Get ready to unleash the power of tax advantages in real estate investing! Imagine joining forces through joint ventures, tapping into diverse opportunities while enjoying shared resources and strategic tax benefits. Picture yourself strategically reducing tax liability by maximizing savings through prepaid expenses and deducting eligible costs.
But it doesn’t stop there! As a Canadian real estate investor, you have access to a plethora of tax credits, incentives, and deductions. From capital gains exemptions to rental losses, every step you take can lead to increased profitability and optimized tax benefits. Navigate the world of real estate taxation with confidence, making informed decisions about timing property sales, incorporating your investments, and leveraging the Principal Residence Exemption (PRE) to secure your financial future as a homeowner.
Are you ready to embark on a thrilling journey that not only promises lucrative returns but also strategic tax planning that will set you apart as a savvy real estate investor? Embrace the excitement of the tax shelter that real estate can be, maximizing your tax benefits and propelling your financial success forward. With knowledge and enthusiasm, you can unleash the full potential of tax advantages in real estate investing, positioning yourself for a world of endless possibilities and financial triumphs!
Tax Advantages Through Joint Ventures
Joint ventures in real estate offer a collaborative approach to seizing investment opportunities. Multiple parties combine financial resources and expertise to acquire, develop, or manage properties, benefiting from shared risks and access to a wider range of assets.
Apart from pooling resources, joint ventures present significant tax benefits not available in individual investments. Key tax advantages include:
- Income Splitting: Partners can allocate the rental income and expenses, minimizing overall tax liability. This is especially beneficial when partners have different tax brackets or income sources.
- Deductible Expenses: Shared expenses, such as property management fees and maintenance costs, can increase deductions, reducing taxable income.
- Capital Cost Allowance (CCA): Partners can collectively claim CCA, depreciating eligible assets over time and further lowering the tax burden.
- Loss Offsetting: Rental property losses can offset partners’ other income sources, resulting in tax savings.
- Enhanced Financing: Joint ventures can attract favourable financing terms due to reduced risk, leading to lower interest rates or more flexible options.
Before entering a joint venture, consider appropriate structuring, and clear partnership agreements, and seek guidance from tax professionals to optimize benefits and ensure compliance with tax laws.
By capitalizing on joint ventures’ tax advantages, real estate investors can strategically enhance profitability and tax efficiency in their ventures.
Maximizing Tax Savings with Prepaid Expenses
Prepaid expenses in real estate investing offer valuable tax-saving opportunities. By paying for expenses in advance, investors can deduct them in the current tax year, reducing taxable income and overall tax liability. Common examples of prepaid expenses in real estate include insurance premiums, property taxes, service contracts, and maintenance costs. However, it’s essential to adhere to relevant rules and limitations. Consulting a tax professional can ensure compliance and optimize the tax benefits of prepaid expenses in real estate investments.
Tax Credits for Real Estate Investors
Tax credits present valuable incentives for Canadian real estate investors to reduce their tax liabilities and retain more of their earnings. These credits directly offset the taxes owed, making them a powerful tool for optimizing tax outcomes. Below is an overview of the tax credits available to Canadian real estate investors:
Non-Refundable Tax Credits: Non-refundable tax credits reduce the amount of income tax owed, but they cannot result in a tax refund exceeding the taxes paid. Some common non-refundable tax credits applicable to real estate investors include:
- Home Accessibility Tax Credit: This credit allows eligible individuals to claim expenses incurred for renovations or improvements to make a dwelling more accessible for individuals with disabilities.
- Medical Expenses Tax Credit: While not specific to real estate, medical expenses related to a rental property, such as modifications for disabled tenants, may be eligible for this credit.
- Provincial Tax Credits: Many provinces offer various non-refundable tax credits, such as property tax credits or credits for specific investments in certain sectors.
Refundable Tax Credits: Refundable tax credits are more advantageous as they can result in a refund even if the credit exceeds the total taxes owed. Real estate investors may qualify for:
- GST/HST New Housing Rebate: Investors who purchase a new residential rental property or substantially renovate one may be eligible for a partial GST/HST rebate.
- First-Time Home Buyers’ Tax Credit (FTHB): While primarily targeted at homebuyers, FTHB can also be claimed by real estate investors if they qualify as first-time buyers and meet specific criteria.
In addition to general tax credits available to Canadian taxpayers, real estate investors can benefit from certain credits specific to their industry. Some notable ones include:
Real Estate Professional Tax Deductions: Real estate professionals engaged in the business of real estate can claim deductions related to business expenses, such as marketing costs, travel expenses, and office expenses.
Renewable Energy Tax Credits: Investors who incorporate renewable energy systems, such as solar panels, in their rental properties may qualify for federal and provincial tax credits.
Understanding and taking advantage of these tax credits can significantly enhance the financial position of real estate investors. Careful planning and professional advice are essential to ensure eligibility and maximize the benefits of these tax credits for Canadian real estate investors.
Timing Considerations for Selling Investment Properties
The timing of selling an investment property can significantly impact the tax consequences for real estate investors. Understanding the tax implications is crucial to making informed decisions and optimizing the financial outcomes. Here are key considerations regarding the tax implications of timing the sale of an investment property:
- Capital Gains Tax: When an investment property is sold for more than its original purchase price, a capital gain is realized. Capital gains are subject to taxation at the applicable tax rate. The holding period of the property influences the rate at which the gain is taxed, as it determines whether the gain is considered short-term or long-term.
- Short-term vs. Long-term Capital Gains: Properties held for one year or less are considered short-term investments and are subject to tax at the individual’s marginal tax rate. On the other hand, properties held for more than one year are considered long-term investments, resulting in a reduced tax rate on the capital gain.
- Additional Tax Considerations: Timing the sale of an investment property can also impact other tax considerations, such as the application of tax credits, deductions, and potential recapture of previously claimed depreciation (Capital Cost Allowance).
Strategies for minimizing tax liabilities through strategic timing
- Tax Planning: Engage in tax planning to estimate the tax consequences of selling the investment property at different times. Consider factors such as current and future income, other taxable gains or losses, and available tax credits to make an informed decision.
- Offset Capital Gains with Losses: If possible, consider strategically timing the sale of an investment property with other investments that may result in capital losses. Capital losses can offset capital gains, reducing the overall tax liability.
- Utilize the Principal Residence Exemption (PRE): If the investment property was once your primary residence, you might be eligible for the PRE, which exempts capital gains from taxation. Understanding the criteria and limitations of the PRE is essential for maximizing its benefits.
- Tax-Free Savings Accounts (TFSAs): If you have realized gains from the sale of an investment property, consider reinvesting the proceeds in a Tax-Free Savings Account. Any income or capital gains earned within a TFSA are tax-free, allowing investments to grow without incurring taxes.
When selling investment properties, strategic timing can lead to significant tax savings for real estate investors. It is essential to stay informed about tax laws, consult with tax professionals, and undertake thorough tax planning to ensure compliance and optimize tax benefits.
Utilizing Rental Losses for Tax Benefits
Rental losses occur when the expenses related to owning and operating a rental property exceed the rental income generated. While rental losses may seem undesirable, they can provide significant tax benefits for real estate investors. Understanding the tax implications of rental losses is crucial for optimizing tax planning. Here’s an explanation of rental losses and their tax implications:
- Non-Cash Deduction: Rental losses are considered “non-cash deductions” because they represent expenses that have been incurred but not paid out in cash. These deductions can be used to offset other sources of income, reducing the overall taxable income.
- Tax Shelter: Real estate investors can use rental losses as a tax shelter to minimize their tax liability. By offsetting taxable income from other sources, investors can legally reduce the taxes owed and retain more of their earnings.
- Limitations on Deductibility: Canada’s tax laws impose limitations on deducting rental losses. The “at-risk rules” and the “restricted loss rules” prevent investors from using losses to create artificial tax shelters. Properly understanding these rules is essential to ensure compliance with tax regulations.
How to offset other income with rental losses to reduce taxes owed
- Active Participation: To offset other income with rental losses, investors must be actively involved in managing the rental property. Active participation allows for the deductibility of rental losses against other sources of income, subject to any applicable limitations.
- Non-Rental Income: Rental losses can generally offset other non-rental income, such as employment income, dividends, or capital gains from other investments.
- Proper Record-Keeping: Maintaining accurate and detailed records of rental income and expenses is crucial for calculating rental losses and substantiating the deductions to the tax authorities.
- Incorporation: If the rental property is held within a corporation, rental losses can be used to offset other income earned by the corporation, potentially reducing the corporate tax liability.
It’s important to note that utilizing rental losses for tax benefits requires compliance with relevant tax laws and proper tax planning. Working with tax professionals can ensure that real estate investors optimize rental losses to reduce taxes owed while staying compliant with tax regulations.
Understanding Deferred Tax in Real Estate Investing
Deferred tax liability is a critical aspect of real estate investing that affects the timing of tax payments and financial reporting. It arises when there is a temporary difference between the carrying value of an asset or liability for accounting purposes and its tax base, leading to potential future tax consequences.
Here’s an explanation of deferred tax liability and its concept in real estate investing:
- Temporary Differences: Temporary differences can emerge due to variations between the accounting rules (Generally Accepted Accounting Principles, GAAP) and the tax regulations. These differences can stem from depreciation methods, revenue recognition, or expenses timing, among other factors.
- Deferred Tax Liability: When an asset’s carrying value for accounting purposes exceeds its tax base, or a liability’s carrying value is less than its tax base, a deferred tax liability is recognized. It signifies that taxes related to these temporary differences will be payable in future tax years.
- Timing of Tax Payments: Deferred tax liability represents taxes postponed to future periods. As temporary differences reverse or tax regulations change, the deferred tax liability is realized and payable.
Examples of situations where deferred tax may apply in real estate investment
- Depreciation Differences: Real estate assets, such as buildings and improvements, are subject to depreciation for accounting and tax purposes. If the depreciation methods used for accounting and tax differ, a temporary difference arises, leading to a deferred tax liability.
- Capital Gains Tax: When selling a property, the capital gains tax applicable for tax purposes might differ from the gain recognized in the financial statements. The resulting temporary difference creates a deferred tax liability.
- Amortization of Financing Costs: Financing costs, such as loan origination fees or deferred financing costs, may be amortized for accounting purposes but not fully deductible for tax purposes immediately. This creates a deferred tax liability.
- Revenue Recognition: Real estate developers may recognize revenue for accounting purposes using a percentage of completion method while recognizing it differently for tax purposes. This creates temporary differences and deferred tax liabilities.
Understanding deferred tax liability is crucial for real estate investors as it impacts financial planning, cash flow projections, and tax strategies. Proper accounting and tax expertise are essential to accurately calculate and manage deferred tax liabilities in real estate investments.
Capitalizing on the Principal Residence Exemption (PRE)
The Principal Residence Exemption (PRE) is a valuable tax benefit available to Canadian homeowners. It allows homeowners to claim an exemption on the capital gains realized from the sale of their primary residence, making it a powerful tool for wealth accumulation. Here’s an overview of the PRE and its tax benefits for homeowners:
- Capital Gains Exemption: Under the PRE, homeowners can exempt the capital gains earned from the sale of their principal residence from taxation. This means that any increase in the property’s value during the time of ownership is not subject to capital gains tax, resulting in significant tax savings.
- No Limit on Exemption Amount: The PRE does not have a monetary cap on the exemption amount, making it particularly advantageous for homeowners with properties that have experienced substantial appreciation over the years.
- Tax-Free Wealth Accumulation: By utilizing the PRE strategically, homeowners can accumulate tax-free wealth by appreciating their primary residence providing financial security for retirement or other investments.
Eligibility criteria and considerations for utilizing the PRE
- Ownership and Use: To qualify for the PRE, homeowners must have owned and used the property as their principal residence during the period of ownership. Periods of non-residence, such as renting out the property, may affect the eligibility for the exemption.
- Reporting the Sale: Homeowners must report the sale of their principal residence on their tax return, even though the gain is exempt from taxation. This reporting requirement is essential to establish the eligibility for the PRE.
- One Property per Family: Generally, the PRE can only be claimed for one property per family unit as the principal residence. Exceptions may apply in certain situations, such as moving for work or changes in family status.
- Partial Years of Use: Homeowners who only partially use the property as their principal residence may be eligible for a partial exemption based on the ratio of years of use to the total years of ownership.
Utilizing the Principal Residence Exemption strategically can offer significant tax advantages for Canadian homeowners. However, adherence to eligibility criteria and proper tax planning are essential to ensure that homeowners maximize the benefits of the PRE and comply with relevant tax regulations.
Incorporation for Real Estate Investors
Incorporating real estate investments can offer several advantages and implications for investors. Incorporation involves structuring the ownership of properties under a separate legal entity, such as a corporation. Here’s an overview of the advantages and implications of incorporating real estate investments:
- Limited Liability: One of the primary benefits of incorporation is limited liability protection. By holding properties under a separate legal entity, investors can shield their personal assets from potential lawsuits or creditors related to the properties.
- Tax Planning Opportunities: Incorporating real estate investments provides tax planning and optimization opportunities. Corporations have access to certain tax deductions and credits unavailable to individual investors, potentially reducing the overall tax burden.
- Professional Image: An incorporated entity can lend a more professional image to real estate investors, which may be beneficial in attracting partners, investors, or lenders.
- Estate Planning: Incorporation can facilitate estate planning as shares in the corporation can be passed on to beneficiaries, ensuring continuity in property ownership.
- Additional Compliance Requirements: Corporations have certain legal and regulatory compliance requirements, including annual filings, corporate resolutions, and maintaining separate financial records.
- Costs and Administrative Burden: Incorporating and maintaining a corporation involves initial setup costs and ongoing administrative expenses, which should be weighed against the potential benefits.
- Tax Considerations: While incorporation can offer tax advantages, investors need to carefully navigate the tax implications, including capital gains tax on property transfers and potential double taxation.
Tax benefits and considerations of incorporating as a real estate investor
- Deductible Expenses: Corporations can deduct a broader range of expenses related to real estate operations, including property management fees, maintenance costs, and professional services.
- Lower Tax Rates: Canadian small business tax rates are often lower than personal tax rates, which can result in tax savings when the corporation retains earnings.
- Capital Gains Deduction: If certain conditions are met, real estate investors may qualify for the lifetime capital gains deduction on the sale of qualified small business corporation shares, reducing the tax on capital gains.
- Income Splitting: Incorporation allows for income splitting among family members, potentially reducing the overall tax liability for the family unit.
- Loss Utilization: Real estate losses incurred within the corporation can be carried forward to offset future taxable income.
While incorporation can offer significant tax benefits for real estate investors, it’s essential to conduct thorough research and seek professional advice to assess the suitability and potential tax implications specific to individual investment scenarios. Understanding the advantages and considerations of incorporation empowers investors to make informed decisions that align with their financial goals.
Real Estate as a Tax Shelter
Real estate has long been recognized as a valuable tax shelter, offering numerous opportunities for investors to reduce their tax liabilities. A tax shelter is a legal method that enables individuals to minimize the taxes they owe by leveraging various deductions, credits, and exemptions allowed by the tax laws.
Here’s an explanation of how real estate can serve as a tax shelter:
- Depreciation Deduction: Real estate investors can claim depreciation as a deduction, allowing them to reduce their taxable income each year. Depreciation represents the allocation of the property’s cost over its useful life, providing a substantial tax benefit.
- Mortgage Interest Deduction: Homeowners and real estate investors can deduct the interest paid on their mortgages, lowering their taxable income. This deduction can result in significant tax savings, especially during the early years of the mortgage when the interest portion of the payment is higher.
- Capital Gains Exemption: The Principal Residence Exemption (PRE) allows homeowners to exempt the capital gains from the sale of their primary residence, effectively sheltering these gains from taxation.
- Rental Losses: Rental losses can be used to offset other sources of income, reducing the overall taxable income and providing a tax shelter for the investor.
Strategies for maximizing tax benefits through real estate investments
- Leveraging Leverage: The use of mortgages and other forms of leverage can increase the depreciation deduction and enhance overall tax benefits.
- Asset Allocation: Careful asset allocation can maximize tax benefits. For example, placing income-generating properties in tax-advantaged accounts or holding them within tax-efficient structures like self-directed retirement accounts can yield significant tax savings.
- Active Participation: Actively participating in real estate management and operations can provide eligibility for various tax deductions and credits that may not be available to passive investors.
- Cost Segregation: Commercial real estate investors can benefit from cost segregation studies, which identify components of the property that can be depreciated over shorter periods, leading to increased tax deductions.
Understanding the tax laws and utilizing appropriate strategies allows real estate investors to make the most of real estate’s tax sheltering capabilities. As with any tax planning, consulting with tax professionals is essential to ensure compliance with tax regulations and optimize tax benefits specific to individual circumstances.
Real Estate Tax Write-Offs and Deductions
Canadian real estate investors can take advantage of various deductions and write-offs to lower their taxable income and optimize their tax position.
Some key deductions and write-offs include:
- Mortgage Interest: Deduct the interest paid on mortgages used to finance investment properties.
- Property Taxes: Deduct property taxes paid to municipal or local authorities for rental properties.
- Repairs and Maintenance: Deduct expenses for repairs, maintenance, and minor improvements to keep the property in good condition.
- Insurance Costs: Deduct premiums paid for property, liability, and landlord insurance.
- Advertising Expenses: Deduct marketing and promoting rental properties costs, including advertising fees and listing expenses.
- Professional Fees: Deduct fees paid to lawyers, accountants, and property tax consultants for real estate-related services.
- Office Expenses: Deduct expenses for running a home office or maintaining separate office space for real estate activities.
Examples of deductible expenses for real estate investments:
- Advertising expenses: Costs for online listings, signage, and print advertisements.
- Insurance costs: Premiums for property insurance and landlord liability insurance.
- Office expenses: Office supplies, equipment, and home office maintenance costs.
- Professional fees: Fees for legal advice, accounting, and property tax consulting.
- Management and administration fees: Fees paid to property management companies for their services.
- Repairs and maintenance costs: Expenses for fixing plumbing, painting, or replacing damaged fixtures.
- Property taxes: Taxes paid to the local government for the property’s assessment.
- Travel expenses: Costs for visiting rental properties and conducting property-related business.
- Utility costs: Expenses for providing essential services to tenants.
- Prepaid expenses: Insurance premiums or property taxes paid in advance for the current tax year.
To maximize tax benefits, keep accurate records of these deductible expenses and consult with a tax professional to ensure compliance with tax regulations and write-off eligibility. Properly utilizing these deductions can help real estate investors reduce taxable income and optimize their financial outcomes.
Exploring Refinancing and Reinvesting for Tax Benefits
Refinancing is a strategic financial move that can offer tax advantages for real estate investors. By refinancing a property, investors can access equity, potentially leading to tax benefits through the following mechanisms:
- Cash-Out Refinance: When refinancing, investors can opt for a cash-out refinance, borrowing against the increased equity in the property. The cash obtained is tax-free as it is considered a loan, not taxable income.
- Tax-Free Reinvestment: The cash obtained from refinancing can be reinvested into other income-generating real estate ventures or capital improvements. These reinvestments can lead to additional tax deductions and depreciation benefits, reducing taxable income.
- Interest Deductions: The interest paid on the refinanced mortgage is generally tax-deductible for income-generating properties. This deduction can lower the overall taxable income, resulting in tax savings.
Strategies for reinvesting funds to maximize tax benefits:
- Invest in Additional Properties: Use the cash from refinancing to acquire new income-producing properties. These new investments can yield rental income, qualify for tax deductions, and build further equity.
- Capital Improvements: Reinvest funds into property improvements and upgrades that qualify for tax deductions or depreciation benefits. These improvements can increase the property’s value and attract higher rental income.
- Tax-Advantaged Accounts: Consider investing the funds in tax-advantaged accounts like a Self-Directed Individual Retirement Account (SDIRA) or Tax-Free Savings Account (TFSA) to enjoy tax-free growth on the investments.
- Real Estate Partnerships: Explore real estate partnerships to pool funds and invest in larger, more lucrative properties. This can spread risks and offer additional tax benefits, such as shared deductions and losses.
Implementing these strategies thoughtfully and in compliance with tax regulations can help real estate investors maximize tax benefits while expanding their real estate portfolio and overall financial growth. As always, seeking advice from a qualified tax professional is recommended to ensure proper execution and adherence to tax laws.
Capital Cost Allowance (CCA) in Real Estate
Capital Cost Allowance (CCA) is a tax mechanism that allows real estate investors to deduct the depreciation of eligible capital assets over time. It is a valuable tax tool that recognizes the wear and tear, obsolescence, or decline in value of income-producing assets. The purpose of CCA is to provide tax relief to investors by reducing their taxable income, ultimately lowering their overall tax liability. CCA applies to depreciable assets used for business or rental purposes, such as buildings, furniture, equipment, and machinery.
How to utilize CCA to reduce taxable income:
- Determine Eligible Assets: Identify and classify depreciable assets within the real estate investment, such as the building structure, fixtures, appliances, and equipment. Land, however, is not eligible for CCA, as it does not depreciate.
- Calculate CCA: Each eligible asset has a prescribed CCA rate assigned by tax authorities based on its asset class. Investors can claim the CCA deduction annually, equal to the prescribed rate multiplied by the asset’s capital cost (initial cost). CCA deductions can be claimed in the year the asset is put into use.
- Apply Half-Year Rule: In the year an asset is acquired or disposed of, the CCA claim is subject to the half-year rule. Only half of the CCA deduction can be claimed in the first year of acquisition or disposition.
- Pooling Assets: Group assets with the same CCA rate into the same CCA class to simplify record-keeping and maximize tax benefits.
- Recapture and Terminal Loss: Be aware of potential recapture or terminal loss if an asset is sold. Recapture occurs when the proceeds from the sale exceed the asset’s undepreciated capital cost, and a portion of the CCA claimed must be included as income. Terminal loss can be claimed if the proceeds exceed the undepreciated capital cost.
- CCA Classes: Familiarize yourself with different CCA classes and their corresponding rates. Some classes have accelerated CCA rates, enabling faster depreciation.
Utilizing CCA effectively can significantly reduce taxable income for real estate investors, leading to tax savings and improved cash flow. However, CCA is a complex tax provision, and careful planning and compliance with tax regulations are essential. Seeking guidance from tax professionals with expertise in real estate taxation can help investors optimize CCA claims while remaining tax-efficient and compliant.
Capital Gains Exemptions in Real Estate Investment
Canadian real estate investors can benefit from two primary capital gains exemptions:
- Principal Residence Exemption (PRE): Canadian residents can claim the PRE when selling their principal residence. This exemption allows homeowners to avoid paying capital gains tax on the appreciation of their principal residence during the ownership period. The PRE applies to the property’s designated years of use as a principal residence.
- Lifetime Capital Gains Exemption (LCGE): The LCGE is available to individuals who dispose of qualified small business corporation shares, qualified farm or fishing property. As of my last update in September 2021, the LCGE was $892,218 (indexed for inflation). This means eligible taxpayers can shelter up to this amount of capital gains from taxation when selling qualified assets.
Criteria and considerations for claiming capital gains exemptions:
- Principal Residence Exemption (PRE):
- Designated Use: To claim the PRE, the property must be designated as a principal residence for the years of ownership. Determining the principal residence for tax purposes may involve prorating based on the number of years the property was used as the principal residence versus the total years of ownership.
- Reporting: Homeowners must report the sale of their principal residence on their tax return, even if the gain is exempt from taxation. Reporting is essential to establish eligibility for the PRE.
- Lifetime Capital Gains Exemption (LCGE):
- Eligible Assets: To claim the LCGE, the assets sold must meet the criteria for qualified small business corporation shares, qualified farm property, or qualified fishing property. Each type of asset has specific eligibility requirements.
- Shareholder or Owner Eligibility: For qualified small business corporation shares, the individual must be a shareholder or owner of the corporation. The individual must be actively engaged in farming or fishing for qualified farm or fishing property.
- Use and Holding Period: There are specific requirements related to the use and holding period for the assets to be eligible for the LCGE.
It is essential for real estate investors to understand the specific rules and criteria for capital gains exemptions to maximize their tax benefits legally. Careful planning, compliance with tax regulations, and seeking advice from tax professionals are crucial to ensure eligibility and optimizing capital gains exemptions in real estate investments.
Tax Benefits of Using The Smith Manoeuvre
When investing in real estate is combined with The Smith Manoeuvre, the Canadian taxpayer can really start to enjoy supercharged tax savings.
While we have read of some tax benefits above when it comes to investing in real estate, what many Canadians are unaware of is the fact that they can convert the non-tax-deductible interest they incur on the mortgage of their principal residence into tax deductions. When a Canadian borrows to invest in real estate, a number of tax deductions apply which reduce their tax bill, which they love. However, the mortgage interest on their principal residence is not deductible. The Smith Manoeuvre solves that problem.
By implementing this strategy, the taxpayer now gets to enjoy tax savings on one the of the biggest debts on their lives, thereby much improving their financial success. And if they have additional income from real estate investments, they can really speed up the conversion of debt on their principal residence using the Cash Flow Dam accelerator. Not only are they significantly increasing their wealth, they are also getting rid of their expensive mortgage debt years, sometimes decades, faster.