Episode 167: Canadian Real Estate Investing with Other People’s Money (OPM): Myth vs. Reality

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Are you risking your financial future by blindly following the use “Other People’s Money (OPM)” playbook in real estate investing?

If you’ve ever been tempted by social media gurus promising Canadian real estate investment riches without using your own cash, this episode is your wake-up call. Before you borrow a dime, you need to understand what Canadian mortgage lenders and private lenders really look for, when “Other People’s Money (OPM)” crosses legal lines, and how over-leveraging could quietly destroy your financial wealth health—and relationships.

In this episode, you’ll learn:

• The legal and financial traps behind gift letters, Canadian mortgages, private lending, and misused HELOCs.
• Smarter, safer ways to structure real estate joint ventures and family real estate lending deals—without causing drama (or fraud).
• How to assess your true readiness for using leverage to invest, and why a conservative strategy can actually accelerate your Canadian wealth.

Press play now to uncover the real risks and rewards of using Other People’s Money (OPM) — and avoid the mistakes that cost Canadian real estate investors more than just money.

Resources:

• Private jets, yachts and parties: Ontario landlords flaunted lavish lifestyle as business began to crumble [CBC Article]
• Legal woes mount for associates of former child star Robby Clark amid property empire collapse [The Globe and Mail]
• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.  

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Canadian real estate investing with Other People’s Money (OPM) isn’t a cheat code—it’s a high-risk strategy that demands careful planning and legal awareness. For Canadian investors and entrepreneurs, understanding how to legally structure joint ventures, private lending, and HELOC strategies is essential to avoid financial disaster. This episode explores OPM pitfalls like fake gift letters, overleveraging, and misused Canadian mortgage lending rules. Discover how smart Canadian investors assess risk, build opportunity funds, and create conservative real estate investment strategies that align with long-term wealth goals. Whether you’re new to property investing or scaling your real estate portfolio, learn how to use OPM the right way—without jeopardizing your financial future.

Transcript:

What if everything you’ve been told about using other people’s money or OPM in real estate was either misleading or maybe even borderline illegal. In this episode, we peel back the curtain on the OPM myth that’s been sold to newbie investors for years. From fake gift letters to risky private lending, we break down what actually works, what gets you in trouble, and how to build your portfolio without

blowing up your finances or your relationships. You’ll want to hear this before you borrow a single dollar for that next investment. Here we go. All right, Canadian wealth secret seekers. I’m here to dig into. Yes, none other but the OPM myth. you can hop on Instagram, tick tock, Facebook, any of the social media platforms and

You’ll probably see some real estate guru out there talking about how they got rich from not using a dime of their own money. Could be true. Maybe it’s not. I’m not here to say whether that is a fact or fiction, but what we’re going to talk about here is the truth about OPM and when it makes sense to use other people’s money and maybe when it’s not worth the risk. So let’s start where

we really need to begin, which is first and foremost, making sure that we don’t do something illegal when we go to a traditional lender, typically an A or a B lender, they’re going to want to actually know where your down payment source is coming from. So if you’re buying a property, whether it’s your primary residence or whether it’s a rental property, they’re going to want to see where’s this down payment coming from and has this been factored in to the numbers?

for the purchase. So that’s why you’ll see they wanna, you know, see usually up to 90 days of your account balance where the down payment is being held. They wanna see that, you know, money has been sitting in that account for at least 90 days. Now that could be incredibly, you know, annoying maybe for some, especially if let’s say you need to move the money around. But what they’re trying to do is just to make sure that you don’t have any additional debt that they don’t know about.

So it’s not that you can’t borrow money in order to invest in a property or you can’t borrow money to say buy your own primary residence, but they are going to look at your financial picture to try to see if this is a good idea or not. Is this a good risk to take for them as the investor or is it something that might actually cause some problems?

Typically they want to see that money, what they call seasoned in an account for 90 ish days. Now, you know, some people have been, have, have heard this idea that, know, you can get a gift letter, for example, that it’s going to get gifted from parents or it’s going to get gifted from somewhere. Once again, if it’s true, if it’s real, then of course have adder that money is coming to you and you don’t have to pay it back to anyone. That’s fine. But if you’re going to use other people’s money, you really need to look at your financial health.

to make sure that you’re not putting yourself in a position where you could be not only not only doing something illegal if you’re actually lying, we don’t want mortgage fraud to take place here. But also we want to make sure that this is in your best interest. So if you need to borrow funds in order to buy that real estate property, the next question then becomes is what are the rates going to look like and sound like if you’re borrowing from say a private lender?

that private lender first and foremost is going to want to see your own personal net worth statement to see what have you done in the past? What sort of assets do you have? Because let’s be honest, they do not want to have to come after you to get that money back if you’re unable to make payments, right? So it’s not as easy as going out and getting other people’s money. Now, if you have assets, so you have a solid net worth, you have solid income, and here’s the other aspect.

you have a history of actually doing this type of thing. We’ll talk about specifically buying real estate as an investment, not your primary residence, but they’re going to want to see that you have a track record and that you actually are running numbers, you’re penciling things out and they look solid. The problem is if you do have a track record, if you do, you know, have a solid net worth, if you do have those things going on, oftentimes the real question then becomes is why am I leaning on private lending?

at all in order to make up for say that down payment amount. So what I’m gonna argue is that using other people’s money for 100 % of financing a deal is a really, really risky proposition. And it’s something that you have to be very, very cautious about. All right, so you know us, we like to have conservative strategies. We do use leverage, but we do like to do it conservatively. So.

What I’d like to give you is a couple ideas on how you can legally use other people’s money and do so in a way that may not put you in a risky situation. What I’d rather see you do is if you are thinking about trying to keep some of your own powder dry, as we like to call it, so keeping your own money there for just in case.

you can still reach out to others and you know, we’ve talked about them before. You might reach out to others to do say a joint venture. Now again, if you’re just getting started, oftentimes like the challenge here is like a lot of people who need money are also just getting started, which kind of gives you two battles that you have to sort of win here because if you want to lean on a joint venture, your challenge becomes not having a track record. So who’s going to want to lend you that money? And then on the other hand,

You also don’t have the money yourself and therefore you’re in a bit of a tight spot. So this can be a really, really tough thing. Finding a joint venture partner and we’ve discussed this in a recent episode where maybe you’re both new and you’re able to use some of each of your money. Now you’re going to get half of the upside might be a better alternative for you, especially when you’re getting started.

Now, if you have the, you know, the experience you’ve done real estate before, and you just want to start using less of your own capital, and you want to start using others capital, there’s, you know, there’s some risk involved in that still, even though you have some experience here, right? Even though you have that experience, the real question is, is now you’re going to have to probably give up some of the deal in order to use all of their money, which is fine.

But it also means that you’re probably going to be doing most of the legwork, which means you’re kind of taking on a job. So you have to really look at this from a big picture, from a big picture perspective. It’s great to know that if I put $0 into a deal, that I get an infinite return, right? If we do the math on that, right? $0 divided by

or sorry, essentially any number of any return a dollar or more that you earn on $0 is going to give you an infinite return, right? You’ll get an error in the calculator because there’s no way for us to calculate how much that $0 is compounded, right? So you getting an infinite return, which is great, but you’re probably going to be doing a lot of the heavy lifting and for only half of the upside. So if you do have capital, if you do have net worth that you’ve been growing,

it’s actually a much better move for you to either bring some or all of the money if you can and potentially even get someone else to do all of that work for you, right? So you have to start thinking about this in a few different ways. So really trying to define for yourself what kind of real estate investor are you looking to become? Do you want to become a passive real estate investor? By the way, not really a thing unless you’re just the money partner or do you want to become an active, essentially an active real estate investor

as a career, right? Because you are going to be putting a lot of time and effort into it as well. These are things that we have to think about as well. All right. Moving on from say a joint venture as an option to use other people’s money might be the family lending done right strategy where you’re looking at others in your family or friends circle. These are people that know, like, and trust you making sure that you are very clear on what the goals are and that you’ve got a

clear game plan as to what’s going to happen and specifically knowing and telling them what will happen if something goes wrong and being very clear that something can go wrong, right? Just because you’re doing this and because maybe you’ve had some experience buying and investing in real estate doesn’t mean that this next property isn’t the one that’s going to cause you, you know, problems, right? So

always being very clear and transparent, making sure that you create, whether you wanna call it a contract or an agreement or an understanding, making sure that everybody’s on the same page so that you don’t actually create a family feud out of this situation can be really helpful. Now, strategy three is using your own home equity line of credit, but doing it smart and legally, which means…

that you’d have to tell the actual lender that that’s your intention here. Now, if your line of credit is all you have to your name and there’s no other assets there, lenders might still have a problem with that. But if you do have other assets or other liquid capital that you just wanna keep on the sideline dry powder, feel free to consider using your home equity line of credit. They’re going to want to make sure though that the interest being charged on that home equity line of credit is going to be able to be covered by you.

and or the property or both so that they’re not getting themselves into a tricky spot. And of course, in turn, you’re not getting yourself into a tricky spot as well. So I’m a big fan of utilizing the home equity line of credit, but I’m certainly not a big fan. As you heard in a recent episode, just a few episodes back, not a good fan of doing so if that’s your only line of safety, meaning those, that’s where your dry powder exists is in the equity in your home.

and you have no other assets there. So be very, very cautious when you’re thinking about utilizing this strategy and making sure that you’ve done all of the math. Can you float the purchase of this investment property should a tenant, for example, stop paying rent for an entire year and you have to maintain the mortgage on the investment property, maybe the mortgage on your own primary residence and the interest on your home equity line of credit.

are you going to be able to do so in order to squeeze your way out of that situation? If that makes you sweat right now and it makes you worried about how that might go, if something doesn’t go very well, then I would argue that you are not doing yourself any favors by over leveraging yourself and trying to use 100 % of other people’s money. So lots of strategies here.

Know your numbers. Make sure you understand what you’re going to need for a down payment, any renovation budget that you might have and holding costs. We want to always build in a buffer for surprises. This is your capital expenditures account. What if, what if, what if, what if, what if the furnace goes, the roof goes, the tenant stops paying and the landlord tenant board doesn’t help you. what if any of those sorts of things happen? What is your next move?

How are you going to feel emotionally when the money stops coming in and you start second guessing yourself, right? Are you able to follow through and ensure that you don’t go and do a fire sale or do something silly that’s going to put you in a bad spot? All right. So make sure that you’re thinking about timelines, thinking about what you would do for 12, maybe 24 months if things didn’t go well. And we would argue that you want to be saving

at the very same time as well. not only do we want to wait to buy into a property so that you not only have the money to do so, or at least a good chunk of it to do so with the down payment, but you also want to make sure that there is liquidity available to you should something go wrong. All right. So what I’m going to have you do right now is start thinking about how do I get in? If you’re just starting this journey, thinking about how do I get into the market?

running numbers, penciling numbers, and maybe even viewing properties so that you can try to determine what kind of property am I after, making sure your goals are clear and making sure that you’re on track to save up enough money so that you can actually make this transition. If you’re finding that it’s impossible for you to put that extra money away to start building up that opportunity fund,

That’s a red flag, right? It’s a red flag to you that guess what? If you take on more expenses, it’s only gonna become more difficult for you to get yourself out of a mess if you’re struggling right now to start building up that opportunity fund. So today, key takeaways is that using other people’s money for investments is not a cheat code. It’s a tool and we wanna make sure that we use that tool very conservatively.

and very cautiously. All right. I use other people’s money for about 70 % of most deals, right? That’s what I’m using to buy properties. Sometimes it’s less, sometimes it’s a little more, but we’re leaving ourself to make sure that we have enough money to put that down payment in so that not only do we have the down payment, so we prove to ourselves that we’re, we have the ability to build up that fund, but also that we can get ourselves out of a mess.

should something go wrong. So be honest about your risk tolerance and your risk capacity. Be clear on your timeline and start thinking about if it is hard for you to build up this fund, what relationships could you lean on or what relationships can you look to build so that you can go and get into this world and work together with a team so that you’re not feeling all alone on an island wondering how you’ll get started.

And finally, the last piece here is stay compliant. Don’t do something that’s going to put you or your family at risk. And of course, if it is illegal and it’s not compliant, then it probably wasn’t a good idea in the first place. So be cautious out there. Make sure that you’re being conservative and let’s build some wealth together. All right, my friends, if you have enjoyed this episode, do us a favor and hit the like button, subscribe.

comment, share with your friends and neighbors, and of course, feel free to reach out to us if we can be of any help. Over on our Discovery page, you’ll notice that we have our Pathway Quiz there available for you. So you can do it all in one place so that you can understand the four stages of wealth building and where you are at each of those stages. Head on over to CanadianWealthSecrets.com forward slash Discovery and take that short quiz so that you can figure out where

your having some success and where you might want to focus your attention next. And just as a reminder, my name is Kyle Pierce and I am a licensed life and accident and sickness insurance agent and I’m the president of Canadian Wealth Secrets Incorporated. And this is not investment advice. It is not for your

tax, legal liability, any type of advice, including accounting advice. So please make sure you do not construe any such information as such. It is for entertainment purposes only. And we look forward to seeing you in the next episode.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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