Using The Bank's Money to Build Your Wealth

Calgary Cash Flow Experts

About 6 years ago we were celebrating our "debt free" day and contemplating what our next financial move would be. We had a significant amount of equity built up in our house. We had already set up a "HELOC" (Home Equity Line of Credit) on our home in Calgary. So we decided to tap into that equity and use some of it as a down payment on another rental property.

"Banks have no problem using your money to build their wealth,

why not use their money to build your wealth instead"

Our Realtor found us a nice semi-detached house in an "up and coming" neighborhood. So we made the plunge and bought the house using our line of credit as a down payment and applied for a mortgage. We were approved and we made the purchase. We found excellent tenants that moved into the house in July 2012.

Here's the good part: That house is now worth more than we paid for it, by $30,000 or $40,000 and we have paid down the debt by about $70,000. And, to top it all off, we have earned $300 per month in rental income. That's an additional $21,600. It has the original tenants still living there. There has been some maintenance and a roof replacement, which was an insurance claim.

If we were to sell this property and walk away right now we will have gained about $131,600 of wealth in a 6 year period and we never used any of our own money but used the bank's money instead. Even if the value of this property hasn't appreciated, we still have made about $90,000. This is what we mean by using someone eles' money (The Bank) to build our personal wealth. This is an example of "Good Debt", which is using debt for appreciating assets, like real estate. 

Now, the REALLY good part: What if we keep this property for 20 years? How much will we grow our wealth during that long-term horizon? You do the math on that one. So far, we have multiplied this process 5 times over.

If you want to live like most people, hand to mouth, paycheck to paycheck, then keep doing what you're doing - working long hours, paying lots of taxes and interest on the bad debt. Or...


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Your Trusted Advisors,

Willis & Nancy Langford

Everyone Needs and Deserves a Quality Retirement Income Plan



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