Investors must be more creative around financing

With lenders constantly changing their regulations and guidelines, investors have to find more creative ways to secure financing for new income properties, say experts.

“The big lenders are not going to be as easy as they once were,” said investor Gillian Irving. “There are always ways to get financing, but right now everyone needs to put their creative hats on.”

Dave Butler, principal broker at Butler Mortgages, added: “Since the beginning of last year, there seems to be a concerted effort by a lot of lenders to change their qualifying guidelines. This is not helping investor applications at all. We have to put on a puppet show for the banks.”
Examples of lender changes include an increase in square footage requirements, a decrease in the number of doors, the inclusion of property management, and different qualifications for income.

Jose Jafferji, a real estate investor and Realtor, said it has become harder to qualify because everything is based on debt-to-income ratio, which can be challenging in some markets.

For instance, lenders look favourably on investors with properties that cash flow. “In Hamilton, for around $270,000, you can still get almost the same in rent, so you’re going to be able to cover all your expenses on the rental income.

“You’re able to service your debt fully with this investment in Hamilton, but there’s no way you’d be able to do that with a $400,000 or $500,000 house in Mississauga.”

Nick Bachusky, a mortgage broker at MortgageinOttawa.com, would advise investors to charge as much rent as possible to improve their debt-to-income ratio. He said: “Increase rent to start with and then negotiate with tenants to bring it down from there.”

And investor Nick Vescio said more stringent lenders means that buyers need to make sure they know what they’re doing. “Otherwise, you’re going to lose your shirt,” he added. “They’re looking for 35 per cent down. Things have gotten tighter, in my opinion.”

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Source: Canadian Real Estate Wealth