Take advantage of a booming market – using your home to get you into real estate investing

Written by Marc on April 1st, 2007

A booming market can present some interesting investing opportunities.  If you are fortunate to have bought your home before the boom began, it has increased in value.  This increase in value could allow you to purchase some investment property. Consider the following example:

Rob and Barb bought their house just a year ago, in Saskatoon.  He put $10,000 down on a $70,000 home.  After the first year, their remaining mortgage is $55,000.  During the past year, they did some repairs to their home.  Recently, their home was appraised at $90,000.  If they sell their home, they would end up with $35,000 (not including fees and taxes due to the sale of their home).  Looking in the real estate listings at mls.ca, they find a duplex for sale at $120,000.  If they put $30,000 down (and save $5000 for repairs), they will have a $90,000 mortgage.  They rent the other side of the duplex out for $650 per month, and their mortgage payments are $580 per month – netting $70 in positive cash flow.  This becomes their first investment property – and allows them to live without having to work to pay the mortgage.

You can use the proceeds from the sale to purchase a duplex like the above example, or you could also purchase two houses or condominiums.  The advantage of buying separate properties are many but the price for a multi-unit dwelling tends to be cheaper.  Just be sure to look into the cost of replacing your home before selling it in a boom market – you may find that you cannot replace it with an equivalent home for a reasonable price.

Read more articles on Real Estate Investing.

Leave a Reply

CommentLuv badge