Advice needed on buying a multiple
Question: I am interested in buying a multiplex. It has 6 units and I have visited it already and is in decent shape. I am in Canada, so not sure if same as in USA, but banks will lend you only 75% on multiplexes if you do not occupy one of the units. I have the 25% to give, but I really wanted to buy 2-3 different buildings and splitting it as cash down on three rather than on one. Obviously I have not found the other two yet and prefer to take it one step at a time.
Is there anyway for me to get the bank to finance with 5-10% down? I am dealing directly with the seller with no agent, so not sure if I could be creative and benefit from that.
Any advice is greatly appreciated
Answer: Anything beyond 75% and you are dealing with the rules of the mortgage insurance company.
Is there any way that the seller would take back a second mortgage? Use the bank for 75% and finance another 20% with the vendor? rental property is not taxed as capital. you don’t get to pay the capital gains tax on price increases like you do with stocks and bonds. it’s a “depreciating asset” and has it’s own tax rules. I’d suggest looking at the taxation carefully and understanding it before buying. Actually when you dispose of the rental property, you pay capital gains tax on the difference between the sale price and the depreciated capital cost. So, for example, you bought a property for $100k, depreciated it down to $0 on the books, and then sold the property for $500k, you would include $500k on your tax return as a capital gain since the CCA allowance reduced the adjusted cost base of the home to $0 and the tax owing is the difference between your ACB and the actual selling price.
If you die, or if you ‘give’ the property to someone, CRA will still ‘deem’ a value for disposition, which usually would be a value consistent with other similar properties in the neighbourhood.
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