[00:00:01] Speaker A: If you're looking for the skills and.
[00:00:03] Speaker B: Tools to succeed in real estate investing.
[00:00:05] Speaker A: You'Ve come to the right place. This show is about breaking through barriers, breaking through limiting beliefs and breaking through to the life that you want to live through the power of real estate investing. You're listening to the Breakthrough Real Estate Investing Podcast.
[00:00:21] Speaker C: And now here are your hosts, Rob.
[00:00:24] Speaker A: Brake and Quinton D'Souza.
[00:00:29] Speaker B: Welcome back, everybody. Thanks for joining us again. Really nice to have you all here to learn some more real estate and, you know, life and wealth and happiness info today here on the show. So appreciate you coming back to join us. As usual today, Quentin looking especially tan from being out of the country for a while. He's back in beautiful sunny Toronto area now though, right?
[00:00:55] Speaker A: Yeah, positive four. But the Caribbean was in the Eastern Caribbean for a week and that was a nice trip.
[00:01:02] Speaker B: So what did you guys do?
[00:01:03] Speaker A: Well, we did a cruise. So we were, we did like St. Thomas, St. Martin, we did the Bahamas, some left from Orlando, arrived in Orlando, that sort of thing. It was fun. It was good. You know, my, my Laura really likes the cruises, so it's, it's definitely a good thing. So it worked out. Worked out well.
[00:01:29] Speaker B: I've never been on a cruise ship.
[00:01:31] Speaker A: You know what it's, it's like taking your all inclusive with you to different countries basically, and Laura likes that sort of stuff. I'm more of the adventure type of traveler, so. But you know, this is my compromise and it works for me. Yeah.
[00:01:48] Speaker B: Oh yeah, man. Wow. What a compromise. What a nice guy you are.
[00:01:52] Speaker A: I, I know for saying so, Rob, I like to think so. But there's, there's a ton going on too in, you know, real estate, you know, especially with, you know, the tariffs, interest rates.
You know, lately I've been working on getting some refinances done and especially with the apartment buildings, we're finding that five year money is, is tighter than usual. And the point spread that I'm getting on off of the CMB is a little bit higher than what I've been able to get in the past. So what that means is that it's costing me more for money because there's less liquidity in the markets and so on the apartment building side as we go for refinance as it's costing a little bit more.
But that also has to do with the fact that there's not much competition really. You only have cmhc and in other countries, you know, you have other organizations that you can go to, but you still don't get the level of financing that we have in Canada. So there's, like, pros and cons to it, but that. That's kind of interesting. And, and also I've been looking at. I know this is, you know, a real estate podcast, but we talk about gold. Gold has been on fire lately. Like, I've seen gold at 4200 an ounce, and maybe about a year and a half ago, I was buying it for like, 2600. So it's been on fire over the last little while. And, you know, when you think about it, like, Canada used to have a thousand tons of gold in the 1960s. Okay. And then over. Over time, progressive governments have eliminated the amount of gold that. That we've had. So, you know, in the. In the 1980s and 90s, you know, there was, you know, gradual selling off of gold. And by. By the time we get down to 2016, we have, you know, less than 0.1 tons. I think somebody said like, 72, 72 ounces of gold in. In our reserve. 72 ounces. So that. That's nothing.
And, you know, it's just what that could mean.
And what's kind of interesting about it is that a lot of central banks have been buying more and more gold, and Trump recently had said that they want to inspect the gold reserves of the US because there's a lot of questioning whether there's actually the gold in Fort Knox. That is in Fort Knox, and it's actually in a number of locations. I think there's like four different locations. But the. The idea behind that is if they inspect it and, you know, whether they have the same amount that they say they have or they don't have, they could reprice the gold to its current value. So I think. I don't know what the value is. I think it's like $32 an ounce or something like that. Whatever it was in 1972 is what they. They've priced it at. If they reprice gold at, that gives a lot more value to the gold reserves that they have, but it would also drive up the value of gold. So you could see a huge jump in the value of gold depending on the reserves and what it gets repriced at. So it's kind of an interesting aside here when it comes to.
I'm all about making money in all different types of things, so it's an easy thing for people to do. And if you have a thousand bucks or whatever, you want to buy a half an ounce of gold or, you know, something like that or a quarter ounce, so they can, you can even buy like 10th of ounces of gold.
You know that, that's something that anybody can really do. But I don't have gold.
[00:05:59] Speaker B: But what about silver?
[00:06:01] Speaker A: Silver's done very similar. Like I've, I've got gold and silver and silver's has a, had a similar tear when it comes to valuation. But it's a lot more harder, it's harder to buy like, like you can get an ounce for let's say $40 and maybe two years ago you could have got it for $20, let's say. But the amount of room that you need to store it is a lot more. As compared to like gold. Right. For the, for a similar amount of value.
So it's quite an interesting, you know, so there's, there's people that invest in, just invest in gold and silver and they, they do some trading on it. But it's, it's, you know, just interesting to see what's been happening in the last little while. Not real estate related but I think it's something that you know, everybody can participate in and you know, you don't, you don't need to a lot to get started. So hopefully that inspires some people to at least take a look at that. Maybe buy the ounce of silver or you know, maybe a little bit of gold and learn a little bit more about that as a hard asset class.
[00:07:15] Speaker B: And then what about the tech tariffs?
[00:07:17] Speaker A: Ah, the tariffs. Well if we do see the tariffs in Canada, I do think that long term interest rates are going to come down. We're going to see some of like the 5 year rates come down and the 10 year rates come down which would actually be beneficial for real estate. Because what we've seen really is like the variable rate come down, but not necessarily like variable and fixed rates. 5 year fixed rates are close to the same and usually there's, there's more of a variation and what we could see is that affecting the five year and tenure rates and perhaps you know, that would be beneficial for underwriting property. The problem is that it would push the economy into a recession for sure. And you know, people that are in a recession don't typically buy houses. You know, it becomes a lot harder for them to just make ends meet and they're not, you know, maybe buying up, maybe they're selling down. Right. They're downsizing or things like that. So it's something to keep in mind. And it's definitely, you know, one of the things that is on my radar. But I don't base decisions of real estate investing on, you know, what's happening with a particular government or.
[00:08:38] Speaker B: Well, right.
[00:08:39] Speaker A: No, it's like the people that call.
[00:08:40] Speaker B: You up and say, is now a good time to invest or should I wait and see what happens? This is a very good example of that. How many people will ask you, should I wait and see what happens? It's like, wait and see what happens with what? With the tariffs, with interest rates, with, I don't know, the price of gold, with what, what are you waiting for? How long are you going to wait? When are you going to know? When is it going to be at the spot where you go, okay, now I see. And now I can make a decision, right? Yeah, no, so I absolutely agree with you. You can't wait. You can't wait for that.
[00:09:11] Speaker A: No.
[00:09:11] Speaker B: The only time you can act is now.
[00:09:13] Speaker A: Yeah, buy real estate then wait, wait for 10 years, 15 years. I just, I finally sold an asset that I, and I remember telling you this, that I, I had bought like 12 years ago. You know, I bought it for like 166 and I was able to, you know, I'm gonna have to pay capital gains on it, but like freeing up 500k, right? So that's, that's a significant amount of funds. Now you can take that and you can turn that 500k into a cash flow stream. Right? Let's say you, you know, you lend it out at 10 or 12% or you, you know, invested into like, maybe you're gonna do option trading and you know, or do, what is it like covered? Call ETFs or whatever it is and, and generate a return. Then all of a sudden, you know, you take that 500, 000 and you're generating 50, 000 a year. That's not a bad, you know, way of, of doing it too. So there's lots of ways of, of doing it, but buying it and waiting gives you that value. And that's usually more than most people would have saved for retirement over a lifetime.
[00:10:18] Speaker B: Oh, for sure, for sure.
[00:10:21] Speaker A: Especially if they don't have a pension, a government pension, or like a work pension. They probably wouldn't have saved that. And all their money is probably in their personal residence. And then getting access to that could be a challenge.
Anyways, so there's always a lot to talk about, but we should, we should really get our guest on here.
[00:10:41] Speaker B: All right, let's do it. Well, today we are very happy to have. Oh, wait, first, one more thing just before I bring you on. Steve, sorry about that. If you're listening. Please go over to Breakthrough reipodcast ca listen all the past episodes, get in touch with everyone that we've interviewed because all of the, all of their contact info is in the show notes and go over to itunes and rate and review the show. We'd really, really appreciate that. So go on over there and do that. Sorry, Steve. Today, today we're really looking forward to talking to Steve Sonav and he's going to be telling us about real estate bookkeeping and tax strategies, which is actually a pretty interesting thing to talk about right now. And specifically how investors can structure their finances for maximum tax efficiency and long term success. So welcome Steve. Thanks for coming on.
[00:11:33] Speaker C: Thank you. I appreciate you having me here. I'm quite excited. It's the perfect timing. It's tax season. I think everybody's interested in those topics.
[00:11:40] Speaker B: We're all just, everyone in the crowd is, or in the audience is just like throwing their hands up like, yes, tax time.
[00:11:49] Speaker A: I don't know where he lives, but that's not me, that's for sure.
[00:11:52] Speaker B: Well, actually I did, I did my taxes here, so I have corporate taxes to do here and I'm getting a refund.
[00:12:00] Speaker A: Wow.
[00:12:01] Speaker C: Yeah.
[00:12:02] Speaker B: $900.
[00:12:04] Speaker A: I don't think I've got a refund since I was like 19 years old, but.
[00:12:07] Speaker B: Well, I certainly wasn't expecting one. But I don't know how things work here. Right. I'm just submitting what they want me to submit and they tell me I'm getting 900 back. So I'm all good with that.
[00:12:17] Speaker A: Yeah, no, that, that's good for sure. Well, Steve, maybe you can tell us, you know, a little bit about yourself.
[00:12:25] Speaker C: Sure, I.
Let's see, where do I start? I've kind of lived in the Vancouver west coast area, so I'm a west coast boy. That's where I grew up, in the mountains, going up and down Whistler.
But now I reside in Edmonton and everybody will tell me, oh my God, why is that? But you know, there are good reasons and there are good things in Edmonton.
My professional background, I've studied accounting. I have a master's in business. My concentration was in finance. I really enjoy numbers and I really like to analyze things and make sure that it makes sense quantitatively. It's not just an emotional decision, but it's actually a business decision. And this is how I kind of communicate with people and I try to point them out in figuring out what is it that they are really after.
In addition to that, I like to snowbird a little bit. I go down south, I usually spend a month or two in Mexico when it's -45 in Edmonton. I think it's one of the best things that someone could do. And, you know, I think someone mentioned it earlier today, if we're making all this money from real estate, might as well just enjoy life a little bit.
[00:13:40] Speaker A: Yeah.
[00:13:41] Speaker B: Yeah, agreed. Yeah, that's what it's about. So then you. You've done some stuff in real estate, too. We're gonna, we're gonna switch to the tax in, in a little bit here. But you've done some real estate investing as well. So do you want to tell us how you got started in that?
[00:13:55] Speaker C: Yes. I think my journey started a little bit different than everybody else.
When I was quite young, my family had a small family business, but it grew to the point where it required some commercial space. So the first real estate deal I ever did was an office warehouse space. So I got straight into commercial. This property I purchased back in 2014, and I still have it, and it's one of my best performing properties. It actually taught me a lot. I learned all about triple net leases. I learned about how to structure and deal with commercial financing. And then that is a very good primary. If you can understand that, then you can do a lot of other things on the residential side a lot easier.
Subsequent to that, I've done various types of deals. Condos in the Vancouver market, I've had townhouses, duplexes, multifamily, like fourplexes, and between B.C. and Alberta, actually. So I currently have about 17 tenants that I'm dealing with in addition to handling a lot of tax issues with our clients.
[00:15:07] Speaker B: Very good. Well, I mean, 17, it's. It's not too, too hard. So you still have plenty of time to handle all people's tax issues.
[00:15:16] Speaker C: That's right. So as long as you have good systems and you have organized yourself, you can absolutely do it. But at the same time, kind of similar to what Quentin was talking about earlier, you sometimes want to diversify, and you don't want to put all your eggs in one basket. Real estate is amazing. It gives you the option to leverage, but you have to know, like, what is it that you want out of life? And what I wanted was, you know, to have the freedom of doing things that I enjoy. And I actually wake up every day, believe it or not. And I'm super happy to go in front of all of the tax issues that I have to deal with because it's a creative out, like, output for me. I just need to imagine and Think about stuff. But on the other hand, you know, you also don't want to be overwhelmed and to have so many properties or, you know, buildings and then be sucked into it and not have that lifestyle that you were after in the first place.
[00:16:09] Speaker A: I just want to say, Steve, I'm thankful that there are people like you that really like, smile when they deal with taxes and bookkeeping. I just want to say I appreciate you.
[00:16:23] Speaker C: Thank you. And honestly, the way I think about it is that I'm actually helping people.
It's a service that a lot of clients feel intimidated about. That's something that they don't. They feel scared. And the reality is the government has a lot of power. They can do things that they're the best collection agency out there. They can do things you wouldn't imagine. But my job is to be their safeguard and to protect them from the big boogeyman, essentially. So it gives me satisfaction to know that I'm actually helping people and the like, making them feel calm.
[00:17:00] Speaker A: Yeah. And if you have, you know, clean books and you're, you know, you know what to expect with your taxes, it certainly makes things a lot easier. Do you have any, like, best bookkeeping practices for real estate investors?
[00:17:16] Speaker C: Sure, yes. I think there's a lot of things that people can do. It depends where someone is in their journey. If they're starting probably maybe their first property or they're just renting the basement in the property that they live in, they would probably be okay handling things on their own. So, you know, we can provide them with various types of checklists of the most common expenses. You know, property taxes, utilities, insurance, those kinds of things. And they could be running a spreadsheet and trying to keep everything like reasonably well organized. But as you grow and as you start to become a professional landlord, so like you're running it as a business, I would highly recommend that that would be a service you would like to outsource. That would be something you hire professional. Someone that has the tools, the abilities, the knowledge and the expertise in being able to handle your file a lot more efficient than you would be able to do it yourself.
[00:18:19] Speaker A: Do you suggest like after two properties, three properties, eight properties, I would probably.
[00:18:25] Speaker C: Depend, like if there's a property with just one unit or a property with 10 units, it kind of depends on that as well. But it also depends on the timing. Like some people may have a part time job or just one spouse is working, one spouse is not. Or they may be super busy and have a lot going on. So it depends on the unique situation they're in, however, around two or three properties, I would start thinking about outsourcing that. And here's the other thing. Like, why would you do a professional service like that yourself when you would not do your own electrical? You're not going to do your own plumbing, you're not going to do your own, like, things that require a professional.
You could do it. Absolutely you could. But how good and how long it's going to take you is going to be usually preventing you from.
[00:19:13] Speaker B: Listen, let me tell you something. If just getting my stuff together to send to the accountant is excruciating to me is there's nothing worse than me just getting it ready to send to the accountant. So there's no way I'm going to dream of doing it myself or trying to do it myself.
[00:19:31] Speaker C: Well, I think, yeah, what we try to do is we have a system where we collect the information on a monthly or quarterly basis, so that way you don't have to go back and do 12 months worth of information. I feel a lot of people are overwhelmed by. No, oh my God. I need to dedicate like an entire day or a weekend to gather all my information. I don't know why it needs that long.
[00:19:52] Speaker B: But what we haven't seen how most people are organized and they're not like most people are. Well, not most people, but if you saw the way that I kept, like if I kept documents.
[00:20:04] Speaker A: Is it a shoebox? Is it a shoe box?
[00:20:06] Speaker B: It's not a shoe box. It's. It's like.
And a file over there and something on my phone and something on my computer. You know, it's everywhere. Nothing is in the right place.
[00:20:19] Speaker C: I think that's another reason why having a professional that's beside you along the way, they can point out these things the moment they happen. So then you don't to wait until later on you realize, oh my God, I've been doing it incorrectly or. Or in a messy way for this entire year or maybe year and a half or two, depending on when you started with things.
It's. But at the same time, if there is a person out there that is behind and you know they, for whatever reason, they've been putting it off and they're a year or two or three behind, let me tell you, we can handle that. We don't judge. We have seen all kinds of scenarios and there could be very good reasons why you're behind. The most extreme case that I've had is an individual that was 13 years behind in filing their taxes. So there came. They had some, some medical condition that just kind of prevented them or didn't allow them to be in the headspace to put together taxes. However, that individual would write a check every year to cra, send it in with a letter that says, I'm sorry, I'm too sick, I cannot do my taxes. But here's $5,000, or, I'm sorry, I'm too sick, here is $10,000. So he would actually send a lot of money to cra. Eventually, CRA said, well, we cannot wait any longer. You need to do your taxes. So they hired a professional and they came to me with a trolley with banker boxes, all receipts, probably, I want to say, like 20 boxes. That was a lot. So we spent the entire summer going through all these paper, like physical receipts, sorting them into the year, into the category.
In the end, we were able to get everything complete, and that person was able to recover thousands and thousands of dollars in refunds because they had overpaid all these years. The thing is that the first three years were past the statute of limitations that CRA has, so that refund was not accessible to them. But the remainder, 10 years, they got a refund for every single one of them.
[00:22:19] Speaker B: So ask you a question?
[00:22:20] Speaker C: Yes.
[00:22:20] Speaker B: If they owed on those three years past the statute of limitation, would they still owe it?
[00:22:25] Speaker C: Yes.
[00:22:26] Speaker B: Yeah. Funny how that works, huh?
[00:22:28] Speaker A: Yeah. Interesting, eh?
[00:22:29] Speaker C: Yeah. The same way when CRA wants to charge you interest and it's 9%, but if they need to pay, your interest is like 0.5 or something.
[00:22:36] Speaker A: So, yeah, there's got to be some changes to that eventually. So, so, so people must be making like big tax mistakes as well when they're, when they're doing this. Maybe you can share, like, what is the biggest tax mistake that real estate investors make?
[00:22:55] Speaker C: I would say when you have rental properties, you always think, oh, it's quite easy. You know, I collect the rent, I have my expenses, and it's a done deal. And for the most part, and for a lot of people can be pretty simple. But then there are unique situations. What if you lived in the property and then you moved out and then you spent like three or four or five months renovating it to get it rent ready? Is that amount, the amount of expenses you had, is it going to be considered a capital expense? Is it going to be considered the current expense? How do you defend that if CRA comes back asking you questions? So those would be the tricky and difficult things to track and report and know exactly how to do.
Other situations would Be when you do major repairs, like, you don't need to have the property vacant, but you still need to fix the roof if it's leaking, or you still need to replace the furnace in the middle of winter when it completely breaks. Now, because it's a big ticket item, very often CRA is going to come and tell you, you got to capitalize that. There's no way it's giving you a lasting benefit. You got to capitalize it. But you need someone like me on your side to defend you, to say, no, this is just bringing the property back to its original condition. And here's the case law that cites that. So we would like you to apply it as a current expense. Those would be the biggest things I would say people miss on. There is another one as well.
There are situations where we cannot find a way to make the expense current and it just has to be capitalized so you don't get an immediate benefit from that. The benefit you get is when you sell the property. And that can be many, many, many years down the line. So if you don't have the proper records to track and to substantiate those additions or, you know, whatever other capital expenditures you had, you may end up losing them because, you know, when 10 years go by and you don't have that information, we're just going to go off of what you bought the property for. Therefore, you leave again, thousands of dollars on the table.
[00:24:56] Speaker A: Yeah, that's a bookkeeping and, you know, making sure that you're. Your tax. Taxes are up to date when it comes to having that on your books. We. Yeah, definitely. I've seen that as an issue before. And every year at the end of each property, we end up keeping track of that if, if, in case, if we can't use it as a current expense. That way it's always there at the end of the year and we can still see it and it carries over, but it's not something that we can use as a, like a deduction. But at least we have it on our books, right?
[00:25:33] Speaker C: Yes, yes. And I will add to that the requirement to keep source documents or receipts is for six years from the date you file the return, not from when the expense happened. So if we're not taking advantage of this capital expense until 10 years later, you got to keep the receipt for 10 years plus six years after that. So it doesn't mean like, oh, yes, they had this expense, you know, six years ago. I don't need the receipt anymore. You need to have those source documents to insubstantiate the claim you're making at whatever point.
[00:26:06] Speaker A: Yeah, so you know, that goes into like, the other question is like, how do investors track these expenses to be able to maximize the deductions?
[00:26:17] Speaker C: You know. Yes, that's a, that's a great question. I think everybody feels like they can do it in Excel and Excel is a decent starting point. Like we talked earlier, if you have one or two units, probably you could handle it. You know, maybe you can have a folder where you can just be dumping all the receipts that are. You have to capitalize and you cannot claim as a current expense. It just starts to get tricky when your situation is unique and maybe you can, you're not capitalizing the entire amount. For example, let's say you, you had to replace the flooring and it was carpet and you put lvp. Now that we got to split it. So the portion that would be replacing equal for equal. So carpet for carpet would normally be a current expense, but now the upgrade to LVP is capital in nature. So let's say you spend, I don't know, $5,000, but carpet would have cost you three. We are going to claim three as a current expense and two as capital. You gotta keep track of that somehow. And Excel tends to be not a very good way to do it. So we, we need to start looking into a proper accounting software or ledger software. There is a lot available out there. Probably the most common ones are QuickBooks Online. You have Sage, you have.
[00:27:33] Speaker A: What do you use? Europe.
[00:27:35] Speaker C: We kind of use all of them. I think we're familiar with most depending on the level of complexity of the file and then feature richness that the client needs. If it's an ongoing collaboration thing with Books Online works great because it is cloud based and we're able to see things that the client is able to do immediately. But then there are other situations where the client doesn't need to see the information until maybe five or ten years later. So then we can probably use something that is desktop based in our firm and save you the cost of subscriptions because, you know, nowadays subscriptions can be like 60 bucks a month. And that's a lot of money for. That's eating into your cash flow quite a bit.
[00:28:17] Speaker A: Yeah, we, we spend. So we, I used.
So we have like 580 units and we use QuickBooks online for our accounting software. But we also used a software called Dext as a front end. And Dext allows you to basically take a picture of your receipt and then add it to the particular property and then it saves some double. Double accounting work. That's all. And then it also connects up to the bank accounts that are associated with the property. And so it helps kind of keep, you know, keep track of different expenses. Also it keeps a copy of the. The receipt. It's for, you know, the bookkeeping side.
Are there other software products like that that can help with the tracking and.
[00:29:13] Speaker C: Yeah, I'll share that. Our firm uses Dex extensively as well. Really.
[00:29:17] Speaker A: Okay.
[00:29:18] Speaker C: Of Dex, the way we think about it is a digital filing cabinet. So if the client has any document, it doesn't matter what it is, it can be a check that they're depositing. It can be a statement, an invoice, anything like that goes through Dext. And if we need to file it or put it in the accounting software, there is a way to do it directly through the integration with QuickBooks. Or if we don't need to do it, we just archive it. But it's an easy way for us to find that information later on. We love Dex because it has the ability to assign, like, a class or. Yes, classes or like just a project in some situations. We have a lot of clients that do fix and flips and they might be having two or three or four different ones going on at the same time. So kind of organizing all the receipts and which one relates to which project. DAX is super helpful with that. And it doesn't give the client the complexity of how accounting works. All you need to do is just tag it in Dex right way, simple. And then we take care of the heavy work, which is just then sorting it into accounting classes.
Another cool feature that Dex has is for any clients that might be doing something with foreign currency, text works great.
[00:30:33] Speaker A: US properties.
[00:30:34] Speaker C: Yeah, QuickBooks has the ability to attach receipts as well. There is a receipt function is just not quite as good as DEXT is. And then we also love the chat function. So if you upload a record and we have a question like, okay, what? We didn't tag it properly or just didn't make sense, we can put a question directly hooked up to that specific picture of the invoice or whatever it is, and that will pop up on your phone as the client. And then you can answer it, like on the spot and be, oh, yeah, this was for a meeting I had with whatever. So then we can very quickly record it in the right spot. It is a really cool feature that we enjoy. And then there's the last one I love about Dex is we all get a million types of, like, receipts or invoices in our emails and keeping track of those is super complicated or needing to download them and then upload them to some platform takes a lot. Dex gives you a unique email address and you can just forward those. That way you know, you forward it, you archive the email and now your inbox is clean. So there's a lot of benefits to it. But again it would be for only individuals that make sense for them if they only have one or two units. Probably we're not going to ask them to pay that 20 or 25 of DEX cost plus the accounting software fee. So it could easily be like 50 bucks. That's quite a lot for their cash flow. But if you have a lot then it will make sense. So we just tailor the technology to the needs of the client.
[00:32:04] Speaker A: Yeah, that's great. Like, like the way we, we have multiple, multiple decks and multiple QBOs because of the, the size and scope of what we do. And the, the email address feature has been beautiful for that because then we can separate it into the, and the different QBOs. So that, that's pretty cool.
Is there, I've got to ask selfishly here. Is there like another software?
[00:32:35] Speaker B: I was just gonna say for 15 off.
[00:32:43] Speaker A: Oh, you're in slow motion.
[00:32:44] Speaker B: I was gonna say Quinton fading in and out or something.
[00:32:47] Speaker A: Yeah.
[00:32:49] Speaker B: Am I?
[00:32:52] Speaker A: So I was just thinking the like I've heard of others like tie in softwares. Is there something else that you would Recommend?
[00:33:02] Speaker C: I mean QuickBooks receipts could be a good start for someone that has something simple. There is Hub Doc. Hubdoc works great if you are a zero client. So you're not using QBO but you're using zero just because they own it. And whenever you have zero you kind of get access to, to Hub Dog as like the package for QBO and.
[00:33:22] Speaker A: And, and I'm selfish here. QBO index people.
[00:33:26] Speaker C: Dex is probably the best kind of included as an automatic thing for almost everyone that's over a certain size.
[00:33:33] Speaker A: And we tried Pluto as well. P L O O T O but it just didn't function very well. It wasn't good.
[00:33:39] Speaker C: Pluto is more about AP and ar like take money and paying money. It was not design about the receipt capturing aspect. Now they have that function. It's just. It's not the best yet. I mean it might work for some one off things that you might have depending on what your needs are. But Dex recently has gone through a major merger with another company so we're expecting to see a lot more features added to it. And just this like the end of Last year they added something which I really like and we've started to use a lot, it's called approvals. So when certain invoices come in or certain type of categories, we can trigger automatic requests for an approval from the client. So that way we're not posting in the books something that the client is not aware of because you could be giving that email address that you have to various type of suppliers or anyone and your invoices do end up in that spot. However, we can create a system where either one person approves, two people approve, no approval is required below a certain amount. This is something new and it's working quite well as long as it's set up properly.
[00:34:47] Speaker A: Can you, can you do the last thing I'm going to ask, what about payments? Because right now like you can do, you can organize it via the, the dax, then you can do the, you know, upload the receipts but the payment still has to be done outside of, you know, Dexter. Is there an automation to that where you can approve and then payment goes through?
[00:35:15] Speaker C: Pluto would be better for that case. The only thing is that Pluto is relatively slow. It takes a long time for something to be processed if you're collecting or if you're paying out. For our clients we have a built in process. We work directly with a financial institution so we can do the payments on their behalf which for actually a lot less like cents compared to like a dollar or whatever other companies are charging.
[00:35:43] Speaker A: Yeah, the challenge is like if you have hundreds of transactions right then it starts to add up. That's, that's the only thing. And if we, if we're already paying for a service, I mean I already learned something today. The chat feature. We're gonna, I'm gonna go back and implement it like today.
[00:36:01] Speaker C: Yeah, it's a, it's a great, great feature. We use it quite extensively on our end and it does keep an audit log as well of all the conversations. If something has been changed from one category to another, who did it? It's, it's a great platform.
[00:36:15] Speaker A: Yeah, very cool, I appreciate that. So I've been dominating because I really like, like this is the stuff that's going to help, right. Like these little tweaks kind of saves time and you know, less people get involved, it becomes more stre mind. We end up with a better process and that's how we have a better business in the end. Right.
[00:36:36] Speaker C: So absolutely, I see it in my own firm as well. There is a lot of things that we have a very clear process for, for like we have an intake, we have a middle part and then we have the delivery of whatever the item request was.
But if we ever get an email that doesn't fit in one of our workflows, then that is the one that is a challenging one and it tends falling through the cracks. So we just got to make sure we have built all those processes and capture as much of the possible intakes that are coming in. So that way the. The rest of it just flows super smooth.
[00:37:10] Speaker A: Cool.
[00:37:12] Speaker B: My connections dropped off quite a bit here, so I don't know.
You just, just keep going.
[00:37:19] Speaker A: I. I will. Why don't you get rid of your video?
The I. I wanted to ask you about the strategies like what can real estate investors do in order to use to legally reduce the taxes that they pay?
[00:37:40] Speaker C: I think one of the best option or something that every Canadian in my opinion should research, understand and hopefully implement is the Smith Maneuver. I'm a Smith Maneuver certified professional and what that is, it's a strategy of how you move the money around in order to be able to create deductions from your primary home residence mortgage interest. Essentially in a normal case your primary residence mortgage interest is not deductible. However, if we can set it up in a certain way, we can create backup or let's say a reasoning behind why at least a portion of it can you can deduct. And when you're able to do that and we put it on your personal taxes, you can start triggering refunds. Then you can take those refunds, put them back through that same process and then create more and more write offs as time goes by. It is a beautiful strategy, but you do need to have three professionals that are involved with it and they need to work hand in hand. You need a mortgage broker that understands it, you need an accountant that understands it and you need a financial planner. As long as you have those three in place, they can create a plan that is customized to you and your needs and the accelerators that are available. Once you do that, all you need to do is maybe spend 10 minutes every month and move the money in the order you're asked to. And then at the end of the year you just provide us with the records that we need and we're able to file that for you. Now I.
[00:39:12] Speaker A: High level, just high level explain.
[00:39:16] Speaker C: Yes, I think I will try. And hopefully people that are listening to this can have good imagination and try and envision it. But essentially what is happening is you will be set up with something called a re advanceable mortgage. So your mortgage is going to have two products attached to it. It's going to have the conventional mortgage that you normally would have anyway and then it's going to have a line of credit. Every month when you make a payment to your mortgage, a portion of it goes to interest and a portion of it goes to principal. When the principal is reduced on the conventional mortgage, automatically the line of credit limit goes up by that same equivalent amount.
[00:39:56] Speaker A: And you're talking about their principal residence. So everybody is clear like because residence.
[00:40:03] Speaker C: And then I'll add an extra layer after that. But let's, let's just focus on that because that's the most simple. Yeah, so all you're doing is you're making your mortgage payment the same way you would do normally. It's just that now you have a readvanceable line of credit attached. So the moment that you pay down principal, then you have that room available in the line of credit. What we can set up then is an automatic draw that takes the money out of the line of credit and put it in some type of investment that pays you dividend or interest. That can be an eft, it can be any, anything that, that you feel comfortable with, investment wise. That's why we recommend having a financial planner because they can guide you through the options.
But now you, what you've done is you've created the connection between a loan, essentially the line of credit that you have, and an investment product that earns you money. When that is the case, the Income Tax act allows us to write off the interest on it. So every month that goes by, that balance gets bigger. The amount of interest you pay gets bigger until eventually you've converted the entire mortgage to be a line of credit. And then essentially you're able to write all of the interest.
[00:41:17] Speaker A: Right. And so basically the, the high level idea behind it is that you're taking debt, which is your principal residence, and you're converting that debt from non deductible debt to deductible debt. Because like your principal residence, the interest on it is, is basically non deductible because it's your principal residence. But if the interest was on a rental property or on an investment, it is deductible interest. And so you're, what you're doing is you're trying to, to convert that. And I actually did the Smith maneuver. I've, I've done it. I, I did it back in 2008-2013. We converted our principal residence debt from non deductible to deductible. So I've Got a fairly good knowledge of it. I'm not, you know, like you, I'm not a Smith Maneuver specialist, but I am, you know, an experienced person who has done it. And you know, we use the cash flow dam strategy in order to quickly convert the, the principal to interest and then deduct the debt. But I'm going to, I'm going to push back a little bit because I've experienced this. What ends up happening is you have this huge mortgage that your accountant loves and your, and your tax planners love because it's tax deductible. Your whole amount is tax deductible, but your wife may not love it. So you have this debt that's let's say like it's a million dollar debt and it's tax deductible. So the whole amount is there, but now you're not paying off any principal because if you do pay off the principal, you lose the tax deduction, right?
[00:43:11] Speaker C: Yeah.
[00:43:11] Speaker A: But in the end, when in your, maybe you're in your like later on, let's say in your 50s or 60s or whatever you are, you may not want to have that debt anymore. So you're going to want to pay it off eventually.
[00:43:23] Speaker B: Isn't there a different way to do it where you can actually use the, use the dividend money to pay down the principal? I thought that there was a way to do that too.
[00:43:36] Speaker C: Well, you can do that.
The point I think that is being made here is that once you do it, then you can no longer write off the interest. Right? So, but then that the stress probably got you far enough and you've created net positive wealth for yourself. So I think that is the key because throughout these years, first of all, you were able to get a whole bunch of tax refunds that nobody about. Like those, that's extra cash that you didn't have before. That's one second.
With time, hopefully your investments have grown, so just the value of them itself has grown. Thirdly, you probably receive dividend payouts from them or interest payouts. So then again that's extra cash that you didn't have before. And then lastly it's just the time value, you know, like you are able to at any time take the entire amount that you have in the, in the mortgage or line of credit at that point and get it paid off with the net proceeds from what you've built so far. So you're not losing the money, you're just organizing it in a certain way to create that, that reduction essentially. And I think you're, you're right like there. The beauty of this strategy is that you don't need any extra cash flow. It's literally the same amount of money that you will have paid anyway for your mortgage payment. It's just that now you're moving it and you're creating this paper trail now when, if you want to be more advanced, there's accelerators and there's multiple. But the most common that I see with investors is the cash damage. And that's because you do have rental properties and we can take the income from those rental properties and expedite the conversion process. If you are able to do that, then you might have been able to create that, I guess, line of credit conversion a lot faster. And guess what? You don't need to be keeping that money in, in the market in terms of securities. You can change it and now you can use that as a down payment for your next rental property. So now you are leveraging the money as well. So not only are you able to do it, but now you have another rental and that's being paid off by the tenants. Hopefully it's cash flow, maybe neutral or positive. So it, it just depends how you structure it. This can be pretty complicated discussion, but it is something that's available and I think people should try and research it more.
[00:45:56] Speaker A: Absolutely. I, 100%, everybody should take a look at it. And I totally agree with you just having experienced it and done it. Like, I know some of the drawbacks and we always hear about the positives. And I think it's important for people when they do the research to kind of think about it. And most of the people don't understand the other parts. Like one of the things that I learned from doing it is that yes, you convert your entire principal to deductible debt, but that line of credit is going to be at a higher interest rate and sometimes significantly higher than if you were to amortize it or you, you were to put it into a regular mortgage where you have the principal pay down. Just the interest rate is higher. So you're getting, you're taking advantage by, by having it convertible, but you're also paying a higher interest rate. So the higher interest rate may offset the benefit of the deduction if you're, if it's high enough, especially in the last like two or three years. Right. Where interest rates went up, you know, 10 times.
[00:47:03] Speaker C: It depends on the, on the level of income that you make as well. If it's someone in a really low bracket, obviously their benefit is less. But if someone is Getting close to the 40 to 50% bracket, then that is kind of the benefit you're getting. You're getting back 40 to 50% of that interest. So it could, it could be in your favor still, even though it's higher.
But also, don't forget that once you're finished with a conversion, you could make that into an investment loan. You could put that back into a normal mortgage that gets amortized and paid off as time goes by. So there are other ways to do it.
[00:47:36] Speaker A: Yeah, and that's what I, that's what I ended up doing. Putting it into a, taking the full amount, putting it into a normal mortgage and then being able to.
[00:47:45] Speaker C: Absolutely, I will just say rely on your professionals to guide you as time goes by.
[00:47:49] Speaker A: Why?
[00:47:50] Speaker C: Obviously things are going to change. Your situation can change. You may want to stop doing it halfway through and we're there to kind of tell you what your options are at that point and give you the best outcome for what your needs are.
[00:48:01] Speaker A: Yeah, very cool.
So we've, we've, sorry, I know we've kind of gone all over the place here with you and, and like, it's, you know, you didn't know about my, my background in doing it. I'm not, I'm not a mortgage broker. I'm not a, you know, an accountant or a big bookkeeper. So I, I, I, I just have, you know, experience to, to, to, to draw upon. But I, I, I, I really want to hear a little bit about Fingo and your company because this is really interesting.
[00:48:37] Speaker C: Yeah, well, Fingo, I envisioned my company probably about 8 or.
It was not always called Fingo, it was just called Sona Business Services at that point. So I know as time went by it became more of a professional thing and I identified things that I liked. I obviously love taxes, not because I want to pay them, but because I don't want to pay them. And it's something that I enjoy learning and getting additional education on and trying to find ways and strategies to minimize my tax bill. So this was something that inspired me to I guess, focus the firm and provide the tax, because tax is really supported by bookkeeping in, in a way where if you do the bookkeeping in a certain way, then the tax can work very easily, or if you do the bookkeeping bad, then the tax doesn't work very well. So, you know, that was kind of the starting point. And then the second passion I have is real estate. I, I really loved it from the beginning. I was 22 years old when I got into it.
So what I've created is some affirm that kind of tailors the services around the needs of real estate investors. And that's just not just your normal investors, but also the investors who have corporations could be real estate agents, it could be others connected to the industry like, you know, handyman property managers. So this, our services are really tailored around this, this sector.
As a result, we, all of our staff members and we have quite a few now, we've grown to compared to where we were last year. But everybody has this training and understanding of concepts that are not something that you're going to find in your H R block per se, or something that you're going to get from Sally, the bookkeeper that just works from home on weekends, you know. And if you are the point where you need that professional advice, Bingo is going to be the firm that can actually help you and give you a lot more options than, you know, just a normal bookkeeping firm.
[00:50:37] Speaker A: Now, do you charge hourly or is it per property or per door or how do you charge?
[00:50:44] Speaker C: I think it would depend on the service that's needed. There are circumstances where someone may require just like one or two or three hours of consulting just to understand where they are with things potentially that could be an hourly rate. If, if it's, let's say a real estate agent or a realtor, the way we call them in Canada, then they might require something ongoing and steady and they want some consistency. We'll probably give them a fixed price per month. Something that will likely include the software that we talked about, QuickBooks Online. Dex. By the way, did you know the dex can track mileage now? That's also a new feature that they added.
[00:51:22] Speaker A: Oh man, I'm learning a lot. This is cool. Thanks.
[00:51:25] Speaker C: Yeah.
[00:51:26] Speaker A: Do they have like an app that helps you to do that or is it just part of the app? That's.
[00:51:31] Speaker C: It's part of the app and I think they're just constantly adding QBO the same. QuickBooks is adding things all the time. Dex is adding things all the time. And my job is literally to go out and test all these platforms and find the things and bring them into the firm and be ahead, like be actually able to offer services that are taking advantage of the latest technology. That, that way we can be efficient and we don't need to spend, you know, time doing things manually. Things can be automated and we can pass those savings down to the clients.
[00:52:04] Speaker A: So what do you, what do you, what do you charge hourly? You gotta, you gotta tell me because.
[00:52:09] Speaker C: Like, so at the moment My rate is 150 per hour for consulting. But if it's someone new and we just want to have a conversation to see if there is alignment in their needs and what we can offer. We can do a 15 minute free call, just kind of get to know each other, see you know where you are in your journey as an investor. And can we bring value to. If we can bring value, we're going to say, okay, you may require some advisory and then you may also require some bookkeeping. We are able to do also bookkeeping for rentals for $35 per unit. So that is also something that may be of interest to them, depending on where they are.
[00:52:47] Speaker A: Yeah, so I've got a friend of mine who's looking for bookkeeping right now and he would probably need 15 to 20 hours a week.
That's probably someone that would contact you directly and then you would probably want to work it out with him specifically because it's a bigger contract. Right?
[00:53:04] Speaker C: Yeah, we, we really need to plan around our capacity and the volume the client has. And the best way to do it is we evaluate the number of transactions they have. So we get the average of 6 months or 12 months of statements, whatever can give us a good idea. And then we, we try and figure out how much work does this really need. And then based on that, we can give them the actual quote. It can be a fixed quote or it can be a variable one as well. We have a lot of clients who are new and then we're just going to give them a price per transaction. That way as they grow, their fees will grow with them.
[00:53:39] Speaker A: Okay, gotcha. So like, how do people get in touch with you? Like how, what's the best way?
[00:53:45] Speaker C: I think the best way is reaching out through the
[email protected] if you go to fingo.com Rei there's going to be a whole bunch of spots where you can just click schedule an appointment. It's going to take you to my calendar. You can find a spot that works for you. I tried to alternate them. I have mornings and have afternoon. So that way, you know, depending on if you have a day job or not, like you can find a spot that works and we can start with that initial free consultation and see where things take us.
[00:54:15] Speaker A: Yeah, that's awesome. So make sure that you reach out to Steve, you go to the website F I n n go.com Rei and you can book a 15 minute call with him and you can figure out what's going to work, what's not going to work. And I think that the bookkeeping is a task that you should. One of the first tasks as a real estate investor, you should outsource to somebody else. And I think, you know, that way you can free up your time to do the highest and best use, which is getting your next property. That's your highest and best use. So do reach out to Steve and Rob. What's the best way for people to get in touch with you?
[00:55:01] Speaker B: Well, if they can hear me, they can go to robisterbreakthrough Ca. Just write me an email. We can talk about whatever you want.
We're we. We've still got the hotel going on here in Costa Rica, Manta Ray Lodge. So if you're planning on a trip to this area, you can check that out and yeah, just any questions you have, rob@mrbreakthrough Cat Quinton. How can people get in touch with you?
[00:55:26] Speaker A: Yeah, you can go to Quintindisouza.com if you want to talk real estate. You can book a 15 minute call. I'm happy to give you 15 minutes of my time between vacations and I think I'm heading off to Jamaica in a couple weeks, so. But like you can. I'm happy to book a little bit of time to chat real estate or Investing and Quintind. Souza.com or if you want to come out to one of our live meetings. Meetings. Durham rei CA is where you can find out about it if you're in the greater Toronto area. All right, thanks very much.
[00:55:58] Speaker B: And obviously Dext was a sponsor of today's show, so if you want 15 off, go to. No, they're not, but maybe they should be.
[00:56:08] Speaker C: And then I'll bring you into one of my webinars with them.
[00:56:12] Speaker A: Good idea. Awesome. Thanks very much for organizing.
[00:56:16] Speaker B: Thanks very much. Have a great day. Bye, guys.
