#wealth #realestate #consulting 
What is an FHSA? – Olympia Trust Company

 

STRATEGY
When you’re young starting out – remember to enjoy your life experience! (Die with Zero)
But DO start saving small amounts asap that minimally impacts your life experience.
That aside…
Contribute the max annually ($8,000) before Dec 31st.
At that rate, you’ll reach the max contribution room of $40,000 in just 5 years.
Self invest in high return funds or development projects (use Olympia Trust)
Let’s say first home purchase is at 23 yrs old (5 years of contribution).
And you self invested with a 10% return DRIP (Compounded Interest)
Given your plan to contribute the maximum amount of $8,000 annually for the first 5 years (totaling $40,000), and assuming a compound interest rate of 10%, let’s calculate how much you would have in your FHSA after 5 years.
After contributing $8,000 annually for 5 years to the First Home Savings Account (FHSA) with a compound interest rate of 10%, you would have approximately $53,724.88 in your FHSA after 5 years.
This amount represents both your total contributions of $40,000 and the interest earned over the 5-year period. This fund can then be used towards the purchase of a home, providing a significant boost to your home-buying budget.
Anticipated tax savings

https://www.taxtips.ca/taxrates/on.htm

The total tax savings from contributing $40,000 to the First Home Savings Account (FHSA), considering both federal and provincial tax rates, would be approximately $9,109.17. This includes about $2,020 in provincial tax savings (at the lowest Ontario tax bracket rate of 5.05%) and approximately $7,089.16 in federal tax savings. ​​
Here’s the HACK
Suppose you DON’T use the FHSA for buying your first home but instead, work the tax free compounded growth over the maximum allowable term of 15 years.
After contributing the maximum amount of $8,000 annually for the first 5 years to a total of $40,000, and compounding interest at 10% annually, the amount in your First Home Savings Account (FHSA) after 15 years would be approximately $139,348.50.
Most of the deal sponsors I work with would market this as
((139,348.50-40000/15)/ 139,348.50)% = 16.56% Annualized return for 15 years!
And that with NO TAXES on the compounded growth until withdrawal!
Which one’s a better strategy for you?
Other Considerations
inflation 4% so you real return is only 10%.
Herein lies to paradox; deals with IRRs over 15% typically require accredited investors.
ACTION ITEMS
  • Find sponsor deals that:
    • Do not require accreditation
    • Have a low minimum amount for investment
  • HOW TO: a bank GIC will have 6 month 6% for the first 5 years then transition over to a couple of  development deal lasting 5-7 years that will offer an annualized IRR for say 16-20%. Then GICs in the last 3 years to avoid tax penalties…. Or take the penalties and go for the full 10 year term, you’d likely still be ahead!
    • Phase I: Aggregate savings for 5 years to $40K in a GIC
    • Phase II: Compounded growth for 10 years in a few of development deals
  • Start an Olympia trust FHSA account
  • Contribute on autopilot asap and lock in GICs asap for a full 12 months of growth