Canadian sitting on 100k in a HoldCo... Where to put it?

[canadian235]

Evening everyone,

First of all, I'm glad to be surrounded by great minds... I'm fairly new to the forum and only discovered MMM a few months back but I feel like I've somewhat lived a similar path as many others here.

I wanted to give a quick summary of where I stand and my current goals and get a conversation started on around investing via a HoldCo.

Me and my wife are in our mid 30s and have just welcomed a little boy into the world who is now 7 months old :)

We've always been very conscious about having a budget and saving quite a bit of money. I'm definitely more aggressive in terms of investing then she is but that's good in a way as it keeps us balanced.

Here is our financial breakdown:

Assets

Primary Residence (value 1.4m)
3 Rental Condos in downtown Toronto (value 1.2m)
TSFAs - 99k Mostly US Holdings
RRSPs - 400k - Mix of CAD (20%) / US (80%) Holdings
HoldCo Broken Account - 100k

Liabilities

Primary Mortgage 650k
Rental Mortgages 660k
No other debt

Other then that we hold about 30k in cash in our personal accounts and about 40k in the holdco account.

Our monthly expenses are $9,000 which includes 15% prepayment of mortgage savings (1 payment a year) for mortgage and also 15% increase in mortgage payments. We've always struggled to make a decision if to invest vs pay off mortgage so we're doing a bit of both.

If we take mortgage out of the mix we're looking at about $4500 in expenses... that's a fairly realistic budget for us... living in Toronto is not cheap and there are some sacrifices we've decided not to make... like moving out of a great city. If we cut our budget to absolute minimum we could take things down to $2500/m (30k /y) but I wouldn't see this lasting a long time esp with 1 or 2 kids growing up over the years.

Over the past few months I've been developing a spreadsheet based off these numbers to see when we could retire. Initially the idea was to retire purely off dividends but as I started exploring the early retirement option I started to think about the entire portfolio value rather then just living off dividends. Was a bit blinded by that strategy.

So out came this...

https://docs.google.com/spreadsheets/d/1bC2umvfegbsZ8SIQNPrQaE5EC5q0udojl9V5cx_kn9o/pubhtml?gid=2125508509&single=true

I was running a few scenarios trying to find out when we can possibly retire. My wife wants to go back to work as she has been off this year taking care of our baby. Once she goes back we don't know long she'll go back for if we have a second child.

Having two kids is substantially more in child care and it doesn't make as much sense for her to continue to work... even at a 100k salary... so we'll see what happens there.

At the moment we're looking like we could potentially cover our expenses by mid 40s, which is great but leaves our mortgage. At that time our mortgage will be around 450k, so we're thinking either focusing on paying it off for a few years then or somehow using my primary business... like selling my 50% stake... not sure exactly as I don't want to fully retire by 45 but really slow down and enjoy less hectic life.

Our unique situation comes down to my business. We run a small agency here in Toronto and we're finally making a decent salary... we've setup HoldCo's to be able to get paid via dividend distributions and not have to pay all the tax up front.

I've recently setup a Questrade corporate account and have transferred in 100k the HoldCo to start to get that money working for us.

My question comes down to where to put it... There are a few things I'm considering...

1. We still have room in RRSPs, but I rather have a larger sum of money working for us atm that's why we're investing via holdco.

2. Thinking about tax implications of investing via holdco

3. Should the HoldCo focus strictly on CAD based ETFs

4. I haven't done much ETF investing and haven't done much diversification around the globe, so I've been thinking about a global fund that holds all markets.

5. I've followed Marc's Get Rich With Dividends quite a bit over the years and I've been able to pickup some great stocks that work well for us. I also have a few investments in companies I really believe in, going forward however I need to be more careful with the investments as we get closer to retirement, hence why I'm looking at global ETFs.

If anyone is interested I can also post our budget but it's fairly low key, we splurge in a couple small areas but in general we try not to overspend.

Sorry about the rambling I feel like I've jumped a bit all over the place but I'm sincerely looking for some feedback and to see what we could improve... working for yourself is much better than for someone else but our lives would change completely knowing we have the option to stop working fully.

Thanks everyone.

[canadian235]

btw numbers on the spreadsheet might be a little outdated, in the spreadsheet "savings" means HoldCo savings account.

[powersuitrecall]

Does the fact that you have over 80% of your assets in one real estate market bother you?  It would bother me.  What happens if there is a 30% correction in the GTA housing market?  I would be much less concerned about what to do with the 100K and more concerned about diversifying.

[canadian235]

Hey guys thanks for the feedback so far. To add some clarity:

1. We weren't relying on the investment condos for our retirement, the idea was to keep them going.

2. If we sell the investment condos we have to pay real estate agents 5% and capital gains, so that return could be deflated quite a bit.

3. The condos are cashflow positive and the market is slowly tightening up so we're hoping for higher rents in the next few years.

4. I've invested quite a bit into my company and sacrificed my salary over the past few years and we're just starting to benefit from a nice bump so I'm hoping to ride this wave for a few years and stack away some more cash.

5. In terms of diversifying that's why I'm here... the 100k I would like to put to work outside of canada at a reasonable return, I was looking at CUD, FIE, VXC etfs

6. In terms of having a lot in real estate, I accept that risk... houses in Toronto have been going up in price quite a bit over the years but the city is running out space, and the long term plan was to hold on and let those investments with OPM keep rising... at some point there will be a correction but even if it's 30% long term I'm not really worried. Again my investment properties I was hoping not to have to touch until closer to actual retirement age.

7. We really hope we can stay in Toronto... however we've been looking at cities outside of it and you can get a house for 40-50% of the price then you can here... the biggest concern is we move and we missing living in the big city... making a big move like that does take it's toll as well.. with double taxation within the city last time we switched houses we took a 70k hit just in paying land transfer taxes and other fees.