Mortgage and Money Making Tips

Are you wondering how to invest in real estate but not sure where to start?

Real estate in BC has shown very strong returns to investors. Using the equity from your home to buy a rental property is one strategy that many people use to access the lucrative real estate market and expand their investment portfolio. With the help of your mortgage specialist, your realtor and your accountant, it is very easy to set up a plan to purchase one or more properties. With current attractive pricing for homes in BC and record low interest rates it is possible to cover most or all of the cost of borrowing.

Here is one example of how I helped a client get into the market. It was simple to set up and the lender paid me - so the client had my personal service to handle everything and at no cost to them.

Current situation:

Arlene and Ed's home is valued at $500,000. The current mortgage balance of $110,000 is up for renewal. They were looking to purchase one condo for rental with plans to purchase two or three additional units within 6-12 months.

Solution:

Renewed their existing mortgage into variable rate mortgage at 2.65% and attached a secured line of credit as an open account they could use to access money as they need it.

New first mortgage = $110,000. Bi-weekly payments at $231.10
Line of credit = $290,000. Interest only monthly payments based on how much they draw

Purchase condo = $200,000 with $40,000 down payment from line of credit
Line of credit cost per month = $83 per month
Mortgage on condo = $336 bi-weekly (based on variable rate of 2.65%)
Strata fees and property taxes = $300 per month
Total monthly cost for condo = $1055
Monthly rental = $1200

In this case Arlene and Ed showed a net gain of $145 which could offset their own personal mortgage costs. This gain is taxable income. However, this income will be more than covered by the tax write off from interest fees and other costs to operate this rental.

With the balance of $250,000 left open on their line of credit they could repeat the same process with 20% down on another condo. After they purchase their third rental property lenders will look at the portfolio of properties based on the ability for rental income to cover costs of interest, taxes and condo fees rather than their personal income to qualify for additional mortgage funds.

Then, by shifting the rental income to pay down their personal mortgage and leverage taxable income, Arlene and Ed were able to increase their net worth, improve their retirement portfolio, pay off their own mortgage faster and reduce their tax bill.

To run numbers for your specific situation, please give me a call anytime. Also, if you don't have an accountant or realtor, I will gladly refer you to professionals within my network.