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Discussion Starter #1
Hello, I have a new construction home closing in Nov2020. It's bought as a second property but most probably I will rent it out.

I paid the deposit (~10%) on Aug2019 from a HELoC on my primary residence. I also planned to pay the rest of down payment and closing fees from the HELoC so that I can continue to claim the interest. I have two questions:

1) My primary residence should be renewed in Sep2020. I am considering swiching lenders. I think in order to switch, the easy way is to consalidate the mortgage and the HELoC balance, into one new mortgage. If I will do that, can I still do my own calculations every month and continue to claim the interest on the amount used as a down payment for the rental. If not, I may avoid switching lenders and stay at a higher rate ..

2) I am trying to make the rental cash flow positive. So, I plan to get a tangerine HELoC mortgage, and pay interest only on 65% of the house price, and interest only on the down payment (20%), closing fees, appliances, .. paid from the primary residence HELoC. I will have only 15% of the house price amoritzed on 25 years. Any rental income after all expenses I would use it to pay my primary residence mortgage or for personal expenses. Is that okay from the CRA point of view?
 

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1) I would lock in a portion (the rental costs) of the heloc at mortgage rates, this makes the bookkeeping much easier.

2) trying to make the rental cash flow positive by paying it down isn’t making the rental cash flow positive, it’s fudging the numbers to justify a bad purchase or investment. The property either cash flows or it doesn’t. Fudging the numbers won’t make it a good investment.
 

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Discussion Starter #3
Thanks for the reply.

1) I would lock in a portion (the rental costs) of the heloc at mortgage rates, this makes the bookkeeping much easier.
I will try to do that. Otherwise, I assume it will be just the bookkeeping burden, but I can still can claim the rental cost part.

2) trying to make the rental cash flow positive by paying it down isn’t making the rental cash flow positive, it’s fudging the numbers to justify a bad purchase or investment. The property either cash flows or it doesn’t. Fudging the numbers won’t make it a good investment.
Is there a specific number of years for the mortgage amortization to use when calculating the cash flow? What if the cash flow is negative, or the mortgage is arranged such that I pay interest only, but the capital gain when selling the property in 10-20 years makes it a good investment?
 

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Capital gains is gambling, not investing. For example, I just put an offer in on a new 1 bedroom place for 40k. It sold for 125k back in 2007. Had a mortgage of 100k. At 125k it would never cash flow, obviously it didn’t, and his capital gains didn’t exactly make up for it.

On the other hand, if I get it for 40k (or maybe a little higher), I’ve got a backlog of people willing to pay me $850-$900/month rent. I will cash flow and never worry about capital gains. If I get capital gains, that’s a bonus. When I calculate my cash flow, I use the entire amount of the purchase price because money is working for me or its not. If I pay down the mortgage I just have an insurance policy for the bank (in the example above, the guy lost at least 25k to the bank) it’s not making me money. All 40k I paid is being used to make me $850-900/month, so I need to account for 40k in my cash flow.

at least the previous owner has a large capital loss to write off, and a destroyed credit rating for 7 years...so it must have been a good investment right?
 
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