Today I came across some very interesting posts that I need to share ASAP.
The first two-part series is on something called the Smith Manouevre (Part 1, Part 2) posted over at a new Canadian personal finance/investing blog called Million Dollar Journey. The author FrugalTrader is on the warpath to accumulate $1.0M by the time he hits 35! A tall task, and I wish him luck.
The Smith Manouevre consists of using a HELOC to invest in rental property. The interest paid on the HELOC is tax-deductible as long as you invest in the right type of vehicle (dividend paying stocks or real estate for example). Mr. Smith suggests reinvesting the saved tax dollars into your non-tax-deductable home mortgage, which then increases your HELOC room so that you can invest in more real estate. The benefit is that your home mortgage is paid off faster and you have access to more OPM for investment purposes.
The second post of interest is from the Investment Property Insider who tells us a little bit about how you can use commercial real-estate to make money, even when the value of the investment declines significantly. He goes over a quick and dirty example of how a $1M property could lose 20% of its value in 8-years, yet the owner could still make money at a 7.5% cap rate. His calculation does make a few simplifications, but most notably it assumes that you borrow the money for the downpayment.
Lastly, I came across the first blog via Canadian Capitalist , which is a fantastic site full of great information for the Canadian investor. I came across it a few years ago, but had lost track! I'm glad to now have it in my agregator.