How to Smith Maneuver, Tax Advantages of Owning a Tesla, Personal Real Estate Corporations with Cherry Chan

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Podcast Transcription

Erwin Szeto [00:00:07] Greetings, my fellow hackers. This is the truth about real estate. Best in show. My name is Erwin Szeto. This new one actually like moving. I mean, selling their house, buying another house and moving. I’ve had this show who’ve moved ten or more times, which has proven a great way for them to make money. But it’s not for me. I enjoy stability. We moved into our new house. For those who are watching a video on YouTube, I’m actually in my house right now recording this and it’s been awesome. Our master bedroom faces East, which is different from our old house and our master bedroom faced west in our old home. Now, in our new home, we faced east. So we wake up to the sun shining into our window in the mornings, and also now in our newly renovated master en suite bathroom with the bathroom. Terry and I are. We’re often in a hurry, so we designed our bathroom this way. So we took out the single vanity sink and the corner tub and replaced them with a wider vanity featuring two sinks. We expanded the shower, we didn’t replace the tub, so we have a tub less master en suite, but our shower is about five feet by three and a half feet. By three and a half feet is about the minimum width of a hallway. There’s also a bench. I don’t think anyone plans on sitting there, but there’s a bench. The original shower was actually enclosed with drywall and tile overnight and is the shower curtain to close it off. So we’ve replaced it with our shower wall is a glass and glass door. So the sun actually will shine in through a window and actually through our glass wall as well, our glass our wall as well onto us. So it’s a great way for us to shower and get some nice vitamin D in the morning. What about privacy? You say we just leave the window open? Yeah, we do. We leave the window shades open because we don’t have a back neighbor, which is one of the greatest features about the house is the hose backs onto a pond. So we are back. Neighbor is probably around 300 yards away. Maybe more than that. It’s pretty far away. So, yes, we are back, neighbor. Can’t we don’t our neighbors can’t really looking to our back window. And I’m really enjoying this this home and then the new view in the backyard. The view is great. I enjoy just standing there and I catch myself standing in front of any rear facing window at the pond. I feel like I’m in nature and I just simply enjoy watching the ducks in the pond in the in the winter. I can’t wait to teach the kids how to skate. So I have my bedroom face east. I like having my bedroom face east so much that I wanted it for my kids as well. So I stuck both kids. We stuck both kids into one bedroom that also faces east. And fortunately, that happens to be the smallest bedroom in the house. Which is it? And it’s about it’s about ten by ten. So they’re in bunk beds, which they think is great. I think it’s actually hilarious. They have no care that they are in the smallest bedroom in bunk beds. They didn’t even ask questions why they didn’t get any either of the bigger bed bedrooms. They’re just happy to be together. So no idea how it is all going to work out, but we’ll see how it goes. But those damn bunk beds, they’re IKEA. And it took me about half, half a day to assemble it anyway, since we can’t travel from our break in April or opening of the pool this weekend, April 10th, I think is the date of our pool’s opening. Yes, that’s earlier than pretty much anyone ever does. But when we want something for the kids to do over the break, I have no idea how this is going to work out. I have some friends who think we can heat up the pool within two days if we crank the heater. So we’ll see how it works out. Yeah, we’ll see how it goes. We’ll see if we can get the pool over 60. It’s definitely interesting times we live in and I’m grateful to be a well hacker, a wealth hacker. I define as someone with a small business, a small business owner, a real estate investor, stock hacker, and we happen to be registered charity operators as well. So with being a wealth hacker, I can stay busy, I can make money and I can help people. I hope you’re all out there staying healthy and if you need any help staying or becoming a world hacker, simply just if you’re on our email list, you get invited to all our free events or free trainings or free virtual tours, or you can join our soon, too soon to be choose about real estate investing forum where we will be over in the middle of creating now it so it doesn’t exist yet but as soon as it does you’ll find out about it. Find out about it if you’re on our email list and we’ll let you know so that you can join it and interact, interact, bounce ideas off other likeminded real estate investors. So if you’re not on my email list, that’s just silly. You can join by going to WW w The Truth About Real Estate Investing Dossier against WW DOT Truth About Real Estate Investing Dossier This entry your name and email address and you’ll be on our email list. So speaking of events, so one. Events is not free, but we don’t need all the proceeds to charity. Saturday, April 17th. That’s the Saturday morning. Our next hour meeting is all. It’s all virtual so you can tune in while wearing your pajamas. The topics include What is the best side hustle? My friend Chris Rock, who has tried them all. Real estate investing. Essential oils. Multilevel marketing. E-commerce. Slash. I call it selling stuff made in China on Amazon. And of course, Dr. King. He’s gone through all of them. He spent you spent quite a few years on each on each of these. And he’s going to share the realities of each and share complete numbers so that you, too, may choose what is the optimal a side hustle for yourself. The more six figure side hustles, the better, in my opinion. Also, we have the co-founder of Life, Nike, Daniel Dubois. He was our guest on our previous podcast. He’s an Airbnb executive and he’s going to share how his new estate business is allowing folks to buy real estate for as little as 2.5% down on average, that’s about $15,000. I know. I’m super excited to learn more about how he is able to make this possible for so many people who are struggling to get into real estate in this crazy, crazy market. Now on to this week’s guest. My wife, real estate accountant, Cherry Chan, CPA, ACA, lots of letters. And we covered a wide range of topics. For example, what investments work best based on work? Best based on the tax returns her team is preparing. One of the nice thing when you when you know someone personally and that’s when you invest with whose team reviews hundreds and hundreds of tax returns. So then we can learn what other people are doing that’s actually successful because the truth about real estate investing and all that stuff out there, there’s lots of people who aren’t successful, real estate investors who pretend to be rich, successful real estate investors. So it’s nice to actually see their tax returns and see what they’re telling Ciara, how much money they’re making. So again, she doesn’t go through specifics, but she understands what strategies work best with me. And so that’s how we invest ourselves and that’s how we teach our clients how to invest in a business. So we talk about best investments. We talk about how to maximize tax savings on mortgage interest on your home, why buying an electric vehicle like a Tesla. It makes financial sense from a tax standpoint. What it’s like being a crazy entrepreneur, right? Married to a crazy entrepreneur and so much more. FYI Cherry will be our may I meeting keynote speaker presenting in detail how to maximize those returns using the Smith Maneuver, which was made so by a popular request. I’ll see you there, and I hope you enjoy the show. Mm hmm. I think this is five years we’ve been doing the podcast and is by far the most professional we’ve ever been.

Cherry Chan [00:08:00] Yeah, of course we have a professional here.

Erwin Szeto [00:08:03] Thank you, Adam. I know a lot of you can’t see, but we’re actually having some high end mikes for once, and we have some cameras going on. Adam, our videographer, is helping us out today, but we’re not talking about that. We’re here to talk about Jackie Chan. So let’s keep you busy these days.

Cherry Chan [00:08:18] Cherry tax season.

Erwin Szeto [00:08:19] It’s a tax season.

Cherry Chan [00:08:20] Oh, it’s the tax season. Well, basically, the government needs to collect their taxes. So we’re doing tax returns.

Erwin Szeto [00:08:28] When are taxes due?

Cherry Chan [00:08:29] April 30th. From majority of the people. For self-employed people is June 15th.

Erwin Szeto [00:08:34] Was it always June 15th or was that pushed?

Cherry Chan [00:08:36] No, that’s always June 15th.

Erwin Szeto [00:08:38] Okay. That’s how much I know.

Cherry Chan [00:08:40] That’s June 15th is the deadline that the taxes are still due April 30th.

Erwin Szeto [00:08:46] So this podcast was probably heard in about two weeks. So they’ll be they will be about mid-April. Are you except the new clients.

Cherry Chan [00:08:53] Well always a something new clients. We’re just not accepting new clients for doing a 2020 return with a guarantee that they can be file by April 30th. Right. We would try our best, but there is no guarantee.

Erwin Szeto [00:09:06] That’s quite a tough question I get, actually. Yeah. I don’t know why people ask me. Is Cherry still taking on new clients?

Cherry Chan [00:09:11] Yes, absolutely. We always are looking for new clients. Look at the number of people that’s working out.

Erwin Szeto [00:09:16] CI Can you talk to that? Your business has grown significantly and you know, I live it every day. It’s kinda like when you look at your kids when they grow, you don’t always notice that they are growing. But we had we had Susan White here just a few weeks ago when we were red zone. There’s Pre-Lockdown folks. We were talking about real estate. So that’s an essential service that’s allowed. But when Susan came in, she said, Who are all these people? But people have seen like we shared pictures of this office on this podcast, on our social media. But I guess a lot of people don’t know how many people have started working here since that time, since we moved in. When do we move in?

Cherry Chan [00:09:50] I think June, maybe June. June 2020. Yeah.

Erwin Szeto [00:09:54] Great. Great time to invest heavily in commercial office real estate space.

Cherry Chan [00:09:59] We bought the place being free COVID. Yeah.

Erwin Szeto [00:10:03] So actually talking about that. So yeah, we bought we offered in December. No, we closed in December.

Cherry Chan [00:10:08] No, we offer in December. Early December or early November. Right. Yeah.

Erwin Szeto [00:10:13] So pre-COVID pre any inkling of COVID? Yeah. Timing couldn’t have been worse, really. And then we closed when?

Cherry Chan [00:10:21] February.

Erwin Szeto [00:10:22] Because in February, then we were like full blown COVID. So renovations were extremely delayed, extremely delayed, almost irrationally delayed. I remember we wanted someone to measure for window coverings. The building was entirely vacant because we were under lockdown, but they were worried about COVID. But the entire building’s vacant and they work by themselves. So they were worried about COVID. And I came off to measure our window for window coverings. So that’s just one of the many delays we had in doing this place. Ready. So then we moved in June.

Cherry Chan [00:10:51] Around June or I think it’s June.

Erwin Szeto [00:10:55] Do you remember how many staff you had at that time?

Cherry Chan [00:10:57] We may have like a couple of people coming in. We always have a team. It’s just we always work remotely. Right.

Erwin Szeto [00:11:02] And how many people was that?

Cherry Chan [00:11:05] I would say four or five people.

Erwin Szeto [00:11:06] Four or five people. And then today, how many staff do you have?

Cherry Chan [00:11:10] 15.

Erwin Szeto [00:11:11] Right. So you got three X in eight months.

Cherry Chan [00:11:14] It’s a different model. But then we were leveraging more subcontractors and now we are leveraging more local employees. And we might go back for a combination of both. Yeah.

Erwin Szeto [00:11:28] So you can understand why people are doing it. There’s only 15 people here. There’s like there’s more.

Cherry Chan [00:11:32] Well, there is more because our other team also. Grohl You’re just talking of all the accounting team. The accounting team, only 15 people. Yeah.

Erwin Szeto [00:11:40] And just want to paint a picture. This is why your business was able to keep accepting new clients is because you’ve actually scaled up. It’s not just Cherry Chan anymore.

Cherry Chan [00:11:49] No, it’s not awesome.

Erwin Szeto [00:11:51] And oh, I want to talk about buying a house because it’s your idea to buy a house.

Cherry Chan [00:11:57] So we moved to this office location. For those of you who don’t know where this place is located, it’s all Fill Trafalgar and UW. And I always consider this as a first world problem. I wanted to move closer to the office, so then we don’t have to take the Q UW to work. We live in West Burlington or.

Erwin Szeto [00:12:18] Just the opposite. You there? Maybe you may call it a First World problem. It’s actually one of the well-known secrets to happiness is a short commute. So living close to work is healthy for everyone.

Cherry Chan [00:12:29] And I wanted to buy back some time to spend with my kids. So that’s the reason why I wanted to move to Offill. And for those of you who follow me, I have gone through this whole thing called turning myself into a mortgage version. And I’ve. It’s a long process, essentially moving some of our rental properties, mortgages to the corporation’s name so that I can qualify to buy a bigger home, not necessarily a bigger home, but if you think about it, a more expensive home in Oakville in our personal name. And so I’ve always been looking, I’ve always been thinking about moving. It hasn’t been it hasn’t come real until this house pop up in Oakville and this house, we know about it.

Erwin Szeto [00:13:13] So we knew the seller there as friends of ours. So we visited the house before and then and you mentioned it popped up, but what happened?

Cherry Chan [00:13:20] So I’ve been always doing our window shopping, meaning that I’ve always been like browsing realtor that that’s to look for the right house for us that we don’t have to go on to UW to come to the office. And so we have a search set up for ourselves and, and this listing pop up. And I immediately messaged a seller who’s the listing agent? And I, I’m like, What do you want for this house?

Erwin Szeto [00:13:47] What’s that? And I’m like, Can we see the house?

Cherry Chan [00:13:50] I didn’t care that we don’t need to see the house because. Because we saw the house before.

Erwin Szeto [00:13:57] Right. So you’re offering on the house before you even told me we’re offering on a house or that there is a house of interest to you even before we saw it. Okay.

Cherry Chan [00:14:04] And Irwin was in an all-day meeting or of some sort from mastermind.

Erwin Szeto [00:14:09] As a real.

Cherry Chan [00:14:09] Estate. Yes. And then he wasn’t available to talk to me, even though he’s in the office. So I just decided to go ahead and ask for the closing date and what he wants. No, seriously, I can even show you that text message that I sent. You might.

Erwin Szeto [00:14:25] Okay. So I feel like it was my idea to actually go see the house.

Cherry Chan [00:14:29] Yes. I wasn’t planning to see the house myself.

Erwin Szeto [00:14:33] But I think you first told me about it at lunchtime.

Cherry Chan [00:14:35] A little earlier. I think that’s.

Erwin Szeto [00:14:37] Okay. Okay. So maybe we talked about it when I was a break from our mastermind meeting and then we booked it for with Mike the seller for to see it at 3 p.m. I believe three or 4 p.m.. And you were at. Yeah because I’m Ron, I said let’s go see it. And you were like a surprise like yeah, okay, we can go see it.

Cherry Chan [00:14:56] Well I had meetings, schedule, I have to like to rearrange the meeting.

Erwin Szeto [00:14:59] Yeah, it’s a small investment.

Cherry Chan [00:15:02] So it may sound funny and that’s the only house that we’ve seen.

Erwin Szeto [00:15:07] Yeah, that’s a really good point. We weren’t in search mode. We weren’t preapproved for a mortgage or you weren’t going to look at anything other than occasionally look at something on Realtor. That’s the way.

Cherry Chan [00:15:20] I think when there is a will, there’s always a way. So if you buy the property first, then there’s always a way. Of course, the house that we closed, so obviously we qualify for financing. It pays everything.

Erwin Szeto [00:15:33] Right?

Cherry Chan [00:15:34] We’re moving.

Erwin Szeto [00:15:35] You know, when I think back, though, if we hadn’t seen the property, I don’t think I could have negotiated the way I did.

Cherry Chan [00:15:40] What do you mean?

Erwin Szeto [00:15:42] So it was actually when we finished looking at the house on the inside, and then we walked around, everything looked fine. And then when we went outside and walked on the path directly behind the house. So folks from folks listening, I’ll paint your mental picture. The house backs on to a rain catchment, which looks like a small pond. So there’s no black neighbor. And that pond is surrounded by a gravel path. So after our viewing of the house, we, we left the home and you and I went walking with our with our one of our mentors. Eve, you walked behind the house, walked the path. And then it was actually at that point you reminded me it was always your dream to live with a view of water.

Cherry Chan [00:16:23] Yes.

Erwin Szeto [00:16:24] And then for me, it was that point where, okay, we can’t lose this house.

Cherry Chan [00:16:29] Yes, in a way. Yeah. Well, like the only reason that trigger us to jump in on this opportunity is really because of the wheel and also the, I guess also the swimming pool and also the walk out base. So all these factors come together. I think recently I listened to a book Call of a New Earth are totally. Yes. So he mentioned that everything happens for a reason. So I believe that too, like the house chose us and we choose the house.

Erwin Szeto [00:17:00] We live a bit of a blessed life.

Cherry Chan [00:17:01] Oh, extremely.

Erwin Szeto [00:17:02] I feel like I take some risks just knowing that we live our life, knowing that things are just going to work out. Okay, folks, again, we didn’t have a preapproved mortgage. And so after that point where you reminded me that it was your dream to live in a home with a view of water, that’s what triggered the moment inside me. Okay, negotiations now we’re playing to win. As in, you know, for anyone who espouse false sports analogies or not, you play to win. Losing is not an option. Then that’s when. So I typically negotiate these deals for our family. So that’s when I went to negotiation mode with the seller. Mike, who’s a friend.

Cherry Chan [00:17:43] Who’s also an extremely good.

Erwin Szeto [00:17:45] He’s extremely good.

Cherry Chan [00:17:46] Sales agent.

Erwin Szeto [00:17:48] Yeah, it’s funny because I told I told Eve’s on the way up way to me. Mike is really good at sales. Mike is really good. And so it’s actually I remember thinking back at it, it was a it was an honor to negotiate with Mike on such something, something so high stakes. So yes, so it was we weren’t negotiating a position of strength at all because a gorgeous house with a view Oakville it was December is December 2020 so I remember it was more playing towards like, oh, what do you want and we’ll give it to you. And that’s basically how we got the offer done. Not only to get the offer done, the seller prepared the offer for us. I think we was.

Cherry Chan [00:18:33] Just got extremely lucky in a way, because Mike never we know as well as a sales agent yourself, we all have experience negotiating deals. We know how to negotiate a better deal. Mike was nice to us.

Erwin Szeto [00:18:49] Is nice to us in that he didn’t shop the deal. Yeah, this is the first day for folks listening. It was the first day at the market. So we were there just hours after it was listed and then we’re offering firm with the expectation to win. And then I forget what the next point was. But and again, in hindsight, to renovate our house to the same level as that house, like remove removed the location out of it, remove the view backing onto a pond out of it. Just the renovation delta alone between that house and our house is probably over $300,000.

Cherry Chan [00:19:20] Yeah, well, the reason why we’re moving is because there are things that we need to do to our current home that would cost a fortune.

Erwin Szeto [00:19:28] At least 300,000.

Cherry Chan [00:19:29] Yeah. To get to the state that the new house is currently in. So this is really the reason, one of the reasons why we’re moving.

Erwin Szeto [00:19:39] And then from a financial decision we can finance by buying the house, we’re financing the whole thing versus having to come out of pocket. 300,000 and living through a renovation.

Cherry Chan [00:19:48] Yeah.

Erwin Szeto [00:19:49] And probably waiting two years to get a pool. Yeah. And waiting for all the landscaping to get done. But, and so it’s not at all financed at all at historically cheap interest rates. And then on top of that, we got the location and the view. So yeah, we got lucky.

Cherry Chan [00:20:05] Got extremely lucky always.

Erwin Szeto [00:20:08] So let’s talk about the mortgage virginity part because that was part of the one of the many moving pieces to us getting our mortgage on our home.

Cherry Chan [00:20:16] Very painful.

Erwin Szeto [00:20:17] I think. Got it. You took care of it?

Cherry Chan [00:20:21] Yes. You’re so lucky.

Erwin Szeto [00:20:23] Yeah, I’ve mentioned it on the show before. The ultimate wealth hack is to marry your accountant. Makes your banking so much easier.

Cherry Chan [00:20:30] Right. So I think back earlier last year, sometime during summer or fall, one of my team members went out to buy her fourth or fifth rental properties in in Kitchener. So she always bought her property inside a corporation’s name in her corporation, even right from the get-go. So she financed it with a bank that worked directly with the corporation. And then this time around, the same bank would not allow her to get an 80% loan to value mortgage so that she went traditional. She went back to the mortgage broker channel and the mortgage broker said, Well, we can finance it, but you have to own it in your personal name. The reason why they could pull it through is because the houses, the three or four houses that they initially purchase inside a corporation are what the mortgage broker does cover is that the credit the mortgage was not registered. All these mortgages were not registered in her name, in her credit report. So therefore, on paper, it looks like as if they don’t have those liability. And that’s the reason why she was able to qualify to get 80% loan to value on the latest purchase in her personal name. And that’s the aha moment that we have. Hey, if you buy in the property by the properties inside a corporation, chances are there is no guarantee because I’m not working for the bank, I don’t work for the mortgage broker, I don’t work for anyone. It’s just an experience share. Chances are you might not be able to you might be able to buy or control what you disclose to the bank. Now, I disclose everything to my bank when I buy the property and when I move it to the corporation, I disclose everything. Whatever they choose, it’s up to them to use. But what we did is that, hey, if you buy in the corporation, they don’t register to lean in your personal name. And sometimes it’s beneficial, especially for us buying our primary residence. We’re able to tell the bank like these properties are only in the corporation is not us and their formula doesn’t does not require them to use them. The numbers, the mortgage and debt service ratio in our personal name where we purchase our primary residence.

Erwin Szeto [00:22:48] And then we put it to the test with, with Meridian, who has our properties in our corporation. They gave us the mortgages. We went to them did we not. For

Cherry Chan [00:22:59] Yeah.

Erwin Szeto [00:22:59] To finance our personal house.

Cherry Chan [00:23:01] Yes.

Erwin Szeto [00:23:02] So a full visibility into their complete visibility into what we own. Yes.

Cherry Chan [00:23:06] So to turn ourselves into a mortgage version, the first step I did was to move all these properties that we own in trust for the corporation to actually own it directly inside a corporation. And so we found we approach Meridian by no means I’m endorsing Meridian. This is just one of the banks that are willing to that’s willing to work directly with the corporation. So I get my mortgage approved by Meridian inside a corporation. We transfer all these three mortgages into the corporation, three properties into the corporation. And then that deal was done. And then we go to Meridian and we said, Hey, can you also try to finance our primary residence? And it was then I realized that the personal mortgage side, they don’t even take into consideration what we own in the corporation and we’re working with the same bank. They know that we have three properties, three mortgages with them, but because they are not registered in our own name, they don’t take into consideration what’s being reported in the corporation. See, it was a very interesting process. Yeah.

Erwin Szeto [00:24:11] Even though they had complete visibility.

Cherry Chan [00:24:12] Exactly. They don’t even count. They know it. They just did the deal for us, right? Yeah.

Erwin Szeto [00:24:17] And again, folks, this is just our experience with one lender. We don’t know how other lenders will behave.

Cherry Chan [00:24:21] Exactly.

Erwin Szeto [00:24:22] Awesome. Yeah. And again, folks, we didn’t have financing for this house. Can you explain why it was so challenging for us to get our mortgage on our principal residence? And again, folks understand, we already bought our house contractually with unconditional. We had a we had a really solid deadline that we needed to get a mortgage for this house and closing the deal.

Cherry Chan [00:24:43] I think one of the challenges is that we carry all of our mortgages in our personal name and the other objective as an accountant or just average Canadian, everyone has the same objective pay less tax. So to structure our business properly, what we have been doing is to minimize the amount of personal income taxes that we pay and maximize the income in the corporation. CI The corporation side is only paying we’re only paying 12.2% tax. So in a way, if whatever we leave in the corporation is only going to be taxed at 12.2, but anything that’s being distributed it to our personal name is going to be taxed at a higher rate. And because we religiously practice this planning process, we always report very low income. And therefore for us to qualify for a bigger mortgage is hard. The fact that we carry so many different mortgages also, that didn’t help.

Erwin Szeto [00:25:41] Yeah, in our personal name.

Cherry Chan [00:25:42] In our personal name.

Erwin Szeto [00:25:44] So I don’t know. The next question is, is almost two questions I need to ask. So if there’s a new investors listening, how should they start? Or is the better question. Who should start with their first investment property and or corporation?

Cherry Chan [00:26:00] Well, there are many different reasons to set up a corporation. It really goes back to the investors objective, long term objective. If you plan to buy many, many properties, then I would recommend them to start with a corporation because when they own it in the corporation, it doesn’t affect their personal credit. I was just on someone else’s podcast.

Erwin Szeto [00:26:20] I think there’s no other ones out there.

Cherry Chan [00:26:23] Andrew Hynes Yes, I was on Andrew Hines podcast.

Erwin Szeto [00:26:27] We did the next mortgage agent.

Cherry Chan [00:26:29] Yeah, we discussed this whole strategy thing, owning properties inside a corporation and not having them in recorded in the personal credit report which allow everyone to qualify for more mortgages down the road. That was really interesting concept and by having them in the corporation, you’re positioning yourself to re-use your personal credit with multiple corporations and potentially buy more. So that’s how I would position if I were to start all over again. Right. Right. Now, if you are saying, okay, I don’t know how many I’m buying. Well, then it goes back to other criteria, too. If you look at your own small business, if you own a small business, if you are personal, you have your personal real estate corp or if you are a stock option, trading income and a lot of it you do day trading. Then those are the criteria that we need to look at. On top of just being a mortgage version. So we look at a big picture on a high level holistic basis. Okay, mortgage qualification, mortgage, having a corporation help. But if you’re not buying more, then it doesn’t really make any difference. Okay. Then we look at if you have small business income, your small business income is much easier. You have a higher base. You’re using series money to finance the purchase of your properties that would be beneficial. Do you want legal protection? Legal protection matters as much as other people say, Oh, light up insurance alone is sufficient to cover your potential liability. The reality is, while insurance company has to protect their bottom line as well, you better read all the fine print in terms of the terms and conditions. Make sure that they do cover what they say they cover. Whenever we file a claim, the first thing that they do is to go back to the fine print and see if you comply with everything in the contract before they release the fund. So that is our experience. That has always been our experience in our lifetime. We had three claims. They always look at what had been happening to see if we’re complying with the policy. So those are the criteria, general criteria. And then in the future, if you want, the cost of transferring the properties to the corporation could also be extremely expensive. The course includes land transfer tax and then it so it goes back to where the property is located. If it is located in Toronto, you have to pay double and transferred to set it to transfer it to the corporation. So it goes back to like realistically your long term plan first and foremost. And then what else is in your life that could be beneficial from using a corporation?

Erwin Szeto [00:29:03] Ma’am. Easy answer.

Cherry Chan [00:29:04] No, that’s why we do the consultation. Right. Really? Look into your situation. People always ask the question. Or should I just wait until I got three properties before I set up a corporation? Well, I don’t know. Like, it’s hard to answer.

Erwin Szeto [00:29:20] Because if your plan is ten properties, then.

Cherry Chan [00:29:22] Yeah. And then also, like, you know, like sometimes your plan is to flip those few properties. The strategy also matter, like flipping is income. So if you report the whole profit that you made from the flip, 100% of it is taxable in your personal name. And if you already got like $100,000 salary job to begin with, adding another $100,000 is not helping. Mm hmm. Mm hmm. Mm hmm.

Erwin Szeto [00:29:47] If people want to learn more about this, where should they go?

Cherry Chan [00:29:50] They can visit my website. Real Estate Tax Tips that C. And then you can also set up us time to have a one on one meeting with my team. There is also a free report on my website that you can download about these seven criteria that we look at and discuss with our clients to determine whether they should set up corporations or not. Right.

Erwin Szeto [00:30:10] But if someone wants to cut to the chase and actually have a consultation around their specific situation.

Cherry Chan [00:30:15] They could email us at records us keep that C records. Yeah.

Erwin Szeto [00:30:20] Why is it called records?

Cherry Chan [00:30:22] Oh, we like that records us. I mean, this is a CPA. That’s the way that works, too.

Erwin Szeto [00:30:28] Hmm. Interesting. I know this. You mentioned saving on taxes, so I remember your reading and math maneuver. You’re reading the book Smith Maneuver a couple months ago.

Cherry Chan [00:30:40] Absolutely.

Erwin Szeto [00:30:41] Mm hmm. Did we do everything right?

Cherry Chan [00:30:43] Oh, no, we didn’t do everything right. It was a big aha moment. So.

Erwin Szeto [00:30:48] Okay, so first off, what is the best maneuver?

Cherry Chan [00:30:51] So in summary, is how you turn your primary residence mortgage, which would normally be nondeductible mortgage to a deductible mortgage.

Erwin Szeto [00:31:02] So home investors, please listen to this.

Cherry Chan [00:31:05] So like, for example, we’re now buying our primary residence and we have a large mortgage on it. And that mortgage, if you incur a loan to properties, your primary residence, which when you sell is not taxable, therefore the interest on it you incur on it is not deductible. Now, is there a way to turn this whole thing into deductible interest? Yes, there is. If you invest and that’s what Smith Maneuver is about, turning it into a deductible mortgage.

Erwin Szeto [00:31:35] So what did we do wrong?

Cherry Chan [00:31:36] So in the past, I thought Smith maneuver is just okay. You take whatever you net. So you, for example, we invest in rental properties. So we take the rent. We use the rent to pay for mortgage. We pay for all the expenses, property, tax, insurance, and then whatever that’s net that net cash flow, we would then use that net cash flow to dump it into our primary residence mortgage. And by dumping it into our primary residence mortgage to the same amount that you dump into the primary residence mortgage, let’s say is $100 a month. So $1,200 annually, that $1,200 will become available as part of your line of credit. So the first step to set up the primary residence he lock, the first step is to set up a lock on your primary residence mortgage. Not everyone is all for that hillock, but you should have that he set up as the first step to make this work. And so in the past, we take the net amount, net cash flow, dump it into the primary residence mortgage, and that’s how we do this math maneuver. But the reality is you should take the gross rent. And dump it into the primary residence mortgage. And when you take the gross rent is $2,000 a month. Then it would be more $100. Exactly. It’s $2 at $24,000 annually. You take the $24,000, dump it into your primary residence mortgage. Now, all of a sudden, the line of credit, the lock availability is increased by $24,000 while a year. I’m using an annual number. So you can take that $24,000 out and dump it into a specific account just for expense purpose for that rental property expense and use that amount to pay for the rental property expense.

Erwin Szeto [00:33:25] Do you have a rough idea what the savings would be?

Cherry Chan [00:33:27] It would be the interest that sorry, the tax on the interest, extra interest that you incurred.

Erwin Szeto [00:33:33] Very calculated handy.

Cherry Chan [00:33:35] Well, if we use the highest marginal tax rate in Ontario, high as a marginal tax rate in Ontario is about 53%. Let’s just say is 50%. So on $24,000, let’s just use the $24,000 rent times. Let’s say 3% interest rate. Line of credit. It’s $720. You get the $720 interest expense as a tax deduction. So if your marginal tax rate is about 50%, so you save $360 right now, $360, it may not seem like a lot, but you may be earning way more than that 24,000 that I mentioned. And this $360 is just by redirecting the funds. Some people’s argument to the strategy is that you would have to carry a lot of interest. Yes, you do carry a lot of interest, but you are carrying that debt anyway. You didn’t have that $24,000. You would have that as your primary residence budget. You’re carrying it as a debt. Right now you’re just converting it and making it a deductible debt. It’s a cash flow maneuver, essentially pushing one cash flow, one stream of cash flow through the primary residence, mortgage runs that through the primary residence mortgage. And put it through your rental property.

Erwin Szeto [00:34:54] Right. That’s essentially free tax savings.

Cherry Chan [00:34:56] Yeah, exactly. I just redirecting the fund that you have.

Erwin Szeto [00:35:00] For someone with ten properties, that’s a $33,600.

Cherry Chan [00:35:04] That’s $360. Oh, yeah, yeah. Three. Yeah, yeah.

Erwin Szeto [00:35:08] Right. That’s. That’s a very nice vacation.

Cherry Chan [00:35:11] Yeah.

Erwin Szeto [00:35:11] Just by rerouting dollars.

Cherry Chan [00:35:13] Yeah. And this this would work with, like, investment with stock option trading as well. You just take all the money, wins it through the account and take it all through your line of credit. And then soon enough, your whole mortgage would turn. We would be turned into your whole primary residence. Mortgage would be turned into a tax deductible mortgage.

Erwin Szeto [00:35:35] Some people do pay more for their mortgages. A friend of ours is just paying 5% interest on their mortgage blender so their savings would be even higher.

Cherry Chan [00:35:44] Yep.

Erwin Szeto [00:35:44] And it’s just. Just push and paper. Really?

Cherry Chan [00:35:46] Yeah, absolutely.

Erwin Szeto [00:35:48] Awesome. Yeah. Hopefully everyone got a new tip here. Tell your accountant, your specimen, your expert. If they’re not, just go buy them the book. Now, when I ask you, what’s it like to be married to a crazy entrepreneur? Now, just to clarify that as well. I know a lot of you are listening to this. Think you’re real estate investors. I would clarify that as you are an entrepreneur in the real estate industry, are investing in real estate assets. That’s what makes you an entrepreneur, right? Crazy entrepreneur.

Cherry Chan [00:36:14] Who’s that? Crazy entrepreneur?

Erwin Szeto [00:36:17] Who’s crazier? Between you and me.

Cherry Chan [00:36:18] Equally as crazy.

Erwin Szeto [00:36:20] Mm hmm. Yeah, but I think you. You have more craft than I do.

Cherry Chan [00:36:26] I appreciate that comment.

Erwin Szeto [00:36:31] Although we have a divide this way. You’re the better integrator than I am.

Cherry Chan [00:36:36] I still don’t like to be the integrator.

Erwin Szeto [00:36:38] I know. That’s why we delegate further. Mm hmm. How would you describe the way we divide our duties? Because, for example, I know there’s lots of listeners who are investing partners with their partner, with their life partners.

Cherry Chan [00:36:49] I think we kind of pick and choose our whatever, our strengths. So in our businesses, you like to build your connections. You’re good at talking to people with other people, hosting events, socializing. I am better at staying behind a scene. I’m an introvert. I know it’s hard to believe, but I am an introvert. I like to be more. I like to keep it more to myself. So sometimes if you see me in at events and I’m not talking, it’s not because of you, the client, but it’s because I’m all drained out. I always remember that Simon Sinek, for example, if you are an introvert, you wake up with five coins every interaction, take away one coin. By the end of the day, you’re all drained and that’s me. I think with you I think you’re closer to the X trophy. It sigh. If you’re extrovert, you wake up with zero. In the morning and every interaction that you get, you draw a coin. So you get energized with by having the social interaction. Whereas for me, I like at the end, I like it to be reading a book. I like to wind down with just being myself. And usually when I’m at the event, I get really drawing out and by the end of it, I would be hiding. And I always remember when I go to bed. I remember when I did the presentation that really took Quest to over 400 USA agents at the end. After the one hour presentation, I have to hide and I hide behind a banner at my booth. Even though there were like tons of people waiting to talk to me, ask questions, I had to hide and let my team handle all this interaction because doing that presentation is exerting a lot of energy for me. But people don’t really pay attention to these things. It’s just I now get to understand myself a lot better.

Erwin Szeto [00:38:50] People don’t really know from the outside looking in, but people are really like.

Cherry Chan [00:38:53] So because of that. So I like to deal. And, and because of my professional degree, I like doing more with numbers and internal management than Erwan does. So Erwin is the one that’s often doing all the socializing or setting the vision for the business. And he’s pretty good at it and pretty, pretty good at making silly names too. Mortgage version is not him from my team. But you have all these crazy name idea.

Erwin Szeto [00:39:26] Yeah. I actually renamed your reports that CCP CPU.

Cherry Chan [00:39:32] Records reference.

Erwin Szeto [00:39:33] And you mentioned filters. And so of our 12 listeners of this show, I think five of them are realtors. What is a track? What’s a stand for? First of all.

Cherry Chan [00:39:46] It’s called Personal Real Estate Corporation.

Erwin Szeto [00:39:49] And I won’t spend too much time on it and little time on it. What realtor needs it and why do they need it?

Cherry Chan [00:39:55] So Ontario government, after years of being lobbied, finally allow real estate agents to set up corporations to operate their business. Majority of the high production real estate agents that do not need all the cash from the business would be benefiting from earning their income inside a corporation. Because essentially you’re trying to defer the taxes that you would otherwise have to pay in your personal name. And as I mentioned earlier, the highest marginal tax rate in Ontario is 54% for a lot of high producing agents out there. If you’re making like 500, 600,000 after deducting your expenses, you still not over 220 for anything that you net over 220. The government gets to keep more than you do. The government takes $0.53 for every dollar that you make. Mm hmm. So by incorporating, you can shelter the income in the corporation. And inside a corporation earning small business income, you only get taxed at 12.2. So 12.2 versus 53 and a half. We’re talking about 40%, over 40% tax saving tax deferral. So when you take money out from the corporation, you still have to pay tax, but it’s not double tax.

Erwin Szeto [00:41:10] Right. And then when investments are allowed inside the product.

Cherry Chan [00:41:13] Inside the product, the mandate allows you to do pretty much everything except trading in real estate directly. So trading meaning having the license. The trading happen with the brokerage.

Erwin Szeto [00:41:24] Right. Right. Mm hmm. Awesome. And then we’re just talking about realtors and making lots of money. Mm hmm. So consumer doesn’t know we have open positions on my team to hire. We’re looking to hire two more licensed real estate professionals. In case you were interested in making lots of money and having lots of fun.

Cherry Chan [00:41:42] And a lot of your team members actually set up cooperation with us to.

Erwin Szeto [00:41:46] Then they.

Cherry Chan [00:41:46] All two of them did, too, so far. Mm hmm.

Erwin Szeto [00:41:50] Right. And they make good money. So if you want to be one of these folks, we have openings on my team to join. Oh, I wanted to ask you about. There’s this virus thing going on.

Cherry Chan [00:42:00] Mm hmm.

Erwin Szeto [00:42:01] So many names for it. Pandemic, whatever. COVID. And then you’re an accountant to a couple hundred clients. Mm hmm. Do you have an idea? What were the trends? Who didn’t fare well in this pandemic and who didn’t do well? And the reason I ask is, like, what are the lessons going forward you’re focusing on and where should people hedge?

Cherry Chan [00:42:24] My sample of clients are not a fair representation of average Canadians. We work strictly with real estate investors or real estate agents. Mm hmm.

Erwin Szeto [00:42:36] And both need to make good money to afford you. Yeah. So right there is a, I guess, an idea of who makes good money.

Cherry Chan [00:42:44] So typically, real estate investors do well, but occasionally we have clients who have to deal with these bad tenants and they would be losing a lot of money. Thankfully, there was government support last year, so some of them would be able to qualify for some support from the government. Who did well are the ones that have multiple properties and multiple sources of income. So not just earning income from one source, but they have other sources of income they can draw out from.

Erwin Szeto [00:43:17] Or what other sources of income include.

Cherry Chan [00:43:20] So a lot of our clients are doing stock option trading. So they have stock option income.

Erwin Szeto [00:43:24] Where they learn that.

Cherry Chan [00:43:26] Well, surprise, surprise. Where do they learn it? I don’t know.

Erwin Szeto [00:43:30] Let’s call Stock Hacker Academy.

Cherry Chan [00:43:32] Where we’re stuck doing all the tax returns for all those hackers. And people would not believe how difficult it is to do those all hacker taxation.

Erwin Szeto [00:43:43] Okay. So what are the common questions around stock hacker stock hacker taxation? Is it capital gains is a passive? You didn’t do it in the corporation.

Cherry Chan [00:43:51] Those are easy, easy questions.

Erwin Szeto [00:43:53] Those are the easy ones.

Cherry Chan [00:43:54] The actual reconciliation is a lot harder. People always think that, Well, I just print out this report and give it to you. Why? What kind of bookkeeping do you need? Well, you don’t need any bookkeeping, but the reality is that that report doesn’t reconcile. So the trades all reconcile and they change it at different they get converted at different rates. And we’re trying to just change rates for an exchange rate is one and the way that they account for the gain for specifically for shared this position. They don’t use it the same way as required by CIA. So we have to backtrack and redo, essentially redo the whole bookkeeping and then people things that all the trading platform already gave us, the t5008, which is the slip on the transaction. Why do you have to do any reconciliation? What? Because that thing is not calculated correctly. So just to give you an example, if you buy Apple for $100 sorry, for 100 shares of Apple, and then you buy it today, and then two weeks from now, you buy another 100 shares. So some platform will take the first batch of $100 when you sell it, 100 shares when you sell it. Well, for you, it’s easy to understand because you understand FIFO first thing first but see how it works. Do the math on average cost of your acquisition of shares. So when you sell it, only sell 100 out of the 200. You’re supposed to calculate average cost of your 200 shares and then sell it at that price. But the platform, the trading platform itself may just do the faithful. So it may just take the first batch of per se price and assign it as the costs against offset against the sale proceeds. And that would be your capital gain. So there could be inherently some difference. And then especially for light, it would not matter, assuming that you sell all your Apple shares by the end of the year. But if you have any open position at the end of the year, that will have to be calculated. Now, the second difference is that if you treat trading options as capital gain, the CIA requires you to take the income, take the premium, like, for example, nickel, put premium and has to be taken into part of your capital gain at the time when you write a contract, not when it expires. So if there is any open position at the end, we have to do that adjustment as well, like people to understand to do it right. It’s a lot of work. Yeah. And it’s interesting even for our team because we know all these things. It’s just that applying what we learned from the Income Tax Act to the actual report, I think one of our clients trade using Thinkorswim and is a different platform than majority of our clients. Is trading differently? None of the numbers make sense. So it’s all there. And then layer it on what the U.S. dollars our currency exchange. And we just went through an exercise to reconcile one of our biggest clients portfolio and there is $95,000 exchange that we thank to. We thought that that’s the foreign exchange, but we have no way to prove it unless we redo the entire years of transaction to prove it. So which is the reason why a lot of accounting firms out there are actually doing transaction by transaction and converting it at the average exchange rate because that is how you would know that you’re doing it. Right. We’re pulling a report in Canadian dollars and everything’s converted. We don’t know if it’s right or not. That’s not.

Erwin Szeto [00:47:35] Pretty.

Cherry Chan [00:47:36] Yeah. And people are upset at us because we’re charging to do the bookkeeping, but it is unfortunate. Mm hmm. Yeah.

Erwin Szeto [00:47:43] So the clients are. People are doing well at this income stream.

Cherry Chan [00:47:47] Yeah, a lot of people are doing well. Okay, it’s. It’s funny. There was this client that I had I have had him since the beginning of my practice. And really in recent year, he started trading options. And it starts he started before we started and I saw all the losses that he incurred. And I so when we started trading, doing the stock option course, I told him like, hey, like you should join this course. And he was wrong. Yeah. And see what’s happening. Like out of the goodness of my heart, I don’t really care whether he buys the course or not. Yeah. He’s not incurring a loss till today. He didn’t sign up with us. He’s following some of us guy and I’m just like, I don’t like. Are there something else that you can do? Maybe follow a different guy? Yeah. Yeah.

Erwin Szeto [00:48:36] That’s too bad.

Cherry Chan [00:48:37] I know. Years after years.

Erwin Szeto [00:48:39] Just. We’re basically beginners and we’re still doing really well. Yeah. Even though we go back to March, like overall, the last 12 months have been exceptional.

Cherry Chan [00:48:48] Knock on wood, everything is green. Today, I could see on the other side.

Erwin Szeto [00:48:53] Green today. Knock on wood. Yeah. Even though again, like March wasn’t good for us, but the last four months have been exceptional.

Cherry Chan [00:49:01] I also think that through this style hacker academy journey, I’ve seen so many different personalities, so many people. And of course hiring expand our heart a lot as while working with different people, with different personality. I found that the greatest things to happiness is really appreciate what you have. Mm hmm. It really matters. Like there are days that, you know, like. It’s a start, Mark. There are days or weeks that the market is going to go down and then there are days that it will go up. Don’t get too high. If it’s going your way, don’t get too low. If it isn’t because it’s going to bounce back or bounce down depending on bounce off or depending on how you look at it. Mm hmm. Yeah.

Erwin Szeto [00:49:45] Mm hmm. The nice thing about having multiple streams of income is like when. When the market was tanking last month. The joke with me, with everybody else, friends, is we joke about real estate today. Who’s been in real estate’s done quite well. Are you guys seeing that? Are real estate clients doing well?

Cherry Chan [00:50:02] I think they’re generally doing well. Like the numbers don’t show that, right? Like what we see is what they report as income. Generally, real estate clients do not report a lot of income because their the rental property, the rent is just enough to cover the mortgage. So they have very little on paper but on a lease on their tax return. Right. I only see the bank numbers when they sell. Right.

Erwin Szeto [00:50:24] So there are big numbers there.

Cherry Chan [00:50:27] Yeah. There would be rarely we see a sale that would be losing money. Right. Right. For sure. Now, I think I just had this discussion with my team member, Joy, and Joanne described this as Joanne described this, all these wealth hacking strategy as having three children. So she’s always being asked, like, why are you doing life insurance? Because we started doing life insurance. Whole life insurance. Why are you doing stock option trading? Why are you doing real estate? Well, she said the analogy that she gave, which was perfect for this podcast, is that it’s like these are like your three children. It’s not an option to have either one or the other is the option to have all three altogether. So when you realize they when you have shitty tenants, oops, am I allowed to say.

Erwin Szeto [00:51:16] Oh, we’re going to kick you.

Cherry Chan [00:51:19] Or when you are, when you have bad tenants, then you can rely on you can look at your stock option portfolio hopefully is performing well and when you have down market and losing money, you can you can be thankful to have the real estate doing well or well.

Erwin Szeto [00:51:37] What’s up like 20%?

Cherry Chan [00:51:38] Exactly. So when Rosie is doing no, not doing well or you have a bad tenant and you have a down market, you can always rely on life insurance because life insurance is guaranteed if is high free. So that’s the reason why you should have all three, not just one of them, pick and choose. You should always have all three. Mm hmm. Mm hmm. And then some people counter back and say, like, I don’t understand why you’re investing in the life insurance because it’s not giving you enough return. You could do a lot better. Well, for us, doing the life insurance is a protection to our family. That’s number one. Number two is that you are rinsing through the life insurance kind of life Smith maneuver. You put the money in there and you take it back, borrow back and then invest. So you’re building two assets at the same time. Why wouldn’t you do that? It’s just being your own bank.

Erwin Szeto [00:52:30] And then we’re. Any final points on that? Oh, sorry. I wanted to ask about stock hacking, because people ask about the update to our competition. You won. Let’s just say you won.

Cherry Chan [00:52:43] I was slowly but surely getting back to stock option trading. I have been, um. I am busy. I have been a little bit busy over the last little while. It’s tax season as well, right? I don’t.

Erwin Szeto [00:52:55] Like I said, your business has grown three times.

Cherry Chan [00:52:58] The number of people, not the business. The number of people. Yes. Yes. Managing people is very interesting job.

Erwin Szeto [00:53:07] And then what would your style be? When you get back to stockbroking, you get back to selling stock options.

Cherry Chan [00:53:12] I will because we.

Erwin Szeto [00:53:13] Were we were day trading last summer.

Cherry Chan [00:53:16] Which is the reason why I got all these are gray hair. Yeah.

Erwin Szeto [00:53:19] So we’re learning, though. I think it’s I think it’s good to try, like, just like just like real estate investing. We tell our clients that our new clients, you know, learn like you be your own property manager. Nothing wrong with learning it because then, you know, understand when you when you eventually hire a property manager, now you know your style, right? You have your standards.

Cherry Chan [00:53:39] So I’ve tried that thing call. Are they trading I’ve try like spread I’ve try long deep in the money call. I’ve tried I’ve tried a lot of it. I don’t know a lot of it, so but I’ve tried them all. But what I’m going planning to do is really just follow all these trades.

Erwin Szeto [00:53:58] Why? Why just that style.

Cherry Chan [00:54:00] Is passive. It’s a little bit passive. He said no to try. I do it. I just do it mechanically. Follow the trade. And then people are still doing what Susan’s doing. Well, 51% market. Yeah. So I could adjust I mean his Paik yeah. To the risk that I am happy to deal with. And so I’ll go from there. Right.

Erwin Szeto [00:54:21] And just for folks who don’t know anyone who does to take stock hacker academy they get 12 months of these trades. Yeah and Lee is the godfather of stock options, the bestselling author there is with Options. And he teaches the four strategies in our course. Firstly, so you get back to stockbroking eventually. I too plan on trying to pacify a lot of my stuff because I got a golf membership to do my highest and best use in this company, which is to.

Cherry Chan [00:54:49] To play no.

Erwin Szeto [00:54:51] We can call it playing or.

Cherry Chan [00:54:54] That way.

Erwin Szeto [00:54:54] You can say I’m intentionally sucking so everyone feels better about themselves, feel sorry and do some business.

Cherry Chan [00:55:01] Golfing is the only sport on earth that I am beating Erwin on.

Erwin Szeto [00:55:05] Yeah, I think I think our record last year was, I think he beat me 4 to 1.

Cherry Chan [00:55:11] I think is better than that.

Erwin Szeto [00:55:13] So at a minimum you can be four rounds. I beat you once. I’ll try to turn that around this year, see if we can get to 500 plus stockbroking with the charity. It’s funny, with the charity we talked earlier about like our relationship, how we kind of, you know, we fill positions kind of as needed. So the charity was something that was my idea and you supported me on it. But one of the big moments for the charity was once when we decided to register as a first year charity. And that was actually you’re doing. That was your idea?

Cherry Chan [00:55:53] I tend to handle all these sort of things.

Erwin Szeto [00:55:55] All right. I think I was just thinking small. That is, you said, you know, if we’re going to keep accepting all these donations, we be giving them charitable receipts.

Cherry Chan [00:56:05] Yeah, absolutely. How else are you going to follow through in the CIA’s eyes? Oh, we got asked to provide invoices, and I’m like, I can’t provide you invoices. What’s there to provide? So I think is a logical decision to make. It’s just logical. It’s not thinking small a thing as 2014.

Erwin Szeto [00:56:27] Oh, you’re pregnant. No, no, no, no. We’re pregnant. At the time we had Robin already, but as if he didn’t have enough on our going on our lives and he started a charity.

Cherry Chan [00:56:37] Tell me about it. There’s always time. There’s always work to focus on. Now we are affirming and we’re doing YouTube channel. We’re doing a lot of other stuff.

Erwin Szeto [00:56:47] If you ever ask the charity, we get to this point. I didn’t.

Cherry Chan [00:56:50] So even though our ones. My. My husband. But I love to call him the asshole that I need in my head. There are times that he’s really annoying, but that’s okay. And then there are times that he is really inspiring. So having that charity, having to drive to do the charity work is also very inspiring. I think people don’t understand that when we did 2014, when we started the charity with our friends, we had literally no money. I think 2014, I just started my business as an accountant. That year, I net at $30,000.

Erwin Szeto [00:57:25] That’s a lot of money.

Cherry Chan [00:57:26] $30,000 is a lot of money, don’t get me wrong. But I would normally at that age, with my experience, with my degree, if I were to work for a big company, I would probably get around at least six figure. So 600,000, 100,000, 100,000.

Erwin Szeto [00:57:43] That’s what you’re doing the year before.

Cherry Chan [00:57:45] Yeah. So I would at least roast 100,000, bring in that as a salary. And that year I was, um, I gave birth as a self-employed individual and I gave birth. There is no I no mat leave. We just got out. At the time, the new home, which is the one that we’re moving out of a bit mortgage to because a $600,000 mortgage.

Erwin Szeto [00:58:09] Repayments.

Cherry Chan [00:58:10] We did 5% down.

Erwin Szeto [00:58:12] For ten $35,000.

Cherry Chan [00:58:13] So to find the money for the charity work, we have to Erwin has to cause the need. But all the rules, the investors that he work with and pull together the money to serve that 20 families. I think that was the first time.

Erwin Szeto [00:58:27] It was six 3232 the first year. Only two families the first year.

Cherry Chan [00:58:32] Yes.

Erwin Szeto [00:58:32] And a lot of those real estate investors only favor because I made them a lot of money.

Cherry Chan [00:58:37] So then we had no money and we’re still doing the charity work. We raise funds to do the charity work. Nobody got donation receipt. They just buy the food and donate a we organize it and we deliver it to the families who are in need in Hamilton. And I think that’s an interesting moment because we were doing charity work when we were not really doing anything and now we’re way better. And our mandate is to donate 10% off our net profit from all of our businesses to the charity. And that’s the Mandy. I don’t think Irwin really knows. He always talk about like all donating 20% of the profit from the trading account, but the mandate is really to donate all the then 10% of all of our businesses net profit, which is bigger than the amount that you mentioned in your other podcast.

Erwin Szeto [00:59:30] But can we afford this?

Cherry Chan [00:59:32] I don’t know. I, I just make it work. I don’t know if you allocated 10% first and you will always be able to make it crazy. Yeah, I think there are a lot of people that are doing that already in this. Well.

Erwin Szeto [00:59:49] For listeners, if you’re doing this, I’d love to chat with you. Maybe we’ll talk about this over a round of golf, my tree of

Cherry Chan [00:59:56] Life, being able to. We’re in such a blessed position.

Erwin Szeto [01:00:00] Yeah, we are. And I find what’s interesting is two things. I don’t always see it at first. You don’t see people doing the same thing. But I also know a lot of people keep this really private versus we don’t. Because my thing is, if you don’t put it out there, you’re not gonna inspire people.

Cherry Chan [01:00:20] Which is a good segway to talk about, like how other people got inspired into starting their own based in different region and they’re doing the exact same thing. They might form a charity; they may not form a charity. They’re doing their own version of pulling a bunch of funds together and essentially delivering the goods that you need. So I think it’s a great thing. Like we posted, we got the donation from a wholesaler, probably over a hundred pair of shoes. Mm hmm. And that wholesaler was closing, and they gave us a bunch of shoes, and we need to sort it, organize it, cut out the tags and everything. I think we posted some pictures last fall, and immediately I got a response from a university classmate and she messaged me. We visited her in Vancouver and she messaged me. She grew up in Hamilton and we visited her in Vancouver and she lives in Vancouver right now. And she said, well, my friend locally in Hamilton needed help, the school that her friend’s kid goes to. There are a lot of people that need all these help. We have changed our model from delivering food basket to delivering clothing and shoes.

Erwin Szeto [01:01:36] Clothing.

Cherry Chan [01:01:37] Things that that the kids need and that can have a lasting impact. I recognize the fact that I think a few years ago that the shoes go a long way, much longer way than buying turkeys because not every family would appreciate a turkey.

Erwin Szeto [01:01:52] Or know how to.

Cherry Chan [01:01:52] Cook it. Yeah, I know how to cook it. Exactly. So we change that model and deliver all these clothing and other people can see it. And they would then go to the approach us and see if we would be able to help other people. So I thought that was also interesting.

Erwin Szeto [01:02:10] And like you said, we, we, I like to say we were inspired people, but the charity that I joined many years ago. In Toronto. Another ask for you in Toronto. We actually exceeded them in size within our within two years in terms of budget and reach. And we registered before they did. And then just two years ago, they registered after seeing what we did.

Cherry Chan [01:02:34] Yeah, absolutely. I, I think inspire is too big a word for me to use to apply to us. I think we was.

Erwin Szeto [01:02:43] Blazed a trail.

Cherry Chan [01:02:44] We yes, we lead by example. We. And that’s always our parenting philosophy, right? Lead by example. And that’s why I always get very upset at Erwin looking at the phone. Mm hmm.

Erwin Szeto [01:02:56] Yeah, that happened with that. Stage one is recognizing of a problem. Before we talk about my own problems, though, we did inspire an organization, another organization in Toronto, another supported charity out of Toronto, and one in the German region. Yeah, without our example, I don’t think it would exist.

Cherry Chan [01:03:14] Yeah. Giving back is important. Mm hmm. Mm hmm.

Erwin Szeto [01:03:18] I always remember there’s a I don’t know where I saw it. I think I was out walking, and I saw someone was walking their dog and their shirts read by the parent my dog thinks I am for anyone who’s a pet owner or anyone who has a kid. Your kids think you’re heroes. Right. So then I want to I always want to live up to that expectation. I just want it to be the who they think I am.

Cherry Chan [01:03:43] Yeah.

Erwin Szeto [01:03:44] So we try.

Cherry Chan [01:03:45] There was a recent call that I really like. I need to look it up in light of that Woman’s Month. Women’s History Month. Mm hmm. I think there was a quote posted by Sarah Blakely, who’s the.

Erwin Szeto [01:04:00] Upstart Berkeley.

Cherry Chan [01:04:02] Billionaire who owns this company called Spanx.

Erwin Szeto [01:04:05] Self-made billionaire.

Cherry Chan [01:04:06] Self-made. She posted this quote called Be the CEO Your Parents Always Wanted You to marry. I thought that was awesome.

Erwin Szeto [01:04:16] Was that her upbringing? Your parents didn’t think that she would. Well, I don’t.

Cherry Chan [01:04:20] I don’t. I don’t. To that level. Yeah. I don’t think that was her upbringing. Her father always asked her, what did you fail at dinner every single day?

Erwin Szeto [01:04:30] That’s impressive that she overcame that?

Cherry Chan [01:04:32] No. She asked what? He asked her to celebrate a failure. Oh. Every single night. Okay. Yeah. So she was good at feeling. She is good at getting back up on her feet immediately after failing. And she takes failing as an everyday life thing. It’s not nothing to impact her, per se. Mm hmm.

Erwin Szeto [01:04:54] The chapter I’m on and she Steve Jobs books. This book is when I just finished a chapter on his venture immediately after Apple. A failed hardware company. But if it wasn’t for that failed hardware company, you never would have come across Pixar.

Cherry Chan [01:05:09] Yeah.

Erwin Szeto [01:05:10] And into the. Into the computer image movie making.

Cherry Chan [01:05:14] Mm hmm.

Erwin Szeto [01:05:15] So that failure had to happen for him to test and experiment in making movies. Pretty crazy.

Cherry Chan [01:05:23] Yeah, absolutely. Yeah. Yeah. The failure is important.

Erwin Szeto [01:05:27] Fascinating. So we’re running out of time. I do have a question. I want a bit of an Elon Musk trip. You told me to read the book 2018.

Cherry Chan [01:05:37] He’s an impressive guy.

Erwin Szeto [01:05:41] Actually, before we get into that. You posted something about the tax benefits of buying a Tesla.

Cherry Chan [01:05:47] Yeah.

Erwin Szeto [01:05:48] Actually, what are the tax benefits? What are the financial incentives or tax incentives available for people? Buying electric vehicles doesn’t have to be just Tesla.

Cherry Chan [01:05:58] For people who are using their vehicle to run their business. You can always write off a portion of your car expenses or if you purchase the car, you can always you can always write off a portion of the car purchase. Now, typically, if you were to buy a regular car, let’s say if you got you buy a car, that’s our Honda Odyssey that we drive. If you buy that car, maybe $50,000, you pay. But if you pay $50,000, the maximum amount that you can deduct is only $30,000 plus the HST. So $33,900 in Ontario, that’s the maximum you can deduct now out of that $33,900. The government only allows you to deduct about 30% annually. So $33,000 times 30%. That’s a maximum you can deduct and then multiply essentially by the business use of your car. So it has to be used for business. So the personal use does not count. So you take that 33,900 multiplied by 30%, and then multiply by your personal business use of the car. That would be your deduction amount. Now, silly. Sorry. Justin Trudeau, our Prime Minister, came out and said, while I support all environmental for any initiative and one of the initiative that was given was that they are, if you are to buy if businesspeople were to buy and low emission vehicle doesn’t have to be fully electric.

Erwin Szeto [01:07:26] Oh, it can be hybrid too.

Cherry Chan [01:07:28] I think it has to comply with certain things, mostly plug in hybrid. What would qualify? If you buy that car for the qualification criteria, you should check all their website because I don’t understand the in hybrid well enough is.

Erwin Szeto [01:07:40] The qualification to get green license plate.

Cherry Chan [01:07:42] Yeah. So if you have that, if you qualify, if you buy that car now is that a $30,000, you get a $55,000 write off. So there is a delta. As historically is only $30,000 for anything that’s over $30,000. Now you get $55,000. The $55,000, you can claim it as a onetime expense on your tax return.

Erwin Szeto [01:08:07] Oh, the whole thing.

Cherry Chan [01:08:09] Times multiplied by the personal use. Yeah. What a business use. That would be deductible. Now people ask me, So what if you buy a bag? So what have you? What if I sell that car? Then a portion of that would have to be taken into income. Oh. Proportionally. Mm hmm.

Erwin Szeto [01:08:28] Don’t you have a bunch of clients who are buying Tesla?

Cherry Chan [01:08:30] Yes, we have a lot of clients, especially those real estate agents out there. To me, if you’re buying a car and you’re buying that like $50,000 range of car, then of course, I would choose a give you like a low emission vehicle over the regular vehicle because you get a bigger deduction. The catch is that you cannot get any government rebate. If you get government repair, you automatically fall back into the $30,000 deduction. So you have to pay attention to these details. By all means. By no means. I’m providing accounting advice here. Please speak with your qualified accountant. I post this whole how to buy a Tesla and save $22,000 of tax everywhere on social media. And I got a lot of feedback about whether they would buy a Tesla or not. The whole thing is all about Tesla is about deduction. And then I got people commenting on the grandma of my poster and I hope that I know English as a second language. Grandma is not there, which is fine. I just hope that the message come across that there is that option and just be aware of it. And then people would call my article and said, Well, in terms of when you sell the car, eventually, I imagine in the comment sorry in the article that, oh, when you sell the car, there could be tax implication. That’s the topic of another day. People would say there was one guy who captioned that in the comment section on my post Facebook post is that while of course you don’t mention these the tax impact of another it’s for another day critic criticizing that I don’t talk about the other side my counter to it is that yes point well taken. But my post is meant to share the information. I am not there as your account in individual account and you should always talk to your own accountant if you are not having any result with your accountant, by all means, come to us. But you should always talk to someone qualified before you purchase the vehicle. It’s never meant to be like, Oh, just buy this vehicle. You get this deduction, verify it and some information. Do your own due diligence.

Erwin Szeto [01:10:44] But that can spoon feed it to people. So Tesla we getting.

Cherry Chan [01:10:50] I don’t know I don’t know where our Alis is not up yet.

Erwin Szeto [01:10:53] When did up?

Cherry Chan [01:10:55] I think next year May around 2022.

Erwin Szeto [01:11:00] It’s funny because you didn’t resist me when they said we’re getting a Tesla.

Cherry Chan [01:11:04] People always tell me there was comments saying that Tesla, will you will you park it at the airport for two weeks? You will never be able to get out. And then there are people commenting that it’s more expensive to run a Tesla than on a regular car. And then there are so, so many negative comments about Tesla. But the point is not about Tesla. The point is about the tax deduction you can buy. I don’t know the future Hummer. Apparently, GDP is coming out with GM. GM, GM is coming out with an electric Hummer.

Erwin Szeto [01:11:41] I saw an electric Mustang yesterday and that was I was like, oh, that’s different. The world is changing.

Cherry Chan [01:11:47] Oh, yeah, absolutely.

Erwin Szeto [01:11:49] Awesome. All right. We’re well over time. Jerry, thank you for doing this. Any final words for the listener?

Cherry Chan [01:11:55] Do your taxes early. If you want to sign up with us, make sure you come in early.

Erwin Szeto [01:12:00] And where can people follow you?

Cherry Chan [01:12:02] You can follow me on Instagram, Facebook and YouTube and nah, my name. I guess what I call my follower. Handle, handle my handle is real estate tax. Write.

Erwin Szeto [01:12:16] Give any books for real estate investors?

Cherry Chan [01:12:17] Yes, I have a book written for real estate investors call a Complete Taxation Guide to Canadian Real Estate Investing.

Erwin Szeto [01:12:25] And then you get it on Amazon.

Cherry Chan [01:12:26] They can get it on Amazon anywhere else. They can get it on my website, too.

Erwin Szeto [01:12:31] It’s free on your website, isn’t it?

Cherry Chan [01:12:32] Free? Yes. Plus shipping.

Erwin Szeto [01:12:35] But also, if you’re a nice client of ours, I can come in and we’ll give you a call, right?

Cherry Chan [01:12:39] Yeah, absolutely.

Erwin Szeto [01:12:40] We’ll lose money on it. I know some of you want that, so.

Cherry Chan [01:12:43] Well, my second book is coming out. I should promote my second book.

Erwin Szeto [01:12:46] What’s that for?

Cherry Chan [01:12:47] For real estate agents, huh?

Erwin Szeto [01:12:49] The five listeners that we have on us.

Cherry Chan [01:12:51] Yes. Only five.

Erwin Szeto [01:12:52] Awesome.

Cherry Chan [01:12:53] Better than nothing.

Erwin Szeto [01:12:54] Better than nothing. Everyone’s got to start somewhere, and then we’re going to get it soon.

Cherry Chan [01:12:59] It will be on Amazon on my website to.

Erwin Szeto [01:13:01] Have you back.

Cherry Chan [01:13:02] Stay tuned.

Erwin Szeto [01:13:03] We’ll have you back when you released the book. It’s been too long since you’ve been on the show. It’s hard to get a hold of you know. Oh.

Cherry Chan [01:13:10] Where’s your office? I was just like, right there.

Erwin Szeto [01:13:13] No one fits in my office. It’s too small.

Cherry Chan [01:13:16] You can take this office.

Erwin Szeto [01:13:17] As a corner office. All right. Thank you for doing this in the middle of a tax season.

Cherry Chan [01:13:23] Thanks.

Erwin Szeto [01:13:31] Before you go, if you’re interested in learning more about an alternative means of cash flowing like hundreds of other real estate investors have already and sign up for my newsletter and you’ll learn of the next free demonstration webinar I’ll be delivering on the subject of stock hacking. It’s a much improved demonstration over the one that I gave to my cousin Chubby at Thanksgiving dinner in 2019. He now averages 1% cash flow per week, and he’s a musician by trade. As the real estate investor myself, I got into real estate for the cash flow, but with the rising costs to operate a rental business, it’s just not the same as it was 5 to 10 years ago when I started. Never forget the cash flow reduces your risk. The more you have, the more lumps you can absorb. And if you have none or limited cash flow, you’re going to be paying out of your pocket like I did on a recent basement flood at my student rental in St Catherine’s, Ontario. If you’re interested in learning more, register for free from my newsletter at WDW dot Truth About Real Estate Investing Dossier. Enter your name and email address on the right side will include in the newsletter when we announce our next Free Stock Hacker demonstration. Find out for yourself what so many real estate investors are doing to diversify and increase their cash flow. And if you can’t tell, I love teaching and sharing the stuff.

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