How to Use the Smith Maneuver to Buy a Second Property in Toronto With Home Equity

What Is the Smith Maneuver?

Most Canadians use extra money to pay off their mortgage. That’s safe, but it doesn’t grow your money.

The Smith Maneuver flips the script. Instead of just paying off your mortgage, you re-borrow the equity and invest it — so your money starts working for you while your mortgage still gets paid down.

Over time, this creates three big advantages:

You invest sooner (rather than waiting to be mortgage-free).
The loan interest becomes tax-deductible.
You build wealth faster with smart leverage.

Disclaimer: This content is for informational purposes only and is not tax or financial advice. We are not accountants. Always consult a qualified tax professional or financial advisor before making investment or financing decisions.

How the Smith Maneuver Works — Step by Step

Let’s break it down with simple numbers:

Step 1: Make lump sum payments or prepayments on your mortgage
Step 2: Re-borrow that equity using a readvanceable mortgage or new loan
Step 3: Invest the borrowed funds into income-generating property
Step 4: Claim tax deductions on interest (when funds are used strictly for investing)
Step 5: Repeat the cycle as equity grows

Example: Using $250K Equity to Buy a Toronto Multiplex with the Smith Maneuver

Let’s say you have $270,000 in equity in your home. Instead of sitting on it, you:

Borrow it using a HELOC or new loan
Use it to cover the down payment, closing costs, and a $10K buffer
Buy a $1.1M turnkey triplex near Downtown Toronto

You then take out a $880,000 investment mortgage at 4% amortized over 30 years.

Now you’re carrying two loans:

$270K (against your home): ~$1,400/month
$880K (on the new investment): ~$4,000/month

Let’s look at what that property brings in.

You’re getting:

A property that pays for itself
Additional monthly income
Tenants covering the mortgage
Tax-deductible interest on the $270K (if structured correctly)

Why the Smith Maneuver Works So Well With Real Estate

Compared to stocks, real estate has unique advantages:

Reliable cash flow: Rents help cover monthly payments
Better leverage: Buy large assets with less money down
More control: Choose the asset, the location, and the value-add
Tax-friendly: You may refinance and still defer capital gains
Appreciation and mortgage paydown: Builds equity two ways

When the Smith Maneuver Can Backfire

Let’s be real — leverage amplifies everything. If your property doesn’t cash flow, and you’re forced to sell at the wrong time, you could be in trouble. That’s why this only works when:

You buy cash-flowing properties (like multiplexes)
You can qualify for both loans
You plan to hold long-term
You’re disciplined enough to keep reinvesting properly

When This Strategy Makes Sense

✅ You have at least $300K+ in home equity
✅ You’re comfortable carrying debt and understand leverage
✅ You’re investing in positive cash flow properties (like Toronto multiplexes)
✅ You have strong income and can qualify for a big mortgage
✅ You have a plan to hold cash-flowing rental properties for the long-term

How We Can Help You Get Started

At Elevate Realty, we specialize in helping Toronto investors use strategies like the Smith Maneuver to buy high cash flowing multiplexes in Toronto that grow wealth smartly.

Here’s how we help you:

Free Strategy Call: We figure out your goals and show you the best way to invest in Toronto. No sales pitch, just real advice.
Find the Right Property: We help you buy properties that make money – whether they’re ready to rent or need some work.
Fix-Up Help: Need to renovate? We know good contractors and we’ll help you avoid costly mistakes.
Rent It Out: Want help finding tenants or managing your property? We do that too.

Want to see what’s possible for you? Book a strategy session with us here.

What Toronto Real Estate Investment Is Right For You?

Check out our complete Toronto real estate investment guide for all the details and real-life examples. If you’re ready to dive in, just book a call with us!

      
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