Important — these topics sit outside LendCity’s mortgage license. Segregated funds, leveraged investment loans, margin accounts, and principal-protection guarantees are insurance and securities products that must be discussed with, and arranged through, a licensed insurance advisor and/or a registered investment dealer. Interest deductibility and any tax treatment must be confirmed with a tax professional — rules vary with how loans are structured, how proceeds are used, and the investor’s overall circumstances. LendCity Mortgages does not sell, offer, structure, or recommend these products, and nothing in this article is investment, tax, or legal advice. The discussion below is educational only and references topics that licensed advisors would cover with you in detail.
What If You Could Buy Stocks With Leverage, the Way Real Estate Uses Leverage?
Real estate investors often use leverage — put a fraction of the purchase price down, borrow the rest, and your return is calculated on the full asset value. Gains and losses are both magnified.
On a recent LendCity podcast episode, Erwin Szeto described how that same conceptual framework gets applied by some licensed insurance and investment advisors to stock-market investing, using leveraged segregated-fund programs. This article summarizes the topics he raised so you can ask informed questions of a properly licensed advisor — it is not a recommendation, and the mechanics below are simplified for illustration only.
Why a Real Estate Pro Started Looking at Stocks
Erwin isn’t some stock market guy trying to sell you on Wall Street. He’s been in the trenches of Ontario real estate for over a decade. He’s owned or had interest in more than 40 properties. His team has helped clients buy close to half a billion dollars in investment properties.
But here’s the thing. His 8-figure portfolio got “nearly slashed in half” in recent years. His clients feel stuck. And he noticed a dangerous pattern.
Over 90% of his clients have their entire investment portfolio in one thing: local Ontario residential real estate. Understanding the importance of diversifying your real estate portfolio is critical. Our investor resources page has tools and guides to help you evaluate diversification options beyond a single asset class. One currency. One country. One asset type. For proven leverage strategies for real estate and stock investing, explore both asset classes strategically.
If over 90% of your portfolio sits in one asset class like Erwin’s clients, book a free strategy call with LendCity to talk through diversification strategies that still use the leverage you already understand.
Building wealth starts with knowing your options — book a free strategy call with LendCity and find out what’s possible for your situation.
Leveraged Segregated Funds — What Licensed Advisors Discuss
Segregated funds are insurance-contract investment products. They typically carry a contractual guarantee that returns a minimum percentage (often 75% or 100%) of the principal deposited — but that guarantee applies only at a defined maturity date (often 10 or 15 years) or on death of the annuitant, subject to the specific contract terms, and is backed by the issuing insurance company. The guarantee is not the same as a cash-equivalent or a daily floor on value. Fees on segregated funds are typically higher than on comparable mutual funds or ETFs, reflecting the insurance features.
Because of the maturity-date guarantee, some lenders are willing to extend investment loans against segregated-fund holdings — a strategy that can only be arranged through a licensed insurance advisor.
The Simplified Setup (Illustration Only)
- The investor contributes part of the total investment amount
- A lender finances the remainder against the segregated-fund holding
- The full amount is invested in the fund
- Gains and losses are calculated on the full invested amount, not just the investor’s own contribution
This is an illustration of how the structure is commonly described. Actual loan-to-value ratios, interest rates, covenants, guarantee percentages, maturity dates, fees, and suitability requirements vary by provider and by investor. None of this is an offer, recommendation, or endorsement by LendCity.
The Math of Leverage, Explained Conceptually
Long-run index returns vary by period and index, and past performance never predicts future results. What leverage does — in real estate, in margin trading, or in leveraged segregated funds — is magnify both gains and losses relative to the investor’s own contribution. A modest positive market return produces a larger return on the investor’s cash; a modest negative market return produces a proportionally larger loss on the investor’s cash, plus the ongoing cost of the loan itself.
That asymmetry cuts both ways, which is why suitability assessments by a licensed advisor exist in the first place. Whether this kind of structure is appropriate depends on the investor’s time horizon, risk tolerance, cash-flow stability, tax situation, and ability to meet loan obligations if the underlying investment declines — all factors a licensed advisor (not a mortgage broker) is required to evaluate. LendCity does not perform that assessment and does not offer these products.
The investors who succeed are the ones who take that first step — schedule a free strategy session with us and let’s map out your path forward.
How This Compares to Direct Real Estate, Operationally
Compared with direct rental real estate, leveraged segregated-fund programs are operationally lighter — no tenant management, no repairs, no property management contracts — and the underlying holding is typically liquid in normal market conditions. Loss exposure on a leveraged investment loan depends on the specific loan agreement and underlying contract; investors may be obligated to repay the full loan balance even if the underlying investment has declined, so the simple notion that “losses are capped” should not be relied on without reviewing the loan documents with a licensed advisor and a lawyer.
Real estate carries its own risks (vacancy, liquidity, interest-rate resets, construction-project failure) that work differently — and pre-construction condo buyers over the past several years have seen those risks up close. Neither approach is risk-free; both require professional advice suited to the product.
A “BRRRR-Style” Analogy for Investment-Loan Programs
Real estate investors are familiar with the buy-renovate-rent-refinance-repeat pattern of pulling equity out of an appreciated property to fund the next deal. A conceptually similar idea — re-borrowing against an appreciated investment account — is sometimes discussed by licensed advisors in the context of leveraged-investment programs. Whether it is appropriate for any given investor depends on lender underwriting criteria, concentration risk, interest-rate risk, and regulatory suitability requirements. The total credit available under these programs is governed by the lender’s policies and the advisor’s suitability assessment — not something to stack across spouses, children, and corporations without legal, tax, and compliance review.
Risk — Beyond the Headline “Guarantee”
Every investment carries risk. Leveraged ones more so.
A segregated-fund contract’s principal-guarantee feature is a contractual promise by the insurance company that applies at the policy’s maturity date (often 10 or 15 years out) or on the death of the annuitant, subject to the specific contract conditions — including holding-period requirements, deposit timing, and potential reductions for withdrawals. It is not a floor on day-to-day market value, not a cap on losses if the investor is forced to sell before maturity, and not a release from the obligation to repay the investment loan used to buy the fund. Real maximum loss depends on the combination of market performance, the loan’s repayment terms, margin/call provisions, and the specific contract’s guarantee mechanics. A licensed insurance advisor is the right person to walk through those details.
The Estate Planning Bonus
Erwin got his insurance license specifically because of what segregated funds do for estate planning for investors.
When you pass away, these funds skip probate entirely. Your beneficiaries get cash within days. The funds get sold, the loan gets paid off, and the rest goes to your family.
Erwin has noted in his work with real-estate investor clients that many of their adult children are not interested in inheriting rental properties because of the management burden and local ties involved.
Whether a financial portfolio is a better estate-planning vehicle than rental real estate is a question that turns on the investor’s specific tax situation, beneficiary needs, and overall plan — and belongs with a licensed estate planner, tax professional, and insurance advisor, not a blog post.
Getting Started
The minimum investment is $50,000 total, which means you’d need about $17,000 out of pocket. That’s a lot more accessible than buying Canadian real estate right now.
Erwin recommends sticking with index funds like the S&P 500. Lowest fees. Best historical performance. Even Warren Buffett says that’s the smart move.
Here’s a practical starting framework:
- Find a licensed insurance advisor who offers leveraged segregated fund programs through a major Canadian insurer.
- Verify the principal guarantee — confirm the 75% guarantee applies and is backed by a rated insurer, not just the fund company.
- Calculate your spread — your expected net return after borrowing costs and management fees. If the math doesn’t work with conservative assumptions, it doesn’t work at all.
- Start smaller than you think you need to — the minimum $50,000 total lets you understand the mechanics before deploying larger capital.
- Consult a tax professional — in Canada, investment interest is often deductible, but the treatment varies depending on how the loan is structured.
For investors who want to keep a foot in real estate while diversifying, some use this strategy alongside investment property financing — keeping their property portfolio while adding a liquid, leveraged asset class. If you’re already invested in US properties, DSCR loans for investors let you qualify on rental income rather than personal income, which can preserve borrowing capacity for strategies like this one.
The Bottom Line
This article is not a recommendation for or against any of these strategies. It describes topics that a licensed insurance and investment advisor might walk through with an investor who is considering diversifying beyond a single asset class — and it highlights that leverage, maturity-date guarantees, fees, and interest-deductibility rules all have detail underneath the headline that must be reviewed carefully with the right professionals.
If you are considering any leveraged investment product, the right next step is to book time with a licensed insurance advisor or investment advisor who is authorized to offer those products, and to confirm tax treatment with a tax professional and legal structure with a lawyer. LendCity’s role is mortgage financing — not insurance, not securities, not tax advice.
This content is for informational purposes only and does not constitute financial, investment, insurance, legal, or tax advice. Leveraged-investment, segregated-fund, and margin products are not offered by LendCity. Principal-protection features on segregated funds apply only at defined maturity dates and subject to the specific contract terms. Past performance does not guarantee future results. Always consult qualified, licensed professionals before making any investment decision.
Key Takeaways:
- What If You Could Buy Stocks Like You Buy Real Estate?
- Why a Real Estate Pro Started Looking at Stocks
- Enter Leveraged Segregated Funds
- Let’s Do the Math
- Why This Might Beat Real Estate Right Now
Frequently Asked Questions
What are segregated funds?
How does leveraging stocks work?
What is the minimum investment required?
How is the risk different from real estate investing?
Can you use the BRRRR strategy with stocks?
What happens to these investments when you pass away?
Which funds should you invest in?
How much can you borrow for this strategy?
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage. Content on this page is for educational purposes only and does not constitute legal, tax, investment, securities, or financial-planning advice. Rates, premiums, program terms, and regulations referenced are as of the page's last updated date and are subject to change. Any investment returns, rental yields, tax savings, or case-study figures shown are illustrative only — they are not guaranteed, not typical, and individual results will vary. Consult a licensed lawyer, Chartered Professional Accountant, or registered dealer before acting on any information above.
Written by
LendCity
Published
January 12, 2026
· Updated April 26, 2026Reading time
10 min read
Appreciation
The increase in a property's value over time, which builds [equity](/glossary/equity) and wealth for the owner through market growth or [forced improvements](/glossary/forced-appreciation).
BRRRR
Buy, Rehab, Rent, Refinance, Repeat - a real estate investment strategy where you purchase a property below market value, renovate it to increase its [ARV](/glossary/after-repair-value-arv), rent it out, [refinance](/glossary/refinancing) to pull out your initial investment, and repeat the process with the recovered capital. Success depends on [forced appreciation](/glossary/forced-appreciation) and strong [cash flow](/glossary/cash-flow).
Down Payment
The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes. Your down payment directly affects your [LTV](/glossary/ltv) and the amount of [leverage](/glossary/leverage) you use.
Equity
The difference between a property's current market value and the remaining mortgage balance. If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. Equity builds through mortgage payments, [appreciation](/glossary/appreciation), and [forced appreciation](/glossary/forced-appreciation). See also [LTV](/glossary/ltv) and [Refinancing](/glossary/refinancing).
Leverage
Using borrowed money (mortgage) to control a larger asset, amplifying both potential returns and risks on your investment. A higher [LTV](/glossary/ltv) means more leverage. See also [Down Payment](/glossary/down-payment) and [Equity](/glossary/equity).
Principal
The original amount of money borrowed on a mortgage, not including interest. Each mortgage payment includes both principal (paying down what you owe) and interest (the cost of borrowing). Over time, more of each payment goes toward principal as the loan balance decreases.
Refinance
Replacing an existing mortgage with a new one, typically to access equity, get a better rate, or change terms. Investors commonly refinance to pull out capital for purchasing additional properties (cash-out refinance) while retaining ownership of the original property.
Passive Income
Earnings from rental properties or investments that require minimal day-to-day involvement. The goal of most real estate investors seeking financial freedom.
ROI
Return on Investment - a measure of profitability calculated by dividing net profit by total investment. Used to compare the efficiency of different investments.
Probate
The legal process of validating a deceased person's will and distributing their estate. Properties held personally must go through probate, causing delays and costs. Corporate or trust structures can bypass probate.
Succession Planning
The process of preparing for the eventual transfer of a real estate portfolio to heirs, partners, or professional managers. Includes documentation, insurance planning, legal structuring through wills and trusts, and gradual transition of operational responsibility.
Hover over terms to see definitions. View the full glossary for all terms.