Episode 5

5 - How to Use Your Home Equity to Buy an Investment Property

Episode Summary

In this episode, Quentin talks with a member, and they talk about leveraging the equity in your property to buy more investment properties. 

The member shares that the first property that he got, he stayed there for five years. Then, he took the equity and went to the second property, which is a principal residence now. Now, he is using the first one as a rental property. While the property is cash flowing negatively as he is in the early stages of real estate investing, Quentin says that it is good to start somewhere. The member shares that the property is being rented for $2500 and it has a negative cash flow of $200 to $300. As for the interest, it is around 1.85 variable, with a 30-year amortization. 

Quentin adds that the reason behind negative cash flow is the size of the mortgage. He adds “You want to make sure that you talk to your accountant, and make sure that you cap when it turned from a principal residence to a rental property. Otherwise, you're going to lose that tax advantage.” He further says that sometimes it makes more sense to sell a property as a principal residence, take the funds, put it into the new principal residence, and use the balance of the funds to invest. Talking about the available lines of credit, the member shares that he has access to some funds. 

Quentin adds that having good credit is the key, saying “if you can access credit in different ways, you can structure things a little differently, especially if you have, good income that can support it. So you can take, pay down secured, and if that is okay with the bank to use a secured line of credit, you increase your room, and then you're able to access, perhaps a third property doing it yourself.” While leverage can help when you’re starting out, Quentin suggests that he should avoid over-leveraging. 

In conclusion, he suggests the member consider selling the first property, seeking multiple options for lending, talk to a mobile mortgage specialist, and explore all of his options.


Topics Discussed

  • Introduction [00:00]
  • His Background and Experience in Real Estate Investing [01:02]
  • How Much Does He Have Available in HELOC, and Other Lines of Credit? [07:41]

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About the Podcast

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About your host

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Quentin DSouza

Quentin D’Souza is a multiple award winning Real Estate Investor, and a trusted authority on real estate investing. He is an Ontario Certified Teacher and holds two university degrees, which includes a Master’s in Education. Quentin has appeared on local and national television and radio, interviewed in national publications, and has been a keynote speaker to large audiences of real estate investors. He owns a real estate portfolio in excess of $80 million dollars of assets under management across Canada and the US and transacted on 80+ properties since 2004. Quentin is the author of several books available on Amazon. He is also mentors real estate investors as the Chief Education Officer of the Education for Canadian Real Estate Investors and Durham Real Estate Investors Club.