Using my RRSPs for Real Estate Investment

FalconJetCaptain

New Forum Member
Registered
Apr 25, 2018
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#1
I have a sizeable RRSP portfolio invested in the stock market. I've decided the time is right to take my money out of the market (before it corrects) and invest it in real estate for the long term. I understand that I can give my RRSP money to other people to invest in real estate (at arm's length) in the form of an RRSP mortgage, but are there any strategies that allow me to invest it in MY OWN projects (builds, renos, and rentals)? Short of retiring and drawing it all out, there must be other options.
 

ThomasBeyer

Senior Forum Member
REIN Member
#2
Besides mortgages you can buy REITs, both private or publicly traded or buy shares, both private or publicly traded of firms that invest in real estate. One such share class are MICs.

The trustee has to approve private equity within RRPSs. We used to offer that but stopped it a while ago as the fund raising cost and real estate margins didn’t make sense anymore.

For your own projects you need the mortgage insured by CMHC.

Certainly arguments can be made that the stock market corrects. But when, and how much ? https://www.forbes.com/sites/oliviergarret/2018/05/01/why-mean-reversion-in-equities-is-coming/

If it corrects you can buy inverse ETFs or PUT options or covered calls. Stock always volatile, but selling CALL options in the money, covered, one way to avoid losses and still make money. Doable in RRSPs.
 
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Martin1968

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Jan 22, 2017
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#3
Many of us would be able to come up with strategies on how and where to invest.
But a few questions I would have is if you have thought about consulting with your accountant or a tax consultant first. When drawing on rrsp,s for retirement purposes, you will trigger taxes, and you would want to know what your tax bracket is cause it will depend on your last year working income. An adviser will be able to tell you how it all works, and if it would be better to wait 2 years. (I admit I’m not a specialist, just like to inform myself on these topics but plz look into this with someone more knowledgeable)

Secondly, what are you trying to accomplish? Are you an early retiree let’s say age bracket 50-55 and wanting to bridge the gap in income loss after you retire till you are 65 with a real estate investment income? In that case, not a bad idea but keep in mind about the tax consequences for drawing on rrsp.
And also decide on what you want for an investment. The ones that Thomas mentioned, which would take a less active roll and easier to manage, or do you really want to dive right in with owning real estate personally with an active, hands on approach.

Or are you close to 65 and just wanting your money out for something different to invest in? If the latter, Not sure why you would want to start investing in real estate that late in the game.
Having said that, real estate is a lot of fun!
 

Matt Crowley

Senior Forum Member
Registered
Dec 14, 2013
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Edmonton
#4
As per above... not really. (Meaning you can't pull out RRSP's for personal direct investment)

If you want to direct invest in projects that you run and operate to my knowledge you can't do that with RRSP's without paying substantial tax.

I'd personally not advise direct investment with one concentrated asset position with a large RRSP portfolio unless you are already a seasoned, professional investor. A general rule of thumb for alternative investments is that it should be 5%-25% of your total portfolio. At the highest end with a longer horizon.

-REIT ETF is possible to get 6-10%
-Direct investment (SFH) you will earn 0% + appreciation gamble... this is probably the worst, least diversified, most macroeconomically vulnerable real estate investment available.
- Home builder 40%+ ... but if you don't know how to do this could be 0
- Direct investment on single project 15% - 20% (but lots of 0's here due to lack of diversification)
- Direct investment with professional asset manager with diversified portfolio 10-12% <- I think this is the best traunche for alternative investment, and is where I work
 
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Alvaro Sanchez

Ottawa-Gatineau Investor
Registered
Jun 5, 2009
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Ottawa
AlvaroSanchez.ca
#5
As far as I am aware, you can only lend it (arms-length) on 1st/2nd positions or become your own bank on your principal residence with the added conditions for a mortgage (such CMHC insured).
 

ThomasBeyer

Senior Forum Member
REIN Member
#7
The assumption you are making is that the stock market is unstable and real estate is stable.
Both are indeed volatile and depend on a variety of factors such as NOI ( or earnings ), expected growth of NOI or earnings, CAP rates ( or PE ratio ) interest rates, sentiment etc .. but RE tends to be not quite as volatile. There is no right or wrong answer here. Like most folks on this blog I am biased towards RE of course but stocks / REITs / MICs / ETFs have their place and can outperform RE from time to time.


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
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ThomasBeyer

Senior Forum Member
REIN Member
#9