In 1987 my parents purchased their house in Tsawwassen Heights for $134,000.
In 2006, the house was appraised at $575,000 and my father utilized this line of credit to invest in his first real estate investment. He achieved financial independence at the age of 75.
When my father passed away three years later, my mother sold the house for $492,000. She wanted a quick sale.
The equity difference was $358,000 (492,000 – 134,000).
Divide $358,000 over 22 years = $16,272 average equity per year.
If you’re earning $16,272 interest on $134,000 unleveraged cash in a savings account, that’s 12.14% interest income per year over 22 years. But wait! Remember, that the $134,000 purchase price only requires a 25% down payment of $33,500 actual cash.
So, the apples-to-apples comparison showing the return on investment on actual cash invested is 48.57% average equity per year ($16,272 divided by $33,500).
What savings account, stock or mutual fund can boast a consistent 48.57% return per year for 22 years in a row?
Sixteen years later (2025 – 2009), that same house is assessed at $1,458,300. This is an additional $966,300 (1,458,300 – 492,000) of appreciation.
Divide $966,300 over 16 years = $60,393 of equity per year.
If my mother had decided to keep the house and rent it out instead, the equity gain would have been $1,458,300 less $134,000 = $1,324,300 over 38 years = $34,850 per year.
As you can see from the math, the purchaser of the house in 2009 made the largest equity gain. Most banks offer a loan-to-value ratio up to 75% of the appraised value of the house, representing $1,093,725 ($1,458,300 * 75%) of home equity line of credit.
The glorious fact about owning a house like this is its collateral value that banks love for potential loans. It also looks great on your net worth statement.
This house rescued my parents from financial disaster. The equity in the house allowed my father to invest in a lucrative real estate investment that ten years later produced a triple digit return for my mother.
Your primary residence is one of the most important retirement assets in your life. Better than a savings account.
Disclaimer: Using only simple math for clarity because there are a host of other factors at play.
