Income property ‘debt’ is an investor’s best friend

Older Canadians may be scratching their heads at a new poll that suggests many don't consider mortgages to be debt, but one expert says there is no denying what income property debt is: it's "good news."

Paul Kondakos, founder of RealtyHub, says: “Many believe that 'debt’ is a four-letter word. However, when used responsibly, debt can be an investor’s best friend.

“Debt used to acquire an income-producing property is considered to be good debt because it facilitates the acquisition of the investment property. The investment property, in turn, not only services the debt associated with the mortgage, it actually generates cash flow for the investor.”

The Manulife Bank Debt Survey, which was published this week, questioned 2,373 Canadians about their levels of debt. More than a quarter (27 per cent) of respondents said they don’t consider their mortgage to be part of their debt.

“In the case of a principal residence, the debt (mortgage) is something that has to be serviced by the owners (assuming the property doesn't have an income suite/rental apartment),” says Kondakos. 

“The 27 per cent of respondents who didn't consider their mortgage to be a part of their debt have likely had their perception tainted because of the year-over-year gains we have been seeing in the housing market for the past few years now.”

The report also found:
  • Approximately one in five of respondents expect to access their home equity to supplement their retirement income.
  • 10 per cent of respondents plan to stay in their homes and borrow against home equity.
  • Eight per cent plan to downsize and use the excess equity to provide retirement income.
“Often homeowners think of their home equity as a fallback plan for retirement income," says Rick Lunny, president and CEO of Manulife Bank of Canada. “The fact that one in five is proactively planning to use this strategy suggests they may be struggling to balance retirement saving with debt repayment.

“Retirees who use home equity to supplement their retirement risk leaving no legacy for their children or grandchildren. If home values fall, they could end up further in debt and have negative equity in the house."

Stay tuned for CREW's February/March issue to read Paul Kondako's column on how to retire rich by investing in multi-family properties.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

Investment Hot Spots:
Popes Harbour, Leeds, Lakeville Corner, Notre-Dame-de-l'Île-Perrot, Camperdown


  • by Dylan Althouse 2014-12-10 5:17:12 PM

    Interesting perspective. There is a real and pressing need for education for homeowners of all ages. Even many "investors" are jumping into income properties without a proper team in place. Glad the CREW is shedding more light on this area.

Get help choosing the best mortgage rate

Just fill in a few details, and we'll arrange for a Mortgage adviser to help you find the best mortgage for your needs

  • How soon do you want a mortgage?
  • Name
  • Where do you live?
  • Phone number
  • E-mail address


Is a T.O foreign sales tax a good idea?