All Forum Posts by: Dave Vogt

Hi everyone,

Interesting conversations here.

I myself am incorporated. Each flip I do would be charged a capital gains tax if I did them in my own name. So for $1200 and about that again every year to pay my accountant to review my own books to give a stamp of approval I am happy to only pay 16% tax on all my business transaction in my incorporations. Flipping houses is my business so therefore the government allows me this rate.

That being said I do own a few rentals and they are in my name. Any profits from rental go against my personal income tax. So I keep my income low and let my profits in the incorporation grow. As a Canadian shareholder in an incorporation you can withdraw dividends which are tax free (except the health tax). I haven't had to do this yet, but I am looking forward to doing so.

I myself would use a three tiered system once I start to grow my rental portfolio. The only reason would be for liability reasons to shelter my own personal assets not held in the incorporation. This is a ways down the road for me, but I like how my house flipping company/property management can charge the rental company for services rendered offsetting the income generated in the rental side of the incorporation. This income is considered passive and taxed at the highest rate.

Sure there will be some expenses to doing this. You have to set up the trust, set up the rental side of the corporation and have an accountant and a lawyer review everything, but in my opinion for the long haul if you plan to build an empire of rentals then this may be the only way to protect yourself.

For me as well having my corp set up makes getting insurance easier, and in the long run is saving me a lot of money in taxes. If I buy a house for 100K put 20K in and make a 30K profit 5 times a year that would add up to 150K in profits...taxed at our governments highest rate. Ouch. In the incorporation I only pay the corporate tax rate and if I withdraw 40K for salary I am still ahead.

I don't even pull that much out as my partner is a real estate agent and we live from that and plan to take dividends out of the company tax free in the future as our company grows.

For my company I use all private money so the banks can go fly a kite. As I get into rentals I am sure my attitude will change on this, but for now I can't stand the slow pain in the butt process and bureaucracy of a bank. I pay my lenders 10% on a first mortgage and 12% on a second interest only for 3-6 months or however long the flip takes and this is a right off for my company. I get to make offers with cash and no conditions with the help of my investors beating out the competition that needs a finance clause and business is good.

I have done the bank thing in the past....can't stand the BS that goes along with it. I am sure as time goes on and my assets build it won't be such a problem for me to buy rentals with the help of the banks, but for now my business is bumping along smoothly.

Was a platinum member for two years....good bunch. The basic membership is all you need to go to the meeting etc. They have a great crew and good insight. Don't need to be a platinum member to take advantage of what they offer, but it was a good experience for Steph and I and we really got a lot out of it for our marketing too.

I love your go get em attitude and especially your OPM tactics and your relax a bit, big picture attitude is awesome...you and I could be good friends.

Maybe in a few years we can have some drinks on a beach somewhere with Roy and talk about all our cool stories.

Yikes...that sounds like fun! I heard they are not too bad to deal with, but I would like to hear how this goes. Private money is my main source of funding for my flips. The banks don't like my junkers so private has been my little secret to quick turnovers.

I want to continue to use my private guys to do commercial deals, so knowing the process you are going through would be very helpful. I want to transition some junker apartments like Filipe and then refinance and pull out funds then rinse and repeat until I grow my empire ;-)

Yes sir, that would be the fellow. He spoke at Rockstar Real Estate meeting last year. Super good speaker. I enjoyed it very much and learned a lot. I will have to sign up for his newsletter thank you.

As to BMO I have been finding them very investor friendly and on some of our residential deals through our broker she was finding this to be the case as well. Good to know you are seeing the same thing. By the way I am certain that a broker (at least the established ones) have access to all the big banks as well. As I mentioned previously we received a better rate quote through our broker from one of the big banks that we had already visited. The brokers can work them for there "best rate" if they have a competitor playing them for business.

Its been a while since I have looked at commercial..do you have to pay your broker on a commercial deal?

I know when it comes to banks it isn't so much the name on the door, as the people that are inside the doors that make a big difference. We banked at Scotiabank for years in one town and when we moved 15 minutes away decided to switch branches. Well let me just say the lady's at the new branch are absolutely hands down the best people I have ever dealt with at a bank. Relationships are the name of the game in REI...no question!

By the way the FREE REAL ESTATE BOOK advertisement you keep seeing on this page if you are in Canada or Ontario more specifically is the guys at Rock Star Real Estate. Too funny....smart marketers.

Missed this one oops!

I didn't know that RBC did this...still my least favourite bank for so many reasons. LOL!

Did you work out the long term return with the CMHC and 4.5% fees. I know when this speaker ran the numbers it still made good sense to go this direction. It boiled down to looking at it for the long term play, not the holy crap 4.5% fee that goes through your head initially.

I guess in this case it really doesn't make sense to pay such a big fee if you can get a 20% down deal.

Hi Filipe,

My suggestion would be to shop that mortgage at a good mortgage broker with commercial experience and multiple companies to work with. I can't stand the big banks for all there bs tactics and hassles. Often using a broker you will end up with a better rate and surprisingly sometimes this can be the same big bank you already went to.

I think this has been one of the biggest lessons that I have learned in the last 10 years. I recently sat in on a conference where an x CMHC employee spoke about the ins and outs of using them for commercial units and as long as the building will meet certain criteria you can do 85% LTV. Even with the fees it works out way better for the you the owner. The biggest reason is cash-flow.

I am not an expert on commercial lending, but I have been around long enough to know you need the right people on your team to get these things done in the best way for you.

In Canada I am 99% sure that anything over a four plex is considered a commercial building.

The other reason for looking at other lenders is the 2 years of experience. They should be basing the loan on the performance and condition of the building and your overall net worth may also be a factor. At least these are the issues the previously mentioned speaker brought up.

As I said I am not a commercial guy, but this is the direction I plan on moving in the future...so I pay attention when people talk commercial. Especially when the person talking was a higher up at CMHC with several 10-50 unit buildings in his portfolio. His story was very interesting and I wish I could have recorded it for my own knowledge.

The price is about the same maybe even a little cheaper at HD. These cabinets are on the shelf and available in store. The only thing you may run into is a custom situation where you would have to special order something.

Quality I would say along the same line as well

To a previous comment to counter top and floor.

We use a local countertop shop and get contractor pricing. Great to deal with and usually a two week turn around measure 5X if you have to...don't screw this one up. LOL.

The flooring is a loose lay higher quality vinyl flooring. I talked about this in a previous post in the do it yourself forum. It can be laid over plywood..no underlay required. Just need to fill the holes or knots and smooth out any rough areas with some wood filler or floor leveler and you are good as gold.

No these are not the $99 cabinets at all. They are the in-stock Barcelona. They are a nicely finished wood door...I believe maple sprayed with dark stain and lacquered just like any high end cabinet door.

The crazy part is that many of the super expensive kitchen's I have seen in 500-600K homes are all melamine boxes with nice ends and doors.

I agree on the white door style at home depot. They suck. They look super cheap. Back several years ago when they used Mills Pride the door style was nicer, but the cabinets are POS. Now that they switched to the Fabritec brand the quality is better. Its still not extreme quality by any means, but once the cabinets are all screwed together and the counter top is on there is no problem with them.

For a $1000 upgrade on our kitchen we could have custom ordered the same kitchen with matching interiors pre-assembled. For some this may be worth the extra cost. For us the three week wait wasn't worth the extra time to get it done.