Dear David,

We just sold our house for $45,000 more than we were expecting. We’re considering renovating our new home in a year or two, should we park the money or have some fun? – PARTY TIME

I’ve seen this scenario with many clients who’ve ended up surprised at how much their house can sell for when properly marketed. It likely feels like you’ve fallen into money and those funds can be really easy to spend – “easy come, easy go,” as the saying goes.  I’ve seen folks spend their unexpected windfalls on just about everything. While I understand you’re excited to find yourself in this position, I encourage you to make a plan and not blow the money (just think about how many years it would take you to save $45,000).

It’s pretty hard to go wrong investing in your financial security. Rather than parking the funds in your savings account, this would be a great time to pay off high-interest debts (like a credit card balances). If you trust yourself to manage it wisely, a great move might also be to put the $45,000 directly into your next home by setting up a Home Equity Line of Credit (HELOC).

A HELOC can be set up as a component of your mortgage. Basically, it acts as an available line of credit that can be drawn down and paid off with the extra cash in your monthly budget. The benefit of a HELOC is that funds are easily accessible, at a much lower interest rate than other types of credit. The drawback is that like a credit card, it’s easy to run up a balance. You shouldn’t use the HELOC to pay for purchases that your monthly income can’t cover.

Speak to your mortgage specialist about whether a HELOC might be a useful part of your investment strategy. If you never end up needing it, you’ll have an extra $45,000 paid down on your house.

Dear David,

We want to sell our investment property, a great little detached home in a good neighbourhood. Our tenant has been there a few years and the place is looking a bit rough. How should we approach this? – UNSURE

DEAR UNSURE: It sounds like your property would be the type to attract a first time homebuyer and not necessarily another investor. If the new owner plans to use the space personally, the tenant will need to vacate. I’ve had a number of clients turn this situation into a win-win by offering their tenant an incentive to help smooth the eventual transition.

When your tenant is moving anyway, I’d suggest offering them their last month’s rent back, with an additional month thrown in if they vacate early. This will allow you to prepare the home for market with fresh paint, carpet, etc. The extra $1500 or so that you spend on incentives could easily translate into a $10,000 – $20,000 gain in the sale price of the property, which is often the difference in value between a home that’s “rough around the edges” and one that’s move-in ready.

Let’s face it, unless you’re renting to Mr. Clean or Debbie Travis, you’re inevitably going to get less money for a home that isn’t clean, tidy and in move-in condition. Not to mention, when it comes to showings, having the place vacant will be much easier on everyone as you won’t need to disrupt your tenant’s schedule.