My wife and I recently purchased a house last July 2009. We decided not to sell the house we were living in and we would rent it out. Not really knowing the ins and outs of renting. After all is said and done we are only up $50 a month in positive cash flow. Much less than we originally thought.
Wanting to improve on my understanding of realestate I went to the ACRE program in Calgary. It really opened my eyes to everything. Long story short we are planning on selling our rental house this coming May. We figure we should be able to come away with about $45,000 from the sale.
I can see two possibilities.
First is take the money and use it as a down payment on a duplex, and possible renos on the place.Second would be putting the money down on our principle residence in order to access a HELOC. There by unlocking much more funds available to us to possibly use on multiple properties down payments. Is it frowned upon to leverage your personal residence?
I hope Im fairly clear in my explanation. Look forward to reading your comments.
QUOTE (Ziemer @ Feb 5 2010, 04:52 PM)
... We figure we should be able to come away with about $45,000 from the sale.
congratulations.
Step 1: celebrate ! [go to Hawaii ... go on a cruise ... buy a new fancy rug for the living room .. whatever fancies you and is maybe 10% of the after-tax gain]
Step 2: pay taxes
Step 3: donate 10% to less fortunate people/causes on this planet
Step 4: invest or reduce debt .. to increase access to cash for new properties/investments
QUOTE (Ziemer @ Feb 5 2010, 04:52 PM)
...
I can see two possibilities.
First is take the money and use it as a down payment on a duplex, and possible renos on the place.
Second would be putting the money down on our principle residence in order to access a HELOC. There by unlocking much more funds available to us to possibly use on multiple properties down payments. Is it frowned upon to leverage your personal residence?
I hope Im fairly clear in my explanation. Look forward to reading your comments.
Send us in the right direction!
cash comes in two forms: real cash .. and accessible cash (via a HELOC) .. YOU have to decide to what degree you are comfortable using (trapped) equity in your house for a rental property. Some say: NONE .. others say: up to 75% .. others up to 50% .. no rule here .. just do what you are comfortable with ! [ my view is 50% or less .. perhaps more if you have 2 incomes and can afford a big hit in case of a real estate loss]
Second would be putting the money down on our principle residence in order to access a HELOC. There by unlocking much more funds available to us to possibly use on multiple properties down payments. Is it frowned upon to leverage your personal residence?
The right decision for you will depend on your personal risk tolerance. However, many investors, me included, would use the cash to pay down the mortgage you have on your personal residence which is not tax deductible and then borrow it back through a HELOC (now tax deductible interest) to purchase rental real estate. In the future, you should consider using a re-advancing mortgage on your principle residence which combines a HELOC and mortgage in one. As you pay the principle on the mortgage, the HELOC room automatically increases.
It is important to note that when using this strategy, the interest only payments on the HELOC will count against your personal TDS. As part of your financing planning, your Mortgage Broker needs to confirm when or if this will not cause an issue with your future goals being considered.
Send us in the right direction!
