Use Your Home Equity to Invest in Real Estate

Posted on October 24, 2007 at 9:56 pm
Filed Under Canadian Taxes, Mortgage Planning, Real Estate, Retirement Planning

Thanks to the appreciation in real estate over the last 5 years, owning an investment property may be closer to reality then you think.

This may be common knowledge to some potential investors, but there are a number of key benefits to owning an investment property. To name a few, you can a) create a predictable monthly cash flow b) enjoy capital appreciation on the entire value of the home and not only on your initial investment c) have someone else pay down your mortgage for you d) enjoy the tax deferral of your capital appreciation over the long run while taking advantage of tax write offs each year. When compared to a retirement vehicle, you can see how real estate has similar characteristics and can be used very effectively in conjunction with your current retirement plan.

Your Take-Away: Using the equity in your principal residence is the most cost effective method of borrowing money to invest in Canada, and the recent market fluctuations have given otherwise cash strapped Canadians the opportunity actually own their first piece of investment real estate. However, don’t throw caution to the wind and forget that there is a level of risk involved in owning real estate. Make sure you ask yourself if you are someone who is capable of dealing with the possibility of disgruntled tenants, or the ongoing maintenance that rental properties require. If so, then you may just be the next person who takes the leap of faith and buys their first real estate investment.

Your mortgage for a property is an entirely different discussion, so please ensure that you talk with a Professional Mortgage Consultant before you make a decision of this nature.

Until next time, happy investing.

Elisseos

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