A young couple sat in my office a few months ago. Both work full time. Both make decent money. They had saved $28,000, and they were embarrassed about it.
“Cherry, we’ve been saving for four years,” she told me. “We’re not even close.”
I hear a version of this almost every week. And I want to say something that might surprise you, coming from an accountant: the problem isn’t that you’re bad at saving. The problem is that you were handed a plan that stopped working.
The plan that used to work
You know the plan. Your parents told you. My parents told me.
Finish school. Get a job. Save up. Buy a house. Hold it. Get wealthy.
For a long time it worked beautifully. Someone bought a house in Mississauga in 1995 for $180,000. Today it’s worth well over a million. They didn’t do anything clever — they showed up, made the payments, and waited.
But look at what that plan asks of you today. An average GTA home needs a down payment north of $200,000. If you’re paying rent, groceries, and daycare, saving $200,000 isn’t a plan. It’s a fantasy.
So a whole generation is doing everything right and still standing still.
The house was never the magic
Your parents didn’t get wealthy because they bought a house.
They got wealthy because of the mortgage.
Stay with me, because this is the whole thing.
Say your dad put $50,000 down on a $250,000 house. The house goes up 10% — that’s $25,000 of growth. But he only put in $50,000 of his own money. So on his money, he made 50%.
The house went up 10%. He made 50%.
That’s leverage — borrowed money doing the heavy lifting. It’s the single biggest reason that generation built the wealth it built. The house was just the container. Leverage was the engine.
Which raises an obvious question: does the engine have to be bolted to a house?
A millennial who stopped waiting
My guest this week is Sadaf Chaudhary. He’s 30, has a young family, and works on the investment side at Equitable Life. He’s exactly the person this problem was built to crush — student bills, no inheritance coming, home prices running away from him.
So instead of saving for a down payment, he took the same leverage his parents’ generation used and pointed it at investments. He’s been doing it with his own money for three years. Not a strategy he read about. One he’s living.
I asked for his numbers on camera and he gave them: about 38% annualized over those three years. He added the honest part himself — the last three years have been unusually good, and nobody should expect that to repeat. His words: “maybe I just got lucky this time.”
I’m sharing it because it’s real, not because it’s a forecast.
The same engine, a different asset
There are lenders in Canada who will lend you $3 for every $1 you put in — but instead of buying a condo, you invest it. Put in $25,000, borrow $75,000, and you’re invested with $100,000. Same 25% down payment idea you already understand, pointed somewhere else.
No tenant, no leaky basement, no 2 a.m. call about a furnace. You can sell whenever you want. And you don’t need $200,000 to start — $10,000 gets you going.
It also ends an unfair comparison I’ve watched for years. Someone has $100,000. Buy a $500,000 rental, it goes up 10%, and they say “I made $50,000.” Put that same $100,000 in the market, it goes up 10%, and they say “I only made $10,000.” So they buy the rental. But that was never a fair fight — they used leverage on one and not the other.
What are you actually buying?
The version we discussed uses a segregated fund. Terrible name, so let me translate. A stock is a piece of one company. A mutual fund is a basket of many companies picked by professionals. A segregated fund is that same mutual fund with an insurance layer wrapped around it.
That layer gets you:
- A death benefit guarantee. If you pass away when the market is down 30%, your family receives the guaranteed amount, not the crashed value.
- A reset feature. Once a year you can lock in your gains. If $100,000 grows to $120,000, you lock the floor at $120,000 — and it stays locked even if markets fall later.
- It skips probate. In Ontario that’s 1.5% of your estate above $50,000, and your family gets the money in days instead of months.
The trade-off is real: those guarantees cost roughly 0.4% to 0.5% more per year than a plain mutual fund.
The tax part (my favourite part)
I’m an accountant, so let me slow down here. This is where people get it wrong.
The majority of your growth is taxed as a capital gain. Not all of it — most of it. And that’s the friendliest treatment there is, because only half of a capital gain gets added to your income.
You’ll get a tax slip even if you never take a dollar out.
Clients tell me this every spring: “Cherry, I never withdrew anything, so I have nothing to report.” Not true.
Things happen inside that fund whether you touch the account or not. The companies you own pay dividends. The fund manager buys and sells holdings. All of it gets passed to you on a T3 slip each year.
And the T3 doesn’t just show capital gains. It splits your income into types — dividends declared, foreign income, interest, and capital gains. With a segregated fund those dividends don’t land in your pocket as cash; they get reinvested right back into your investment. But they’re still declared on your slip, and you still pay tax on them that year.
That dividend line is exactly why you get to deduct the interest.
Don’t skip this part. It’s the foundation of the whole strategy.
CRA lets you deduct interest when you borrow to earn income from property. Capital gains don’t count for that test. Growth on its own doesn’t count. You need real income — dividends, interest, foreign income — actually flowing from the investment.
A fund holding dividend-paying companies produces exactly that, year after year, right there on your slip. That’s what supports deducting the interest on your loan. In a 50% bracket with a 5% loan, your real after-tax cost lands closer to 2.5%.
But it has to be a genuine income stream. Pick a fund that produces almost nothing and you’ve weakened your position. Have that conversation with your accountant before you borrow, not after.
And no, you’re not taxed twice. Whatever you report each year gets added to your adjusted cost base, so your gain is smaller when you finally sell.
Invest $100,000. Report $1,000 a year for five years — $5,000 total. Sell at $120,000. You don’t pay tax on the full $20,000 of growth. You pay on $15,000. And only half of that is taxable.
What if the market crashes?
Leverage cuts both ways. It magnifies losses too.
Normally, borrowing to invest carries an ugly risk called a margin call: if your investments drop far enough, the lender demands cash or forces a sale — at the worst possible moment.
If you own real estate, you’ve seen this movie. Everyone who bought a pre-construction condo in Toronto in 2021 for $1 million and closed in 2025 at $600,000 got the same message: bring another $200,000, or walk away. I’ve sat across from clients living that. It’s brutal.
The program we discussed uses a soft margin call instead. If your investments fall below the line, nobody seizes anything and nobody forces a sale. Your interest-only payment simply converts to one that includes principal. Your payment goes up — but you keep your investment, and you buy yourself time.
Time is everything here. Since 1929, markets have dropped more than 30% about ten times. The worst, 2008, took a little over a year to recover. A year of higher payments is survivable. Selling at the bottom is not.
Who this is not for
Let me be blunt, because I’d rather you skip this than get hurt by it. Not for you if you might need the money within a few years, if a bad market year would break your budget, if your income is unstable, or if you’re carrying credit card debt.
It works best for people with steady income in a higher tax bracket — that’s who gets the most from the interest deduction — who can leave the money alone for ten years or more.
Final Thoughts
If you’ve felt like the door to building wealth closed just before you reached it: it didn’t close. It moved.
Your parents’ wealth came from leverage. Leverage still exists. It just doesn’t have to be wrapped around a house.
Want to go deeper?
My husband Erwin explains this strategy far better than I can. He’s been using leverage to build wealth for years, and he’ll walk you through the numbers in a way that actually makes sense. He’s hosting a webinar on it, and you can join him.
👉 Saturday, September 12th, 9:00am
👉 Tuesday, September 15th, 8:00pm
And if you haven’t watched my full conversation with Sadaf yet, 👉 start there
Until next time, happy Canadian Real Estate Investing.
Cherry Chan, CPA, CA
Your Real Estate Accountant
Next Steps
If you want to make sure your file can stand up to a second look, Book a consultation with my team today. We help everyday Canadians navigate the confusing world of taxes so you can keep more of what you earn.
Until next time, happy Canadian Real Estate Investing.
Cherry Chan, CPA, CA
Your Real Estate Accountant
