Home owner equity – Making your investment grow.

One of the common questions I receive as a Realtor® is, “How do I get started in purchasing income properties? 

With the increase in property values across Metro Vancouver this past year, many homeowners have now built up a significant amount of equity in their primary residences. 

Before heading out to view rental properties, one of the first actions to take is to determine what you can afford. 

This week, I asked local mortgage professionals if they could weigh in on how to leverage this increased home equity to purchase an income property.   Today, I will share the expertise from Meghan Dodds, Mortgage Consultant, The Mortgage Group. 

“By accessing your homes equity and utilizing the power of leverage, these funds can be an asset to provide you with down payment or purchase funds for a rental property.

There are several strategies that can be used to access funds and choosing an approach will depend on your particular situation.  Refinancing your current mortgage will allow you to take advantage of up to 80% of the appraised value of your property.  Experienced investors set up a HELOC (home equity line of credit secured against their home) to purchase the property outright or borrow the down payment and finance the remaining amount on the rental property, essentially borrowing 100% of the rental purchase.  Many investors will opt for a re-advanceable product which allows them to re-borrow the principal as it gets paid down on the mortgage.

Financing 100% of your investment property will often create a “negative” cash flow, if the financing is arranged properly. Cash flow can best be defined as total rent received minus all allowable expenses.  Interest on the mortgage, property taxes and general maintenance are examples of acceptable expenses. If the rental property is highly leveraged, the expenses in almost all cases will exceed the rental income and the monthly deficiency or negative cash flow will be paid by the investor.  The negative cash flow from the rental property can be deducted from your earned income; therefore, reducing your personal income taxes.”

Look for more expert advice on financing an income property this week, and stay connected for information on the factors to consider in making a decision on what and where to buy.


Meghan Dodds is a licensed Mortgage Consultant, and a resident of South Delta, one of Metro Vancouver’s highest growth areas. She specializes in residential mortgages, working with first-time homebuyers, investors and has access to private funds for her clients that need an out of the box approach.  Meghan can be reached at 778.891.5607 or Meghan.Dodds@mortgagegroup.com.

Joanne Hoekstra is a Realtor and Sales Advisor with rennie & Associates Realty.  Joanne is experienced in helping buyers upsize their real estate portfolio and is always on the look out for great investment opportunities.  Joanne can be reached at 604-722-6645 or jhoekstra@rennie.com.