I am not sure if I missed where you discussed it, but would you not have to declare income to the amount of $8700 ($725 x 12) as capital gains or some other kind of income from your distribution for tax purpose. It would be somewhat offset by the interest you pay on the borrowed money but in this example not entirely. Correct?
gerry smith great question Gerry. Yes, there most often will be some tax drag on the distributions, usually in the form of capital gains. Although depending upon the clients individual situation their may be return of capita investments used within the strategy as well. We would manage this with our clients to ensure we choose the most tax efficient distribution of capital for their specific needs. Hope that helps clarify. Be sure to let us know if you have any other questions.
Two things I want to mention. $448 plus $725 add up to $1173 not $1165. Also what is the interest rate on the ILOC in this example? 4.2% approximately? I am not sure but can you get a term over ten years? It just means you have to take the current amount of the mortgage and redo the interest at whatever they will be at in ten years.
Is it better in the long run to throw every spare dollar we have into paying down the mortgage while using this strategy, or backfilling our unused RRSP contributions and letting the strategy take care of itself?
Hi Vinay, thanks for watching. I'm sorry, I don't follow what you're asking? If you send us an email to info@precedencewealth.com I can send you the exact portfolio we are using with the strategy.
Don't you have to pay gains fees from that 6% interest on the 145k investment, how can you sustain a 725$ paiement ? no taxes ? Am I missing something ?
Jonathan Hung great question! The buffer is to ensure the strategy runs even if the cash flows do not are flawed temporarily by the financial institution and if interest rates were to rise slightly. This allows us to keep cash flows static and only need to adjust them annually. Also, our initial tax deductible set up fee comes out of the buffer as well. That way clients are not forced to come up with it out of pocket. Hope that helps clarify. Let us know if you have any other questions!
Thanks. In your example you show two investment accounts. One for the initial 100k and another for built equity each month. Does it need to be two separate investment accounts or can it be just one?
Thanks for checking out the video. They do share some major similarities, but this is an accelerated version. If you would like more information, send me an email at info@precedencewealth.com
Thanks Todd for the amazing video. A question if I have a rental property purchased 5 years ago but unfortunately I bought it using my personal money. Currently it has a mortgage of $200k and its FMV is $500k. How do I apply your strategy to my case? Thanks
You want to use personal money and not corporate. Reach out to us at info@precedencewealth.com and our team can prepare a detailed benefit analysis and cash flow illustration for your specific situation. That is the best way to assess this strategy for yourself. Thanks again for watching!
Hi Susan, Thanks for checking out the video. They do share some major similarities, but this is an accelerated version. If you would like more information, send me an email at info@precedencewealth.com
Thanks for the video., it is amazing. Have one question, the $725 return would need pay tax, which is higher than the $504 tax deductable interest, so the refund from cra each year would not be higher.
Because your mortgage is becoming more and more tax deductible over time, there is a natural hedge should interest rates being to rise. The higher rates increase the more tax deductions you will receive within this strategy. This is very different in comparison to a traditional mortgage where the borrower is exposed to 100% of the risk of rising interest rates. However, we always ensure that our strategies are locked in at rates that are the most advantageous possible. For example, if we can lock in the investment lending portion into a 5 year term, this will help stabalize the strategy for a defined period of time.
Does this strategy need a market timing like correction to take place before committing to the ILOC? Or it is based on the investment portfolio that can weather the storm?
Hi Shan, Thanks for checking out our content. If you would like, I can email you our investment performance. Our flagship portfolio has been providing double-digit returns, net of fee's consistently over the last 10 years without a single annual loss. You can email me at info@precedencewealth.com
tim johnson great question! Tell you what we will post a video to address that very question as it is very common. But you have to subscribe to get notified 😜 jk, but not really. We’ll try to have it out by Thursday as it is quite technical...
Question. So what happens if I start a mortgage and my equity is now higher than my actual mortgage. Would borrowing more equity and investing it be beneficial on the smaller mortgage?
sarge388 yes, based on pure economics it would make sense. However, one would have to assess of it is suitable to do so. But again in theory it would be beneficial based on the fundamentals of the strategy.
Jamie Fitzpatrick unfortunately you can not utilize a TFSA as it would not become tax deductible. It has to go into a non-registered “taxable” investment account in order to create the tax deductibility illustrated. But that certainly would be sweet if we could! 😊
Yes! But that usually is not an issue as most institutions allow 10% of the original mortgage balance as well as “double-up” payments. If you are maxing both of those out you are going to be in good shape! 😎
Precedence Private Wealth A well-constructed portfolio of diversified asset classes has easily provided those types of returns over several decades. But it always surprises us how poorly advised Canadians are on the investment management side. We welcome you to learn more about Precedence Capital’s investment management process by visiting our website and also by watching the “Investment” playlist on the Precedence UA-cam Channel. Curious to hear what you’re thoughts are afterwards. We always welcome great feedback!
How come you have $250k mortgage on $500,000 fair market value for 30 years? Who pays 50% down and then take mortgage for 30 years ? Or do you want your clients to refinance their house mortgage for 30 years after they have paid about 30% of it already ?
This was just a simple example that we chose for the illustration. It quite accurately depicts a realistic situation for real estate for the largest markets in Canada (Toronto, Montreal, Vancouver) over the past several years however, every market is obviously different. Great question! Yes, we always recommend refinancing to a new 30 year mortgage so that the extra cash flow can be used to contribute to an RSP for further tax savings on the same amount. Corresponding refunds can then be applied against the mortgage. The end result is a larger amount of net wealth.
Yes it would, but so would it be if it were your earned income. But, there are other ways to offset that such as “sponsored labour funds” where you contribute $5,000 a year in Saskatchewan and you get a $3,500+ Tax refund. And, there are other strategies as well.
Is it required to take monthly distributions to make mortgage prepayments. Could I deploy this strategy by just making prepayments out of my cash flow and let the investment compound.
Absolutely that is possible. Although, we most often would not recommend to make additional prepayments with after tax income. Best use of additional funds is to invest into RRSP’s and then take the tax refunds and apply them against the mortgage. That is always the best way to build your wealth overtime. The mortgage may take slightly longer to pay off, however the total wealth accumulated is far greater. Hope that helps clarify. If you have other questions, please reach out to us at service@precedencewealth.com
Agitator 1/3 that’s awesome! Not many do. That’s definitely a great accomplishment. Did you check out our video on Transferring RSP Assets to your TFSA tax free? Be certainly worth exploring if you have been that committed to maximizing your RRSP. As you are likely aware of the huge future tax liability that is ahead...check it out and circle back if you have any questions. Thanks again for watching! 🙏🏻🙏🏻🙏🏻
Hi Bill, We work with clients all across Canada. Send us a note and I can have you speak directly with our lead advisor Todd Mclay. info@precedencewealth.com
kevin wilson we do not have an office directly in Winnipeg but we do work with several clients from that area. We are happy to serve the great people from Manitoba! If you would like to discuss this strategy and/or learn more about out firm, please reach out to service@precedencewealth.com Looking forward to hearing from you!
No, this needs a re-advance-able mortgage structure. One that allows access to the available equity once it is paid down on the mortgage. The term of the mortgage is irrelevant. We would simply advise on the most suitable format for each specific clients circumstance.
Hi Art, Thank you for watching. I would have to assume so, however, we are not licensed to serve clients in Australia. Best to connect with a competent financial planner in your country and share this content with them as a starting point.
Sousan Niroobakhsh thank you for watching our video and reaching out to us. Our head office is in Saskatoon, however we are licensed in Ontario and throughout Canada. If you would like to discuss further, you can best reach us at info@precedencewealth.com
Unfortunately not as you would not be able to deduct the interest personally. However, the Corp can certainly borrow equity to invest and deduct the interest at any point.
Thank you! Same to you as well. It’s always great to find ambitious and disciplined future investors within our home province. Thank you for your time and attention in consuming our content. We are happy you are finding it valuable. Welcome!
duchess eagle yes and no. The income within a non registered account is obviously taxable, but many of the distributions are funded from future capital gains and dividends which are somewhat inconsistent. Therefore, we simply send the distribution on a consistent schedule to keep the monthly cash flows steady and easier to manage throughout the year. Then we make adjustments ever year to top up the remaining amounts. Hope that helps. Circle back with us should you have any other questions or need more clarification.
Rudy Spajic Thank you Rudy. We’re glad you found it valuable. Check out of page for an updated version which is a little more illustrative as well as other content. You can also learn more at www.precedencewealth.com Once again thanks for your comment and feedback! 🙏🏻
duchess eagle thanks for watching. We would be happy to assist you 😊 Reach our to us at info@precedencewealth.com and we can discuss further your specific needs.
It's all Greek to me. Since the video is 5 years old I wonder if this guy is still in business. Seems to me like a scheme. "Round and round the money goes, where it stops only Todd know.
Is the 6% realistic? How can you garantee 6% return on investments with bonds stocks and funds? What happens if they actually return less then that? thanks!
Hi Joel, Great question! Unfortunately if I could other a 6% return then we would all be set. But that being said a 6% return is hire predictable in all market environments. I would welcome you to check out our Risk Parity Investment Tutorial at www.precedencecapital.ca It will explain how exactly we have obtained over a 9% compounded return per year net of fees. Although not ever guaranteed the investment returns have been remarkably consistent. Please let us know if you have questions about the investment strategy after you have a chance to check it out.
Absolutely agree with Joel. It is hard to guarantee anything with stock market. So what do you do if it is bear market? Can you just use some other assets,like cash, while market is low?
Wow this just sounds like the Smith Manoeuvre without the accelerators. Best way to beat the tax man and generate wealth out of leverage. Great content
Momo True North thank you for watching. Yes, indeed. We have been utilizing this strategy for our clients for over 10 years now. It’s a total game changer 👍🏻
Momo True North well done! You’re certainly way ahead of the curve. I’d be honoured if you would subscribe to our channel and give us some feedback on the content we are putting out. It would be extremely helpful to our cause.
@@toddmclay5029 For sure will do, anything I can do to help homeowners and your cause I am not subject matter expert like you but I know a thing or two!
A well-constructed portfolio of diversified asset classes has easily provided those types of returns over several decades. But it always surprises us how poorly advised Canadians are on the investment management side. We welcome you to learn more about Precedence Capital’s investment management process by visiting our website and also by watching the “Investment” playlist on the Precedence UA-cam Channel. Curious to hear what you’re thoughts are afterwards. We always welcome great feedback!
Hi Jayze, thanks for watching. We actually speak to clients from Quebec every week and are implementing this strategy all across Canada. If you would like more information, send us an email at info@precedencewealth.com
You’re better off taking an amortized term where the interest rate is much lower. Principle payments are required, but it at least builds up equity rather than paying additional interest expense. Also, it is important to acknowledge that the after tax value is what needs to be considered. For example, 4.5% interest rate would provide an after tax cost of 2.7% at a 40% tax bracket. That is a very low threshold to match with the investment portfolio. Hope that helps clarify. Reach out with African questions if needed.
Yes, it does Gordon! If you would like to see how the strategy could work in your situation, I would suggest speaking to our lead advisor Todd McLay. You can reach me at info@precedencewealth.com
Reg Gatch as long as you have a minimum 20% equity you will see significant results. The mortgage products required for this strategy require 20%. The more the better but it even works well at shaving years off the mortgage with the minimum equity requirement.
Reg Gatch yes, however the Line of Credit is required within the mortgage itself as it requires a “re-advanceable” component in order to capture the equity on a monthly basis. Let us know if that is not 100% clear. Happy to hop on a quick call if you would prefer to discuss further. If desired, you can reach out to us at info@precedencewealth.com
Thanks for the great video Todd. This sounds like a really interesting strategy. Couple of quick questions. You mentioned that the 6% distribution from the $145,000 initial investment is paid consistently, irrespective of the actual returns. I am assuming these are capital distributions. Can you please confirm? If yes, have you come across any pushback from CRA regarding the tax deductibility of the interest on the initial $145k withdrawal from HELOC? Also, is there a reason why the initial $145k investment and the subsequent investments from the tax clearing account kept separate? How do I set up a call with you?
Abraham Jacob thanks for reaching out with your questions Abraham. The easiest way to set up a quick call together is to email our team at info@precedencewealth.com
Are you a financial planner or investor? This is very interesting. Why no one telling us about? It only work if investment account pays well. In current climate I am not sure if this work? What happen to line of credit payment when mortgage paid off? Thanks.
the key thing is divide our mortgage into regular and HELOC? then use the HELOC money to invest in a cash account and the investment return is higher than the home mortgage rate,and then pay the regular mortgage payment + the investment monthly/routine earning to the regular home mortgage part. so that the HELOC insterest is taxable and deduct personal income or investment income? Also, the key factor of this strategy is finding a investment is higher yield than the HELOC intereste rate. Overall that is nice strategy. Thanks for sharing.
I Agree "d mc cullum" is totally out of control with his agenda. He forgot the meaning of a politician, they are an elected official by the people for the people. there is no I in that meaning,
Hi Tsigereda, We are based out of Saskatoon, but the majority of our clients are from the greater Toronto area. Here is a link to a video we shot on the subject of where your advisor is located. ua-cam.com/video/PsgM5C_QY3c/v-deo.html
Are there initial set up costs? I don't understand the purpose of the "Tax Clearing Account." If all the funds are tax deductible then what is the issue if the funds come right from the line of credit? The origin and use of the funds can be tracked easily without this additional account. Do you pay tax on the 6% monthly distribution?
Hi Shayne Slinn, thank you for watching our video. Great questions. Yes, there is an initial set up cost of $2750 that covers the consultation to set up the mortgage structure and cash flows for the strategy. These costs are tax deductible as well as they are financial planning fees. We also pull the initial costs from the Tax Clearing Account so that there are no “out of pocket” costs to starting this strategy. There are two main reasons for the tax clearing account. First, a bank will not allow interest payments to be made directly from a Line of Credit. But most importantly it provides a clean audit trail for our clients should CRA request a review. All tax deductible expenses are tracked within this account. There definitely will be some taxation that is required to be captured on the investment growth but is managed efficiently in order to keep it as low as possible.
Hi Todd, thanks for the reply. I am trying to set this up myself so I am still trying to wrap my head around this "tax clearing account." My line of credit will capitalize the interest so I am pretty sure I can just remove and borrow to invest the increased equity in the loc. I will still be able to easily show the CRA that the money was used to pay interest on interest or purchase investments. Just trying to simplify it for myself. Should only be about 10 minutes of transactions a month.
Just remember Shayne that you have to pay the interest on the tax deductible side. It is far easier to set up a checking account for these payments. Let us know if you need further clarification. Good luck!
Thanks for the prompt reply. That I don't understand. My LOC will capitalize the interest, meaning I am charged the interest by I never have to pay it if I do not go over my limit. I can just move the equity created with the mortgage payment and direct it right to my brokerage account.
That makes more sense then Shayne. If that is the case then you should be all set without a clearing account. Curious what lender you made this arrangement with?
Yes, it’s really just for CRA’s purposes. Unfortunately they have proven to not be smart enough to decipher the information if it’s in one single account 😂 We eventually realized it was just simpler to have two accounts. Our clients have enjoyed tracking the progress this way as well.
Thanks for your question. You would have to terminate your existing mortgage. You are not required to wait until your renewal date. However, it is important to consider the total cost of terminating your existing mortgage and setting up the new mortgage into your decision. We assist our clients in these calculations so that we can clearly determine what the best timing is to enter this strategy.
Erika R thank you Erika! We’re glad you found it valuable. I have not yet heard that podcast so I’ll be sure to check it out. I would kindly suggest you also check out or more recent video where it also touches on how rental income properties can also be added to this strategy for further benefit. Also, it is a little more polished and clearly illustrated 😊 Thanks again for reaching out!
Thanks for checking out our content. If you have a few minutes, I would like you to speak to our lead advisor Todd McLay so he can explain the process. info@precedencewealth.com
@@emeraldcastle If you would like, I can email you our investment performance. Our flagship portfolio has been providing double-digit returns, net of fees consistently over the last 10 years without a single annual loss. You can email me at info@precedencewealth.com, otherwise thanks for watching.
Am I missing something here? I am not sure what interest the HELOC charges, but mine is 3% annually. 3% of $1165 = $34.95 annually which is only $2.91/ month. So where does the $504 charge come from?
When u state ILOC is that a requirement for the lOC or can a unsecured LOC work just as well . I 'm very interseted in following up on this process Also do you have any office in Victoria
Hi Mark, thanks for checking out our channel. We don't have an office in Victoria, but we have lots of clients in British Columbia. If you have a few minutes and would like to speak with our lead advisor Todd Mclay, please send me an email to info@precedencewealth.com
I would suggest a consistent contribution to a long/short hedge fund that we have been using for several years at Precedence Capital. This will ensure there are no trade costs to make each contribution. Once the portfolio grows to a more substantial level, $10k+ then we would begin reallocating the funds to a more diversified constructed portfolio. Curious where the odd number was derived from?
Is there a minimum net worth requirements to get involved into this strategy? At least there is a free and clean property, full load money in RRSP correct?
Our regulators restrict this strategy to only accredited Investors. By definition, and accredited investor is someone who has $1,000,000 of investable assets, or $200,000 of earned personal income, or $300,000 of earned family income. There are many different ways in which a client can qualify as being accredited. For example, pension assets play a part in this calculation, as well as other business assets. Should you have any questions about the qualification for your family we are here to help.
We have been in a Tax Deductible Mortgage Strategy for sometime with Todd. It has given us investment opportunities that would not have been possible not to mention the Tax savings.
The initial setup fee is $2950 +GST. This includes full consultation for the set up of the appropriate mortgage structure and the activation of the monthly cash flows within the Tax Deductible Mortgage Strategy. www.precedencewealth.com/tax-deductible-mortgage
Is there an age limit this works with? I assume it requires you to be insurable. At some point the insurance premiums will get too high to make sense. No?
Hi Tim, It becomes more clear when we illustrate to our clients for their own specific situations. The only requirement is that you must have 20% equity in your property so that you can enter into the correct mortgage that is required for the strategy. Let us know if we can further assist you in better understanding this strategy.
Yes certainly. Although your interest is already tax deductible. But it is always wise to borrow to invest when interest rates are this low. If you would like to discuss further feel free to reach out to us at info@precedencewealth.com and we can set up an introductory call with our lead advisor Todd McLay to evaluate if this plan would be beneficial to your specific situation.
very informative, thank you very much for spreading that type of knowledge, one question though want to clarify: in this presentation the leftover money (after paying a borrowing price) can be lumped with 145k or must to have separate investment portfolio?
We keep it separate for accounting purposes. From our experience CRA has difficulty assessing the validity of the strategy when it is commingled. They are not used to more complex structures and therefore are quite complacent when it comes to reviewing them. So we have decided to make it easier on them. But certainly adding to the income find account as one larger transaction would be advisable in the future. It also would be quite simple to track.
Hi Todd. One question still comes to my mind. There will be tax on interest and/or dividends. Would company hold tax on dividends ? We can write it off against interest on borrowing but don't know if tax will be hold first ? Thanks. Great video
Great question Bhavin! The income tax is not withheld upfront. It is claimed at tax time. You are correct that it is very often offset by the tax deductible interest and tax deductible management fees. If there is tax payable at the end it can be withdrawn as it was from realized gains, interest, and dividends without affecting the tax deductibility of the strategy. Hope that helps clarify! Let us know if you have any other questions.
Thanks for watching our video and for reaching out to us! Great question. More often than not it makes sense to switch lenders as we have direct communication and access to the information for your mortgage with our private lending relationships. That being said if it is best from a straight math perspective to stay with your current lender, then we certainly will accommodate that. Best way to see how this strategy will work for your own specific mortgage situation is to view a customized detailed illustration. If you wish have one prepared please email us at info@precedencewealth.com Be sure to let us know if you have any other questions!
I liked your detailed explanation. It is good information.
Very informative!
Thanks Todd .
very interesting.. I am meeting my financial planner tuesday and we will discuss this.. If all is good, i will contact this company
I am not sure if I missed where you discussed it, but would you not have to declare income to the amount of $8700 ($725 x 12) as capital gains or some other kind of income from your distribution for tax purpose. It would be somewhat offset by the interest you pay on the borrowed money but in this example not entirely. Correct?
gerry smith great question Gerry. Yes, there most often will be some tax drag on the distributions, usually in the form of capital gains. Although depending upon the clients individual situation their may be return of capita investments used within the strategy as well. We would manage this with our clients to ensure we choose the most tax efficient distribution of capital for their specific needs. Hope that helps clarify. Be sure to let us know if you have any other questions.
Would like to make contact to set up the tax deductible mortgage .
Two things I want to mention. $448 plus $725 add up to $1173 not $1165. Also what is the interest rate on the ILOC in this example? 4.2% approximately? I am not sure but can you get a term over ten years? It just means you have to take the current amount of the mortgage and redo the interest at whatever they will be at in ten years.
yes, but the interest will be tax deductable..so who cares, right?
Thank you Sir
Is it better in the long run to throw every spare dollar we have into paying down the mortgage while using this strategy, or backfilling our unused RRSP contributions and letting the strategy take care of itself?
Who guarantees 6% return, if it lower than 3% , then the borrower is screwed
Hi Vinay, thanks for watching.
I'm sorry, I don't follow what you're asking? If you send us an email to info@precedencewealth.com I can send you the exact portfolio we are using with the strategy.
Sounds Genius, I will definitely look into this with you guys
Thanks, Lyle! If you would like to speak with our lead advisor Todd McLay directly, send us an email at info@precedencewealth.com
Don't you have to pay gains fees from that 6% interest on the 145k investment, how can you sustain a 725$ paiement ? no taxes ? Am I missing something ?
@@precedenceprivatewealth2872 Thank you for the information.
Amazing content, thanks
Thanks for watching Josh! Appreciate the feedback. Let us know if there are any specific topics you would like us to cover in the future.
@@precedenceprivatewealth2872where is your updated video on this topic thanks
Hi Thank you for the informative video. I may have missed it, but did you explain why we need the 5k buffer on the LOC? Thanks.
Jonathan Hung great question! The buffer is to ensure the strategy runs even if the cash flows do not are flawed temporarily by the financial institution and if interest rates were to rise slightly. This allows us to keep cash flows static and only need to adjust them annually. Also, our initial tax deductible set up fee comes out of the buffer as well. That way clients are not forced to come up with it out of pocket. Hope that helps clarify. Let us know if you have any other questions!
Thanks. In your example you show two investment accounts. One for the initial 100k and another for built equity each month. Does it need to be two separate investment accounts or can it be just one?
Jonathan Hung we use two so that it is easier to track the progress of the account. It also is easier for CRA to view as well upon an inquiry.
Can anyone point me to the "equivalent" USA strategy ?
is not this the smith maneuver?
Thanks for checking out the video. They do share some major similarities, but this is an accelerated version. If you would like more information, send me an email at info@precedencewealth.com
Ok...mind blown! I want to know how I can implement this on our mortgage.
Hi KK, thanks for watching. If you send us an email, we can set up a time to discuss and provide you with an illustration. info@precedencewealth.com
Fantastic presentation!! I would love to speak with someone about this strategy to see if any of this could apply to myself.
Thanks, Elvira! If you would like to speak with our lead advisor Todd McLay directly, send us an email at info@precedencewealth.com
Thanks Todd for the amazing video. A question if I have a rental property purchased 5 years ago but unfortunately I bought it using my personal money. Currently it has a mortgage of $200k and its FMV is $500k.
How do I apply your strategy to my case?
Thanks
You want to use personal money and not corporate. Reach out to us at info@precedencewealth.com and our team can prepare a detailed benefit analysis and cash flow illustration for your specific situation. That is the best way to assess this strategy for yourself. Thanks again for watching!
Is this the same strategy as the Smith Manouever?
Hi Susan,
Thanks for checking out the video. They do share some major similarities, but this is an accelerated version. If you would like more information, send me an email at info@precedencewealth.com
I understand financials and investments well after 40 years as a broker. The presenter either does not explain well or mixed up
Thanks for the video., it is amazing. Have one question, the $725 return would need pay tax, which is higher than the $504 tax deductable interest, so the refund from cra each year would not be higher.
HI Olivia, Here is a section that may help explain things. ua-cam.com/video/-8eN_HMnHt0/v-deo.html
Would this strategy still be viable with the current interest rates compared to the returns on investment?
Because your mortgage is becoming more and more tax deductible over time, there is a natural hedge should interest rates being to rise. The higher rates increase the more tax deductions you will receive within this strategy. This is very different in comparison to a traditional mortgage where the borrower is exposed to 100% of the risk of rising interest rates. However, we always ensure that our strategies are locked in at rates that are the most advantageous possible. For example, if we can lock in the investment lending portion into a 5 year term, this will help stabalize the strategy for a defined period of time.
Does this strategy need a market timing like correction to take place before committing to the ILOC? Or it is based on the investment portfolio that can weather the storm?
Hi Shan, Thanks for checking out our content. If you would like, I can email you our investment performance. Our flagship portfolio has been providing double-digit returns, net of fee's consistently over the last 10 years without a single annual loss. You can email me at info@precedencewealth.com
Wish I found this years ago
just wondering what the scenario looks like when what you have borrowed is getting charged higher rates than you can get from the market
tim johnson great question! Tell you what we will post a video to address that very question as it is very common. But you have to subscribe to get notified 😜 jk, but not really. We’ll try to have it out by Thursday as it is quite technical...
Question. So what happens if I start a mortgage and my equity is now higher than my actual mortgage. Would borrowing more equity and investing it be beneficial on the smaller mortgage?
sarge388 yes, based on pure economics it would make sense. However, one would have to assess of it is suitable to do so. But again in theory it would be beneficial based on the fundamentals of the strategy.
Do you recommend putting that money into a tfsa? Do you have any examples of what those numbers might look like? Thoughts on heloc?
Jamie Fitzpatrick unfortunately you can not utilize a TFSA as it would not become tax deductible. It has to go into a non-registered “taxable” investment account in order to create the tax deductibility illustrated. But that certainly would be sweet if we could! 😊
Someone need to make sure that they have room available to prepay their mortgage otherwise company will charge them penalties.
Yes! But that usually is not an issue as most institutions allow 10% of the original mortgage balance as well as “double-up” payments. If you are maxing both of those out you are going to be in good shape! 😎
@@precedenceprivatewealth2872 for sure.
How do you arrive at the fee of $504? Also, will you not pay the interest of taking the $145k ILOC?
I believe that is the interest and management fee combined. Let us know if that does not help clarify for you.
Very informative, but the problem is how you could get 6% rate of return.
Precedence Private Wealth
A well-constructed portfolio of diversified asset classes has easily provided those types of returns over several decades. But it always surprises us how poorly advised Canadians are on the investment management side. We welcome you to learn more about Precedence Capital’s investment management process by visiting our website and also by watching the “Investment” playlist on the Precedence UA-cam Channel. Curious to hear what you’re thoughts are afterwards. We always welcome great feedback!
@@precedenceprivatewealth2872 thank you
6 percent per month is hard to achieve, is it not? most dividends stocks pay 6% annually. Say like a cibc stockfor example.
It is 6% per annum not monthly 😊
How come you have $250k mortgage on $500,000 fair market value for 30 years? Who pays 50% down and then take mortgage for 30 years ? Or do you want your clients to refinance their house mortgage for 30 years after they have paid about 30% of it already ?
This was just a simple example that we chose for the illustration. It quite accurately depicts a realistic situation for real estate for the largest markets in Canada (Toronto, Montreal, Vancouver) over the past several years however, every market is obviously different. Great question! Yes, we always recommend refinancing to a new 30 year mortgage so that the extra cash flow can be used to contribute to an RSP for further tax savings on the same amount. Corresponding refunds can then be applied against the mortgage. The end result is a larger amount of net wealth.
Would the 6% distribution aka the $725 not get taxed also?
Yes it would, but so would it be if it were your earned income. But, there are other ways to offset that such as “sponsored labour funds” where you contribute $5,000 a year in Saskatchewan and you get a $3,500+ Tax refund. And, there are other strategies as well.
When should one use this strategy?
Sooner the better. Albeit there are some requirements that need to be met. The full details are discussed on our website at www.precedencewealth.com
Is it required to take monthly distributions to make mortgage prepayments. Could I deploy this strategy by just making prepayments out of my cash flow and let the investment compound.
Absolutely that is possible. Although, we most often would not recommend to make additional prepayments with after tax income. Best use of additional funds is to invest into RRSP’s and then take the tax refunds and apply them against the mortgage. That is always the best way to build your wealth overtime. The mortgage may take slightly longer to pay off, however the total wealth accumulated is far greater. Hope that helps clarify. If you have other questions, please reach out to us at service@precedencewealth.com
RRSP maxed out, all annual room used yearly. I probably need to sit down with you.
Agitator 1/3 that’s awesome! Not many do. That’s definitely a great accomplishment. Did you check out our video on Transferring RSP Assets to your TFSA tax free? Be certainly worth exploring if you have been that committed to maximizing your RRSP. As you are likely aware of the huge future tax liability that is ahead...check it out and circle back if you have any questions. Thanks again for watching! 🙏🏻🙏🏻🙏🏻
Can you set this up for me, or recommend a financial advisor
Hi Bill,
We work with clients all across Canada. Send us a note and I can have you speak directly with our lead advisor Todd Mclay. info@precedencewealth.com
Are you located also in Winnipeg, Mb ?
kevin wilson we do not have an office directly in Winnipeg but we do work with several clients from that area. We are happy to serve the great people from Manitoba! If you would like to discuss this strategy and/or learn more about out firm, please reach out to service@precedencewealth.com
Looking forward to hearing from you!
That will only work on open mortgages?
No, this needs a re-advance-able mortgage structure. One that allows access to the available equity once it is paid down on the mortgage. The term of the mortgage is irrelevant. We would simply advise on the most suitable format for each specific clients circumstance.
Can this be done in Australia?
Hi Art,
Thank you for watching. I would have to assume so, however, we are not licensed to serve clients in Australia. Best to connect with a competent financial planner in your country and share this content with them as a starting point.
How can the $504 be tax deductible?
Here is the section where we go over the deductions: ua-cam.com/video/-8eN_HMnHt0/v-deo.html
How do I find you guys in Ottawa.
Sousan Niroobakhsh thank you for watching our video and reaching out to us. Our head office is in Saskatoon, however we are licensed in Ontario and throughout Canada. If you would like to discuss further, you can best reach us at info@precedencewealth.com
Can this system work under Corp rather than personal?
Unfortunately not as you would not be able to deduct the interest personally. However, the Corp can certainly borrow equity to invest and deduct the interest at any point.
@@precedenceprivatewealth2872 borrow from personal under corporate as second mortgage or LoC? Sorry can u explain more pls.
What is your contact info? I have questions, because I accidentally ended up with a strategy similar to your.
info@precedencewealth.com
too complicated for me :)
Very interesting! Btw you're pronouncing subsequent wrong. It's not subseequent
I know of this strategy, but your video is the best explanation that I have seen. I will be sharing this video. Thank you!
You got a new Sub. Im young new home owner from Saskatchewan. Rare to get info that directly pertains to me geographically. I appreciate you.
Thank you! Same to you as well. It’s always great to find ambitious and disciplined future investors within our home province. Thank you for your time and attention in consuming our content. We are happy you are finding it valuable. Welcome!
duchess eagle yes and no. The income within a non registered account is obviously taxable, but many of the distributions are funded from future capital gains and dividends which are somewhat inconsistent. Therefore, we simply send the distribution on a consistent schedule to keep the monthly cash flows steady and easier to manage throughout the year. Then we make adjustments ever year to top up the remaining amounts. Hope that helps. Circle back with us should you have any other questions or need more clarification.
More of her ok??
I have a call booked with you this Friday, so many questions, can’t wait to learn !
Great video. Very informative, I really want to start looking into these sorts of strategies. 👍
Rudy Spajic Thank you Rudy. We’re glad you found it valuable. Check out of page for an updated version which is a little more illustrative as well as other content. You can also learn more at www.precedencewealth.com
Once again thanks for your comment and feedback! 🙏🏻
duchess eagle thanks for watching. We would be happy to assist you 😊 Reach our to us at info@precedencewealth.com and we can discuss further your specific needs.
It's all Greek to me. Since the video is 5 years old I wonder if this guy is still in business. Seems to me like a scheme. "Round and round the money goes, where it stops only Todd know.
It is Feb 2021. Can you still do this today.
Is the 6% realistic? How can you garantee 6% return on investments with bonds stocks and funds? What happens if they actually return less then that?
thanks!
Hi Joel, Great question! Unfortunately if I could other a 6% return then we would all be set. But that being said a 6% return is hire predictable in all market environments. I would welcome you to check out our Risk Parity Investment Tutorial at www.precedencecapital.ca It will explain how exactly we have obtained over a 9% compounded return per year net of fees. Although not ever guaranteed the investment returns have been remarkably consistent. Please let us know if you have questions about the investment strategy after you have a chance to check it out.
Absolutely agree with Joel. It is hard to guarantee anything with stock market. So what do you do if it is bear market? Can you just use some other assets,like cash, while market is low?
Wow this just sounds like the Smith Manoeuvre without the accelerators. Best way to beat the tax man and generate wealth out of leverage. Great content
Momo True North thank you for watching. Yes, indeed. We have been utilizing this strategy for our clients for over 10 years now. It’s a total game changer 👍🏻
@@toddmclay5029 Thank you Todd McLay I started doing this on my own before I know it existed now I'm taking it to the next level with accelerators
Momo True North well done! You’re certainly way ahead of the curve. I’d be honoured if you would subscribe to our channel and give us some feedback on the content we are putting out. It would be extremely helpful to our cause.
@@toddmclay5029 For sure will do, anything I can do to help homeowners and your cause I am not subject matter expert like you but I know a thing or two!
Here's an accountant's short, simple How To for this classic strategy: ua-cam.com/video/s2AFeHhbdQk/v-deo.html
Thank you for your times and all the useful information. Have a great day.
You’re very welcome Jenny. Appreciate the feedback!
who can guarantee 6% of investment output rate? I am not against this idea, just want to know if there are any existing product can do such promise.
A well-constructed portfolio of diversified asset classes has easily provided those types of returns over several decades. But it always surprises us how poorly advised Canadians are on the investment management side. We welcome you to learn more about Precedence Capital’s investment management process by visiting our website and also by watching the “Investment” playlist on the Precedence UA-cam Channel. Curious to hear what you’re thoughts are afterwards. We always welcome great feedback!
Very informative and well explained! I live in Quebec and I think the tax code isn't as generous to us. Can this still be applied in Quebec? Thanks.
Hi Jayze, thanks for watching. We actually speak to clients from Quebec every week and are implementing this strategy all across Canada. If you would like more information, send us an email at info@precedencewealth.com
Robert Kiyosaki approves of this method
Today my heloc rate is prime+0.5=7.2%, how high the portfolio return has be to make this stratage work?
You’re better off taking an amortized term where the interest rate is much lower. Principle payments are required, but it at least builds up equity rather than paying additional interest expense. Also, it is important to acknowledge that the after tax value is what needs to be considered. For example, 4.5% interest rate would provide an after tax cost of 2.7% at a 40% tax bracket. That is a very low threshold to match with the investment portfolio. Hope that helps clarify. Reach out with African questions if needed.
Check out the investment section of our channel at Precedence Capital. ua-cam.com/channels/Sf9AIHWdet5HMlWoY_231Q.html
Thanks for the eye opening tips!
Thanks for sharing this video, and I am interested in this strategy. Please give me more information about mortgage loan second mortgage loan 🙏.
Thanks for your interest, please email us at info@precedencewealth.com
Does this strategy work for Quebec residents - I have a mortgage with Alterna.
Yes, it does Gordon! If you would like to see how the strategy could work in your situation, I would suggest speaking to our lead advisor Todd McLay. You can reach me at info@precedencewealth.com
This strategy works well if you have a good equity in your home. What if you have little To no equity?
Reg Gatch as long as you have a minimum 20% equity you will see significant results. The mortgage products required for this strategy require 20%. The more the better but it even works well at shaving years off the mortgage with the minimum equity requirement.
@@toddmclay5029 HELLO Todd. Thank you for thé answer. Would this startegy works with a personal line of crédit? Not a Heloc
Reg Gatch yes, however the Line of Credit is required within the mortgage itself as it requires a “re-advanceable” component in order to capture the equity on a monthly basis. Let us know if that is not 100% clear. Happy to hop on a quick call if you would prefer to discuss further. If desired, you can reach out to us at info@precedencewealth.com
Amazing video very informative
I'm interested. Can the two investment accounts be the same account or does it have to be a separate one?
Reach out to our team at info@precedencewealth.com for complete details.
I like this a lot!! Super !!
a good video. thanks.
Very nice
Thanks for the great video Todd. This sounds like a really interesting strategy. Couple of quick questions. You mentioned that the 6% distribution from the $145,000 initial investment is paid consistently, irrespective of the actual returns. I am assuming these are capital distributions. Can you please confirm? If yes, have you come across any pushback from CRA regarding the tax deductibility of the interest on the initial $145k withdrawal from HELOC? Also, is there a reason why the initial $145k investment and the subsequent investments from the tax clearing account kept separate? How do I set up a call with you?
Abraham Jacob thanks for reaching out with your questions Abraham. The easiest way to set up a quick call together is to email our team at info@precedencewealth.com
Todd McLay Thanks Todd. I will email you.
Are you a financial planner or investor? This is very interesting. Why no one telling us about? It only work if investment account pays well. In current climate I am not sure if this work? What happen to line of credit payment when mortgage paid off? Thanks.
the key thing is divide our mortgage into regular and HELOC? then use the HELOC money to invest in a cash account and the investment return is higher than the home mortgage rate,and then pay the regular mortgage payment + the investment monthly/routine earning to the regular home mortgage part. so that the HELOC insterest is taxable and deduct personal income or investment income? Also, the key factor of this strategy is finding a investment is higher yield than the HELOC intereste rate. Overall that is nice strategy. Thanks for sharing.
I Agree "d mc cullum" is totally out of control with his agenda. He forgot the meaning of a politician, they are an elected official by the people for the people. there is no I in that meaning,
Does your company have a branch in Toronto?
Hi Tsigereda, We are based out of Saskatoon, but the majority of our clients are from the greater Toronto area. Here is a link to a video we shot on the subject of where your advisor is located. ua-cam.com/video/PsgM5C_QY3c/v-deo.html
Are there initial set up costs? I don't understand the purpose of the "Tax Clearing Account." If all the funds are tax deductible then what is the issue if the funds come right from the line of credit? The origin and use of the funds can be tracked easily without this additional account. Do you pay tax on the 6% monthly distribution?
Hi Shayne Slinn, thank you for watching our video. Great questions. Yes, there is an initial set up cost of $2750 that covers the consultation to set up the mortgage structure and cash flows for the strategy. These costs are tax deductible as well as they are financial planning fees. We also pull the initial costs from the Tax Clearing Account so that there are no “out of pocket” costs to starting this strategy. There are two main reasons for the tax clearing account. First, a bank will not allow interest payments to be made directly from a Line of Credit. But most importantly it provides a clean audit trail for our clients should CRA request a review. All tax deductible expenses are tracked within this account. There definitely will be some taxation that is required to be captured on the investment growth but is managed efficiently in order to keep it as low as possible.
Hi Todd, thanks for the reply. I am trying to set this up myself so I am still trying to wrap my head around this "tax clearing account." My line of credit will capitalize the interest so I am pretty sure I can just remove and borrow to invest the increased equity in the loc. I will still be able to easily show the CRA that the money was used to pay interest on interest or purchase investments. Just trying to simplify it for myself. Should only be about 10 minutes of transactions a month.
Just remember Shayne that you have to pay the interest on the tax deductible side. It is far easier to set up a checking account for these payments. Let us know if you need further clarification. Good luck!
Thanks for the prompt reply. That I don't understand. My LOC will capitalize the interest, meaning I am charged the interest by I never have to pay it if I do not go over my limit. I can just move the equity created with the mortgage payment and direct it right to my brokerage account.
That makes more sense then Shayne. If that is the case then you should be all set without a clearing account. Curious what lender you made this arrangement with?
Why do you need two separate investments accounts in your example? Couldn't you just use the same one?
Hi Eric, thanks for watching. The separate account keeps things organized for a clean audit trail.
Yes, it’s really just for CRA’s purposes. Unfortunately they have proven to not be smart enough to decipher the information if it’s in one single account 😂
We eventually realized it was just simpler to have two accounts. Our clients have enjoyed tracking the progress this way as well.
Does this work for a fixed mortgage?
Thanks for your question.
You would have to terminate your existing mortgage.
You are not required to wait until your renewal date. However, it is important to consider the total cost of terminating your existing mortgage and setting up the new mortgage into your decision. We assist our clients in these calculations so that we can clearly determine what the best timing is to enter this strategy.
Great video. Just learned about this through a podcast featuring Robinson Smith and I loved how you have broken this down.👍
Erika R thank you Erika! We’re glad you found it valuable. I have not yet heard that podcast so I’ll be sure to check it out. I would kindly suggest you also check out or more recent video where it also touches on how rental income properties can also be added to this strategy for further benefit. Also, it is a little more polished and clearly illustrated 😊
Thanks again for reaching out!
@@toddmclay5029 Thanks for the suggestion, I will check that out! Happy Friday!
The 3% is compounded daily or continuously; is the 6% a simple return?
The Smith Maneuver
Thanks for checking out the video. They do share some major similarities, but this is an accelerated version.
This is the Smith manoeuver
Thanks for checking out the video. They do share some major similarities, but this is an accelerated version.
So what happens to the LOC? We still owe that amount. So we are mortgage free but not loan free.
Thanks for checking out our content. If you have a few minutes, I would like you to speak to our lead advisor Todd McLay so he can explain the process. info@precedencewealth.com
Can I use a Manulife All-In-One for this?
Thanks, tblack21! It may be best if you speak with our lead advisor Todd McLay directly, send us an email at info@precedencewealth.com
so where can i find a risk free 6% investment???
Hi JC, If you would like, send me an email info@precedencewealth.com and I will send you our current investment portfolio.
@@precedenceprivatewealth2872 none of them gonna be risk free 6% though
@@emeraldcastle If you would like, I can email you our investment performance. Our flagship portfolio has been providing double-digit returns, net of fees consistently over the last 10 years without a single annual loss. You can email me at info@precedencewealth.com, otherwise thanks for watching.
Am I missing something here? I am not sure what interest the HELOC charges, but mine is 3% annually. 3% of $1165 = $34.95 annually which is only $2.91/ month. So where does the $504 charge come from?
AH, I see, I forgot that there was also already 150k taken out of the iloc.
When u state ILOC is that a requirement for the lOC or can a unsecured LOC work just as well . I 'm very interseted in following up on this process
Also do you have any office in Victoria
Hi Mark, thanks for checking out our channel. We don't have an office in Victoria, but we have lots of clients in British Columbia. If you have a few minutes and would like to speak with our lead advisor Todd Mclay, please send me an email to info@precedencewealth.com
Wish I knew this 10 years ago
Thanks for watching! If you would like to speak with our lead advisor Todd McLay directly, send us an email at info@precedencewealth.com
Very, I interesting, something to consider on my mortgage. Thank you for sharing.
Hi Todd, just wonder what you could invest with $661 every month. If we use $661 to buy stock, it is going to cost $10 per trade almost 2% of $661.
I would suggest a consistent contribution to a long/short hedge fund that we have been using for several years at Precedence Capital. This will ensure there are no trade costs to make each contribution. Once the portfolio grows to a more substantial level, $10k+ then we would begin reallocating the funds to a more diversified constructed portfolio. Curious where the odd number was derived from?
Is there a minimum net worth requirements to get involved into this strategy? At least there is a free and clean property, full load money in RRSP correct?
Our regulators restrict this strategy to only accredited Investors. By definition, and accredited investor is someone who has $1,000,000 of investable assets, or $200,000 of earned personal income, or $300,000 of earned family income. There are many different ways in which a client can qualify as being accredited. For example, pension assets play a part in this calculation, as well as other business assets. Should you have any questions about the qualification for your family we are here to help.
We have been in a Tax Deductible Mortgage Strategy for sometime with Todd. It has given us investment opportunities that would not have been possible not to mention the Tax savings.
How much do you charge to your clients? Are all these things legal and the government of Canada or CRA sue me if I use this strategy?
The initial setup fee is $2950 +GST.
This includes full consultation for the set up of the appropriate mortgage structure and the activation of the monthly cash flows within the Tax Deductible Mortgage Strategy.
www.precedencewealth.com/tax-deductible-mortgage
Is there an age limit this works with? I assume it requires you to be insurable. At some point the insurance premiums will get too high to make sense. No?
Hi Tim,
It becomes more clear when we illustrate to our clients for their own specific situations.
The only requirement is that you must have 20% equity in your property so that you can enter into the correct mortgage that is required for the strategy.
Let us know if we can further assist you in better understanding this strategy.
Can you do this with a heloc, instead of a cash out refi?
Wow! This is great. What if I am currently renting out the property and coming out on top every month with + $250. Could I still do this?
Yes certainly. Although your interest is already tax deductible. But it is always wise to borrow to invest when interest rates are this low. If you would like to discuss further feel free to reach out to us at info@precedencewealth.com and we can set up an introductory call with our lead advisor Todd McLay to evaluate if this plan would be beneficial to your specific situation.
very informative, thank you very much for spreading that type of knowledge, one question though want to clarify: in this presentation the leftover money (after paying a borrowing price) can be lumped with 145k or must to have separate investment portfolio?
We keep it separate for accounting purposes. From our experience CRA has difficulty assessing the validity of the strategy when it is commingled. They are not used to more complex structures and therefore are quite complacent when it comes to reviewing them. So we have decided to make it easier on them. But certainly adding to the income find account as one larger transaction would be advisable in the future. It also would be quite simple to track.
Hi Todd. One question still comes to my mind. There will be tax on interest and/or dividends. Would company hold tax on dividends ? We can write it off against interest on borrowing but don't know if tax will be hold first ?
Thanks.
Great video
Great question Bhavin!
The income tax is not withheld upfront. It is claimed at tax time. You are correct that it is very often offset by the tax deductible interest and tax deductible management fees. If there is tax payable at the end it can be withdrawn as it was from realized gains, interest, and dividends without affecting the tax deductibility of the strategy. Hope that helps clarify! Let us know if you have any other questions.
i have a mortgage and heloc with RBC already, do i need to switch to another financial institution for YOU to manage this for me monthly?
Thanks for watching our video and for reaching out to us! Great question. More often than not it makes sense to switch lenders as we have direct communication and access to the information for your mortgage with our private lending relationships. That being said if it is best from a straight math perspective to stay with your current lender, then we certainly will accommodate that. Best way to see how this strategy will work for your own specific mortgage situation is to view a customized detailed illustration. If you wish have one prepared please email us at info@precedencewealth.com
Be sure to let us know if you have any other questions!
Does the strategy apply in QC? Sometimes taxes are little different in QC. Especially for dividends
Yes indeed! 👍🏻