Is financing getting tougher for the self employed?
It seems that more and more Canadians are self employed.
The self employed tend to have less steady income then full time employees and as a group it can be more difficult to get a mortgage or refinancing.
As a self-employed website developer who had recently restructured his business, Greg Schmidt knew that refinancing his mortgage wasn’t going to be a piece of cake.
“I had a little bit of a line of credit built up from shifting the focus of the business and my car lease had come up for being bought out, so I needed money to take care of that,” said Mr. Schmidt, a single 42-year-old who owns a home in Toronto that includes an apartment for income. “It turned out the best way to go was to do a new mortgage, increase the amount of the old one and take care of those costs.”
However, when he approached his bank, he was told “the numbers didn’t work for them.”
Read the full article in the Globe and Mail.
October 17th, 2012 at 6:35 am 1
Yep, it turned out the best way to go was to roll his formerly tax-deductible interest payments and car expenses into his big amortizing, non-deductible, non-readvanceable one.
And I must echo a mocking comment from the soon-to-be-dead Globe comments section — Restructuring? The guy’s a web developer; all he needs is a clean shirt and a laptop!
Hot debate. What do you think?
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October 17th, 2012 at 7:26 am 2
“when he approached his bank, he was told “the numbers didn’t work for them.”
What were the numbers? You’d think they would give a hint. Self employed web developers could make 2K per year or they could make 100K per year.
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October 17th, 2012 at 7:48 am 3
“restructure”? (that’s kind of a vague word). More details please!
Anyway, his re-fi problems could be from many sources.
Maybe he is just making less money…and had restructured his approach as a result of that. Banks care about GDSR, TDSR, security offered, and other soft issues like history with them and credit scores. Sometimes things change and the numbers dont always work. Maybe before he did more of a “stated income” type deal, and now they are looking at income.
On the other hand, maybe he makes great moneu, and performed a miniature tax-reorg “section 85′ing” his self employment assets into a corporation to defer tax on money earned that he did not need to spend at the time, etc. If you restructure this way, you will show lower income on all lines of your T1. All banks treat this differently, but it is always more risky for them to consider income at two levels rather than one, especially since now they have to look at corporate financial statements every year, so this will show up in rates, limits, and overall willingness to get the loan done.
I’m not sure that he is going to get much sympathy in either of these two situations, as:
1)Stated income mortgages are rightfully being culled, and
2)Whoever advised him to incorporate should have worked that decision all the way down to the personal financial planning and tax level, and besides, he is in control of his personal income with a corporation, just bump up the bonus or dividend.
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October 17th, 2012 at 8:40 am 4
looks like the credit taps are closing for the COCS – Caucasians on credit, lol.
Hot debate. What do you think?
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October 17th, 2012 at 8:48 am 5
@Can’t wait: “looks like the credit taps are closing for the COCS – Caucasians on credit, lol.”
Can you give us a break with your bigotry and racism? Thanks.
Hot debate. What do you think?
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October 17th, 2012 at 8:55 am 6
From Ben Rabidoux’s latest post (with a hat-tip to Mike Fotiou):
This graph shows the difference between nationwide “raw” sales figures and the “seasonally adjusted” sales figures over the past 20+ years. We’ve broken a record with last month’s “seasonal” adjustment.
Discussion over whether last month’s adjusted sales statistics were cooked or not should start and end with this graphic.
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October 17th, 2012 at 8:56 am 7
@Turkey: Argh. Image worked in preview, but not in final post. Look here.
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October 17th, 2012 at 8:58 am 8
@Makaya:
I agree it’s annoying to see this person, who seems to think they are funnier than they really are, push the acronym COC (Caucasian on credit), i don’t think it’s racist.
And if it is racist, it’s no more so than HAM and suggestions that asian money is driving the market, and descriptions of the number of asians lining up for pre-sales.
Either this board already full of anti-asian racists, in which case who cares about an anti-white racist, or these terms are simply descriptive in which case who cares?
Well-loved. Like or Dislike:
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October 17th, 2012 at 8:59 am 9
“looks like the credit taps are closing for the COCS ”
yup. crying and whining already started in G&M, next stop. CBC and Global..”bank told me that numbers don’t work buuuu” ….of course moron get a fuking job..dot com bullshit javascript rollovers do not count anymore
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October 17th, 2012 at 9:01 am 10
Does he ‘OWN’ his home?
I am not sure we all share the same definition of this word
This morning on CBC radio: ‘the RE market is finally picking up’ !?!??!?! WTF?
No explanation whatsoever…
This is quality journalism at its highest!
Well-loved. Like or Dislike:
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October 17th, 2012 at 9:37 am 11
And here I thought COC was Chinese on Credit? Caucasians… Chinese… seems taps are closing for Canadians on Credit, if you ask me.
Well-loved. Like or Dislike:
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October 17th, 2012 at 10:09 am 12
“COCS”
Hey you know what, a big portion of my income is, in effect, “Hot Asian Money” because it is generated based on productive output from Asia.
Hot debate. What do you think?
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October 17th, 2012 at 10:34 am 13
Ladies and gents, I present: The Most Delusional Listing Ever.
“But,” you protest, “there’s no content! No images, no write-up!” The Google street view gives you the general idea: cars up on blocks, a pit bull, surrounded by warehouses. The house seems pretty trashed, and the yard’s a disaster. If you could zoom in far enough, you’d see a prominently displayed box with an American Body Armor logo. Trucks, and the nearby fire hall, use the route frequently. There was a pretty major police incident at the house earlier this year.
$1.1M for this? If you think the property has development potential, think again. All three levels of government, plus the Port of Vancouver, plus the rail companies, have a medium-term plan to redirect traffic from Prior along what they call the “Malkin Connector”. It’s possible the property will be expropriated outright. If not, you can look forward to the existing truck traffic plus all the traffic that currently runs along Prior, and possibly a chunk of Terminal Ave. the current traffic as well.
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October 17th, 2012 at 10:43 am 14
@Makaya: you should also voice your concern to those who anti-asians in this blog; everything goes both ways.
Hot debate. What do you think?
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October 17th, 2012 at 10:44 am 15
Scary housing market of horrors.
Trick but no Treat.
Boo hoo.
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October 17th, 2012 at 10:50 am 16
Just overheard my co-worker turned into an accident landlord.
Tried to sell his old property at Coquitlam after purchasing a big one at Surrey. 4 months passed without even 1 offer.
He is day-dreaming to sell for more next year.
Well-loved. Like or Dislike:
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October 17th, 2012 at 10:54 am 17
@good-format: COC or HAM?
Hot debate. What do you think?
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October 17th, 2012 at 11:13 am 18
“Owner is looking for tenant who cares and maintains the unit following maintenance manual. No Pets, No Smoke. No oil fry cooking,”
http://vancouver.en.craigslist.ca/van/apa/3332875369.html
$1530 for 467sqft, and you expect the tenant to maintain the place and you tell the tenant what they can cook in their own home.
I should rent this place, bring in the nastiest pitbulls I can find, and invite the entire DTES for the biggest smoke-a-thon and deepfry cooking contest you’ve ever seen (don’t worry about the lack space, there’s room in the halls). Then I’ll make the landlords life endless stress as I’d demand my damage deposit, and get it back (twice over) because they don’t know the rules. Finally, I’d gather all information I have about the landlord, and call the CCRA just for the helluvit.
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October 17th, 2012 at 11:20 am 19
@Makaya:
http://www.youtube.com/watch?v=FYafV2dN6vg
Hot debate. What do you think?
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October 17th, 2012 at 11:40 am 20
@Patiently Waiting: “No oil fry cooking” I can almost understand this. They aren’t saying no cooking, just no deep frying. My wife almost divorced me our place stunk so bad from my failed attempt to make pakora.
Hot debate. What do you think?
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October 17th, 2012 at 11:47 am 21
Yeesh, this seasonal adjustment stuff is really pernicious. See e.g. Propertywire.com:
Hey, great! The gravy train is rolling again.
Wait, WHAT?
And here I was thinking that seasonal variability was one of the reasons we bother with YOY comparisons in the first place…
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October 17th, 2012 at 12:24 pm 22
Checking out listings here in Victoria….
One house is for sale. Assessed value $556,000 but they are trying to sell it for $1,700,000.
Three years old.
Do people really do that – triple the assessed value?
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October 17th, 2012 at 12:59 pm 23
@S3v1n:
If it makes us feel any better – - imagine a small Chicken when hearing the pronounciation of our seemingly new but dividing acronym . . . . .
Hot debate. What do you think?
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October 17th, 2012 at 1:42 pm 24
@patriotz:
Better….
http://www.youtube.com/watch?v=H6Y6LtILYiY
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October 17th, 2012 at 1:45 pm 25
If you are self employed it is a good idea to have a long term relationship with one commercial lender. Use them for everything, including mortgage and car loans. Keep them up to date occasionally on how you are doing so they are familiar with your business. Keep your credit rating clean. Bankers don’t like surprises so when you need them, they should already see it coming beforehand and are hopefully more open to keeping you going than shutting you down. If you don’t feel your commercial lender is competent, move on. There are a lot of them that will never help you at all, find one that seems cooperative. A good banker is one of the main keys to staying in business.
Hot debate. What do you think?
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October 17th, 2012 at 1:47 pm 26
@Victoria:
Could be ALR or an under built urban property with under market assessment for long-term owner.
I doubt any agent would list that much above a regular assessment.
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October 17th, 2012 at 1:53 pm 27
Patriotz, it is an ALR… In the middle of nowhere. Not a tree around it. North Saanich.
I guess that is why.
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October 17th, 2012 at 3:53 pm 28
@Patiently Waiting: That CL add is awesome! I like this bit:
“Great Layout, no waste space inside unit, Better than other units with larger sqft”
It’s 467sqft, you better not waste any space with furniture! $50/month more get’s you an additional 122sqft based on ads on CL now…pay 3% more get 25% more space (which is still a rip-off). Folks that bought at Maynards are already screwed so each incremental building along 2nd that completes is going to be worse. The only winners are the developers.
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October 17th, 2012 at 4:44 pm 29
462 square feet is not a one bedroom, that’s a typical studio. I can’t imagine the developer making a one bedroom that small, i bet they just put up a dummy wall in the living room.
Hot debate. What do you think?
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October 17th, 2012 at 5:20 pm 30
@Patiently Waiting:
HAHAHAHAHAHA
I have gotten several damage deposits back because of naive landlords too who don’t follow proper procedures. No oil fry cooking… lol. What’s wrong with some people? He actually says it’s a bonus that you can communicate directly with him. Sounds to me like he has some psychological issues… not sure I’d want to. CL always good for a laugh. I think you need to pull a Kramer on him… cuban cigars, hot tub, a few dogs and maybe install a garburator in the shower. Better yet, install a gas powered wok in the bathroom so you can cook up an oil storm while taking a dump.
Hot debate. What do you think?
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October 17th, 2012 at 5:27 pm 31
@good-format:
There’s lots of “accidental landlords” out there lately. The oil fry comment is just the tip of the iceberg – craigslist is rapidly becoming full of idiot homeowners who cannot sell their places and so decide to become amateur landlords. You can always tell these ads from the rest because they claim they want a “Great tenant who will take care of our wonderful home!”. Like if they say that, somehow they will only get good tenants showing up and not bad ones.
Yes, please, I only want the tenants with an 800 credit score, a good job, 2 work references, 1 landlord reference, no pets, no smoking, no oil fry cooking and no partying. Sure. No problem, here’s HARDLY ANYONE to choose from. These landlords wouldn’t know a good tenant if hit smacked them in the side of the head anyways. They always seem to pick the couple with kids too, as if someone being a parent automatically means they will be a better tenant. They quickly learn, however, that it is a lot harder to clean up baby vomit from a carpet than it is to clean up cat vomit.
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October 17th, 2012 at 5:35 pm 32
Black swan?
There were NO sales of Richmond detached houses today.
New listings 8
Price changed 6
Sold listing 0
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October 17th, 2012 at 5:41 pm 33
@Anonymous:
The new MC2, the 1bedroom are 450 sq feet
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October 17th, 2012 at 5:43 pm 34
@Victoria:
If they list at triple of the assessed value, it just means the seller is not in rush to sell. They are simply fishing for fools.
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October 17th, 2012 at 6:07 pm 35
You ShitBalls have no idea how much developers are shitting their panties these days.
Credit is drying up – fast.
Shit is unwinding, don’t believe the average price BULLSHIT.
What we’ve been waiting for IS unfolding.
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October 17th, 2012 at 6:21 pm 36
“The new MC2, the 1bedroom are 450 sq feet”
is the MC2 the Maynards building?
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October 17th, 2012 at 6:22 pm 37
@Inventory: infinite MOI. love it!!
Hot debate. What do you think?
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October 17th, 2012 at 7:09 pm 38
@Romeo Jordan:
“ShitBalls”? You have a real way of ingratiating yourself…
Hot debate. What do you think?
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October 17th, 2012 at 7:14 pm 39
@Ralph Cramdown: I wondered about that too. LLC to INC? Same laptop, same dirty t-shirt…
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October 17th, 2012 at 7:19 pm 40
Is there any real numbers of how many presale were sold? I see MC2, Solo, and the new Station Square all try to show that there are a lot of interests in their buildings. But I read it somewhere (From Jurock?), that only 50% of the all the presale condos this year are sold.
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October 17th, 2012 at 7:33 pm 41
I heard Solo presale is only 40% sold of the 1st tower which has a total 400 units. They plan to build 3 more 400 unit towers. Good luck with that .
Hot debate. What do you think?
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October 17th, 2012 at 7:48 pm 42
Hidden due to low comment rating. Click here to see.
Poorly-rated. Like or Dislike:
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October 17th, 2012 at 7:50 pm 43
@G: If you’re hearing there’s ‘lots of interest’ in their buildings it means there isn’t enough interest to sell their units and they’re trying to drum up more. They just need to find enough fools left to buy them.
Even when a building is ‘sold out’ it just means the developer is holding back X number of units for sale later. If they can’t say they ‘sold out’ you know sales really suck.
Hot debate. What do you think?
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October 17th, 2012 at 8:00 pm 44
FYI Maynards have been preselling for 3 yrs and they still are not sold out, never mind the Olympic village which has been about 5 yrs and only 75% sold. Condos are gonna get some serious reductions.
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October 17th, 2012 at 8:00 pm 45
New Listings 162
Price Changes 106
Sold Listings 84
TI:18952
http://www.paulboenisch.com
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October 17th, 2012 at 8:03 pm 46
@ScubaSteve
Regarding the vomit thread, I would add that baby vomit is expected in the first two years, but cat vomit… I still get it after 13 years
and it has a tendency to get worse with age.
(On the other hand, the baby is now 17, so …)
Hot debate. What do you think?
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October 17th, 2012 at 9:22 pm 47
Anyone know how “The Crescent”, that new condo development at 16th and Granville, is doing?
A recent magazine article said there were 15 “townhouses” there, 1000 sq.ft. to 3500 sq. ft., priced between $2 Million and $6 Million.
So much for EcoDensity providing “affordable” housing for the people who live here! All it did was destroy the heritage entrance into First Shaughnessey for the sake of this developer’s outrageously priced condos.
Hot debate. What do you think?
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October 17th, 2012 at 9:53 pm 48
Willow Tufano, 15, grabbed national headlines when she bought a house. Now WBBH says Tufano owns two houses.
Teen can’t drive, owns two homes
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October 17th, 2012 at 10:00 pm 49
@painted turtle
but cat vomit… I still get it after 13 years and it has a tendency to get worse with age.
(On the other hand, the baby is now 17, so …)
Now that your baby is 17, (s)he might start throwing up on the floor again, especially on Friday and Saturday nights.
Hot debate. What do you think?
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October 17th, 2012 at 10:18 pm 50
Sales way higher this month versus last month?
Are we recovering?
What is typical for October? Always this strong?
Does anyone know?
Hot debate. What do you think?
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October 17th, 2012 at 10:19 pm 51
RE http://www.thecrescentonmcrae.com/#!home/mainPage
Looks like 1 of 15 is sold, i am surprised they didnt do a presale, as the just completed a 2 yr build. They would have cornered some fools in the past 2 yrs but slim pickings these days.
It is one of the nicer develpoments i have seen for a while in Vancouver.
Expensive!
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October 17th, 2012 at 10:21 pm 52
@West Coast Woman:
Wow…what a joke…those units will never sell at those prices. They sit right on top of an extremely busy intersection.
Hot debate. What do you think?
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October 17th, 2012 at 10:25 pm 53
@bag it and tag it: Really? I thought Granville & 16th was “a tranquil oasis”. That’s what is says on their webpage.
Hot debate. What do you think?
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October 17th, 2012 at 10:43 pm 54
@Dog:
No change in trend since August. Same rate of weekly year/year sales decrease. We are getting some noise because september had 19 days and October has 22 – this has a 15% impact on volumes so when the volumes are up 30%, it’s only up 15% and that’s not much of an increase. So – the answer is that there is no seasonal change in sales (although since they are up – the REB will say that for sure and jump on it totally . . This market has finally turned – - which it has not).
Hot debate. What do you think?
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October 17th, 2012 at 11:14 pm 55
Oh ya over 2000 sales versus 1500.
Media is gonna go crazy!
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October 17th, 2012 at 11:36 pm 56
@YVR2ZRH: RE: REB Seasonal Sales Spin
Yes indeed! To summarize on seasonally adjusted sales: What is the year over year sales to inventory ratio? If you put every home on every street on the market, suddenly (and temporarily) there will be a lot of sales by the law or large numbers. I suppose some buyers and sellers are reassured by the spin, but the good feeling won’t outlast the reality. There will be nothing left to spin when all stops pulled out in a few weeks/months to make any sales at all.
@ReadyToPop: re: …”Willow Tufano, 15, grabbed national headlines when she bought a house [for US$19K]“…
She paid $19K for a detached property on a big lot with intact exterior envelope, working plumbing and wiring. No sounds of gunfire or other location complaints. Finally, a property priced as shelter and coming to your country near you!
Imagine some of those Surrey concrete micro units in couple years. It may well be cheaper to write a cheque for one of those than the cost of a few weeks stay in a posh hotel.
Original CNN link:
http://www.cnn.com/video/standard.html?/video/us/2012/10/16/dnt-teen-buys-second-home.wbbh&hpt=hp_tvvideo
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October 18th, 2012 at 12:03 am 57
@WOWSERS:
regarding presales, how many percent of the total units have to be sold in order for the bank to loan the money to break the ground?
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October 18th, 2012 at 6:24 am 58
@Dog: Take a gander at the inventory graph:
http://vancouverpeak.com/groups/inventory-graph/forum/topic/inventory-graph/?topic_page=3&num=15
Typically, yes, inventory peaks mid October then drifts downward before accelerating downward through the holiday season. This year the chart will just do it at levels similar to 2008. Which, you know, wasn’t a bad year for real estate, right?
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