How do we tap into the first-time investors hiding in your database?

Joel Olson • January 20, 2022

(*What's your preference? Listen to the podcast above or read the blog post below)

Did you know that most first-time investors are right under your nose?

There is a lot of media around the idea that investors are scooping up rental units and houses all across the province.

But what if I told you that on our side investors are not some lucrative big city investor with millions, millions of dollars?

What if I told you they're not people that are Uber wealthy, but they're actually the clients you’ve served over the past 24 months.

In fact, our data shows that almost 80% of the clients we've served in the last two years are in a position since when they were first time homebuyers can now become first time investors.

And this is not a bad thing.

The idea that a first time homebuyer can build their wealth, especially when many of them tend to be quite young, by buying a rental property is extraordinary.

And we do ourselves a disservice by not reaching out to our buyers in the last two years and seeing if instead of selling a house, we can help them buy their second home.

Imagine if you can gain a whole book of clients without having your previous clients have to sell their home but having them keep what they have.

The only thing stopping you from doing that is most clients don't even know where to start.

But with huge equity gains in the last 24 months, the majority of people have enough equity for us to leverage their current home to buy a rental property.

With the increases in rental income being derived from most rental properties, it means that the vast majority of rental properties they will buy will more than cash will enable them to have a home that does not put any extra burden on their monthly family budget.

In fact, it's almost as if they'll be able to get a rental unit for free while letting the long term appreciation over 10, 20 or 30 years allow them to be in a better position than ever before.

This is a really about changing a family's financial position.

So who are these people we're talking about?

The majority of people that we've helped the last two years are first time homebuyers that put 5% down.

Now, they have enough equity to pull up to to pull enough equity out of their home by a refinance or adding a home equity line of credit.

The situation or strategy we would do would depend on the client - taking the equity out not putting any additional cash in and using that money to buy another home.

Now, another strategy can be looked at at this point, is a lot of people might think about that idea that they may have bought a condo or a townhouse and maybe now's the time to move to a single family home. In that scenario, they may turn their existing home into a rental and actually only put 5% down on the next house.

So we're not even talking about a huge amount of equity having to be pulled out.

In many cases, we could probably even see them get into a second home by putting 20 to $70,000 down depending on what they're buying and the market they're in.

So if you'd like help, we are currently offering a program where we can reach out to your past clients and see if we can help them strategize and build a realistic strategy on getting into their very first rental property with a little bit of guidance.

This is very, very easy for the vast majority of clients.

The other thing we're doing right now is that we are currently starting a newsletter based on hot investment properties around the province.

Now we invite you to submit some properties that we could show to our database that ranges from Northern BC to Vancouver Island to the interior to the Lower Mainland, really all throughout the province.

If you would submit those properties to us, we're putting them out in a weekly newsletter so they can be exposed to more and more people that may be looking for an ideal rental property strategy.

Additionally, we're setting this newsletter out to our existing clients and building even more clients that may be looking at it.

So, if you're interested in maybe getting a hold of some of these leads, and maybe being part of some of these leads please reach out to us on that as well.

As always, let us know any way we can help you.

< Older Post Newer Post >

Joel Olson

GET STARTED

Why Downpayment Source Matters

By Joel Olson • February 11, 2025

If you’re looking to purchase a property, although you might not think it matters too much, the source of your downpayment means a great deal to the lender. Let’s discuss the lender requirements, what your downpayment tells the lender about your financial situation, a how downpayment helps establish the mortgage loan to value. Anti-money laundering Lenders care about your downpayment source because, legally, they have to. To prevent money laundering, lenders have to document the source of the downpayment on every home purchase. Acceptable forms of downpayment are money from your resources, borrowed funds through an insured program called the FlexDown, or money you receive as a gift from an immediate family member. To prove the funds are from your resources and not laundered money from the proceeds of crime, you’ll be required to provide bank statements showing the money has been in your account for at least 90 days or that you’ve accumulated the funds through payroll deposits or other acceptable means. Now, if you’re borrowing all or part of your downpayment, you’ll need to include the costs of carrying the payments on the borrowed downpayment in your debt service ratios. If you’re the recipient of a gift from a direct family member, you’ll need to provide a signed gift letter indicating that the funds are a true gift and have no schedule for repayment. From there, you’ll need to show the money deposit into your account. Financial suitability Lenders care about the source of the downpayment because it is an indicator that you are financially able to purchase the property. Showing the lender that your downpayment is coming from your resources is the best. This demonstrates that you have positive cash flow and that you’re able to save money and manage your finances in a way that indicates you’ll most likely make your mortgage payments on time. If your downpayment is borrowed or from a gift, there’s a chance that they’ll want to scrutinize the rest of your application more closely. The bigger your downpayment, the better, well, as far as the lender is concerned. The way they see it, there is a direct correlation between how much money you have as equity to the likelihood you will or won’t default on their mortgage. Essentially, the more equity you have, the less likely you will walk away from the mortgage, which lessens their risk. Downpayment establishes the loan to value (LTV) Thirdly, your downpayment establishes the loan to value ratio. The loan to value ratio or LTV is the percentage of the property’s value compared to the mortgage amount. In Canada, a lender cannot lend more than 95% of a property’s value. So, if you’re buying a home for $400k, the lender can lend $380k, and you’re responsible for coming up with 5%, $ 20k in this situation. But you might be asking yourself, how does the source of the downpayment impact LTV? Great question, and to answer this, we have to look at how to establish property value. Simply put, something is worth what someone is willing to pay for it and what someone is willing to sell it for. Of course, within reason, having no external factors coming into play. When dealing with real estate, an appraisal of the property will include comparisons of what other people have agreed to pay for similar properties in the past. You’ll often hear of situations where buyers and sellers try to inflate the sale price to help finalize the transaction artificially. Any scenario where the buyer isn’t coming up with all of the money for the downpayment, independent of the seller, impacts the LTV. All details of a real estate transaction purchase and sale have to be disclosed to the lender. If there’s any money transferring behind the scenes, this impacts the LTV, and the lender won’t proceed with financing. Non-disclosure to the lender is mortgage fraud. So there you have it; hopefully, this provides context to why lenders ask for documents to prove the source of your downpayment. If you’d like to talk about mortgage financing, please connect anytime; it would be a pleasure to work with you.

Understanding a Spousal Buyout Mortgage

By Joel Olson • January 28, 2025

If you’re going through or considering a divorce or separation, you might not be aware that there are mortgage products designed to allow you to refinance your property and buy out your ex-spouse. If you’re like most people, your property is your most significant asset and is where most of your equity is tied up. If this is the case, it’s possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property’s value. Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program. It’s called the spousal buyout program. Here are some of the common questions people have about the program. Is a finalized separation agreement required? Yes. To qualify, you’ll need to provide the lender with a copy of the signed separation agreement, which clearly outlines asset allocation. Can the net proceeds be used for home renovations or pay off loans? No. The net proceeds can only buy out the other owner’s share of equity and/or pay off joint debt as explicitly agreed upon in the finalized separation agreement. What is the maximum amount that you can access through the program? The maximum equity you can withdraw is the amount agreed upon in the separation agreement to buy out the other owner’s share of the property and/or retire joint debts (if any), not exceeding 95% loan to value. What is the maximum permitted loan to value? The maximum loan to value is the lesser of 95% or the remaining mortgage + the equity required to buy out other owner and/or pay off joint debt (which, in some cases, can total < 95% LTV. The property must be the primary owner-occupied residence. Do all parties have to be on title? Yes. All parties to the transaction have to be current registered owners on title. Your solicitor will be required to confirm this with a title search. Do the parties have to be a married or common-law couple? No. Not only will the spousal buyout program support married and common-law couples who are divorcing or separating, but it’s also designed for friends or siblings who need an exit from a mortgage. The lender can consider this on an exception basis with insurer approval. In this case, as there won’t be a separation agreement, a standard clause will need to be included in the purchase contract to outline the buyout. Is a full appraisal required? Yes. When considering this type of mortgage, a physical appraisal of the property is required as part of the necessary documents to finalize the transaction. While this is a good start to answering some of the questions you might have about getting a mortgage to help you through a marital breakdown, it’s certainly not comprehensive. When you work with an independent mortgage professional, not only do you get a choice between lenders and considerably more mortgage options, but you get the unbiased mortgage advice to ensure you understand all your options and get the right mortgage for you. Please connect anytime; it would be a pleasure to discuss your needs directly and provide you with options to help you secure the best mortgage financing available. Also, please be assured that all communication will be held in the strictest of confidence.