totally different point of view, keep all the paperwork.

With a rental property there are alot of taxable implications. These can work for or against you. I would suggest you talk to your accountant (Or PM me) about what sort of things you should be looking out for.

This has to do with including the rent you receive as part of your yearly income and claiming it on your 2007 Income Tax return as well as balancing that income out with expenses incurred. Furthermore there are alot of considerations to be had with respect to capital gains upon sale, as your 3 options stated in your first post.

Other than that, congrats on dipping into a very lucrative market and good luck to you.

Locke.

Yes sir!

Thanks - I'll definitely PM you.

Regarding cap gains, yeah I won't know anything about that until July 1 08 when I may need to move in, or find somewhere else.

Thanks again!

[Teh_Bandwagoner]

If you're looking for forms such as application forms, RTA, or inspection forms, Rentfaster.ca has some good free samples you can use, rather than buying them through a rental board. They can be found here:

http://www.rentfaster.ca/forms.php

[Wookie]

Originally Posted by Teh_Bandwagoner

If you're looking for forms such as application forms, RTA, or inspection forms, Rentfaster.ca has some good free samples you can use, rather than buying them through a rental board. They can be found here:

http://www.rentfaster.ca/forms.php

Thanks - very handy!

I just bought my place!! I'm so excited!! Posession date Nov. 15th. I'll be renting it out shortly after for min. of 7 months. and then maybe move in. Funny that I'm so happy with it that I almost just want to move in now..

[North East Goon]

I loathe renters, and would freak if one of my neighbours rented out there homes. Renters seem to have no regard for there house and/or neighbours! IMO of course!

[photon]

Really depends on the renter. With such low vacancy right now it's fairly easy to be picky about the renter.. previous landlord, references, and credit checks are all necessary, plus meeting with the person a few times.

Take a look at their car when they come to see the place.. not what kind, but what does it look like inside the car. Another thing to sometimes if it works out, drop off something (a copy of the agreement or something) at their current address when you think they'll be home.. nothing tells you more about a person than a quick unexpected drop in.

Of course tenants play games to get around these things too.. they'll give their buddy as a landlord reference (when you call the landlord reference, first question should be "I'm calling to see if you have any vacancies", and if they answer "What?" then you know. Or sometimes it's even a real landlord but they really want to get rid of the tenant, that's tougher to tell.

But yeah, in general tenants suck. I do find that our condo that has double the rent of our other properties has ZERO problems, I never hear from them, and the place is exactly like it was when I moved out years ago.

[Wookie]

Yeah, I think with the vacancies in Calgary you can try your best to get a tenant that's suitable. But like photon said, they can trick you I guess.

Thanks photon, good tips: