We all know that here in Ontario, home prices have a tendency to appreciate year over year. While there may be variances in that percentage, we can see that historically over the past 25 years, Ontario home prices overall have been on a steady incline.

But I bet you hadn’t previously been wondering if your home makes more a year than you do…

A recent article on storeys.com  referenced a handful of charts based on data from the Canadian Real Estate Association (CREA) that show just how incredible home appreciation has become.

For those that currently own a home, this data may come as a pleasant surprise, for those that are hoping to enter the market the results are less uplifting. So what is the jarring figure that you’re waiting to read? $160,000. Yes, you read that right. The charts indicate that the typical house price rose $160,000 year over year in Canada.

And let’s not forget that if you were to receive an income of $160,000 that it would be taxable, to truly earn that much through work, would be to earn $270,000 pre tax.  That $160,000 rise however, if on a primary residence, is tax free dollars.

Whether this figure excites or intimidates you, I think that we can all agree that it is substantial.

But what does it really mean? Well, it ultimately shows the strength of the Canadian housing market and what it can do for you as a wealth building tool. But we aren’t going to pretend that it’s just magical free money to spend, it is equity. And if you do not a) sell your home, or b) refinance that primary residence to invest in a cash flowing asset (such as a rental property), then that $160,000 is really just a pretty number to look at.

To further that point, let’s touch on a) selling your home. If you see this great appreciation and decide, ‘wow! look at all of this equity in my home, i’m going to sell and have all sorts of cash to enjoy.’ that is a lovely sentiment, however, we must remember that in the real estate market, it’s all relative. If your home has appreciated by 15% this year, so have the homes that you are looking to purchase after you sell. So unless you are open to moving to a more remote area, a smaller home, or a lifestyle adjustment, you likely won’t be exiting these transactions with extra spending money in your pocket.

That being said, building equity in your home and utilizing that to move up say from a condo, to a town home is a great way to continue building wealth through real estate, by continuing to move up the housing ladder.

If you go with option b) refinancing your primary residence to invest in a cash flowing asset (such as a rental property), this is an amazing way to enjoy your home and leverage it to help you build wealth. We could talk about this topic for hours as we are passionate investors ourselves; but the key is that if you are able to invest in a property that covers its mortgage payments via rental income and even cashflows to help with other expenses, you are utilizing the appreciation in your primary residence to grow your portfolio and build your wealth even faster.

Want to learn more about how you can leverage your home to purchase an investment property? Head to our Investors page and get a copy of our Investors Guide for the full scoop!