Following up the 2025-08-28 article A Case Study for “Your House Outperforms a Savings Account,” the #1 most common complaint that I hear is “I can’t afford it.”
My response is: You can . . . but not in the traditional sense.
Let’s say that you were a one-quarter (25%) investor in the purchase of the $134,000 Tsawwassen Heights house. The cash downpayment of $33,500 is pro-rated four ways = $8,375 each.
This chart shows the interest accrual on $8,375 if it were in a savings account using the Bank of Canada’s overnight lending rate for the interest rate. Bank of Canada Interest Rate 1935-2025 | WOWA.ca
Your $8,375 cash would have compounded to approximately $27,201.93 over 22 years in a savings account.
The mortgage on the house is comprised of $33,500 (25%) downpayment and $100,500 (75%) mortgage. The mortgage payment is $710 per month at 7% interest over a 25-year amortization period and 5-year term. The total interest payments are $112,593 and principal payments $100,500.
amortization table
Remember that there are tenants making rent payments. The interest payments are a tax-deductible cost of doing business. Each investor gets to write off $28,148.25 (25% of $112,593) from their pro-rated portion of the rental income.
Remember also to add the pro-rated principal portion as equity gain. This is your net worth growing.
Upon sale of the house at $492,000 in Year 22, there would have been three years left in the mortgage term leaving $22,428 mortgage balance.
Sale $492,000 less $22,428 mortgage balance less $33,500 capital contribution = $436,072 equity split four ways = $109,018 capital gain per investor. This does not include cash flow from the rental income. This does not include whether capital cost allowance was taken – if so, this is where the tax consideration Recapture takes place.
This is a simplified example to emphasize the difference between the performance of an unleveraged savings account and that of a leveraged real estate investment. The equity difference is $81,816.07 ($109,018 – $27,201.93).
Millions of people invest in registered savings accounts every year for decades. Due to the nature of mutual funds, the portfolio can go negative – wiping out the gains from positive years. It seems unfair that even when the fund loses money, they still charge their Management Expense Ratio (varies between 2% to 3%) that further erodes your earnings.
Now this is the radical thinking part. Why are we investing in these underwhelming financial instruments when investing in real estate is way more lucrative? The short answer is – we’ve been trained to think this way, then it becomes a habit, and then it becomes a belief.
Challenge your belief system. Consider pooling your cash with others to buy a real estate investment. A $1,000,000 house is affordable when there are multiple investor-owners. A 25% downpayment is $250,000. Joint venture with five $50,000 equity partners or ten $25,000 equity partners or any other combination. Just pro-rate each investor’s capital contribution.
This is the same process for multi-million-dollar real estate syndications. How do you build a $50-million rental building? By raising $10 million through the capital contributions of 42 investors. That’s how we funded the 191-unit Willoughby Walk rental project in the Township of Langley.
Whether you start small or go big, let your real estate investments build your wealth.
