A must for any real estate investment, the refinancing of a multilogment, is not a pleasant step. To maximize leverage and minimize risk, having maximum refinancing is an interesting strategy. It allows, most of the time, to fetch large amount that allows us to invest money again. For example, if you invest $100 000 on an income building, and you are able to get it back at refinancing a few months later, you can say that you have made your money work well. But how?
The different options for multihomed refinancing
Some options are available to you: Flip, new construction, purchase-resale often called speculation, etc.
1-” The flip ” is a duplicable option to buy a building, renovate it and refinance it or resell it. If you sell it, you will be taxed on profit (which happens to be the price sold less the purchase price). If you refinance it, you will be able to get back for some or all of the money you originally invested. You will then not be taxed on profit but be careful, you will have to invest the money again. You can’t go shopping and buy a new home theater with the money you’re going to take back. This strategy will take more or less 1yr to be carried out according to several factors: the time to relocate the tenants, to have the work done by a qualified contractor and to re-rent the dwellings. This option is good if you are in acquisition mode and you plan to keep your buildings for a long time. In addition to giving you a nice pension fund if you wish, the fact of having renovated your entire building will save you problems for the next few years. You have to calculate the numbers before you buy your building. Knowing the sector is often one of the most important points. We recommend that you renovate the whole building and with good quality materials to be able to rent more expensive accommodations. By renovating with condo quality, you could potentially rent at about the same price as condos in your area. In this way, you will increase the value of your building since the value is based on the income of your building. Speaking of paid renovations here are some examples :
- System Installation to provide Wifi Internet to tenants
- Doors and windows
- Air conditioning
- Make open areas
- Conversion of heating to tenant’s expenses
Several other renovations are good for the glance and will help to rent your accommodations more quickly and to good tenants :
- Luminaires and recessed
- Quartz or granite countertops
- Heat pump to reduce tenant’s heating costs
- Home Staging
- Several other
2-In the case of a new construction, you have to buy a land, you have to build a building and only when it is fully rented, you can refinance it. If you have calculated correctly, you will be able to resume your bet. This strategy will require at least 6 months and often it’ll take more time. It is also necessary to calculate the time to do ground studies, to change zoning if necessary, to have plans made by an architect, to have these plans approved by the city, to find a good qualified contractor to build and finally to rent the accommodations. If you are well organized, you will even be able to rent the buildings during the construction to reduce the delays before being profitable.
When your project is well optimized, you can go to the refinancing stage. Look for a good and proven mortgage broker who can take care of you. Check with whom he has already worked and do your little investigation before. If you know people around you who have already done business with him and everything has been good, it is positive. Now, with social networks, it’s pretty easy to go and see the comments on a person or agency. The right broker will allow you to maximize your return, and resume your bottom-up and other investments that you have made on your building. It is not an easy task to mount a formal case. Your file must be complete and realistic according to several scales. You must know the criteria of financial institutions, the ratio of debt coverage RCD, interest rate, amortization, CMHC, ratio loan VPN value, economic value EV, market value VM, the qualification rate, and I pass. Complete trainings of several days are necessary before you can begin to master these calculations in a real world.
One thing is certain from our point of view, real estate investment, if you are well trained is a safe investment. The MrexCollege, the Real estate Investor Club, Immo facile, the faculty of real estate enthusiasts are resources to know. It is not the training that is lacking.