Are you in Canada looking to break into the US market? Then we have the guest just for you! In this episode, hosts Ava Benesocky and August Binjaz interview Tax Specialist Elliott Milek. Elliott is an experienced tax specialist with a highly demonstrated history of working in the recreational facilities and services industry. Elliott breaks down Canada-US cross-border tax accounting, the differences between the two, and the costs you need to consider. He also lays out some tax disaster prevention strategies that can help you avoid common pitfalls Canadian investors tend to make when it comes to US syndications. Tune in to find out more!
Get in touch with Elliott Milek:
If you are interested in learning more about passively investing in multifamily and Build-to-Rent properties, click here to schedule a call with the CPI Capital Team or contact us at firstname.lastname@example.org. If you like to Co-Syndicate and close on larger deal as a General Partner click here. You can read more about CPI Capital at https://www.cpicapital.ca. #avabenesocky #augustbiniaz #cpicapital
Watch the episode here
Listen to the podcast here
About Elliott Milek
Experienced Tax Specialist with a demonstrated history of working in the recreational facilities and services industry. Skilled in Tax, Sales & Use Tax Compliance, International Tax, Corporate Tax, and Sales & Use Tax. Strong accounting professional with a Bachelor of Commerce – BCom focused in Business/Commerce, General from Carleton University.
Canadians Investing In US Syndications Tax Disaster Prevention – Elliott Milek
We have another great show for you. Please like and subscribe as it helps us build our channel and allows us to keep bringing you great content and expert guest speakers. Our mission is to empower investors to earn passive income through real estate investing. We’re excited because we’re joined by Elliott Milek and who is an experienced tax specialist with a strong focus on Canada-US cross-border tax accounting. This interview with Elliott will bring great value to both active and passive investors looking to learn how Canada-US cross-border taxes work. Welcome, Elliott.
Thanks for the introduction. I appreciate it.
We’re looking forward to this. This is my favorite topic, cross-border accounting. Let’s dive right into it. We would love to start off with you telling us about your background and what was it about cross-border tax at interested you in this field of accounting.
To give you a bit of a background on myself, I was born and raised in Ottawa. I’m in Florida at the moment but enjoying the nice weather these days. I’ve been always been interested in finance and tax. When I started out my journey, I was always reading the Rich Dad books back in high school, elementary school, and even in college. I was trying to figure out the path I wanted to take. I always knew it would be some type of business focus, whether it was finance, insurance, tax, or accounting, essentially. I decided to go through the accounting field. I graduated in Tax Business there at Carleton University several years ago.
After I graduated from Carleton, I worked at a couple of the larger firms, both Ernst & Young and Deloitte. I then worked in a private company essentially for a couple of years before branching out on my own. When I first started on my journey, I wasn’t too sure whether it was going to be working on the Canadian side or the US side. I was fresh out of university. I was willing to take any job that was offered to me.
A friend of mine at Ernst & Young said that there was an opening and there’s a US tax practice. They brought me in for an interview. I was very energetic to accept anything I was offered. I got introduced to the US tax practice there. I bounced around in various departments there. Due to the complexity and constant changes that happen a lot more frequently on the US side, I decided to focus my attention more on the US tax practice at Ernst & Young. I worked there for several years.
I went to Deloitte for a couple of years. I was a manager there. I worked for a construction company in Ottawa in their tax division, essentially. They had a lot of projects in the United States and Europe. I did a lot of international tax there. About a few years ago, I branched out on my own full-time. I was always interested in real estate. I own some rental properties for several years ago. I’ve been buying in New York and in various states in the US.
I built my practice around real estate-focused cross-border issues. About 60% of my practice now is Canadians that are buying US property. I have a lot of Canadians that buy exclusively Canadian property as well, but we work with a lot of Canadian businesses that sell to the US. A lot of US citizens live here in Canada. I would say 98% of our business is some type of cross-border component. It’s rare that we only have clients that have an exclusively Canadian component to their business.
Thank you for that. Let’s dive right in. What is double taxation and how does this happen?
Double taxation occurs when you can’t take some type of credit on the opposite side of the border. For example, if you buy a property in the United States through a corporation, you’re paying corporate tax. When you take the money out as a Canadian, you pay tax individually as well. You’re paying tax twice on that same income. There are certain vehicles where we can structure you to avoid that double taxation situation. Typically, when you’re not getting some type of credit in Canada, that’s where double taxation arises.
If a property is purchased in a corporation, Revenue Canada doesn’t see that. Any profits that you’ve made, you pay your taxes on the corporate level in the US but when those funds are repatriated, Canada doesn’t account for those taxes you’ve paid on those capital gains to the US and taxing it on the original sum?
It’s the after sum. For example, if you make $100 to a US corporation, in the United States, you’re going to pay 21% federal tax. There might be some state tax depending on where the project or the property is located. They will pay 21% tax. Since you’re a Canadian that owns a US corporation, there is a 5% withholding is done on that dividend essentially. That’s 5% you won’t get back because it’s not a substitute foreign tax credit here in Canada. Essentially, on that $100, you’re already down $26 on that profit.
You pay additional tax on that $74 remaining in Canada based on your marginal tax rate in Canada. If you make over $200,000, you’re in a 50% tax bracket already in Canada. You’re going to pay about $35 on that $73 or $74 remaining. Your after-tax amount is $35 or $40 at most on $100 earned. You’re paying about 60% in tax on that income, which is certainly not a tax-efficient way of doing business.
All of our investors are accredited. In most cases, they’re making more than $200,000 amount than they’ve made in the last few years. Does it make a difference if it’s a corporation or if it’s an LLC?
LLCs are taxed differently on the US side as opposed to Canada. LLCs, for most US investors and US individuals living in the United States, the consider was on the closer entity. All the income flows up directly to their 1040 or their individual return. They pay tax based on their individual rates. In Canada, if the Canadian owned an LLC, CRA taxes them as a corporation essentially because it’s not owning the property directly in your personal name and there’s no partnership type structure with an LLC. CRA deemed LLCs to be foreign corporations, which are subject to double taxation.
As we move along through our discussion, we’re going to have two main focuses. The first is for Canadians looking to acquire investment and vacation homes in the US and the correct tax structure for this. Secondly, Canadians invest passively into US syndications or real estate private equity investments and avoid the costly double taxation pitfalls. Let’s discuss Canadians buying investments or vacation homes in the US, leaving out the US debt and financing concerns. What is the best way for a Canadian to purchase US real estate?
A lot of it is going to be dependent on where the funds are coming from. That’s going to be key for the individual. When you’re buying a vacation property, a lot of these individuals may have holding companies or businesses in Canada. That’s where they store their cash. In that case, a lot of times, if you’re buying a vacation property, it may make sense to buy through a Canadian Holdco. The main reason for that is that you don’t have to take the funds out of Canada or out of the company and pay personal tax on that income.
Canadian companies are allowed to buy property in the United States. The rental income will be reported on the US side so the Canadian company will have to follow the US tax return. For a vacation property, after you take the depreciation and all that good stuff, there’s very little profit to earn or to report, so it’s just a filing obligation that needs to be done on the US side.
If you have personal funds, that’s where we’re going to be buying the property. A lot of people do buy it through their personal name. Again, there are liability risks that you want to be concerned about. That can be mitigated with proper insurance. The other issue is also financing. You said you don’t want to talk about financing, but a lot of Canadian banks will lend to Canadians in their personal name. If they’re going through the US route and you want to get the US lender, you might have to set up some type of entity in the US too, to buy that vacation property.
In both instances, a portion of the expenses is solely used for rental purposes because the IRS and CRA will not allow you to claim deductions that you’re using for your personal use. You also have to figure out the number of days you spent in that property and how many days were rented out for the year and a portion of the number of days you rented it out. It can only claim a portion of those expenses on your tax return.
Those are your two options. A lot of people like to set up a partnership to buy vacation properties, but for most people, the incorporation costs and additional tax pieces don’t outweigh the benefit of doing that. You want to set up an entity when you plan on buying multiple units where the cashflow can outweigh the corporation cost and additional fees you’re paying on a yearly basis.A lot of people like to set up a partnership to buy vacation properties, but for most people, the incorporation costs and additional tax pieces don't outweigh the benefit of doing that. Click To Tweet
Is that a Canadian partnership or US partnership they create to buy through that if that’s the route they want to go?
To be honest, it could be either. I want to speak to the bank because most Canadian banks won’t lend to US partnerships. You don’t have to get a Canadian partnership if you’re getting a US bank, then they’re not going to lend to the Canadian partnerships. You’ll have to get a US partnership. I prefer a US partnership and the main reason is that you don’t have to file the additional Canadian tax forms every year, which saves on the compliance cost every year.
You brought a vacation property through a US partnership, so the US partnership owns your vacation property. Every year, you don’t have to file Canadian taxes for the partnership. You don’t have any income rate because it’s a vacation property.
If it’s solely for vacation purposes, the way we work through a company or a partnership is that the IRS considers you using that for personal use. You have to de-rent on personal use through a company. We use it for 100 days out of the year personally. If you don’t rent it out, then you have to deem the fair market rent and capture that rent on your partnership with a corporation, however, you choose.
You can claim expenses for those 100 days as well, but the remaining portion can’t be claimed. If you use it personally for 100 days and rent it out for 50, you have to report the 50 days you earned from a third party and 100 days that you used personally. You need to figure that out but this is why most people buy their vacation property in a personal name because it’s a lot simpler and a nice way of saying it.
That leads me to my next question for Canadian buying an investment property in the US for cashflow and appreciation. How can the cashflow be repatriated to Canada every month? When the property is sold, how can the capital gains be repatriated in the most tax-efficient way?
It’s going to be dependent on how the investment’s made. If you have an individual that’s buying property, they can buy property in their personal name. The rental income they’ll have to follow US tax return if they do it individually to report the rental income. Since the property is physically located in the United States, the IRS, and that state jurisdiction get the first crack at that tax.
For example, if you buy the property in your personal name, you have to file a US tax return individually, file a state return and pay tax there. As a Canadian, you get taxed on worldwide income. You have to report that US source income on our Canadian individual return as well. Because the property is owned in your personal name, you’ll get a foreign tax credit here in Canada. That offsets that double taxation situation.
For example, if anybody makes $100 dollars of profit on the US side, they pay $10 a tax in the United States. If you’re in the 30% marginal tax bracket in Canada, you pay 30%, but you already paid 10% to the United States. You have to pay an additional 20% to CRA. You pay that top off there. When people are first starting out, they buy using their personal name because they don’t know credit corporation costs and tax fees. You do get the ability to use a foreign credit which is the most efficient way to repatriate funds back to Canada.
Again, a lot of people use Canadian Holdco where the majority of their funds are. You don’t want to take the funds out of the company to pay personal tax on it. You can use that Canadian Holdco to buy a rental property. That rental property is going to be subject to a US tax return and you’re not going to file a US tax return on the US side.
The Canadian company will be eligible for a foreign tax credit, which offsets that double taxation situation. There is a C-Corp which I try to avoid because it does result in double taxation. The most prominent way and where most people invest in US properties is through some type of partnership in the US. The main reason for that is that it is considered a flow-through entity. A limited partnership is considered a flow-through entity for both CRA and IRS tax purposes. You do avoid double taxation there. You do get the benefit of a foreign tax credit on the Canadian side, so you’re not double taxed on that rental income and also on the capital gains if you sell the property.The most prominent way and where most people invest in US properties is through some type of partnership in the US. Click To Tweet
Let’s switch the conversation and discuss syndications or real estate private equity investments. In recent years with the growth of groups such as Cardone Capital, US multifamily investments have become mainstream. More people want to invest in US multifamily passively as limited partners. This has increased Canadian investors who are also looking to take advantage of tremendous gains available in the US.
Some US multifamily firms accept Canadian investors, but most investments are structured in LLCs. You explained what the issue is with an LLC-structured entity. Revenue Canada sees that as corporate income, and then you pay taxes on the US side, but then you also have to still have to pay taxes on the Canadian side. If a Canadian investor invests with a US entity, syndication outfit, or a real estate private equity firm, they receive their cashflow. When the property is sold, they receive their initial investment and capital gains. Are they subject to taxes on the US side because they invested in this LLC?
If we go back to where the actual projects are located, that’s the jurisdiction that gets taxed first. If you invest into a US LLC that owns an asset through syndication, the tax is going to be paid on the US side first, and then as a Canadian, you get taxed on their worldwide income on what’s remaining. LLCs are not the most tax-friendly way for Canadians to do so.
At the end of the day, the Canadian individual has to file a US tax return to report the US source income and pay the US tax. Whatever’s remaining will have to be reported on the Canadian side. Whether it’s through their individual return, directly in a personal name, or through the Canadian Holdco if they have a Canadian company that made the investment.
A Canadian Holdco or personally invests into this US LLC as a syndicated investment, the US LLC then pays the investor. Are the US LLCs required to do any withholding tax or do they hold any taxes back? Does the Canadian investor have to file US taxes and pay their portion of US taxes at that time?
An LLC on distribution, a profit, or a capital gain is required to withhold a certain amount. It’s about 37% for an individual. That’s the highest tax rate on the individual side or 21% of the corporate rate of a Canadian company. Anytime an LLC makes a distribution, they have to withhold that amount and send those amounts to the IRS as withholding on behalf of that foreign investor.
It’s not a really tax, it’s more of a deposit that’s made with the IRS. It forces Canadian individuals or companies to file a tax return to report the actual amount of taxes required to be paid. The actual amount of tax less the actual withholding that was done or made to the IRS is put together and then the difference is refunded to the individual. 99 times out of 100, there’s going to be a refund because it was holding a larger than an actual tax that needs to be paid. It forces Canadian individuals or corporations to file a tax return. That’s why they do that.
There are issues when the projects are sold because you don’t get that refund back until the next filing season. Even then after you file a tax return in April, May, or June, you take 3 to 6 months to get a refund back. There’s a timeline with these projects for us Canadians. It is something we need to plan ahead of time before you sell a project.
Let’s discuss this a little bit further. The LLC pays the investor their distributions and gains. There’s withholding tax done. The remainder of the funds is brought back to Canada. The Canadian investor has to file their US taxes to figure out what is the total amount they owe. They are forced to do those filings, but because the source of the funds was from an LLC, does this also trigger the double taxation here, even if they file US taxes?
It does. For example, they’re making the investment in the personal name of this LLC. The tax is done through a corporation from CRA’s eyes. That tax you paid on the US side is not eligible for a foreign tax credit in Canada. That’s where the double taxation needs to be. Again, if we go back to our $100 example, the LLC makes $100, you pay $10 to the IRS, and the remaining $90 is subject to tax in Canada. You don’t get that $10 credit back.
The main reason why CRA has this LLC foreign corporation type rule is that it takes the characteristics of an LLC because it’s a separate entity. There’s no general partner in this type of structure. Its character is more of a corporation that does an actual flow-through partnership, or a limited partnership. That’s where a lot of Canadians run into because they deal with a lot of US accountants and US lawyers.
Also, a lot of US operators. That’s the next point I want to know. We’re in this space, creating a lot of content, and becoming thought leaders when it comes to Canadians looking to invest in US real estate private equity investments. What we’ve noticed is that some operators of syndications do offer their investments to Canadian investors, but they structured a deal in an LLC. What they require from the Canadian investor is to form a US entity and invest through that US entity.
There’s some misconception and misinformation that exists out there that if the investor goes to the US, creates a limited partnership or flow-through entity, and they’re tax efficient and a great structure to use. If they make their investment through a limited partnership into an LLC where the sources of their gains are coming from, somehow this middle feeder fund limited partnership will relieve them from double taxation because there’s a limited partnership involved. Please explain this and correct me if I’m wrong that this is misinformation or incorrect or not, or if this is a great way to utilize a tax structure.
It’s a gray area. The issue there is that CRA hasn’t come out and provided a lot of clarity on this. I even see some Canadian CPAs and lawyers take the position that if you had that US LP as a blocker underneath, then, you can’t see the LLC underneath. When he goes through a CRA audit, they’ll look at the actual source, which is the US one, which is coming from the limited partnership, but a lot of CRA agents may not ask if there’s anything underneath that structure. The good ones will.
That’s where the issue lies. Since the US source income is coming from a foreign corporation for CRA’s purposes or an LLC, a lot of CRA will take the position that it’s a foreign corporation with the US LP on top, and the Canadian resident owning it. Now, I have the issue with the double taxation situation that we alluded to. I try to avoid these types of situations by owning the asset directly through the US LP. Again, this is not something you’ll get a lot from US CPAs because they’re not aware of how CRA regards LLC from a Canadian perspective.
The other concern is you have a US operator who is focused on raising the equity needed for their deal. They’re open to allowing international investors to invest. Their accountant has said, “As long as this Canadian investor invests through a US entity, they’re good. LPs are a great entity to use,” that’s the instructions they give to the Canadian investor. Canadian investor goes and creates a US limited partnership, investment through their US limited partnership, but this could be problematic. It doesn’t solve the issue.
My next question for you is because they’ve created this entity in the US, they have to file taxes for that entity in the US as well. That’s an extra cost as well for an investor, correct?
Absolutely. It doesn’t disregard the whole foreign corporation issue. There are additional compliance and corporation fees you need to consider. I wish there was 100% clarity on this, but CRA hasn’t come out and provided that to us yet. The best way to mitigate that is to eliminate the whole LLC formation as a Canadian who is earning passive income. That’s key.
You’re generating rental profits, which is considered passive income and is subject to the rules here in Canada. That’s the issue with a lot of Canadian space. If you can set up that US LP and if you have a US syndicator that is willing to use a US limited partnership type structure as opposed to an LLC, then if the returns make sense and that’s the best route you should take.
Another concern for an investor is that the US operator will provide the schedule K1 to each investor during a tax season, but the Canadian government does not recognize a K1 and needs the K1 to be converted to a T5013 slip, which is the Canadian equivalent. Talk to us about the conversion. As a Canadian accountant, what information do you need from the US operator to complete the transfer? Does having a K1 suffice?
If the buyer is yourself and you have your own US LP where you’re the 99% owner, the correct way to CRA wants to show that rental properties through the US LP is on form T776. You can receive the K1 issued reporting, saying your proportionate share of the K1 income on form T776, which reports the rational rental income from the properties and all the expenses associated with that.
If you are investing into it like a syndication-type deal, you’re not having a large portion of that partnership. You might have 0.5%, 1%, 2%, or whatever the case may be of that project. It’s a little bit more difficult to obtain those numbers. Ideally, that’s the correct post that I typically take with my clients. A lot of people will convert that to a T5013, which is a Canadian tax slip to report the partnership income and as a sworn investment income on the Canadian side. It’s more simplistic. It’s not always the correct approach as CRA likes to see because they like to see the number of profits and the rental income earned from the actual US investments.
Multifamily investments are one of the most advantageous passive investment options for busy professionals because of all the tax benefits they provide such as depreciation, cost segregation, and bonus depreciation. It’s super exciting. Could you please explain these tax benefits? Let’s be clear, everybody. We’re talking about US investors investing in a US syndication.
If you’re a US individual investing in the United States, you are allowed a portion or share of the appreciation and all that good stuff. In a syndication type dealing, most of these individuals are not active real estate investors. They have a W-2 income. They may have their own job. They’re not allowed to be eligible for these active real estate rules in the US, but they are allowed to claim the depreciation depending on the partnership agreement.
In the US, there is accelerated depreciation. Appliances, vehicles, and furniture would have to be depreciated over 5 to 7 years or whatever the case can be. Over the past several years, there’s has been a lot of these accelerated depreciation rules where if the recovery rate is under fifteen years for an asset, you can claim the full expense in the year of acquisition.
That is a nice benefit because you can even capture losses of the first couple of years since you bought the property and carry those losses to the future. If it’s structured properly, in the first couple of years of any type of syndication deal, you shouldn’t be reporting a taxable income for the investor. You don’t have to worry about paying tax on that investment until a few years once those losses have been recovered.
The cool thing is you can roll them over. When you have the capital gains, you can a big loss. That’s incredible. We know that there’s an incredible tax benefit for US investors, which is great, but how about a Canadian investor? Can they also benefit from these tax benefits? If not, what are the tax benefits for Canadian passive investors?
When you’re investing as a Canadian in a US syndication deal, you would have to report that income based on CRA rules. You report that income on your form T776 or as a foreign investment, however you choose. Typically, you can still claim depreciation, but unfortunately, Canada doesn’t have those accelerated depreciation-type rules as you do in the US. You’re supposed to report on form T776 and use the depreciation rates CRA has imposed on us. It can create a bit of a mismatch between the two countries. As we talked about how you can carry over losses on the US side, in Canada, you can’t a loss on real estate investments using depreciation or CCA.
Canadian report losses of depreciation on foreign investments?
Correct. It has to be done based on CRA rules.
To my understanding, is it 4% per year that you can claim as depreciation?
If we buy a $10 million property and have a limited partner who’s invested a small percentage, do they get to utilize or pursue that 4% of the $10 million? How does that work?
If you buy a property through US LP, you’re correct. The residential rate in Canada is about 4% on a building or residential property. Every time we take that 4%, the following year, that asset base gets reduced and your depreciation rate gets reduced as well on a yearly basis. In the US, residential property is a straight-line depreciation of 27.5 years. The depreciation rates remain constant for that building until you sell it. That’s why you have a little more clarity on the US side, but as a Canadian, you’d have to use the CRA rates of 4% per year. That’s what the CCA rate for that building on Canadian tax rules.
Taking that 4%, you can roll it over every single year and then utilize it on the capital gains on the backend. Another question, can you take that loss and use it against your ordinary income?
If you’re not claiming depreciation in Canada on that asset, you can use that loss for that property against your ordinary income. You cannot claim CCA and claim a loss on that property to be used against your T4 income. CCA can be reduced down to zero for that property, and then there’s no loss report or income to report.
If you have a number of expenses that exceed your rental income for that year, maybe you had a significant of repairs as opposed to the capital expenditures, or maybe you had a twenty-unit building, and every single unit needed to repair was significant in value that exceeded that rental income for the year. That is reported as a loss. In Canada, you can’t claim CCA, but you can claim that loss against your T4 income if you have it or business income outreaches.
We’re learning a lot. Next question, let’s discuss cashflow distributions. Assets we acquire in the US are cashflowing from day one, unlike most investments available in Canada. We send out monthly distributions to our investors. Can you please explain what is the return of capital and why don’t investors have to pay tax for the term of the project while receiving cashflow, which is a return of capital?
The investments that most people or most companies make are with after-tax cash. You go to your job. You may make $100,000, pay $30,000 in tax, and you have $70,000 left. If you take $50,000 of that, you already paid tax on that $50,000. You make an investment and it’s already using after-tax cash. When you make that investment, you get those funds back tax-free because you already paid tax to CRA on that income. Your first $50,000 of distributions received is tax-free. Anything above that is a capital gain. Depending on how the project is structured, cap gains above that amount.
In Canada, you are taxed on 50% of the capital gains, and the remaining 50% gets added to your income. The total amount is taxed at the bracket that it aligns with.
If you make $100,00 capital gains, only $50,000 of that is included in your income individually. If you’re in a 30% tax bracket, you pay 30% tax on that $50,000. You’re not taxed on the full amount like you are in the US but we do have higher tax rates here in Canada. It’s a nice way of saying you can get capital gains as opposed to ordinary income. In most cases, it’s most beneficial for you, either as a Canadian or a US individual.
In the last few years, we’ve spent our lives learning about taxes and we still learn something new every time we talk to an expert. That concludes this segment of our show. Thank you so much for all the travel information. We hope that anybody who’s reading this gets in touch with Elliott because he’s the master of cross-border taxation.
Let’s start the next segment of our show, Elliott. The ten championship rounds to financial freedom, whatever comes top of mind. First question, who is the most influential person in your life?
Honestly, I would say my father. He immigrated from Eastern Europe when he was in his twenties. He didn’t have much college education, but he’s always a hard worker and he instilled that in me. I always put in the twelve-hour days. While we earned our income differently, I remember my income is more of a business owner and his, more of as an employee. I attuned my work ethic to him.
Next question, what is the number one book you recommend?
If you’re first starting out, I would say Rich Dad Poor Dad. It’s based on fundamentals, but I’ve always liked Think and Grow Rich by Napoleon Hill. I’ve read that a few times over my life. I honestly always pick up a few new things every time I do read it. It puts me into the brains of some of the best minds in the world and that’s what I liked.
If you had the opportunity to travel back in time, what advice would you give your younger self?
Don’t procrastinate as much as I did. I’m more of a planner as opposed to a doer at times. I tend to over-plan at times rather than do the work. If I want something, I’m doing it right away as opposed to taking weeks, months, or even years to plan things out. It’s great to plan, but you got to take action and that’s key. I wasn’t doing enough of that back in the day.
What’s the best investment you’ve ever made?
People like to say monetary, but at end of the day, it’s a partner. It’s who you marry. If they’re not on board with what you’re trying to do and their goals are aligned with yours, then you’re not going to have a great successful marriage, successful business, or even life. I’ve been very fortunate to find my wife and she’s been right next to me from the start. When I’m not willing to wake up at 5:00 AM, she pushed me out of bed. She’s the little push when I need it.
Elliott, what’s the worst investment you’ve ever made, and what lesson did you learn from it?
I invested which ended up being a scheme about several years ago in Ottawa. It was probably one of the largest rent-to-own type companies down there. Financially, that was probably the worst. What I learned from that it is I let emotions get the best of me. Rather than do my due diligence and speak to people who’ve made these investments, I let the returns dictate my actions. I lost quite a bit of money. That’s what I try to keep in check now. I try to keep my emotions in check and make sure I make decisions based on the numbers as opposed to being based on greed and fear.
I see that happening with cryptocurrencies and Bitcoin. A lot of people feel like they missed the boat. I don’t believe they have, but they see these investment possibilities online. They’re not sure about the investment. I also get emails from the securities commission, a warning about these investments that are available. I understand what you’re investing in, who you’re investing with, and what the asset class is.
Next question. How much would you need in the bank to retire now? What’s your number?
I would need probably between $40,000 to $50,000 a month in passive income. It sounds large, but at the end of the day, we have two kids and they’re in private school. After you take off $20,000 a year in taxes and depending on where you live, and your housing, it still leaves you with a $5,000 to $10,000 a month buffer. That’s my number so that I can officially maybe take a step back from some of my businesses and reassess what I want to do.
Did you read that everybody? He said, “passive income.”
That’s a sophisticated way of looking at it because you could have $5 million or $10 million, but your expenses add up. That money gets eaten away. You’ve got inflation coming on there. You might make some not smart investments because you’ve got access to all these funds. If you have a consistent passive income, it allows you to have a certain lifestyle in accordance with that passive income and use the rest for compounding interest to invest and make other stuff.If you have a consistent passive income, it allows you to have a certain lifestyle in accordance with that passive income. Click To Tweet
If you could have dinner with someone dead or alive, who would it be?
I would say, my two grandfathers. I never meet them. They did pass away before I was born. I learned a lot from my parents from them, but it would be nice to meet them firsthand.
You might not need a translator at that.
We don’t speak the same language, but that’s what the parents are for.
If you weren’t doing what you’re doing now, what would you be doing now?
Several years ago, I would say, “Hopefully, a hockey player.” Those ambitions died off pretty early when I realized I wasn’t pretty good. I always saw myself in this field, even from a young age. I always liked business, taxes, and real estate. I always knew that I would be running my own business. Did I know what type of business would be? No. I knew I would be working with people and working on my own and I have my employees. I don’t know what I would be doing if I wasn’t doing this.
Elliott, book smarts or street smarts?
I probably say book smart, but at the end of the day in business, I don’t think a college education is necessary to be successful. I do think you need that business acumen, but whether you get an A in a certain class, it’s not going to make an impact on your life. It proves to people that you do have the capacity to sit still, do the work, and get a degree. At the end of the day, I don’t think it defines how successful you are going to be in life. If you have the ambition and you’re young, in your teens, or whatever the case may be, if you can start businesses, street smarts would overweigh the book smarts.
Last question, if you had $1 million in cash and you had to make one investment now, what would it be?
I would probably buy a piece of real estate in the Midwest. There’s a lot more value there these days. For most people, the cashflow should provide you with a pretty nice life. I’m assuming you have no other sources of income. I would probably hold it and maybe put it into an LP or into a trust. It has my kids’ names in it. We leave it there and let it make them money essentially.
Elliott, what’s the best way people can reach you?
The best way is by email. You can reach me at ElliottMilek@CAN-USTax.com or my phone number is (613) 581-2695.
We appreciate you coming on again. We’ve been on a few calls with you. You’ve educated us and we’ve learned some new things also on this interview. Thank you so much.
My pleasure, guys. Thanks for having me and I look forward to the next one.
We’ll have you on, again.