The right evaluation is critical in buying your next investment property. There are many different formulas and calculations that you can use to evaluate potential investment properties. Today we look at Debt Coverage Ratio (DCR) Debt Coverage (Service) Ratio (DCR or DSR or DCSR): Calculates to see if the net cashflow will cover the cost of financing. Specifically, the Net Operating Income before financing (NOI) is divided by the cost of financing. Lenders want to see at least 1.1 or 1.2 co...

The right evaluation is critical in buying your next investment property. There are many different formulas and calculations that you can use to evaluate potential investment properties. Today we look at Cash-on-Cash return (COC). Cash-on-Cash return calculates what rate of return you receive on the cash that you put into the investment. When purchasing, the cash is the downpayment and expected renovation costs needed. Specifically, net cashflow (Net Operating Income minus financing costs) d...

The right evaluation is critical in buying your next investment property. There are many different formulas and calculations that you can use to evaluate potential investment properties. Today we look at Capitalization Rate (Cap Rate). Cap rate calculates the Return On Investment (ROI) relative to the purchase price. Specifically, the Net Operating Income (NOI) before financing is divided by the purchase price. This will give us a percentage which we can compare to market cap rates for the a...

Considering using your home equity to purchase your next investment property but not sure if it is a good idea? Refinancing your home to take out equity to use for investment can be a great way to build your investment portfolio. The key is that the investment rate of return is higher than the cost of borrowing. With any investment, if you can borrow money at a low interest rate and invest this money with a high rate of return, then you are making more money than it costs. This is a great w...

Canadian’s love to own investment properties. As a mortgage broker, I help many people purchase investment properties every year. Here are three common mistakes that I help people avoid when buying an investment property. Not taking into account all the costs of owning an investment property. From a lender perspective, they will include all possible costs of a rental property when qualifying you for a mortgage. Obvious costs such as property taxes, insurance, and utilities. But also, a...