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Trifecta explains Real Estate Investing

With interest rates being so low, and if you invested in your first home about five years ago, you may be in a position to buy an additional housing unit for rental income. Here's how the theory of borrowing from your equity works:

Let's say you bought you home several years ago for $200,000 with a $25,000 down payment. This would have been a moderate price perhaps in Kelowna BC or Hamilton Ontario. In the past five years the appraised value of your home most likely would have increased by $100,000 or more. Taking $300,000 as the current market value of your home, we can calculate that your equity position in the first home stands at approximately ($300,000 current value - $175,000 owing) = $125,000. You only require 5% down on your first home that you occupy, which is $15,000 and in fact less than your original down payment.

This means you now potentially have $110,000 available to invest in a second and possibly a third property. Reinvesting your equity is one of the fastest ways to compound and grow your wealth. The mortgages on the investment apartments will likely be paid for by the rental incomes. Be sure to look for units that require little to no repair and you could watch your finances grow faster than you thought possible.

Recommended - also see our sections on:
Residential Mortgages in Canada

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