The $500 Billion Opportunity

CIFPs CONFERENCENiagara Falls, Ontario

June 22, 2005

The Smith Manoeuvre

Fraser Smithwww.smithman.net


• 10.5 million families in Canada

• 3.5 million rent

• 3.5 million own, with mortgage

• 3.5 million own, free and clear

The Wealth PyramidThe Wealth Pyramid

Today you will learn how to:Today you will learn how to:

• Get FREEFREE tax refunds from the CRA

• Pay off your mortgage faster

• Build an investment portfolio

SIMULTANEOUSLYSIMULTANEOUSLY

The Wealth PyramidThe Wealth Pyramid

The Problems…The Problems…

THE SMITH MANOEUVRE

Is your mortgage tax deductible?

The Solution…The Solution…

History of THE SMITH MANOEUVRETHE SMITH MANOEUVRE

What is THE SMITH MANOEUVRETHE SMITH MANOEUVRE

THE SMITH MANOEUVRE is a financial strategy designed to convert the non-deductible interest debt of a house mortgage to the deductible-interest debt of an investment loan, which simultaneously ensures the building of a free and clear investment portfolio.

A picture is worth A picture is worth a thousand words…a thousand words…

THE SMITH MANOEUVRE


THE SMITH MANOEUVRE


GOOD DEBTBAD DEBT

Another 1000 words…Another 1000 words…

THE SMITH MANOEUVRE


tidbit

How much do you have to earn to pay off a $200,000 loan?

Read it and weep…Read it and weep…

• You need to earn this much: $700,402

• You pay this much income tax: $280,161

• You have this much left: $420,241

• You pay this much bank interest: $220,241

• Pay back the original loan: $200,000

$700,402 !!!

Is this legal?Is this legal?

During the past 20 years, THE SMITH MANOEUVREhas not been challenged by any tax authority, by any lawyer, by any accountant, by any financial planner or by any financial guru as regards the theory, the strategy, the mechanics, the arithmetic or the projected outcomes.

The Four Steps

Plain Jane Smith Manoeuvre

1. Re-borrow and invest any paydowns on your first mortgage.

2. Apply tax refunds against your first mortgage then immediately re-borrow and invest the same amount.

The Four Steps

Enhanced Plain Jane 3. Cash in and apply current paid up

assets against the first mortgage in the morning, re-borrow and invest the same amount in the afternoon.

4. Divert any monthly savings or investment programs against the first mortgage, and immediately re-borrow and invest the same amount.

case history:

Quantify the value of THE SMITH MANOEUVRE

for the Blacks.

The BlacksThe Blacks

• $200,000 at 7% for 25 years

• Both work, $100,000 per year

• 40% tax bracket

• $50,000 rainy day fund

• Adding $500 per month

• 40 years of age, 2 kids and a dog

Future value for Future value for the Black’s current the Black’s current

investment program?investment program?

FV of $50,000 for 25 yrs $541,735

FV of $500/mth for 25 yrs 663,417

_______

Total Future Value $1,205,152

$1,205,152$1,205,152

What if they did What if they did THE SMITHTHE SMITH

MANOEUVRE? MANOEUVRE?

Results of the Four Steps

Plain Jane Step I $214,207 $214,207

Step II 95,675 309,882Enhanced Step III 899,827 1,209,709 Step IV 753,061 1,962,770 ________ Total $1,962,770

$1,962,770$1,962,770

THE SMITH MANOEUVRE way$1,962,770

The difference$757,618

The Black’s way$1,205,152

For the Black’s, For the Black’s, this is a decision worth this is a decision worth 3/4 of a million dollars!3/4 of a million dollars!

The Smithman The Smithman CalculatorCalculator

.

ACCELERATORS

1. Debt Swapping – Step III

2. Cash Flow Diversion – Step IV

3. Cash Flow Dam I – for business

4. Cash Flow Dam II – for rental homes

5. Investment Category Switch

6. Leverage

The Cash Flow Dam

The Cash Flow Dam (Rental unit at $1,000 / month)

The Blacks

Plain Jane results $309,882

The Cash Flow Dam + $303,315

__________

Total Improvement $613,197

Investment Category Switch

Capital gains to income

LEVERAGE

THE SMITH MANOEUVRE


Who’s doing the Who’s doing the financing?financing?

Lets summarize…Lets summarize…

Today you learned how to:Today you learned how to:

• Get FREEFREE tax refunds from the CRA

• Pay off your mortgage faster

• Build an investment portfolio

SIMULTANEOUSLY!!!

Your next step…Your next step…

“Procrastination

is the enemy of your

financial success”

F. Smith

The $500 Billion Opportunity

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