This topic is for aspiring Real Estate Investors who dream of owning more than just their own home: who want to build financial independence based on revenue properties; who want to know how to become a real estate investor in Canada. To get started on the 'property ladder' one needs to understand  mortgage financing. Spoiler alert: there is a particular mortgage tool that will make climbing the property ladder much easier - you want to get this type of mortgage when you purchase your first home or early on in your investing journey.

So without further ado, I'd like to take you on a little journey with a character we will call Lori. These are the first steps of Lori's Journey from first-time homeowner in preparation to becoming a successful real estate investor.

Lori’s Journey: From First-time Homeowner to Aspiring Real Estate Investor

Lori always dreamed of owning more than just her home. For her, real estate represented stability and a smart way to build long-term wealth. Inspired by her goal of financial independence, Lori decided to approach her homeownership journey from a strategic real estate investing point of view.

The Challenge

Lori faced a common hurdle: capital. Capital refers to the money or cash required to purchase a home (also called your down payment) or the money required to make strategic renovations that could increase her rental income, such as a rental suite.

Lori didn't have enough down payment for an investment property, which started at 20%. She wondered if she’d have to wait years to save up before starting her real estate investing journey... or were there steps that could compress this time frame?

She did know, however, that the minimum down payment to buy a home that she would live in Canada started at 5%, which was much more attainable, and the thought occurred to her that perhaps she could purchase a home to live in now with a basement suite or the potential to add one, and then convert it to a full rental property at a later date. But could she (or how could she) tap into her growing home equity of this first property to fund the down payment on the next one, how would that work? 

The Guide: Unlocking the Power of a RELOC

A mortgage expert introduced Lori to a unique mortgage product known as a Re-advanceable Equity Line of Credit (RELOC), which would work well not only to finance for her first home purchase but would also serve as a foundation for her future real estate investments. A RELOC is like a Home Equity Line of Credit (HELOC) but on steroids! This RELOC tool would enable her to access the future equity she would build in her owner-occupied home without having to sell it or refinance it. The RELOC's flexibility would allow her to aggressively reduce her mortgage balance while still maintaining access to her equity. When needed, she could withdraw funds (the crucial Capital) for upcoming real estate down payments or renovation projects. Better yet, until that point in time, she would only pay interest on the outstanding balance owed, and over time, a larger portion of each mortgage payment would go toward the principal rather than interest. Unlike a traditional mortgage, a RELOC would provide Lori with a revolving credit option linked to her home's value—a financial safety net that could expand as she repaid it. That's part one to getting started with real estate investing as a beginner with little money for down payment.

The Plan: Leveraging the BRRRR Strategy

The BRRRR investment strategy (Buy, Renovate, Rent, Refinance, Repeat) is a popular means to building a real estate investment portfolio. In Lori's case, the strategy needs a little tweaking as she is just getting started, but she will soon find out - to her delight - that it works even better when a RELOC is used for her initial first home purchase financing, as well as all subsequent home financing requests.

With the decision made to pursue a RELOC for her first home purchase (and a pre-approval confidently in-hand), Lori's next task was to decide on the type of property to buy. Her mortgage expert advised her to choose a property she could comfortably live in now as her primary residence, but (and more importantly) which could later serve as an excellent rental property once she moved out. The expert, who was also an experienced real estate investor and landlord, recommended a half-duplex with a basement suite and a detached garage. He explained that a half-duplex would be more affordable than a single detached home but could generate similar rental income. The basement suite, whether legal or not, and the garage would provide additional income that could help her pay down the RELOC mortgage faster. Moreover, if the basement suite was legal (or could be made legal), the potential rental income could even assist in qualifying for the mortgage in the first place! Lori was intrigued to learn that car enthusiasts often seek garages to store valuable vehicles, and that finding properties with multiple income streams is a key lesson in top 'Learn to Invest' courses. FYI, investing in real estate education is a wise decision, and REIN Canada is a great place to start.

With a RELOC as her target loan type, and a property search objective in mind (potential for multiple income streams), Lori could now set her sights on executing her version of the BRRRR strategy.

She would use her available cash to purchase a property that she would initially occupy with a minimum down payment reserving some funds to improve the property as required to create an incremental revenue stream. Her mortgage expert even explained that there were ways to get her RELOC lender to rebate her for pre-agreed home improvements after they were completed, she just needed to ask. 

Once the renovations were complete, Lori found reliable tenants and started generating rental income from both the basement suite as well as the garage. She used this income to not only help cover her property’s ownership expenses, but also to aggressively pay down her RELOC mortgage. After a few years, she would be able to access the equity she had created in her first property, and use that for a minimum down payment on her next owner-occupied house. Her current home would now become her first rental property in her empire! As part of the the BRRRR strategy she intends to Repeat the process and she is on her way.

The Result: A Clear Path to Financial Freedom

Lori’s first home eventually became her first rental property and a testament to her success. By planning to leverage her RELOC for her next home purchase and adhering to a well-structured strategy, she overcame her initial financial challenges, and learned how to start investing in real estate. She now had a system to expand her portfolio, using her first and subsequent homes as stepping stones toward long-term financial security.

Why a RELOC Was the Game Changer

• Accessible Capital: Lori established from the outset a way to quickly build and access home equity without the need to sell.
• Flexibility: She only borrowed what she needed, and reduced debt quickly.
• Tax Benefits: Interest on the RELOC used for investment purposes could be tax-deductible. She also learned from her tax-accountant that any increase in her property's value over time (called 'capital appreciation') would be tax-free on the owner-occupied value, as long as she is not considered to be 'flipping houses'.
• A Scalable Strategy: As Lori repaid her RELOC and then financed future properties, she continually unlocked funds for new investments.

Lori’s journey illustrates how leveraging a RELOC can empower aspiring real estate investors. By starting with her home and adopting a thoughtful strategy, Lori turned her vision into a sustainable plan for wealth-building.

Get Started with Real Estate Investing - Next Steps

To learn more about how a Re-advanceable Equity Line of Credit (RELOC) works, and other financial uses, click the link.

If you are interested in a complimentary consultation to help you begin your real estate investment journey, whether as a first-time homebuyer or at any stage of property ownership, click the link.  Happy to help - let's get started!

Bonus: if you would like to take a deep dive into how the numbers of this strategy actually work, grab yourself a coffee and watch the following video where we get full-on into the math.  

In this video, I demonstrate the strategy for first-time homebuyers to enter the property market. I share insights on how to leverage equity, move to the next property, and build wealth over 30 years including a net worth target to aim for. If you are Gen-Z/Millennial, rest assured that there is hope. The video supports this blog post and emphasizes the importance of financial planning for long-term success in real estate. Viewers are encouraged to consider their financial future and take steps towards property ownership as it ultimately relates to retirement planning.