Tax Optimization

Yes, 100% legal and CRA-approved. The Canada Revenue Agency released Interpretation Bulletin S3-F6-C1 specifically addressing the cash damming technique. As long as you follow the rules—borrowed funds must be used for income-generating purposes—the interest is tax-deductible. This isn't a loophole; it's using the tax code exactly as written. However, proper documentation and CPA review are essential to ensure compliance.

No additional borrowing required. These strategies simply reorganize your existing cash flows. Your total debt stays the same—you're just shifting it from non-deductible to tax-deductible. For example, with Rental Lab, you use rental income to pay down your home mortgage, then re-borrow the same amount for rental expenses. Your net debt position doesn't change, but the tax treatment of that debt improves dramatically.

You need a re-advanceable HELOC (Home Equity Line of Credit) with an auto-readvance feature. This allows the principal portion of your mortgage payment to automatically become available in your investment line of credit each month.

Important: Not all HELOC products work for this strategy. Many lack the proper readvance features or have structures that create implementation friction. This is why working with a mortgage broker who specializes in these strategies (like our team at MortgagesLab) is critical.

You need at least 20% equity in your home. The multi-component structures required for cash damming are only available up to 80% loan-to-value (LTV). If your home is worth $800,000, you can structure up to $640,000 (80%), which means you need at least $160,000 in equity to access these strategies. If you don't have 20% equity yet, we can help you develop a plan to get there.

Yes! This is one of the most powerful aspects of Rental Lab. Even if your rental expenses exceed your rental income, the strategy can still work—and in many cases, the structure will self-fund the shortfall through tax refunds.

In our case study from the mini-course, we show a rental property with a $453/month shortfall that runs negative for 15 years. Despite this, the homeowner generates $877,000 in net wealth without contributing extra cash beyond their regular mortgage payment. The tax efficiency and debt conversion more than compensate for the negative cash flow.

No, Business Lab does NOT work for incorporated businesses. This strategy only applies to self-employed individuals operating as sole proprietors.

If you're incorporated, your business is a separate legal entity. You cannot use corporate income to pay personal mortgage expenses and then claim business deductions. The CRA would disallow these deductions. If you're incorporated but interested in tax optimization strategies, book a call with our team—we may have alternative approaches that work within a corporate structure.

Typically 6-12 years depending on your income level, number of rental properties, and how aggressively you apply tax refunds back to your mortgage. In the Rental Lab case study from Chapter 8, debt conversion happens in 9 years. This doesn't mean your mortgage is paid off—it means 100% of your remaining mortgage debt is now tax-deductible, and you're receiving maximum annual refunds.

Professional guidance is strongly recommended. While the concepts are straightforward, improper implementation can lead to denied deductions, CRA audits, or unwanted penalties. You need two key partners:

Think of it this way: a good CPA is worth every penny. They ensure you capture all available deductions while staying within CRA guidelines, protecting you from costly mistakes.

Both use the same cash damming principle, but they apply to different situations:

With Suite Lab, only a proportional amount of your home mortgage interest becomes deductible (based on the percentage of square footage rented). With Rental Lab, you can potentially convert your entire home mortgage to tax-deductible debt over time.

Yes! If you have at least 20% equity in your home, you can use that equity as a down payment to purchase a rental property and implement Rental Lab immediately.

In our Rental Lab mini-course, we show exactly how this works—including scenarios where:

• • You borrow the down payment from your HELOC
• • The rental property is cash flow positive
• • The rental property has negative cash flow (and how the structure covers it)

Alternatively, if you have existing investments (GICs, stocks, bonds), you can use Conversion Lab to start benefiting immediately without buying a rental.