# Yet Another SM Question...



## codetrap (Oct 18, 2009)

Greetings,

First, I'm a total fan of the milliondollarjourney website. Thanks for the ton of information and continuing updates.. Now, to the meat.. we're implementing the SM, or at least our version of it since it seems to be pretty custom to each person, and I just want to make sure I have this nailed down step by step, so here goes with roughly our example.

(some values edited to simply make this easier to do the math on.
So, here goes.. 

We have a 120k HELOC setup at 2.5%/a. Mortgage is locked at 5.79%.
We’ve pulled 100k of that into investment bonds returning 15%/a, paying out quarterly. Our first quarter payment came in and it was only 2 months worth, so we held that in the tracking account to pay the HELOC interest costs. I’m debating whether or not I should “capitalize” that interest by pulling that money back out of the HELOC, and getting back up to the original $2500, or just leave it at the eroded amount.

Now, our second interest payment has arrived, and I’m ready to get this into full swing and make a mortgage payment. So, assuming I capitalize that interest, I’ll have $6250 in the tracking account. So, I’m thinking I withold the 40% for tax, make a mortgage payement of $3750, pull 10k out of the heloc and reinvest it, and go on my merry way till next quarter. Rinse, repeat.

All the while, we’re still making our accelerated payments of $700 into the mortgage.

So, do I have this on track? Any suggestions on how to improve it?

Thanks!

Jim


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## FrugalTrader (Oct 13, 2008)

Hey Jim,

Thanks for the kind feedback. It looks as though you have the system figured out. Your method is very similar to what I am doing - paying down the non-deductible mortgage as fast as possible along with capitalizing the interest on the investment loan/heloc.


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## codetrap (Oct 18, 2009)

Sweet! Thanks for confirming it. Now I'm just going to call Firstline and have them automate the capitalization of the interest. Apparently, they have a lot of that from talking with the rep when I was setting up the online access.


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## FrugalTrader (Oct 13, 2008)

That's neat, I didn't know that Firstline could capitalizing the interest automatically. I'm with BMO readiline, and I need to manually transfer the money between accounts. 

Mind you, it's no big deal - it's basically one transfer per month from my HELOC repaying my chequing account. The payment out of chequing to the HELOC is automatic.


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## steve_jay33 (Aug 29, 2009)

I am interested in finding out what bonds you have that yield 15%


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## codetrap (Oct 18, 2009)

It's not a full public offering, so I'll check with the investment manager before I post it. If I can, I will.


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## iherald (Apr 18, 2009)

codetrap said:


> It's not a full public offering, so I'll check with the investment manager before I post it. If I can, I will.


Be careful, that's higher than a lot of 'junk' bonds are paying out these days.


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## Ben (Apr 3, 2009)

My investment expertise is spotty, but when I read 15% guaranteed return paid quarterly, my spidey senses tingle. RE: Early Jones, Bernie Madoff. Is nobody else suspicious of this investment?


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## Oldroe (Sep 18, 2009)

Go to each exchange in Canada and USA and punch that name into discipline section.


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## codetrap (Oct 18, 2009)

iherald said:


> Be careful, that's higher than a lot of 'junk' bonds are paying out these days.
> 
> My investment expertise is spotty, but when I read 15% guaranteed return paid quarterly, my spidey senses tingle. RE: Early Jones, Bernie Madoff. Is nobody else suspicious of this investment?
> 
> Go to each exchange in Canada and USA and punch that name into discipline section.


Just to be clear, I'm not pushing this stuff. I've reviewed the supporting documentation, and I know the people who are generating the revenue. I don't know if it's inside info or not, but I've seen their profit numbers, and I'm happy with their performance year after year. Personally, I'm completely comfortable with investing in these bonds. That's not to discount your skepticisim of course. They are a "risky" investment, but I'm in a position where I'm ok with it. Both eyes open and all that. There's a family connection here of course, and I'm pretty sure that the manager's wife'd murder him if he screwed us. 

Once I hear back from them as to whether I can put the offering details here, then I will, or I won't if they prefer not to.


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## AndrayDomise (Oct 21, 2009)

Ben said:


> My investment expertise is spotty, but when I read 15% guaranteed return paid quarterly, my spidey senses tingle. RE: Early Jones, Bernie Madoff. Is nobody else suspicious of this investment?


Red Flags went up immediately for me. I'd be very wary of dropping 100k into privately offered bonds with that high a yield.


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## Ben (Apr 3, 2009)

codetrap said:


> Just to be clear, I'm not pushing this stuff. I've reviewed the supporting documentation, and I know the people who are generating the revenue. I don't know if it's inside info or not, but I've seen their profit numbers, and I'm happy with their performance year after year. Personally, I'm completely comfortable with investing in these bonds. That's not to discount your skepticisim of course. They are a "risky" investment, but I'm in a position where I'm ok with it. Both eyes open and all that. There's a family connection here of course, and I'm pretty sure that the manager's wife'd murder him if he screwed us.
> 
> Once I hear back from them as to whether I can put the offering details here, then I will, or I won't if they prefer not to.


As long as you've done the due diligence and are comfortable....

But seriously, I would run the other way if it were me. 

I cannot comprehend what basket of businesses would need to pay 15% in order to attract investment. Why would they need to come to private investors and pay such a high premium on capital investment, if the profits figures were as strong as you say - couldn't businesses that strong just go talk to the bank and get a nice loan at 5%?


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## bean438 (Jul 18, 2009)

If it sounds too good to be true............


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