I recently read a book called the Smith Manoeuvre by the late Fraser Smith, a financial planner, written in 2002. Just a disclaimer, I am in no way affiliated with Fraser Smith or have anything to gain by helping sell his book, but I feel it’s my duty to report to you that this book is a complete game changer! I learned how I could pay off my mortgage in just under 6 years, when I currently still have 25 years remaining on my amortization. Now lets us talk about this powerful financial strategy a bit more.
To summarize, the Smith Manoeuvre is a system that gradually helps restructure the non tax-deductible mortgage in your principal residence into a tax-deductible investment loan where you pay simple interest. Additionally, you will receive annual tax refunds on your investment loan, reduce years off your mortgage, and thus increase your net worth!
Now, you maybe asking…“Is this legit…?” Thankfully, I am happy to report, it IS!! All techniques that’s mentioned in the book are legal and have been reviewed by the CRA. So now, how does this Smith Manoeuvre really work? Here are the steps listed in the book, which assists in converting your non tax-deductible mortgage interest into tax-deductible debt.
In order to take full advantage of the Smith Manoeuvre, you will need to have a principal residence with a mortgage.
Step 1) Obtain a re-advanceable mortgage from a reputable financial institution: A re-advanceable mortgage is different from a traditional mortgage as it’s a mortgage with a home equity line of credit all in one product. When you pay down your mortgage, the principal portion that you pay down simultaneously increases the credit limit on the HELOC. To give you an idea of how that’s done, my current mortgage is with TD Bank with over years left on my term. The penalty is about $2400 to break this mortgage (3 months interest), and I will be switching to Manual Life 1 or RBC, which are two financial institutions I know that provides re-advanceable mortgages.
Step 2) Use the funds in the HELOC to invest: Withdraw the HELOC portion of your mortgage to invest in investment properties, or any type of investments like stocks or bonds. If you already own investment property(s) in your personal name (not in a corporation), the HELOC would be used each month to pay all your monthly expenses while all rental income is applied towards the principal pay-down each month on your principle residence mortgage. Be careful here, as you must pay dollar for dollar for your expenses. Talk to your accountant to help you with this as if it’s not done correctly here, you may disqualify your ability to claim expenses on your HELOC. Remember again that your HELOC limit will increase with each regular mortgage payment paid, which in turn allows you to invest the newly available money in your HELOC. This in accounting terms is called “Cash-damming”.
Step 3) Deduct interest paid on your HELOC when filing your taxes: When you are filing your tax return every year in March, deduct the annual paid interest amount from your HELOC. This should result in a tax refund based on your marginal tax rate.
Step 4) Re-invest the interest from the tax refund: Apply the tax return and the investment income (dividends, interests, etc.) against your non tax-deductible mortgage and invest the new HELOC money available.
Step 5) Repeat Steps 2 to 4 until your non tax-deductible mortgage is paid off!
This doesn’t sound super-complicated, right? Keep in mind that the Smith Manoeuvre does not happen overnight; it requires years to achieve.
I strongly recommend you read the Smith Manoeuvre so that you too can learn how to pay your mortgage off much much faster, AND be able to claim tax deductions. And don’t forget to run everything pass your accountant first, or talk to a financial planner who is familiar with this strategy to assist you 🙂
If there’s one thing I say over and over again to clients, it’s to make sure your investment generates positive cash flow.
Here’s an example of a savvy teen who understood this principle, so much so that Ellen Degeneres interviewed her!
Click on link to view: https://www.youtube.com/watch?v=GTTczC27fko
With a new year comes an opportunity to reflect the past year’s successes and lessons learned, and set goals for the upcoming year. As a Real Estate Investor, I reviewed my life priorities, added goals associated with each of them, and defined a plan of action to achieve what I want for 2016.
Here are the 7 life priorities that I have identified for myself for 2016:
- Health and Fitness
- Real Estate Investing
- Hobbies & Recreation
What priorities have you set for your life? Perhaps you have identified some that are similar to my list?
Identifying your priorities is a great first step, because it gives you an overall picture of what’s important to you in your life right now. The next step is to be clear about the goals associated with each, because that’s what gives you a sense of direction.
- Real Estate Investing – increase # of doors to 18 by end of 2016
- Finances – maintain same level of income in 2016 as in 2015
- Self-Development – finish commercial real estate program and one public speaking course
- Relationships – have #1 relationship with my teenager
- Health and Fitness – go on low carb diet and remember to take my Usana vitamins daily
- Spirituality – continue to attend church on Sundays and donate monthly
- Hobbies & Recreation – learn how to use my Sony camera and make an album of my favorite photos for Christmas 2016
When creating my goals, I purposely set out to make sure they are realistic for me. I didn’t want to make them too aggressive because I don’t want to stress myself out when trying to achieve them.
Most people stop here. But the key to achieving your goals is to have a plan of action. Below are the actions steps I have taken, or will take, to achieve the first 2 goals just to give you an idea of how it’s done.
- Real Estate Investing – increase # of doors to 18 by end of 2016
- Host Cashflow 101 evenings with fellow investors and network
- Research JV-worthy projects to promote to other investors and clients
- Finances: Maintain same level of income in 2016 as in 2015
- set lunch & dinner dates with all past & current clients
- exhibit and speak at minimum 7 Keyspire events
- contributing author in new book, “Tax Savings Bible” – done!
- Become Finalist for Realtor of the Year 2016 with Canadian Real Estate Wealth Magazine
- Continue writing for Canadian Real Estate Wealth Magazine
- Continue blogging and updating business website
You’ll notice that some goals don’t need any additional action, because I’m just maintaining what I’m already doing. For some of your goals, it’s ok to just maintain. For the goals that make you stretch outside of your comfort zone, you will need to add many action items and review daily, weekly and monthly and adjust accordingly.
Also, it’s best to tell others about your goals to make yourself accountable. You said it, so you MUST do it.
More importantly, I’ve share my goals and the process I go through because I hope you find this helpful as you define your own life priorities, set your goals, and start making your 2016 dreams a reality!
Sometimes when we’re busy or stressed we forget how good we have it, until news from around the world, or even down the street, jars us back into gratefulness.
Below is a slide deck that has been passed around online for years. Perhaps you’ve seen bits and pieces of it on your Facebook feed, or maybe it was sent to you by a friend.
I think it’s a great reminder of how blessed we are to live in Canada.
Wishing you and yours a happy holiday season and a prosperous 2016!
My first year as a Realtor was a huge success!
April 30th marked my one year anniversary as a licensed BC REALTOR, and it’s been a great year!
I became a Finalist for Realtor of the Year with Canadian Real Estate Magazine, I was featured in the REIN Real Estate Report’s December issue, I am co-author with Best-Selling Author and Business Mentor Colin Sprake for his new book “Entrepreneur Success Stories”, and I will be launching the Vancouver chapter of Synergy Real Estate Investment Network with Best-selling author and Commercial Mortgage Broker, Sua Truong in May.
But that didn’t happen without taking daily action.
When I became a licensed BC Realtor last April, I had a slow 6 weeks to start and didn’t make my first sale until June. Then in September, I decided to really focus on my business and take massive action. I communicated my sacrifice plan with my daughters and also put romantic relationships aside. That’s when I started to really see the results which led to a great year that I can feel proud of.
What was my success formula?
- I got myself some great mentors: one for my business, one for investing in Canada, and one for Investing in the US.
- I ensured a forward momentum in my life by taking daily action.
There’s nothing like learning from people who have already done what you want to accomplish, but it takes action on your part to make it happen.
What have you really desired in your life? If you really want it, and if you take action every single day, that’s when magic happens…
Like many of you, I have been watching Oprah since I was a little girl. Oprah has inspired us as we graduated from high school, went off to college, got married, sat and folded laundry in our living room, made dinner in our kitchen, and then had children of our own. What an amazing 25 years we’ve had with this remarkable woman.
Seeing Oprah live is one of those things you must do in this lifetime. If I had to describe what she has done for women and for society, I would need to write a very long book. So to simplify; I will use a quote from Oprah herself. She has accomplished the “maximum achievement of her calling.”
As Oprah stood on stage on January 2013, there was a magical connection between her and the 16,000 mostly female fans at Rogers Arena. Within the first 10 minutes, most of us were captivated, touched, and inspired to “achieve our maximum calling”. Oprah grew up poor and disadvantaged. Her life could have been very different if it wasn’t for the choices she made to service others.
Some of the highlights of the show for me are… well almost EVERYTHING.
- Everyone wants validation. The cause of every argument in your life is because one person does not feel they are seen, heard, and/or appreciated.
- There is no such thing as failure….you’re just on a “climb” to take one step at a time. What is the next right step? Then the next right step after that?
- There is no such thing as luck. Choice, not chance determines your destiny.
- When you honor your power, nobody can touch you or stop you.
- Your life is validated only through the service of others. (helping, educating, donating and making a difference in other people’s lives).
- Not everyone can be famous, but everyone can be GREAT.
- Parents go from “Managers” to “Consultants” as their kids become Tweens. (My family counselor tells me this all the time, but why is it so damn hard to stop “managing”?)
- Whenever you feel you need to shift, when you do shift, EVERYTHING will change.
- Gratitude changes your energy field. Be grateful for everything you have. When you don’t know what you are grateful for – take in a breath of air : )
- Intention –> Action –> Reaction. When you BELIEVE, your beliefs are the lenses you see in the world. You are co-creating your life.
- Everything that happens to you grows you to who you are meant to be.
And my personal favourite:
- Life gives you Whispers, and the Whispers are ALWAYS RIGHT. Pay attention to the Whispers. Because if you don’t, life will give you a lesson. When you still don’t listen, life will give you a brick, a crisis and then a complete Tsunami Disaster. These are the “Hmm… that’s odd” moments. LISTEN TO THE WHISPERS.
After discussing this enchanted evening with my 3 sisters and some friends who attended the event with me, it was agreed that we all had an amazing time. Some of us received affirmation from Oprah of what we believe to be true of ourselves, and all of us received some life-changing tips that we will apply to make a difference to our life and to the lives of others.
– By Teresa Leung
My recommendation. Print out my Oprah highlights and place it somewhere prominent like the wall in front of your work desk. This will remind you every day that YOU MATTER, and your daily choices will ultimately determine your life’s destiny. As Lady O said, “Not everyone can be famous, but EVERYONE can be GREAT!” The only difference between you and Oprah is more people know her name… and maybe a few billion bucks.
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