Investment Properties- an Alernative to RSPs

Over the last few years, relatively weak stock markets (comparedto the late 90's) along with continued global economicuncertainty have changed the way many Canadians are investingtheir hard earned dollars. More and more Canadians are venturinginto the rental property market, some swayed by the real estateappreciation that we've seen over the last few years. Otherswant to add real estate to their investment mix to betterdiversify their investment portfolios.Approximately 25 per cent of the condominium units built inCanada will be used as rental apartments. Additional investmentis occurring in multi-unit residential properties such asduplexes, triplexes, and fourplexes, as well as single-familydetached housing. Canadians are looking to have the rent fromthese investments at least cover their costs and, over the longterm, gain a reasonable return on their investment.Consider Your Mortgage and Financing Needs CarefullyInvestors who consider adding rea...

...l estate assets are oftenconfused about their mortgage financing options. Since the BankAct allows only up to 75 per cent of the value of a property tobe in uninsured financing, many investors who put 15 per centdown use an insured mortgage for the difference. The cost of theinsurance premium can be as high as 4.5 per cent, which cantranslate into a $10,000 cost on a $225,000 mortgage. Even so,not all investors can meet the strict requirements that go alongwith an insured mortgage on rental property. These requirements include having a relatively high net worthand demonstrating that you can carry the mortgage payments inaddition to your other debts without factoring in all of therental income you will receive. This certainly doesn't leaveroom for many Canadians who want an investment property.Another option if you have a good amount of equity in yourprincipal residence is to take some of that equity out,typically through a line of credit, to get a...

...a big enoughdownpayment that then may qualify you for a regular firstmortgage. Financing Made Easy To simplify the process, you can also now consider thoselenders who have mortgage products specifically designed forsmall investors who own or are purchasing a residentialinvestment property. Canadian investors can now access up to$500,000 without costly mortgage insurance premiums, orleveraging the equity in their principal home. Up to 85 per centfinancing inclusive of applicable fees is available for singlefamily units or up to a fourplex located in major urban centres.Properties on well and septic systems located in a town orsubdivision can also qualify. Typically, 75 per cent financingis available for condominium units and all properties mustgenerate a positive cash flow.Perhaps now more Canadians can heed the wisdom offered by manyfinancial professionals and diversify, diversify, diversify byincluding real estate in their investment portfolios.