Thursday, January 31, 2019

When You Thought You Could Fly and Then... Got Stuck

When you thought you could fly
but then got stuck
and are really afraid!
Sometimes, the moment you think that you've figured out how to become financially free, the situation changes and you have to adjust your plan.

Approaching the Financing Wall

In the past five years, my strategy was to get a new property using expensive private money, renovate it, get a great tenant, then re-finance with more affordable money.

The refinance step is critical. It improves my cash flow. In addition, after the refinance, equity starts to build up within the asset because my mortgage is interest-plus-principal-paydown, rather than interest-only.

Without refinancing, holding on to the property is pointless. The property doesn't bring much positive cash flow. It doesn't accumulate equity over time either. The downpayment money is getting lazy. It's stuck inside of the property, not doing much.

This strategy worked for me five times.

With five different properties, I got a private interest-only loan to acquire a vacant asset. Renovated. Advertised. Got a great tenant. Enjoyed my skinny cash flow for a few months. Then, qualified for a traditional mortgage at a better rate. Refinanced.

Voila! Much better cash flow and principal paid down by my tenants. How nice!

The process worked like a clock. Over and over again. Until it failed.

Slammed Against The Financing Wall

At the end of 2017, I acquired three properties with private money. My plan was to replace the expensive interest-only loan with a more affordable conventional loan in a few months. Like previously, this would lead to improved cash flow and principal paid down by tenants.

Except, this time I couldn't qualify for a conventional mortgage!

The problem was that I no longer met the bank's underwriting criteria. In simple language, the lenders concluded that it was too much risk to give me another mortgage.

In the past, I had a job. My salary looked great from a lender standpoint.

Today, I am self-employed. My rental income is considered risky. Even though it is supported by 17 families working at 17 different jobs, lenders believe it's riskier than relying on my old one-woman paycheque.

In the past, I had one property. It looked great from a lender standpoint, as having a mortgage was so typical.

Today, I have a bunch of assets. Yet, most lenders don't approve more than five mortgages. They consider it risky because a borrower with more than five assets doesn't match their typical good borrower profile. Having more than five mortgages is not typical.

Investors call it the Financing Wall.

When you just gained the momentum, then slam - no more money for you!

Through and Beyond The Financing Wall

Long story short, let me jump to the conclusion of the story:

Don't give up when you don't qualify for a mortgage four times in a row. 
Don't give up when your credit score went from Excellent to Good to Fair. 
Don't give up when your situation doesn't fit a conventional good borrower profile.
Don't give up when your credit card payments give you creeps.


  • Make sure your mortgage broker is as awesome as mine! See their contact info below
  • Eliminate liabilities! read through my prior blog post on how eliminating liabilities can decrease the burden of expenses and expedite your financial freedom
  • Make sure you have Plan A, Plan B, and Plan C and you do just fine with or without better financing
  • If your profile doesn't match the characteristics of a good borrower, learn what those characteristics look like and tweak your profile to change your financial future, so you can qualify down the road. Here is a link to an Excel template that I use to help me stay as organized as possible and make a very good impression on potential lenders
  • Keep learning, so you can adjust your strategy or start using new strategies! There are infinite number of different ways to accomplish a goal.
  • Ask! What I didn't realize far too long is that no matter what your situation is, chances are someone has been there and will gladly help you find a way out. Email me at

Here's the info for my broker, who has helped me with financing many-many times when I doubted there was a path forward. In fact, he shared this quotes with me when we broke through the Financial Wall after a few unsuccessful attempts:

"Never give in. Never, never, never, never--in nothing, great or small, large or petty--never give in, except to convictions of honour and good sense." 
-- Winston Churchill
If you need a mortgage in GTA, check out these guys

PS Did you know that a $300,000 mortgage with 3% rate will cost upwards of $575,000.00 and you could save 10 years and $90,000 of interest if you were to pay just $200 more per month? Here's an Excel tool that I use to do all my numbers when it comes to planning accelerated mortgage pay down and tracking my results

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