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Building small business owner's new family

on Mon, 11/28/2011 - 09:51

You know how small business owners usually report very low income, so that they can pay lower tax...

Here is my experience on a small business owner that I want to share:
I met this small business owner in 2005 and he owns restaurants in Toronto, normally he has about $5000 income from the business for his daily expenses, and any retain earnings is used to set up the next restaurant. 
However, he reported only about 12k income for himself and his wife. They rented a house in Scarborough at the time. 
We started to look into his finances and of course he has no problem meeting his ends and still live happily day in and day out. He started to invest out of his business. 
Then, he started to tell me they are planning to buy a property. I advised him if he need a mortgage, their 12k reported income would not be able to get him a mortgage even though he has excellent credit, because the lenders need to see they can afford the mortgage. 
We started to gradually increase their reported income. In 2007, they bought a condo in Scarborough and we arranged a mortgage for him at P-1%. That was the best rate on the street and not a lot of people were able to get. They had their first baby at that time and we explored RESP and alternative savings for the baby.
They had another baby a few months ago. While we continued to increase gradually their reported income to about 35k each, they just qualified for a much higher amount for a single detached property in Richmond Hill over the summer. 
I am happy to see things work out for my clients and that they are happy :)

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