# Grad Student looking for investment property



## cmattina (Oct 29, 2009)

Hi everyone,

So, I am a grad student living in a town with cheap home prices (35000-80000) and high rental prices (300/room). I want to buy a multi-unit home to rent out for approximately 1500/month. I have enough for a 15-20% downpayment on a 70 000 home, but since I have a government student debt, which I do not have to pay back as long as I'm a student, as well as a low income (9000 on a graduate assistant contract) I cannot qualify for a mortgage. The hang up I have is I recieve and will be recieving an additional 15 000 of income through scholarships and grants for the next two years, but the bank I am dealing with will not acknowledge it, or says CMHC will not acknowledge it. 

Does anyone know what I can do about this? Will other banks want to compete with my bank?


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## Rickson9 (Apr 9, 2009)

You're going to have to look for a hard money lender.


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## Gregreid (Oct 26, 2009)

Also, the banks will not consider your rental income as income. i.e. you must have sufficient employment income to cover all the expenses in the event you have no renters before they will lend you money.


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## cmattina (Oct 29, 2009)

As for the hard money loan, do I not need to own a property to borrow against? And, I've been told by a mortage specialist, that if there are leases in place, 50% of that can be counted as income...


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## iherald (Apr 18, 2009)

cmattina said:


> As for the hard money loan, do I not need to own a property to borrow against? And, I've been told by a mortage specialist, that if there are leases in place, 50% of that can be counted as income...


I think you can count the income of the rent only if it's a legal multi-unit place. My duplex had a renter but I couldn't use the rent since it wasn't a legal duplex. It turned out it was, but no one new.

The host of Income Property was able to get mortgages for his first homes while he was in University, so it can be done. Perhaps someone could co-sign for you. 

It's a good plan though, if you can do it properly.


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## cmattina (Oct 29, 2009)

Yes co-signing is an option I am exploring and slowly exhausting.


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## Shayne (Apr 3, 2009)

Gregreid said:


> Also, the banks will not consider your rental income as income. i.e. you must have sufficient employment income to cover all the expenses in the event you have no renters before they will lend you money.


Of course they will! It is income.


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## iherald (Apr 18, 2009)

Shayne said:


> Of course they will! It is income.


I was told that unless it's a legal rental property, banks will not take this money into account when determing your income. From what I'm told, if it's not a legal apartment, and the tenant refuses to pay, the home owner is in a tough spot to try and force them to pay.


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## Shayne (Apr 3, 2009)

My bad, you are correct.


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## OhGreatGuru (May 24, 2009)

cmattina said:


> Hi everyone,
> 
> I want to buy a multi-unit home to rent out for approximately 1500/month.


Sounds like you're planning to buy a single-family dwelling and rent it to 5 students. This puts you into a really grey area of illegal zoning and converting a single family dwelling to a rooming house. You see it done under the table all the time, but if anyone complains, you're out of luck, and no one is going to lend you money on the projected revenue stream from an illegal conversion.


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## Dr_V (Oct 27, 2009)

OhGreatGuru said:


> Sounds like you're planning to buy a single-family dwelling and rent it to 5 students. This puts you into a really grey area of illegal zoning and converting a single family dwelling to a rooming house. You see it done under the table all the time, but if anyone complains, you're out of luck, and no one is going to lend you money on the projected revenue stream from an illegal conversion.


Not only would you be out of luck... at least in Waterloo (Ontario), under by-law 140, you can face a fine of $5000 for operating an unlicensed Lodging House. There has been some discussion about trying to increase these fines up to $50000, as well. Further, because there is a minimum separation distance of 75m between Class II lodging houses, it's very likely that you won't just be able to buy a house and convert it into a Lodging House -- you'd probably have to ensure that the house is already licensed.

(That said, I doubt that the author is looking in Waterloo -- rental homes around the university typically run closer to $250k.)


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## specialk (Jul 14, 2009)

cmattina said:


> Hi everyone,
> 
> So, I am a grad student living in a town with cheap home prices (35000-80000) and high rental prices (300/room). I want to buy a multi-unit home to rent out for approximately 1500/month. I have enough for a 15-20% downpayment on a 70 000 home, but since I have a government student debt, which I do not have to pay back as long as I'm a student, as well as a low income (9000 on a graduate assistant contract) I cannot qualify for a mortgage. The hang up I have is I recieve and will be recieving an additional 15 000 of income through scholarships and grants for the next two years, but the bank I am dealing with will not acknowledge it, or says CMHC will not acknowledge it.
> 
> Does anyone know what I can do about this? Will other banks want to compete with my bank?


Sounds like you are asking for a disaster in your life. You are broke and in debt and you are a student with little income, and you want to be a first time landlord with iffy tenants at best and no income or savings to support the emergencies that happen. No thank you to the whole thing. The reason the bank is not letting you have a mortgage (thank God!!) is because they can see the impending doom that you are obviously ignoring.


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## PlanW (Nov 5, 2009)

If you're good with money, then go for it. I did, and I made a lot of money in a similar market! Just make sure the numbers work before buying. Plan to make all of your money from the rent money and treat any appreciation over time as gravey. I bought in my second year of University. Lived in it myself for 3 years with tennants.  Then kept it for another 7 before selling at at huge profit. It paid for my tuition each year, paid for a used car and paid for a couple of vacations. Just make sure you can budget. I can't stress this enough, screen your tennants very well. Do not rent to friends (It's your house, you clean it)!!! Rent the house, do not rent to 5 individual tennants. I had a co-signer. Oh ya, the bank should treat half of the rent as income.

Hope this helps.


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