In this episode of Get Real Wealthy Season 2, Quentin talks about creative strategies to help you buy your first rental property if you own a house.
Quentin says that these are out-of-the-box strategies but these creative solutions will help you get your first rental property. Number one, home financing, using your home equity line of credit to borrow against the equity to purchase the new property. Any of the lines of credit that you use to pay down the principal on the new rental property, the interest on that is tax deductible. You can use your HELOC paid and use that for the principal and then continue to own that new rental property. Number two, you can rent out your existing property, and buy a new primary residence. That way, you can usually lower your down payment. However, you will have to figure out if this will work with CMHC or not.
Number three is using second mortgages to access the equity from the primary house. Especially if you're locked into a five-year mortgage, and you're not able to access the equity, you can use a second mortgage for the downpayment on the rental property. Number four is using cross-securitized lenders. What you're doing is that you’re using the equity from your house as the downpayment on the rental property by securitizing a second-position mortgage on the property with the first mortgage on the rental property. Number five is to refinance your house. Instead of getting a HELOC, just increase the mortgage on your house, and especially when mortgage rules change, it is the best thing to do.
Lastly, you can use joint ventures. If you're looking at into joint ventures, take a look at The Scaling Up Toolbox book, available only on jointventurebook.com. In conclusion, Quentin says that these six creative strategies can help you leverage your primary residence to secure your first rental property.