My DF (dear fiancee) has family who live in a nearby village, and when one of their neighbours passed away they immediately put in an offer to purchase the property. They then passed it off to DF, she agreed to it (somewhat blindly, IMO), so the offer went in in her name. Now, we are having a bit of a time securing a mortgage due to her lack of credit history, and because of the age of the property. Here are some details:
Current Price: $69k
This is very low for the area, and well below the property tax assessment. The property is actually two adjacent 150'x100' lots, one with an older mobile and one vacant but levelled. The mobile is in tact and "liveable" but would need some updates. However, lenders are very hesitant to finance older mobiles (this one is from 1976), which is part of the issue.
Gross rents: $700
This is my estimate based on some kijiji listings which come up once in a while, but there are usually very few to go on since it's a small village of a few hundred people. The only reason for people to live there is because it's close to a military base. Most people commute to the base from the next nearest town (40km, pop 6k) or city (50km, pop 70k). The rents in the closer town/city would be closer to $1k for a house, or $600-800 for an apartment.
Expenses:
Taxes are low here, about $650/year. Tenant would pay utilities. Insurance would be on the order of $800/year. The somewhat unknown cost would be repairs/maintenance. We have a somewhat guaranteed tenant for at least a couple of years - DF's step brother who currently lives with her parents and is looking to move out but stay in that village as he works at the base.
Other factors:
DF's parents live literally next door to this property, and were considering buying it themselves. They are still interested in buying the vacant lot which can be severed from the title once the property is purchased. Her dad is recently retired, fairly handy, and is willing to help out with much of the repair/maintenance side of things. The disadvantage of having her parents there and renting out to a family member is we lose a lot of control regarding what gets done to the property.
So, first off, if we can get a traditional mortgage at 3.44% (what we were quoted if it goes through with me cosigning), is this a good deal? My calcs show that it is, but I may have missed something. This would be for a 5 year term, 25y amortization as is common in Canada.
Secondly, if we can't get the mortgage, what are some other options? It's possible that if her parents cover 20-25k for the emtpy lot that they want, we can scrape together enough to cover the rest between the two of us. However, this would require me to either cash out most of my TFSA investments (which are at a low point right now) or take a significant sum out of my line of credit at 6.5%. If we went this second route, both our names would be on the title as opposed to just her name in the first case.
Either option would deplete her current liquid savings, whereas the first option would leave me rather uninvolved apart from being a guarantor for a loan for one year. I know some people are opposed to buying real estate jointly when you aren't married but I'm not too worried about it, so no need to comment on that.