Today I am going to tell you about how I bought my first house and how that house ended up turning into a rental property. Let’s see what you think.
It was 2016; I was living in my friend’s basement for almost two years since I arrived in Canada when we decided to have a change in our life. I was sick and tired of having people walking over my head. It was time to move out and look forward. I had had enough!!
Even though my husband and I were still debating whether to rent an apartment or buy a place of our own, we start contacting renting companies to know how much a small apartment would cost, and what the process for renting was. We could never dream of that we would end up having a rental property of our own
At that time, a two-bedroom apartment was renting for between 1300 to 1600 dollars. That was a considerably $500 over our monthly expenses.
At the same time, we registered with a real estate agent and started learning what we needed to buy a house. The whole buying a property sounded so scary!.
Our realtor helped us decide our budget based on our salaries to make sure we would qualify for a mortgage.
Prices were insanely high according to our perception. The housing market had been bumming for a couple of years. As a result, Every time a house hit the market, the price was higher than the previous one sold, comparable to the new one.
We set a budget of 350k, and it was tight. Now that I think 350k is nothing in today’s market.
When we run the numbers, buying made more sense. Even though prices were high, interest rates were meager, and we would pay a little less than if we were to rent. We finally decided that buying was our best option.
Putting finances in place.
Everybody was advising me to go for a mortgage broker. I didn’t do it that way, and I am glad I didn’t. Online I found the institution that was offering the lowest rates, and I went with them.
I negotiated the rates even lower and got approved for 300k at 2,4% for five years open term. I will explain in a later post why I chose open over closed.
We have been aggressively saving for the last couple of years. Our monthly expenses were low. Between my husband and I were making over 90k a year before taxes.
However, we had recently invested almost all of our cash and part of our line of credit in private mortgage lending. As a result, we couldn’t give a 20 percent down as we would have wanted.
We only put five percent down. In Canada, when you put less than 20 percent as a down-payment, you have to pay for mortgage insurance. As a result, we had to add 10k more to our closing costs.
Finding the right place to buy.
Even though we were proactive, we stood in the market actively looking for over a month. Every time we put an offer on a place, someone else would bid higher.
Likewise, the realtor wasn’t that good, after all. I think she was a little lost, or maybe she was new to the trade. I remember we were thinking about changing realtor, but we couldn’t break the contract, and we stick with her. After all, she was always willing and ready to show us places, and that’s super important.
When I first saw the house, I thought there must be some mistake. Believe it or not, the price was like 20k below the market price. They listed it for 247k. Immediately, we put an offer without seeing the house, and that’s how we got it.
To sum up, our buying price was 253k. Our total mortgage was 250k because we added the closing cost and the insurance to the mortgage, and that was with only 5 percent down.
Converting our first house into a rental property.
We moved after we took ownership right away. We were happy to have our own space and enjoying the sun through the windows. I can’t forget the first night we slept there. The feeling of belonging was awsome.
After you buy your first house, you fell a rush to keep buying. OM, that’s what I felt!!. Once you know, that is ok, that you can handle it, and how greatly you can benefit from having a property you want to keep buying.
One year passed, and we decided it was time to hit the market again, and we signed for a newly built house.
Since we were waiting for the return of our investment, we extended the closing of the new house as far as we could. After two years of living in the first house, we were moving to our new property.
This time we were able to give the 20 percent down. We saved some of it, and the rest came from the investment that we had, which came to term at the same time as the closing.
We decided we would keep our first house as a rental property. Having selected the right financial institution helped a lot. We had been their clients for two years and have built a good record by paying on time and never a skipping payment.
So far, I have never had problems with tenants missing payments or causing troubles. Finger crossed!!
If you are like me and are always looking for ways to do business and trying new things check the start a business.
I almost forget to tell you that after four years of having bought the first property, it has doubled in value!!
So what do you think? Are you ready for your next property, or are you saving for the first one? Let me know in the comments below.