With today’s real estate prices in Saskatchewan or throughout Canada for that matter, it is challenging for people to buy their first home. Saving up for a down payment is a losing proposition, because by the time you have saved up for the down payment, the price of real estate has gone up again. Let’s talk about a game plan. Be willing to get a mortgage helper, (yes that means tenants or roommates) for 5 to 10 years. Let your tenants make the mortgage payments. Let your tenants pay the property taxes and utilities or at least part of the bills. You are banking on the leverage of time and other people’s money to pay down the principal and to generate equity. Equity is the road to wealth, and the faster you can build equity, the more options you have.
Think of home ownership as a business and an investment! You can find a home with extra bedrooms or a basement suite that, once rented out, can have you living with minimal costs to you. By the time the house comes up for refinancing in 5, 7 or 10 years, you can eliminate the tenants. OR take the equity and buy the next home and keep the first house rented. The income from the first home may very well pay part of your payment for the next one. Now you are well on your way to becoming a Real Estate Investor!
Helping You…Build Your Wealth!
For example – for a $300,000 home, a first time home buyer needs 5% down or $15,000. There will be a CMHC fee of approximately 2.75% or $7,838 and your mortgage payment on $292,838 would be $1,392/mth. For this example let’s say this house is a 4 bedroom – you the owner occupy one and rent out the other three for $500 each plus their share of the utilities. So after a mortgage payment of $1,392 and property taxes of $200 and insurance of $100, total expenses per month are $1,692 – rent is $1,500, so your costs are $192 plus utilities. For an extra measure of safety – you keep paying the $500/mth rent too and put that money away for emergencies so if a tenant moves unexpectedly or the roof needs repair, you have the funds to do so. On top of that your $300,000 property will likely increase in value by 3% or $9,000. In the first year the mortgage will be paid down by $5,365 as well.
Don’t have the $15,000 down payment? Talk to Mom and Dad or Grandma and Grandpa about putting up the cash, and give them a return on their money. If they get $100 per month on their $15,000 investment, that is an 8% return on their money. Everybody wins! Already signed a lease? Talk to the owners or Property Manager – right now it is pretty easy for owners to find new tenants and some don’t mind if you break the lease early.