Rental Pools

[pmckendrick]

I am currnetly in the process of buying two properties and both are in a rental pool. I have been informed by our mortgage broker, that the lenders are not going to approve our mortgage due to the fact that we are in a pool. In order to obtain a mortgage, we need a letter from the managment company which states that we can be independent and another letter from us stating that we will do our own managing. At such time we will then be approved for the mortgage. I have not heard of this before. Is this a new policy? Patti

 

[DonCampbell]

Hi,

It all goes back to the Golden Rule, he who has the gold makes all the rules. The sad part is that the bank`s safety of payments is better if the property is in a pool, so you must question why, unless they have see a lot of fraud in these types of investments in their bank.

Time for your Mortgage Broker to earn their money, they should know which banks have this policy and which ones are accepting of rental pools. Get on the phone to your broker.

 

[brentmatheson]

I`ve purchased a few properties that were in rental pools. The broker ended up using TD and Scotia, and the only confirmation that we had to provide was that the unit had a separate title and we would have full control it (ie. self manage or move in if we chose).

Brent

 

[PeterKinchMortgageTeam]

QUOTE (brentmatheson @ Feb 29 2008, 06:36 PM) I`ve purchased a few properties that were in rental pools. The broker ended up using TD and Scotia, and the only confirmation that we had to provide was that the unit had a separate title and we would have full control it (ie. self manage or move in if we chose).

Brent

Most lenders are okay with rental pools as long as they are not mandatory (ie you can opt out IF you wish). Most often its the way that the deal is presented - most lenders assume (as do many brokers) that rental pool equals hotel condo which very few lenders will touch. If it is a mandatory rental pool, there are still lenders out there, but they tend to be a little more pricey.


Its all in the way that the deals are packaged! Make sure your broker understands how the rental pool works and knows the details. If it is presented to the lender with full details, its more likely to be approved!

 

[pmckendrick]

QUOTE (CanadianMortgageTeam @ Feb 29 2008, 09:01 PM) Most lenders are okay with rental pools as long as they are not mandatory (ie you can opt out IF you wish). Most often its the way that the deal is presented - most lenders assume (as do many brokers) that rental pool equals hotel condo which very few lenders will touch. If it is a mandatory rental pool, there are still lenders out there, but they tend to be a little more pricey.


Its all in the way that the deals are packaged! Make sure your broker understands how the rental pool works and knows the details. If it is presented to the lender with full details, its more likely to be approved!


Thanks everyone. I have had a conversation with my broker today, and she indicated to me that she will try again with TD. She has been informed that banks are now more leary due to people not disclosing all the facts re the rental pools of their properties. Unfortunately, we all pay when investors do not disclose the correct facts to the lenders.

 

[RobMacdonald]

Just to add a little bit more information and some further clarity to the `rental pool` situation. The words `rental pool` gets used too loosely in real estate, and the true definition means something completely different to the banks that offer the financing. A true `rental pool`, by the banks definition is a mandatory requirement that each unit holder must assign their unit to the rental holder. The rents are assigned to the pool manager, and then divided up less expenses at month end.

What the bank`s concern becomes is that on the event of a foreclosure, they are not in control of the rents and/or the property. If your broker can prove that the rental pool, as referred to, is simply an optional management arrangement, then most bank`s will be okay with the terms and will offer financing.

A rental pool, by definition, may be registered on the title on the property. Another form of rental pools hotel/condo building, typically found in resort areas. Both types of properties are very difficlut to finance.

Just be very cautious when using the terms `rental pool`, as the definition is misleading and confusing depending on the province the property is in.

 

[pmckendrick]

QUOTE (RobMacdonaldCMT @ Mar 4 2008, 12:19 PM) Just to add a little bit more information and some further clarity to the `rental pool` situation. The words `rental pool` gets used too loosely in real estate, and the true definition means something completely different to the banks that offer the financing. A true `rental pool`, by the banks definition is a mandatory requirement that each unit holder must assign their unit to the rental holder. The rents are assigned to the pool manager, and then divided up less expenses at month end.

What the bank`s concern becomes is that on the event of a foreclosure, they are not in control of the rents and/or the property. If your broker can prove that the rental pool, as referred to, is simply an optional management arrangement, then most bank`s will be okay with the terms and will offer financing.

A rental pool, by definition, may be registered on the title on the property. Another form of rental pools hotel/condo building, typically found in resort areas. Both types of properties are very difficlut to finance.

Just be very cautious when using the terms `rental pool`, as the definition is misleading and confusing depending on the province the property is in.


Thanks so much. That really clears up the confusion, and gives me a better understanding of the issue. I will now make sure that the lender is aware of the situation right from the beginning. Patti