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Mortgage to buy a house in another city
July 13, 2020
1:20 pm
MarkoBC
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July 13, 2020
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We are self-employed yard maintenance workers living in Vancouver who are growing tired of living in this expensive city and would really like to buy a house, maybe in Nanaimo on Vancouver Island. Although our income isn't super high ($80k), we do have $200k in savings from a house we sold twelve years ago in Victoria.
So we are faced with a dilemma. We have lots of savings and a steady income stream for the last decade, but if we move to a smaller town on Vancouver Island and try to get a mortgage the bank will see that we are starting from scratch, even though we could easily put down 25%-30%. They would likely want us to show a decent income stream in our new location for a couple of years before we could qualify.
On the other hand, could we just continue living and working in Vancouver and buy a house in Nanaimo and rent it out to qualify for a mortgage? Could we then move to Nanaimo in a year or two and occupy the house or would that violate the mortgage, even if we had not missed a payment?
Moving to Nanaimo and renting and starting over for a couple of years seems the most feasible option, but we are getting older and the wait is just something we would love to avoid.
Of course, the pandemic complicates everything, including the likelihood we could start up our business on the Island.
Just curious whether anyone else has somehow gotten a mortgage for a house in a different town from the one they work in? Has anyone who is self-employed moved and been able to get a mortgage right away? Does a steady income stream in your previous town and a big down payment make any difference?

July 13, 2020
3:10 pm
Loonie
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My experience may be too old to be of use, but when we bought our house a long time ago, the bank was only interested in the income from the person on salary. The income from the person who was self-employed was of no interest to them - and we put down 35%.

Because you will essentially be losing your income stream when you move, I think the banks would look on you with scepticism. They may also note that you are "older" and may wonder if you can keep up the physical work involved.

If I were in your shoes, much as I might want the house in Nanaimo and to get it now, I would be asking myself if it's really feasible to maintain the mortgage payments while rebuilding the business. Buying and renting it out might be feasible, but you will get stung on capital gains, if any, because it's not your principal residence. You will need to get it professionally evaluated on the date you finally move in. Landlords need some capital to deal with emergencies, bad tenants, times when not occupied etc. And you would need to know that the rent would fully cover the mortgage and taxes. Another ocnsideration is that you would need to be paying rent in Nanaimo yourselves, while building the business. You might very well be paying as much rent as your tenants, and getting nowhere.
Alternatively, if you are eager to move, you could perhaps buy something that you already have enough capital for, even if it's a trailer.
I wouldn't count on putting the whole 200K into the property. You will need to keep some aside fro repairs, bad tenants etc., as well as money to fund yourselves during the transition in income.

Perhaps you have already considered this, but I would look at seasonality as a factor. You want to move at a time when it is good to pick up new clients, whenever that is. The work is seasonal in terms of how customers see it. What time of year do you normally pick up new clients or lose old ones? Ideally, you might be able to make this coincide with the time of year when real estate is harder to sell, but this might also mean less choice.

What does a modest house in Nanaimo cost these days?

Perhaps commuting to some old clients would be feasible, to ease the transition, but I am not sure what the ferry rates are these days.
Best to just ask the bank directly, as a "what if?" question.

July 13, 2020
10:00 pm
Rick
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I've dabbled in being a landlord (and a tenant). Without a doubt, it has it's benefits and challenges. If not for a income suite in our home back in the 80's, we probably would not been able to keep it. Good tenant is a Godsend... bad tenant.... nightmare. You can't tell which is which until it's too late. IMHO, the tenancy laws in BC are skewed heavily toward the renter. I could not imagine having to cross on a ferry to deal with renters issues out of your pocket. Don't kid yourself...they're renters. Most don't have the same incentives you do as an owner to maintain and upkeep their residence....and you are the recipient of their ire when something goes awry or breaks down. Ever had a phone call at 4:00 AM to inform you that the basement was full of water, or the roof was leaking because the gutters hadn't been cleaned since they moved in? You do an inspection to find the spare bedroom was used as a litterbox for their 7 cats and the carpet and flooring were ruined. Don't think their 1 month damage deposit will cover it.
At the very least you will need someone to manage the property for you while you are on the mainland "just in case".
Sorry...don't mean to be a Debbie Downer. I have had excellent tenants that became close friends. I've also had near-nightmare tenants I was lucky to get rid of. More the former than the latter.
On the tax front, it's like Loonie said. But their are also extensive write-offs you can use WHILE you are renting..including mortgage interest (back in the 80's anyway). I don't think I ever actually made much money to declare after my deductions prior to selling.
And the banks....I don't think I'd take that deal. Maybe forthrightly buy it as an investment for rental.
Have you considered moving east instead of the island? We looked all the way out to Hope and the farther out we went the less expensive it got. Not to mention no ferry(write-off) to deal with.
Good luck what ever you do and welcome to the forum!sf-cool

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