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Rental Property Overload

Rental-Property-Mortgage With today’s new rental programs it’s tempting, and much easier, to accumulate income properties quickly.  That sometimes has a downside though, as this Globe & Mail piece illustrates. 

Picking up rental properties with zero down can seem like easy money.  Unless you have adequate cash reserves, however, it’s a roll of the dice.  What happens if you’re overleveraged and barely covering carrying costs, and then the furnace dies, or you have uninsured water damage, or you get a prolonged vacancy?

Worse yet, what happens if property values decline, your personal finances deteriorate, and you’re in a negative amortization scenario (i.e. you owe more than the rental is worth)? 

Tools like CMHC’s new 100% financing program are a boon to prudent investors.  Unless you plan for the worst, however, overexposure to rental real estate can be your undoing.

Talk to a mortgage planner openly about your ability to carry multiple properties.  A good planner will help you create contingency plans if your real estate investments don’t pan out.