Guelph Mercury: Investing for Income

Published in Life Steps, Special Advertising Feature of the Guelph Mercury – October 2009

Do you own your home and work hard to make wise financial decisions in order to create security for today and for tomorrow?  Do you still wonder how you could earn a little extra income without having to get another job?

Whether you’re looking to save for retirement or simply to enhance your family’s quality of life, consider this: Investing for income.  Although the word “investing” can elicit anxiety and even anger in some, especially in light of the devastating impact of the recent economic downturn, it is a necessary part of life planning.  Investing for income is a unique investment strategy that allows you to invest and earn a passive monthly income while growing your original capital investment at the very same time.

The key is to invest in a stable and growing income-generating investment, like real estate for example.  As a homeowner, you clearly understand the value of owning real estate, so why not continue to invest in the strength and reliable growth of bricks and mortar?

Owning rental property is another way to generate additional income by investing in real estate, but it is hardly passive.  The effort that is required to own these properties can sometimes outweigh the return that they generate.  But what if you could own rental property without being a landlord?  REITs (Real Estate Investment Trusts) are loosely defined as a pool of investors who jointly own a portfolio of real estate; this is also a great way to own rental property and generate passive monthly income without the headaches of property management and stresses of monitoring an investment portfolio.  Because of the stable and long-term growth trends of real estate, REITs often pay higher than average returns (or distributions) for such a low level of risk.

You may be asking yourself where you might find the money to invest in a REIT in order to benefit from its stable and unique tax benefits.  Why don’t you put your house to work for you?  Why not maximize its value by leveraging the equity you have built up in your home?  You have worked hard to pay down your mortgage over the years, but as you do so, that money just sits there, when it could be put to better use, more specifically, you could reinvest it.

The benefits of leveraging equity in your home are endless and this strategy is one that many individuals use to build wealth.  You can usually take up to 80 per cent of the paid portion of your mortgage in the form of a credit line and you can even claim the interest on that line as a tax credit when you use it to invest.  What is most remarkable however is your ability to generate a passive monthly income (cash flow) from the equity you’ve built up in your home if you simply invest that money into an income-generating investment such as a REIT.

Again, the key is to reinvest the money into an income-generating investment in order to generate that passive monthly income.  Borrowing from real estate to invest in real estate is a pretty solid strategy, especially when your return is significantly greater than your cost of borrowing.