Leveraging and risk tolerance

Suppose you buy a building with a 7% mortgage rate and notary fees of about $750. To make a profit, you need a net return that exceeds the cost, that is 7% plus notary fees. The gross return should be at least 10% or 12% in order to make a profit.

If you need a 10% or 12% return to make a profit on your investment, you will have to take higher risks. Ask yourself if you can afford it and if you will be able to sleep at night, knowing that your investments are at risk. Only you have the answer.

It is important to know that the interest on a loan is tax deductible when the loan is used for investment purposes, but not when it is used for RRSP contributions. If you buy bonds, the deductible amount is limited to income generated by the investment, so there are restrictions on the permitted deductions.