# How to lock in that home equity before bubble bursts?



## gentlepuppies (Jan 17, 2016)

My parents live in Vancouver and paid off the house decades ago. Their home value went from $1 million in 2013 to just under $2 million. Knowing that it's an eventuality that this value will evaporate when the bubble bursts, is there any way to "lock in" that windfall (ie mortgage?) without literally selling the house and moving elsewhere?


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## none (Jan 15, 2013)

No.


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## Pluto (Sep 12, 2013)

How about exploring if a reverse mortgage would achieve what you want?


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## Just a Guy (Mar 27, 2012)

A reverse mortgage would only give you about 40-60% LTV, then the interest would eat up the remainder.

The only way to ever lock in your gains, and this applies to every investment out there, is to sell the investment.

The best you could do is get a heloc (margin the asset) and invest the money elsewhere. Hopefully your leveraged appreciation outgrows any depreciation you may encounter.

For example, if you own 1 house for 100k, which you paid off, and the market corrects 50%, you now have only 50k. 

If you leveraged the property 80%, bought 4 more with a 20% downpayment, you now own 5 places worth 100k each. Assuming you paid them off and the market corrects 50%, you now have assets worth 250k. Of course, you used other people's money to pay off the 4 rentals...

The above is a hypothetical example, full of all sorts of potential problems and assumptions. It's meant to illustrate a single concept, don't be confused that it is a "always works, win-win" situation.


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## OptsyEagle (Nov 29, 2009)

gentlepuppies said:


> without literally selling the house and moving elsewhere?


Selling the house and renting elsewhere.


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## dotnet_nerd (Jul 1, 2009)

You can hedge your gains by shorting the market.

Buy credit default swaps, or some LEAP puts on a Canadian REIT or even the banks.


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## birdman (Feb 12, 2013)

Sell it and lease it back.


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## Causalien (Apr 4, 2009)

Like the American investors found out. There's no way to short the Canadian housing market without some complex maneuvering. So there's no way to take a profit without selling a house.

I took the plunge and sold.


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## tygrus (Mar 13, 2012)

Take out a HELOC and invest it, deduct the interest. If things fall, the bank isnt likely to call it in unless you cant service it.


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## naysmitj (Sep 16, 2014)

gentlepuppies said:


> My parents live in Vancouver and paid off the house decades ago. Their home value went from $1 million in 2013 to just under $2 million. Knowing that it's an eventuality that this value will evaporate when the bubble bursts, is there any way to "lock in" that windfall (ie mortgage?) without literally selling the house and moving elsewhere?


If your parents are happily living out their final days in the house they have lived in for decades and they do not owe any money on it, why are you so concerned about locking in a what you believe is a windfall?


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## MoreMiles (Apr 20, 2011)

naysmitj said:


> If your parents are happily living out their final days in the house they have lived in for decades and they do not owe any money on it, why are you so concerned about locking in a what you believe is a windfall?


+1

Your parents already bought late... Those houses were $200k not too long ago, then they were up $500k... about 10 years later, it's $1 million, then your parents took over, then it's $2 million.

How would you know where the peak is? That is one issue.

The second issue is, how do you cash out and still enjoy it? There is no way. You can sell and lease back... but those investors will probably want $5000 per month rent for $2 million home. Would your parents want to pay $60,000 per year just to maintain the same residence? Would your parents be ready to move whenever their landlord needs it for personal use or sell it?


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## gentlepuppies (Jan 17, 2016)

House was bought in '97 for $400k. Anyway, they're nowhere near their final days lol, but thinking of downsizing to a $700k/1000sf condo to lock in the gains now that the 2nd kid is about to move out too. I'm just wondering if there's a less disruptive way for them to lock in gains, but it doesn't seem so.


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## My Own Advisor (Sep 24, 2012)

I would simply enjoy life with a paid off home in Vancouver. Be thankful and enjoy


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## Just a Guy (Mar 27, 2012)

Yeah, but it's not his house...he's trying to cash in on someone else's (his parent's) good fortune...a little greed and entitlement creeping in.


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## gentlepuppies (Jan 17, 2016)

Haven't checked the site in a while...

^^oh wow, kinda presumptuous? It's their retirement idea - I'm just asking out of curiousity!


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## Davis (Nov 11, 2014)

Sale and leaseback would be the only way, but it may be difficult to find someone willing to give them a lease that allows them to stay in the house as long as they want. I heard of a situation in France where a man bought an apartment from a woman in her 70s or 80s under those conditions. She lived past 100, and outlived him.


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