Question for the Creative Investor!

[Greatful]

I have a private investor who is willing to invest with me in a property and put in 20,000.
I would however like to funnel this money through my RRSP before applying it to an actual mortgage in order to recieve the tax benefits and no interest loan of the money.

However I am aware the money is needed to be in the RRSP for a total of 90 days before being able to be used as a down payment.

So...any creative investors on here who have done something like this or capable of manifesting a way to make it work?

I am thinking there may be some way to funnel this 20000 into my rrsp, secure some type of loan against it and in turn use that as my down payment instead.

Anyone following me here so far?, lol.
It`s 4am in the morning and I should be sleeping...just brainstorming some last minute strategies before going in for a close Mid August.

Thanks in advance!

 

[GaryMcGowan]

QUOTE (Greatful @ Jul 23 2009, 06:56 AM) However I am aware the money is needed to be in the RRSP for a total of 90 days before being able to be used as a down payment.

I am thinking there may be some way to funnel this 20000 into my rrsp, secure some type of loan against it and in turn use that as my down payment instead.

I have not heard of this. You may be miss informed but I might be wrong. You should have your down payment funds for 90 days.

Adding the RRSP element is making it a little confusing. Why not just use the 20k as part of the down payment? Give him a specific return or percentage of the property. Keep it simple.

 

[RobMacdonald]

You are only eligible to withdraw funds "tax free" from your RRSP when you are buying a principal residence and you qualify under the First Time Home Buyers Plan. This is where the 90 day rules apply.

Other than that, I`m not sure of any other way to funnel the funds through the RRSP.

 

[invst4profit]

Is this a self directed RSP.
I thought when you use a RSP for investments you are required to pay some level of interest to yourself but I may be wrong on that point.

 

[Greatful]

Thanks guys.
Yes, it seems there is a 90 day period of time monies must be in an RRSP account before they can be used towards a down payment on a home.

However, in certain circumstances where the money is given as a gift from a family member and agreed that the money is not to be repaid the money can then in some instances be used immedietely.
Just finished talking to a banker today on this subject but still working out the kinks.
If I find anything worthy of sharing on the subject I will come back and do so.

Thanks again guys!

 

[Greatful]

QUOTE (GaryMcGowan @ Jul 23 2009, 08:16 AM) Adding the RRSP element is making it a little confusing. Why not just use the 20k as part of the down payment? Give him a specific return or percentage of the property. Keep it simple.


Because if the money can be funneled through an RRSP I would get an approximate return of $6-7000 return on that bad boy
And interest free use of the money for 17 years within the guidelines.

Just curious is all...always looking to gain leverage/knowledge.

 

[MonteDobson]

A couple of other points to address:

1) You cannot loan your own money via RRSP mortgage to your own properties...it is then deemed "non arms length" by CRA.
2) Do you have $20K in contribution room within your RRSP. That is essentially what you are doing by "funneling" this $20K thru your RRSP.

As Gary said, keep it simple, no need to overcomplicate for $20K!

Regards,

 

[Greatful]

QUOTE (C2Ventures @ Jul 24 2009, 07:45 AM) A couple of other points to address:

1) You cannot loan your own money via RRSP mortgage to your own properties...it is then deemed "non arms length" by CRA.
2) Do you have $20K in contribution room within your RRSP. That is essentially what you are doing by "funneling" this $20K thru your RRSP.

As Gary said, keep it simple, no need to overcomplicate for $20K!

Regards,


Hey C2Ventures
Non arms length??...going to have to look into that term....thanks
Yes, I do have $20,000 worth of contribution room...I`m a newbie at managing my money thus the reason I have to be that much more creative to catch up!...lol.

 

[MonteDobson]

QUOTE (Greatful @ Jul 26 2009, 10:55 PM) Hey C2Ventures
Non arms length??...going to have to look into that term....thanks
Yes, I do have $20,000 worth of contribution room...I`m a newbie at managing my money thus the reason I have to be that much more creative to catch up!...lol.

A "non-arm`s length" mortgage is a mortgage on property owned by a person who is related to you such as your spouse, children, grandchildren, or parents. You can loan your RRSP on a "non-arms length" basis to yourself, or a relative, however it must be insured and meet certain criteria...usually not worth the expense and/or hassle.

An "arm`s length" mortgage is a mortgage given to any person not related to you, and with whom you deal at "arm`s length". Revenue Canada looks at the interest rate and payment terms to decide you are, in fact, dealing at "arm`s length" with the borrower. These mortgages need only be secured by real property located in Canada to qualify.

An "arm`s length" mortgage may be also be given to a corporation, providing you and/or your relatives to not control it and you are dealing at "arm`s length" with the corporation.

 

[MikeMcCrae]

Sometimes we get creative for the sake of being creative. Look for the easiest solution not the difficult one. Your own RRSP money can not be used for a property that you have ownership in unless you are a first time home buyer.

 

[Greatful]

QUOTE (C2Ventures @ Jul 27 2009, 03:16 PM) A "non-arm`s length" mortgage is a mortgage on property owned by a person who is related to you such as your spouse, children, grandchildren, or parents. You can loan your RRSP on a "non-arms length" basis to yourself, or a relative, however it must be insured and meet certain criteria...usually not worth the expense and/or hassle.

An "arm`s length" mortgage is a mortgage given to any person not related to you, and with whom you deal at "arm`s length". Revenue Canada looks at the interest rate and payment terms to decide you are, in fact, dealing at "arm`s length" with the borrower. These mortgages need only be secured by real property located in Canada to qualify.

An "arm`s length" mortgage may be also be given to a corporation, providing you and/or your relatives to not control it and you are dealing at "arm`s length" with the corporation.

Ahhh, clarity.

Thanks C2V!

 

[Greatful]

QUOTE (MikeMcCrae @ Jul 27 2009, 03:16 PM) Sometimes we get creative for the sake of being creative. Look for the easiest solution not the difficult one. Your own RRSP money can not be used for a property that you have ownership in unless you are a first time home buyer.


Hey Mike,...
I agree...keep it simple as possible.
And yes it would have been used in the context of "First Time Home Buyer".
But the 90 day rule still applies...doh!.

Peace and Prosperity to you Mike!