# Mortgage renewal/refinance HELOC



## Happyslappers2002 (Jul 25, 2012)

Mortgage on my principal property is up for renewal in Sept. I am considering the Scotia Step Mortgage because I am hoping to refinance my principal property, then purchase a new property for approx $1,500,000 and then rent out my current property for approx $3000/month. I currently have approx $150,000 in cash and would like to put down 20% for my new property. I'm considering the Scotia Step program because I'm considering using the HELOC portion to help me get to the 20% needed to avoid any insurance premiums. Any comments or suggestions will be appreciated!


Current Snap Shot

Principal Mortgage Outstanding $350,000
Current Value of home $750,000
Renewal: Sept 2012

1st Rental Property:
Outstanding mortgage: $230,000
Monthly Rent Income: $2900/month
Monthly Mort Payment: $1300/month
Renewal: March 2013

2nd Rental Property:
Outstanding mortgage: $300,000
Monthly Rental Income: $3500/month
Monthly Mort Payment: $1200/month
Renewal: Feb 1, 2015

3rd Rental Property:
Outstanding mortgage: $85,0000
Monthly Rental Income: $1600/month
Monthly Mort Payment: $600/month
Renewal: Apr 2015

4th Rental Property:
Outstanding mortgage: $175,000
Monthly Rental Income: $1250/month
Monthly Mort Payment: $650/month
Renewal: Sept 2016

Besides mortgages currently zero debt

SDRSP Approx Value $125,000
Liquid Cash Apprx $150,000


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## Just a Guy (Mar 27, 2012)

I'm gathering you live someplace like Vancouver?

Aside from rental #3, I'd say most of these don't look like great holdings. Yes they cash flow, but there is a lot of dead money here. Of course I don't know what the actual value of any of the rentals are, but let's look at your current one...

You want $750,000 to generate $3,000 before expenses...you are averaging 50% expenses, so you are happy with $18,000/year income on $750,000 of 2.4%. 

You could get 5% dividend by buying BMO, have no tenant hassle and remain fairly conservative.

If all these places are leveraged at 20%, your returns would, of course be 5 times higher, but you only have one door each. For those prices you could buy apartment blocks in any province (though not any city) which would increase your revenues.

I'd look at selling all your places and investing where your money can actually earn you some good returns.


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## themortgageguy (Jun 28, 2012)

You currently have 4 rental properties, are contemplating a 5th and you also have a personal residence. Your holdings are significant and complicated enough that I wouldn't expect you to get much useful information from a online discussion on real estate. 

I'd suggest you go to your mortgage broker and ask for a full review of the financing in your portfolio. I'm assuming you have one and if you don't you probably should because you likely need access to the multiple lenders available through a broker. 

Not only would you see if there are any savings to be had now, but you would also get some advice on your question from an individual that knows whats available to you and has the ability to ask you relevant questions to you situation.

Will likely be free of charge as well.

Rob


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## Happyslappers2002 (Jul 25, 2012)

Just a Guy said:


> I'm gathering you live someplace like Vancouver?
> 
> Aside from rental #3, I'd say most of these don't look like great holdings. Yes they cash flow, but there is a lot of dead money here. Of course I don't know what the actual value of any of the rentals are, but let's look at your current one...
> 
> ...


Thanks for your response. I live in Toronto and all the properties are in Toronto. Besides looking at my returns I also consider that my properties are increasing at least 5% a year.

Here's some additional info that might help:

Principal property
Current Value of home $750,000
Original purchase price $500,000
Initial investment $100,000


1st Rental Property:
Current Value of home $800,000
Original purchase price $308,000
Initial investment $77,000
Purchased in 2007

2nd Rental Property:
Current Value of home $600,000
Original purchase price $370,000
Initial investment $74,000
Purchased in 2005

3rd Rental Property:
Current Value of home $360,000
Original purchase price $198,000
Initial investment $40,000
Purchased in 2000

4th Rental Property:
Current Value of home $240,000
Original purchase price $225,000
Initial investment $45,000
Purchased in 2012


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## Happyslappers2002 (Jul 25, 2012)

themortgageguy said:


> You currently have 4 rental properties, are contemplating a 5th and you also have a personal residence. Your holdings are significant and complicated enough that I wouldn't expect you to get much useful information from a online discussion on real estate.
> 
> I'd suggest you go to your mortgage broker and ask for a full review of the financing in your portfolio. I'm assuming you have one and if you don't you probably should because you likely need access to the multiple lenders available through a broker.
> 
> ...


Thanks for your note Rob. I am currently working with a broker but I'm just curious to see what other people have to say.
Cheers!


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## Just a Guy (Mar 27, 2012)

Okay, first off, until you sell a place, you never really know what it's worth. If you don't plan on selling a place, then thinking about its worth is pointless unless you can access the money by refinancing.

Based on your initial investments, you aren't earning a bad return in some cases, but there is a large portion of dead money here. Principal property 400k, 1st - 570 k, 2nd 300k, 3rd 175k, 4th - 65k. About 1 million of your net worth is sitting...earning a projected 81k/ year.

Now some risks, 5 doors.

Property values in a bubble.

If you were to sell, you'd have 1 million. Buying BMO would give you a 5% return in dividends, plus capital gains probably. Cash in hand, not on paper, will probably increase.

Basically better returns, no tenants. Yes, extreme example.

Sell and buy an apartment (or several)...have multiple doors, more secure cash flow. Value of property is based more on cash flow, so it doesn't fluctuate as much usually.

This is very simplified of course. You should check out www.easysafemoney.com, the guy knows a lot about putting leverage to work. Don't be affraid to look outside Toronto, better cash flow properties can sometimes be found in smaller centers.


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## marina628 (Dec 14, 2010)

Is the $150,000 your entire cash flow?If you post the mortgage rates on each property would give a clearer Idea for all of us.


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## marina628 (Dec 14, 2010)

We own a house , cottage and five rentals in Ontario.That debt would scare me and I personally would sell #1 and pocket that equity in cash.I don't buy into the housing bubble stuff but for me that makes good business sense a bird in hand worth more than 2 in the bush


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## Happyslappers2002 (Jul 25, 2012)

Rental property #1 has 2 doors (duplex)
Rental property #2 has 3 doors (triplex)
Rental property #3 has 1 door (condo)
Rental proeprty #4 has 1 door (condo)


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## Happyslappers2002 (Jul 25, 2012)

marina628 said:


> Is the $150,000 your entire cash flow?If you post the mortgage rates on each property would give a clearer Idea for all of us.


The $150,000 is in a high interest savings account and it's stayed steady at that amount for years now. I don't want to use it all in my next purchase but I do plan to put down 20%, therefore will have to dip into my HELOC.

The mortgage rates are as follows:
Principal property P-0.9%
#1 rental P-0.5%
#2 rental P-0.2%
#3 rental P-0.8%
#4 rental P-0.65%


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## Causalien (Apr 4, 2009)

Happyslappers2002 said:


> The $150,000 is in a high interest savings account and it's stayed steady at that amount for years now. I don't want to use it all in my next purchase but I do plan to put down 20%, therefore will have to dip into my HELOC.
> 
> The mortgage rates are as follows:
> Principal property P-0.9%
> ...



No problem here. Move along. I would just cash out the ones that have risen the most and keep the ones in the hottest market. Not the right time to buy more though.


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## Berubeland (Sep 6, 2009)

There are a couple questions I would ask...

Do you like being a landlord? 

How does being a landlord fit in with your future plans? 

How old are you? 

Other than that I don't see this collection of properties as being troublesome in any way if you're making money at the end of the year.


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## Jay (May 9, 2012)

I think themortgageguy had the best advice - there isn't nearly enough info here for someone to give you solid advice on a discussion forum, and what info you have provided appears to be selective to make the case for your proposed new investment. For someone with this level of holdings, I would think you should be the one giving advice, rather than receiving it.


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## Happyslappers2002 (Jul 25, 2012)

Berubeland said:


> There are a couple questions I would ask...
> 
> Do you like being a landlord?
> 
> ...


Yes...I enjoy being a landlord.

I don't have a pension because of my job. My future plans are to pass these properties to my 2 kids (currently 5 and 7 years old) and let them learn some business experience. My wife is a teacher and will have a decent pension.

I'm 38 years old.

Thanks for your response!


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