SS TV1

#1 Rule for Financial Freedom in Your 20s

a) Focus on borrowing as much as possible

b) Build credit with credit card and try to get line of credit (LOC)

c) Use your income to pay interest

d) Invest LOC in buying First Property (5% down payment), business

Even you lose money, you have time for yourself to restore

No risk, no reward; Take risk and do something bold

High cash flow rental properties in Windsor. Prices got triple in last 3 years.

In 2019 a youth purchased a property in $190,000 / rented $1750/month now $2100/month

In 2021 $485,000

In 2017 $1200 rental apartments are $2400 a month now.

3BR 1WR house for $500,000 x 20% Mortgage $1600 Insurance $100 Property Tax $200 Property Management $100 Rent $2400 Free Cash Flow $400

With 5% down, you'll roughly breakeven

Investors have a very good flow in this city now

Real Estate Wealth Hack; Huge Tax Refund for FTHBs. First Time Buyers 5%. Open an RRSP. Deposit your 5% down payment. Withdraw it right away.

Tax deduction on your deposit with no penalties for withdrawing to buy first home. You have 15 years to payback and pay no tax on it. You can do it every 4 years.

Marginal Tax Rate x Deposit = Estimated Refund

Great saving on First Home purchase

First Time Home Buyer

RRSP $35,000 for 90 days to show income

COVID prices hike

First Time Home Buyer (1)

Three things lender will look into; Income, Down Payment and Credit.

For job employment letter after probation period and not more than 30 days old.

Up to date pay stubs no later than 30 days. Last 2 years T4 and Last 2 years NoA (Notice of Assessment)

If any child benefit bank statement will show it

Down Payment: proof from where it is coming from (2)

Last 3 months bank statement from where receiving that money

In case of First Time Home Buyer parents help for Down Payment

Gift letter stating that money is gifted to you. Better if 3 months money rests in your account.

Min credit score 680 (3)

If two person are going on title and one has higher score, it helps

Credit history and payment history also matters

Missed or late payment also matters

Maintain good credit score, careful, not neglectful

Mistake First Time Home Buyer make (1)

They try to time the market

They wait for market come down or market crash

Prices rise and they regret

Thumb rule is, if you can afford, buy now

Having brand new car may make difficult to get mortgage. Bank will look into First Time Home Buyer Debt service ratio. Income and Debt. If you have co-signer, it may make big difference.

Debt service ratio and credit history. Having no Debt and no payment history is also negative point. If it is only car loan payment and no other credit card history, may be a good point. It all depends on situation.

Mistake First Time Home Buyer make (4)

After buying home they buy furniture and rack up their credit card. Change in Debt ratio can affect your position. Before closing they may look into again. Any Debt of any kind may be an issue.

Wait for closing before buying new car or putting anything on your credit.

First Time Home Buyer (Hidden Cost)

$500K then min down payment 5% = $25K plus 1.5% (roughly) closing cost which includes lawyer's fees, land transfer tax, title insurance. So you need more or less $30K

First Time Home Buyer (Co-Signing on Mortgage)

Most of the time parents co-sign for their kids. When a co-signer comes off title before the house is being sold, it is viewed similar to a sale and land transfer tax has to be paid. Lawyer can educate may be when you put as 1% owner then little money as land transfer tax required.

1) First Time Home Buyer (live with your parents as long as you can)

Live rent free or very very low rent payment

Save as much money as you can to pay down payment, closing cost and your own bills

While renting you are building equity for someone else

2) First Time Home Buyer (don't get yourself into new debt nearing the time you are looking to buy - wait until after!)

New credit card, loans, car loan / lease; anything that can affect your debt service ratio

These things lenders look into; monthly debt load vs monthly total income

Wait until after you've closed on your house - you can still be affected by change up until closing

Here note difference between buying and closing

3) First Time Home Buyer (Build your credit)

You need credit history

If you are not using credit card very often, car loan payment would be helpful

Get a credit card with a limit of $2000, avoid spending $1000 on it, pay it off in a timely manner

4) First Time Home Buyer: Don't get too caught up on minor issues; color of the walls, kitchen and bathroom; Cosmetics can easily be changed

Location, Square footage and ceiling height, layout, potential

Cash Back Mortgage: your debt load is hurting the amount you qualify for - use the cash back towards debt to relieve some or all of that debt load to help qualify or more money.

You don't have enough money to cover your closing costs - take the cash back to cover the closing costs so you can still get into the market.

Interest rates are at an all time so low right now. So this type of mortgage could be a great option for you!

Tell the bank that you’d like to refinance; Get your income docs in order

Max amount you can pull out as cash is: 80% x FMV (Fair Market Value) – Existing Mortgage Amount

Bank orders an appraisal to determine the new FMV

Bank lends you at the current mortgage rate. You can also ask for blended rate. The cash you pull out is tax free.

Buy an investment property / Resale; renovate your house; Start a business;

Contribute to your RRSP and get a tax deduction

Contribute to your TFSA and buy stocks

Buy crypto / NFTs; Earn 10% interest on Nexo / Celsius / Block Fi

Due to price increase people have enough equity in the properties which they can pull out by refinancing. If you take out $50,000 mortgage is increased only $5 per month. Because you will get amortization 30 years instead of 25. When rates are low always think about refinance.

DON’T use all the cash you pulled out to buy meaningless things!

Use it to INVEST in something and BUILD YOUR WEALTH.

Banks asks about intention when you request for funds. You can change your intention as per circumstances but with valid reason. Like you shifted from any city to Toronto. But you have to get back after a while due to weather or some other reason. You should always stay true with your intent.

Stop trading your time for money. Instead of working hard, learn how to work smart

Earn with your mind, not with your time.

Nobody will value you more than you value yourself.

AirBNB possible in rented property

Find a landlord willing to let you AirBNB. A lot of landlords are OK with this offer to pay extra rent upfront.

Buy cheap modern furniture from Marketplace.

Offer a discounted rate. $150 / night x 80% capacity = $3600/month

Rent + Utilities = $2000/month

Cash flow = $1600/month

Review 3 Ls: leases, laws and local regulations

Hidden Benefits of Paying Taxes

More income = More taxes

People focus on negative side of taxes

Don't get trapped in low-wealth mentality. Focus on your borrowing capacity

Use leverage safely = Financial freedom

Don't let taxes be a decision maker for your investments

Increased income = Increased borrowing capacity

Government just wants their cut

Government is partner with the banks to give you $5 credit for $1 you declare your income.

Earn $275 / month for free with smart approach

Claiming Capital Cost Allowance (CCA)

Inflation Tax Hack

Depreciate your rental property

Little to no tax to your rental income

Find out the city assessment value of the house itself

A portion of building falls under this because land is excluded

Half year rule (1st year); following years calculated on a declining basis

Most of the properties come under Class 1 (4%); (4%) write off every year

Finally tax would be paid on all write offs

This is valuable when inflation is high

Dollar has low value as compared to few years ago

Take advantage of way Less taxes

Preserve the value of your money.

5% vs 20% down:

5% is low upfront cost. First Time Buyers. Eligible to participate in the home buyers plan. You can pull money from your RRSP tax free. Condition is that money is there for more than 90 days and is used to purchase home. Hard to get mortgage.

Prices of properties are high. High sustainable income required for mortgage approval.

Less than 20% need to buy mortgage default insurance. This is equal to 4$ of the purchase price. Available for properties less than $1M; CMHC (Canada Mortgage And Housing Corporation), SCHL (La Société canadienne d'hypothèques et de logement), Genworth, Canada Guaranty.

With 20% down payment easy approval from A lenders and B lenders. Lower monthly payments.

If investment property 80% of market rent is considered income.

High upfront cost.

Stop home shopping before preapproval (2)

You make sure you qualify for mortgage or not

If yes how much

Otherwise you will waste your time and realtor's time

Market is very hot and sometimes properties get sold the same day it comes in market (3)

If buyer can't get which he liked then it becomes hard for them because they would start looking that same kind of property.

Sell your existing house first before putting an offer on the next one. Sometimes people get stuck due to any reason. Take out the equity to buy next property is the best strategy.

a) 25% ROI (Return on Investment). $500K property needs $100K from you and $400 comes from bank (mortgage). You rent it to cover your costs or you live yourself. If market 5% as usual. Property will be at $525K in one year.

b) Risk does not = the amount of debt owed. Risk is a function of demand and control. Buy property in most in demand area. At Entry Level town homes are always in demand. Second thing is control. As compared to stocks, real estate is tangible (physically see, touch and feel). Rent, sell, change its use (make duplex, triplex), improve and reassess. Take the equity and buy another property.

FSBO When you sell your house by yourself. One simple example and you will learn. A person wants to buy a Rolex watch. He goes to downtown. Pays money and buys the watch. Other person is looking Rolex watch from garage sales and finds exact same watch there. Price will obviously be different.

Same is with your property. People who would be looking for FSBO, looking for a deal.