# Need help guys!!



## scorpion101 (Jul 8, 2019)

Hello, im new to the forum , i have searched google and have not found any answers and am hoping that you guys can help me out, i recently bought a brand new property 3 weeks ago, i own my current home (mortgaged) i bought the second home for my father in law to live in the basement suite (living off a pension) no rent charged, and have my Brother live in the upper suite. i went in with 10% down, well things changed for the worst, he has decided not to move in and now im stuck with a vacant place having to pay bills and mortgage on, and im aware of needing to put down 20% in order to turn it into a rental property. am i ok to find a renter to rent the upper to cover my mortgage payments? or could someone get in trouble, im really stuck now and not sure what to do. any help would be appreciated.


----------



## Mukhang pera (Feb 26, 2016)

Maybe just me, but I am a tad confused by your question.

I know of no law that says unless you put 20% down on a property, it cannot be a rental. That seems to be your concern. Is it? Are you maybe thinking of some kind of mortgage lender's requirement? Banks usually apply different rules (and interest rates) when lending on income property as opposed to a principal residence.


----------



## kcowan (Jul 1, 2010)

Because your second property is a rental, the first priority is to get the upper floor rented. Then you can apply for a mortgage. It will be more expensive unless you can show the income from the basement.


----------



## Mortgage u/w (Feb 6, 2014)

As MP mentioned, there is no law to put 20% down for a rental. If you obtained a mortgage for the property with 10% down and your lender considered it a second home, then you essentially qualified to support the payments of a second home.

If I understand correctly, you bought a 2 unit property with the intention of housing your brother on one floor and your dad in the basement. I also understand you were not charging any rent therefore assuming all costs. What I don't understand is why is this a problem now that they are not occupying the property? Or you were charging rent but had no intention of declaring it?


----------



## scorpion101 (Jul 8, 2019)

Exactly, so now im not sure what to do because with the bills its going to be around $2000. so is it legal for me to rent it out ?
Its just all the lenders and brokers were saying if you are doing a rental property they need 20% which was confusing to me why. and where does it say this because i couldnt find any information.


----------



## Mortgage u/w (Feb 6, 2014)

scorpion101 said:


> Exactly, so now im not sure what to do because with the bills its going to be around $2000. so is it legal for me to rent it out ?
> Its just all the lenders and brokers were saying if you are doing a rental property they need 20% which was confusing to me why. and where does it say this because i couldnt find any information.


When you say 'exactly', which part are you refering to because it seems you may not be completely informed of all the rules and regulations.

To answer a part of your question, the 20% on rental properties is required if you are purchasing a non-owner occupied dwelling with the intentions to use as a full rental. (which seems to be the case already but I'll come to that later). You could still purchase with as low as 5% down on an owner-occupied rental containing 2 units or 10% if 3-4 units. These rules are 'lending' rules and in no way represent a 'law'. 

So to come back to my observation, you essentially lied to your lender by saying you would be purchasing a second home with the intent to occupy it which allowed you to put 10% down. You qualified and went with it.......but your true intention was to house your family members who would be paying the expenses for you. For whatever reason your father and/or brother are not on title is a whole other issue, the fact remains that you twisted the story a little in order to get max financing. You now regret it because your plan did not work out as initially thought.

Bottom line, you obtained your financing and it no way affects your ability to rent out your property.


----------



## Just a Guy (Mar 27, 2012)

Normally, when you apply for a rental property mortgage, the banks will require a 20% down payment to qualify you. You can’t*, for example, pretend it’s your principal residence and put down only 5%. Technically that’s considered mortgage fraud. 

However, you can convert your 5% down principle residence to a rental after a certain time period (I believe a year, but I’m not sure) to a rental without having to convert or pay down the mortgage to get the 20% equity. 

The reason for the “*” above is also I’ve seen it done many times with full knowledge of the banking staff. 

Circumstances, as in your case, change all the time. You are not locked into living in your house forever because you have a mortgage, nor do you have to renegotiate he mortgage every time something changes in life. 

Banks actually prefer rental properties unofficially because they have an income stream. 

There is nothing illegal about renting your place, assuming it’s a legal duplex and I don’t think you need to worry about paying down the mortgage to get 20% equity as long as you continue to make your payments on time.


----------



## scorpion101 (Jul 8, 2019)

thats alot of information and thank you, so to clarify exactly, i did not lie to the lender i did tell him it would be close family member occupied,
i live in my current home with my family we purchased it 3 years ago with 20% down to avoid CMHC fees, this time around we wanted to purchase a 2nd home to gain equity for the future, father in law is retired and living off the pension, so we decided to purchase this second home that has a separate entrance to the basement, it is not yet finished so father in law offered to pay cash to have the basement legal suite finished so that he can occupy it, Rent Free , for helping us out with this, my brother on the other hand was going to live in the upper 2 floors (2 storey house with basement), with a friend and cover partial of the mortgage, but his friend decided not to come out from another province and this is how im stuck, brother cant afford it so that is why i asked if i can rent the upstairs legally, while my father in law lives in his basement suite rent free, only paying his bills. not sure if it makes a bit more sense now?


----------



## Just a Guy (Mar 27, 2012)

It’s not that complicated and you’re over thinking the whole thing. You’ve already got your mortgage, as long as you make your payments no one really cares about what you do. 

If I were you I’d be more worried about tenants living in the same place as your father. I’ve seen enough bad tenants over the years that I’d never expose family to them. Not saying they’re all bad, in fact most are good, but you just need one...


----------



## nobleea (Oct 11, 2013)

scorpion101 said:


> thats alot of information and thank you, so to clarify exactly, i did not lie to the lender i did tell him it would be close family member occupied,
> i live in my current home with my family we purchased it 3 years ago with 20% down to avoid CMHC fees, this time around we wanted to purchase a 2nd home to gain equity for the future, father in law is retired and living off the pension, so we decided to purchase this second home that has a separate entrance to the basement, it is not yet finished so father in law offered to pay cash to have the basement legal suite finished so that he can occupy it, Rent Free , for helping us out with this, my brother on the other hand was going to live in the upper 2 floors (2 storey house with basement), with a friend and cover partial of the mortgage, but his friend decided not to come out from another province and this is how im stuck, brother cant afford it so that is why i asked if i can rent the upstairs legally, while my father in law lives in his basement suite rent free, only paying his bills. not sure if it makes a bit more sense now?


I don't know about CGY, but in Edmonton, making a new suite legal would require a second furnace and separate ductwork, among other things. It's not a cheap venture.


----------



## scorpion101 (Jul 8, 2019)

same with calgary, so alternative is using 4 zone electric heaters which is what im doing, much cheaper and easier. thanks for all the help guys, and all the knowledge you have. i appreciate it.


----------



## peterk (May 16, 2010)

nobleea said:


> I don't know about CGY, but in Edmonton, making a new suite legal would require a second furnace and separate ductwork, among other things. It's not a cheap venture.


Wow that's excessive.

Was trying to think about if I buy a house whether I should go big and get a large fancy place that has a rental suite walk-out basement, but it sounds like a hassle and you are at the mercy of the municipality/province and whatever dumb idea they come up with next about tenant's needs...

Much better off just buying the house I need for myself, and if I felt like "real estate rental" investing, buying an apartment condo and renting that out.


----------



## Just a Guy (Mar 27, 2012)

Many municipalities offer grants to build a suite. There are usually strings attached, like it being a rental for at least 5 years or something, but the grants can be generous if there is a need for housing or you offer affordable housing. 

Still, I’d never have tenants with access to my property or family. A rental should be a rental, your house is your house.


----------



## peterk (May 16, 2010)

Hmm I know someone who just built a suite here, will have to ask about it.

But ya, I am having a hard time picturing a house that would have a suitable rental suite for me. Something where it is completely separate and secure, and yet easily convertible to a "whole house" with a usable basement for the future if I no longer wanted tenants. Probably best to forget the whole idea and just buy my own house and put the rest in XIU and QQQ, as is my current plan.


----------



## nobleea (Oct 11, 2013)

Edmonton has a grant program to build a secondary suite. 50% of the costs up to 20K. For a basement suite, that's a big chunk of it. Unfortunately, the terms are you have to rent for 5 years to someone below a certain income level. I don't think there's a limit on what you can charge them, so it could still be market rent. It would work well for a student.

Peterk, you need a garage suite. More expensive, but still a way better investment than a standalone rental property. But as you want, completely separate and secure and rents for much more than a basement suite of the same size.


----------



## scorpion101 (Jul 8, 2019)

Anyone have a good lease form that they can share or send to me? thank you


----------



## Spudd (Oct 11, 2011)

There's one posted here:
https://alberta-mortgages.com/mortgage-documents.html


----------



## Plugging Along (Jan 3, 2011)

scorpion101 said:


> Anyone have a good lease form that they can share or send to me? thank you


Rentfaster.ca has form. I modified them for our own purposes. You may want to take some time to learn about being a landlord. There is some good information there.

I also totally agree with JAG, think very carefully about having a tenant with a family member. I would see if you have your brother find another roommate he knows first.


----------



## scorpion101 (Jul 8, 2019)

thanks spudd, very much appreciated. 
ill see what i can do about tenant


----------

