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RRSP Investments in Real Estate ...
Did you know you could use RRSP's in Real Estate investing??
 

Do you know where your RRSP money is?

Just like you, many people religiously purchase their RRSP’s either on a monthly basis, directly off of their paycheck or possibly one lump purchase hours before the RRSP deadlines. And just like you many people follow this cycle every year because they know they have to purchase their RRSP’s so they can provide for their future, yet many have no idea how to choose their funds or what the returns will be.

Worse yet, many of the people who buy their funds directly from the banks are getting limited choices and are being directed by people who have had crash courses on RRSP’s during the previous few months. Does it make you comfortable knowing someone with 20 hours of training to sell the banks products is looking out for your best interests?

Past Returns are not indicative of future returns?!?!

Off on another tangent, if you ever read the prospectus that is sent out by the mutual fund companies and the banks there is one line you see almost universally, “Past returns are not indicative of future returns.” Isn’t that like a get out of jail free card? They are essentially telling you that although we did pretty good last year if we have a horrible year it’s not our fault.

Now it’s not so much the bank or the funds fault, but how the system is set up. Mutual funds are just an assortment of stocks that are picked out according to the funds mandate. You as an investor have to hope that the stocks that the managers are going to pick are going to have a good year. If they don’t have a good year the bright side is you’re dollar cost averaging. For a quick explanation of dollar cost averaging, read on. Mutual funds are sold as units, as the funds unit price goes up you buy less units with your dollars, as they go down you are able to buy more units for the same amount. This is referred to as dollar cost averaging and refers to the fact that the average is supposed to work out to your advantage when the prices go down.

Dollar cost averaging? I just want my money back!

You just have to hope that the dollar cost averaging point doesn’t come when you are hoping to retire and that it doesn’t last for several years as we have seen. If you see a 20% reduction in your RRSP value you simply do not care that are able to buy more units when you need to take the money out!!

People in their retirement years or closing in on those years simply cannot take a chance on losing the money they have as investments and many of them have to move out of the standard RRSP markets and into very low return GIC funds and other “safe” investments.
This can put a serious crimp on their last few years of investing as they now have the most money set aside and the least amount of time for it to grow.

Past returns ARE indicative of future returns!!

What if there was a way now for you to not only get a safe investment, but an investment that has a tagline saying “Past returns are indicative of future returns”.

And it’s tax deferred?

What if this investment was further secured so your initial investment would never go below it’s starting point and it was still providing you with tax deferred growth in an RRSP? Would this interest you? Have I made you read so much already another few paragraphs won’t be to painful? The investments I am referring to are RRSP mortgages. As Real Estate investors we are constantly looking at revenue properties and finding new ways to help our partners achieve above average returns.

Recently we were introduced to the prospect of RRSP mortgages and it works like this. We find a property that fits the system and will provide enough positive cash flow to not only cover the mortgage payments, but all the other little extras that are involved in managing a property and enough to pay a nice little interest payment out to a second mortgage.

12%? Annually and consistently?

This second mortgage would be an RRSP mortgage that can be set up by several of the small pro-active trust companies that act as RRSP Trustees. These trust companies include Olympia Trust, Canadian Western Trust and B2B Trust. These mortgages would then be set up to pay an annual interest rate of 12%. Yes a consistent annual interest rate so that every year you would know where you stand with your investment. Wouldn’t that be a nice change from your current plan?

The actual payments would be a 5% yearly interest rate that would be paid out quarterly with a bonus payment of 7% at the end of each year. This is just one of the quirks of how these have to be set up, but the important part is it works out to 12% total.

Your money is secured by the property!!

As it is a mortgage this will actually go on the title of the property further securing your money. No one can just close shop overnight and pack up a building and take it with them!! If the property is ever sold you are in second position meaning after the original mortgage holder is paid any money still outstanding you get paid. Since the mortgages never total more than the properties appraised value you are even more secure. And every year the first mortgage gets paid down a bit while at the same time property values continue to move upwards further solidifying your investment!

Questions are free, retirement isn’t

So the question for you is, do you continue, like the masses settling for yearly fluctuations and dollar cost averaging? Or do you take action? Do you make a call, or send an email and find out more? Or do you let your retirement money dwindle away? More importantly, ask yourself this question, Would it bother me to know, that I had a chance to really change my retirement, and what I could do with my retirement funds, and I didn’t even ask more questions?

info@housez.ca or 403-880-5256

Bill and Karen Biko
KatSid Housez Inc.

 
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