abby mcquire financing 20140531...
Transcript of abby mcquire financing 20140531...
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 1
Abby McQuireDirector, Commercial Financing
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 2
• Apartment industry is active
• Difficult to find product
• Multiple offers on properties
• Buyers must be prepared to put down 25% to 35% of the purchase price plus closing costs
• Capitalization rates are compressing2
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 3
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All of this action is driven by historically low interest rates
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 4
• Why do I have to put down approximately 25% to 35% of purchase price when CMHC states they will lend up to 85% Loan to Value?
• Canada survived the credit crisis in 2008/2009 due to their conservative lending practices.
• Why choose a CMHC insured mortgage?
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 5
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In the long runCMHC offers the best rate of return
on multi-family buildings
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 6
• Significantly lower interest rates for the life of the loan
• Higher loan amounts (up to 85% LTV)
• Longer amortization periods (up to 40 years)
• Typically no Appraisal Report is required
Plus…6
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 7
• Any location in Canada(conventional mortgages are typically limited to major urban centres)
• Insured loans are assumable by a qualified buyer
• #1 option for the “Buy and Hold” investor
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 8
• Purpose built multi-family properties are preferred
• Additional due diligence for furnished suites
• Zoning requirements (all units must be legal and conforming)
• Student rentals can have a generous return but usually require a larger down payment
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 9
The Rule:
• The Borrower must have 25% of the loan amount in net worth, of relatively liquid assets, outside of the down payment for the property
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For Example:
Purchase price: $1,300,000 75% Loan to value: $975,000Minimum net worth: $243,750 (plus down payment)
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 10
Assets123 Main Street, Victoria, BC $550,000 (Principal Res)10428 114 Street, Edmonton, AB $425,000 (Triplex)RRSP $165,000Jewelry $ 12,000Art $ 5,000Car, 2013 Audi A5 $ 52,000
Total Liquid Assets $1,140,00010
Sam WilkinsonBorn: August 5, 1967 | SIN: 123-456-789
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 11
Liabilities
Mortgage (PR) $289,000Mortgage (Triplex) $225,000Line of credit $ 50,000Car loan $ 35,000
Total Liabilities $599,000 11
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 12
• Does Sam qualify for a mortgage of $975,000?
• 25% of the loan amount is $243,750
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Sam Wilkinson’s overall Net Worth: $541,000
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 13
• NO!!!
• Why when Sam meets the 25% Rule?
• Sam must also have the funds for the down payment outside of the net worth requirement
• Following the example the down payment required is $325,000 (assuming a mortgage of 75% LTV).
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 14
Includes:
• $325,000 for down payment PLUS
• 25% of the Loan Amount is $243,750
• There is a solution…
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Sam’s requirement: $568,750 overall Net Worth
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 15
• Name of borrower, principals, beneficial owners and 3 years financial statements
• Note: All beneficial owners of the Borrower company MUST provide a personal guarantee
• Net Worth Statement including:Date of BirthSIN NumberPrincipal residence
• Confirmation of all assets listed on Net Worth (RRSP Statements)
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 16
• Details of registered debt on real estate holdings (Includes all rent rolls and annual expense statements)
• Confirmation of down paymentDocumentation of the funds going back 90 days
• Real estate resume
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 17
• Current Rent RollTenant namesBedroom typeUnit #
• 3 years of Financial Statements for the subject property
• Copy of the signed Offer to Purchase
• Current year Property Tax Bill
• Copy of all Utility bills for the last 12 months17
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 18
• Property Description:
Address, number of units, number of storeys, age, construction type, site area, heating type, appliances, parking, amenities & who pays utilities
Details of recent improvements to the property
Recent colour photos18
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 19
• Your reputation as a Borrower/Investor is one of your greatest assets
• The Industry is smaller than you think
• Have a great relationship with your Lender
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CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 20
• CMHC is the best option for the “buy and hold” investor
• All beneficial owners of the Borrower must provide a personal guarantee
• Be organized with your information for a quicker approval
• Take advantage of the low interest rate environment
• And…20
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 21
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It’s a great time to buy or refinancea multi-family property!
CMHC Financing for Multi‐Family Properties As presented at the May 31, 2014 BC REIN Workshop
Abby McQuire, [email protected] | (416) 593‐3020 22
Abby McQuireDirector, Commercial Financing
[email protected]: (416) 593-3020
Toll Free: 1-800-463-0039
www.firstnational.ca
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