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Arm's Length RRSP Mortgage

WV789

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Hello all,

I work for a land developer and participate in company projects; I am wondering if anyone has used an arm's length RRSP mortgage to participate. I believe I would be securing the loan via second or third mortgage on the property to be developed.

I believe that Greybrook uses this arrangement; has anyone invested with them using this arrangement?
 

Thomas Beyer

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Hello all,

I work for a land developer and participate in company projects; I am wondering if anyone has used an arm's length RRSP mortgage to participate. I believe I would be securing the loan via second or third mortgage on the property to be developed.

I believe that Greybrook uses this arrangement; has anyone invested with them using this arrangement?

Yes it can be done (and I have done it) as your RRSP becomes the lender and you swap cash out and a mortgage in. Only a few RRSP trustees like OlympiaTrust do it, for an upfront and annual fee plus legal fees.

What specifically do you want to know?


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

WV789

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Thanks very much Thomas,

1. How flexible are the terms of the mortgage? Is it possible to have a single balloon interest payment at the end of the project or must some interest be paid every year?
2. If I am receiving e.g. 20% ROE can I structure the mortgage with only e.g. 3% interest and keep the remainder of the return outside of the RRSP?

Thanks in advance!
 

Michel Lafleur

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I have lent registered funds on projects through Olympia Trust.
The terms of the mortgage are very flexible, whitewater's agreed upon between parties.
If I recall, you can combine up to 5 individual lenders, or 5 products (RRSP, LIRA, TSFA etc) if you are looking to syndicate funds for a larger raise. The trustee (Olympia in my case) have their own rules/CRA guidelines, so anything written that pulls funds outside of the registered plan wount be permitted. Exect to pay double digit returns to the lenders, and you pay all the fees to register the mortgage. I have done it where its interest onply payments with a balloon payment at the end, or you could do something like pay the interest up every 6 months if its a longer loan.
 

Thomas Beyer

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Thanks very much Thomas,

1. How flexible are the terms of the mortgage? Is it possible to have a single balloon interest payment at the end of the project or must some interest be paid every year?
2. If I am receiving e.g. 20% ROE can I structure the mortgage with only e.g. 3% interest and keep the remainder of the return outside of the RRSP?

Thanks in advance!

Most trustees allow a balloon payment structure but insist on an annual payment say 2% or prime.

OlympiaTrust rules here https://rsp.olympiatrust.com/assets/forms/arms-length-mortgages/GeneralInformation.pdf

To get ROI outside the RRSP you need shares in a company or another JV arrangement totally separate from the RRSP mortgage at say 8% and you need real consideration say $1000 outside the RRSP for share purchase or for a 25% JV interest.


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

WV789

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I have lent registered funds on projects through Olympia Trust.
The terms of the mortgage are very flexible, whitewater's agreed upon between parties.
If I recall, you can combine up to 5 individual lenders, or 5 products (RRSP, LIRA, TSFA etc) if you are looking to syndicate funds for a larger raise. The trustee (Olympia in my case) have their own rules/CRA guidelines, so anything written that pulls funds outside of the registered plan wount be permitted. Exect to pay double digit returns to the lenders, and you pay all the fees to register the mortgage. I have done it where its interest onply payments with a balloon payment at the end, or you could do something like pay the interest up every 6 months if its a longer loan.

I would be acting as the lender so it is interesting that I could combine RRSP and TFSA funds to lend to a single borrower.

I suspected that all proceeds would have to be returned to the RRSP, thank you.
 

WV789

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Most trustees allow a balloon payment structure but insist on an annual payment say 2% or prime.

OlympiaTrust rules here https://rsp.olympiatrust.com/assets/forms/arms-length-mortgages/GeneralInformation.pdf

To get ROI outside the RRSP you need shares in a company or another JV arrangement totally separate from the RRSP mortgage at say 8% and you need real consideration say $1000 outside the RRSP for share purchase or for a 25% JV interest.


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

Thanks Thomas, I suppose a separate agreement could be written where my holdco would receive some profit but I would then worry about active vs. passive income.

Thanks!
 

Thomas Beyer

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Thanks Thomas, I suppose a separate agreement could be written where my holdco would receive some profit but I would then worry about active vs. passive income.

Thanks!

Correct. Lending ie interest is usually considered passive income.


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

Havan8655

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which one is good between Olympia trust vs CWT (Canadian western trust) when using RSP funds?
 
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