I need more, but don't know how to start.

by Kevyn House
(Milton)

What the heck, it never hurts to ask.

I am the current owner of a single family investment property in Guelph Ontario.

This house is currently revenue neutral.

I do not make any money, nor does it cost me (except for the $7k renovation I just completed in April). I have a stable long term tenant who will very likely be in this house for the next 10 years.

My goal when renting this property was to find a stable long term tenent who would take care of the property, pay the rent, and not cost me any money - I achieved that goal.

I now have a new goal. I would like to retire. More specifically, I would like to quit my job. I do not care if that takes me another 5-10 years, I just want there to be an exit strategy.

My question.

I have about $60,000.00 in equity on my rental property.

How can I use this equity most effectively to buy one, two, three (start with one) more property? Can I use this equity?

I am sure I can - I just do not know the best way. I would prefer not to sell the property to access the equity.

The area is increasing in value at about 8-9% per year, and there are plans to build a GO train station within walking distance of the house - which will only increase the value.

Kevyn

Comments for I need more, but don't know how to start.

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May 28, 2010
RE: I need more...
by: Tom Karadza

Hi Kevyn,

Congrats on hitting your first goal.

Many people never make it to that step.

So pause to congratulate yourself.

As for accessing the $60K in equity ... the easiest way is a "refinance" of the property but that can include paying mortgage penalty fees.

And depending on the mortgage products available to you and the value of the property you may not be able to access all of it.

I would speak to a good mortgage broker and ask them to map out the fees involved in refinancing the property and giving you a realistic amount of money that you could extract.

Remember, when you do this your carrying costs on the property will go up b/c the mortgage has increased which may make the property go into negative cash flow status on you.

Also, if the market changes and properties fall 10% if you're highly leveraged you may be "under water" ... make sure you're comfortable with that. As long as you continue to rent the property that shouldn't be an issue, but at least plan for the possibility.

So...there's no direct advice here but hopefully this helps a bit.

Tom.

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