Business Ideas

Another New Financial Product I’d Like to See

Continueing in the same vein as yesterdays new financial products post, another product I’d like to see is “segmented” loans. Basically these would be exactly the same as regular loans, except that you would be able ot “tag” part of them for specific uses, and those tagged parts would each be individually tracked.

e.g. say you qualified for a 80% (under new CMHC rules to avoid mortgage insurance) loan on a principle residence. But say you’d been saving for a while, and actually had a 25% down-payment. You take out the 80% loan, and tag 5% of it as “borrowed for investment purposed” and buy some dividend stocks with it. You also specify that all payments are to go towards the “non-investment” 75%. At the end of each year, they report your mortgage information, and give you a breakdown on the different “tagged” amounts. Each year you’d get a deduction for the investment portion of the mortgage, which would increase as time went on (since it would be accumulating interest as you paid down the other portion).

HOWEVER, from both your perspective and the banks, the mortgage is being paid EXACTLY the same as if it was all one amount (same payments, same amortization, same rate, etc), its just some automated book-keeping to help your with your taxes.

Eventually you’d pay off the “non-investment” part (especially if you kept refinancing, and borrowing more for investment purchases against your primary residence) and then would start paying off the tax-deductible portion.

I realize this is quite similar to a readvanceable mortgage, but the big difference is that this would ONLY require bookkeeping, in terms of movement of money, nothing would be different from a traditional mortgage (I could write a simple on-line application that would take any mortgage and break it up to provide this information). Therefore, anyone who offers mortgages could add this as a free additional service.

Business Ideas

Starting a business

I’m always attracted to the idea of standing on your own two feet and running a business where your compensation is directly in sync with your productivity, and the only person your beholden to is your customers. I’ve tried starting a fair sized venture (a software company that I devoted myself to full-time for about 2 years, and part time for about 4 years) which unfortunately never reached the point where it was even possible to support myself on.

Thoughts are constantly bouncing around in my head about how to escape the 9-5 grind and live the lifestyle of an entrepreneur. I’m honestly not after a “get-rich-quick” scheme, but would rather just live life on my own terms and be able to do what I think is best/right instead of being told what to do by someone else.

Real estate investing has worked out well along these lines, however my approach seems to be quite capital intensive (especially in Toronto right now, the rent:price ratio just doesn’t work out very well for land lording). I would need quite a bit of cash to buy enough property to make even a meager living on (although as time went on I suspect my standard of living would shoot up).

I came across an interesting list of 20 things NOT to do when starting a small business. It prompted a bit of a debate in the comments. I think I agree with the original post, that for a small start-up business, keeping costs at the absolute minimum is a good idea while you test whether your business actually works or not. I think that might have been part of my problem, I kept rolling along with my business and didn’t test whether I was on the right track (and make corrections) enough.