RRSP Mortgages Still Worth Doing?
- Thread starter ClintL
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Why not. What else provides high returns these days with low risk ? Be mindful of return OF your capital before you look at return ON your capital. Construction mortgages are more risky than 1st mortgage. 2nd can make sense but you must be prepared to take the property back and manage it.
As a lender there is limited upside but still the possibility of 100% capital loss. An equity investment may make more sense.
Check out some MICs.
As a lender there is limited upside but still the possibility of 100% capital loss. An equity investment may make more sense.
Check out some MICs.
Thomas, forgive my naivete but your response seemed to imply a self directed aspect to mortgage RRSPS. I am particularly looking for a self directed RRSP (real estate based) that I can manage myself, like new construction, but hold inside an RRSP to reduce my tax lability. Does anyone on the board do anything like this?
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Are you the lender .. Or the borrower ? Or both ?
I think I found my answer but perhaps you can enlighten me.
I was hoping to use one of my own housing investments sheltered in an RRSP somehow. Makes sense to me that I lock a personal investment into an RRSP and keep it till I retire, while enjoying a tax benefit.
I understand I cannot do this if I have an interest in the property. Find that odd as it implies people who invest in RRSP's have no interest in their fund allocatiosn. I think I trust my own real estate investments better than any twerp stock broker throwing darts at the veritable spinning wheel.
I was hoping to use one of my own housing investments sheltered in an RRSP somehow. Makes sense to me that I lock a personal investment into an RRSP and keep it till I retire, while enjoying a tax benefit.
I understand I cannot do this if I have an interest in the property. Find that odd as it implies people who invest in RRSP's have no interest in their fund allocatiosn. I think I trust my own real estate investments better than any twerp stock broker throwing darts at the veritable spinning wheel.
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You can lend your RRSP money as a mortgage to an unrelated party and collect the interest as an investment.
You can't lent your RRSP money as a mortgage on a property you own, because people would use that in combination with RRSP tax deductions as a huge tax shelter, outside the spirit of the law.
The trick is to find someone who needs the money but is also reliable. It also depends how much you have in your RRSP, as larger numbers will be easier to place.
Regards,
Michael
You can't lent your RRSP money as a mortgage on a property you own, because people would use that in combination with RRSP tax deductions as a huge tax shelter, outside the spirit of the law.
The trick is to find someone who needs the money but is also reliable. It also depends how much you have in your RRSP, as larger numbers will be easier to place.
Regards,
Michael
I fail to see how me taking care of my own retirement vehicle, and helping it grow 30-50%, would be somehow considered unethical or wrong. Perhaps someone can offer an example.
Why would I want to take my hard earned $30K and stick it into any RRSP that some desk jockey manages, and takes 2-3% off the top just for the honour of sitting in front of him. For me, my money is better served in a real estate investment where I make 30-40% or more, and cashflow. The problem is, I simply can't reinvest all the money I make on more houses. The government wants taxes. Yet if I pay into a shitty money losing RRSP (excuse my French), the government gives me a tax break. Doesn't make sense.
Excuse my lack of tax acumen here, but I guess the real purpose of my question is how I can somehow report/claim my investments, as if they were an RRSP.
If I make $100K a year from my investments, then I potentially have a $40K tax bill. I have nowhere to turn but the Desk Jockeys RRSP. Or, do I?
Why would I want to take my hard earned $30K and stick it into any RRSP that some desk jockey manages, and takes 2-3% off the top just for the honour of sitting in front of him. For me, my money is better served in a real estate investment where I make 30-40% or more, and cashflow. The problem is, I simply can't reinvest all the money I make on more houses. The government wants taxes. Yet if I pay into a shitty money losing RRSP (excuse my French), the government gives me a tax break. Doesn't make sense.
Excuse my lack of tax acumen here, but I guess the real purpose of my question is how I can somehow report/claim my investments, as if they were an RRSP.
If I make $100K a year from my investments, then I potentially have a $40K tax bill. I have nowhere to turn but the Desk Jockeys RRSP. Or, do I?
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You can still do it as far as I know...That is, use your RRSP on your own Mortgage (principal residence or rental). There are some conditions such it must be insured.
http://www.genworth.ca/content/genworth/ca/en/products/features/self_directed_RRSP.html
http://www.greatpacificmortgage.com/blog/lending-your-rrsp-money/
http://advisors.tdwaterhouse.ca/public/projectfiles/cffab99a-bcd6-4ae6-959c-bae1513918b6.pdf
http://www.genworth.ca/content/genworth/ca/en/products/features/self_directed_RRSP.html
http://www.greatpacificmortgage.com/blog/lending-your-rrsp-money/
http://advisors.tdwaterhouse.ca/public/projectfiles/cffab99a-bcd6-4ae6-959c-bae1513918b6.pdf
You can lend money non arms length.
You need to jump through a fw more hoops and you need to CHMC insure the loan.
The way it was described to me for this way of doing it was: Mom and Dad would give son a mortgage on his property through the RRSP. To which son would never pay and Mom and Dad would write it off as bad debt and never try to collect it. Therefore transferring money out of a tax deferred instrument with out paying taxes on it.
Hence now you have to CMHC insure the loan so you cannot walk away plus a crown corp makes some coin on it as well.
Regards,
You need to jump through a fw more hoops and you need to CHMC insure the loan.
The way it was described to me for this way of doing it was: Mom and Dad would give son a mortgage on his property through the RRSP. To which son would never pay and Mom and Dad would write it off as bad debt and never try to collect it. Therefore transferring money out of a tax deferred instrument with out paying taxes on it.
Hence now you have to CMHC insure the loan so you cannot walk away plus a crown corp makes some coin on it as well.
Regards,
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[quote user=nubiwan]Excuse my lack of tax acumen here, but I guess the real purpose of my question is how I can somehow report/claim my investments, as if they were an RRSP.
yes you can BY NOT SELLING!
In a cash-flowing real estate asset you will usually not pay any taxes while you hold, as you depreciate the house by 4% to offset any income or positive cash-flow, and the equity creation through mortgage paydown and value appreciation accumulates tax free, TAX PREFERED - until you sell !
You pay LESS taxes of real estate on exit than taking cash out of an RRSP, namely capital gains, ie. only 50% of the gain is taxable income, if the asset is held for rental income purposes (and not flipping).
yes you can BY NOT SELLING!
In a cash-flowing real estate asset you will usually not pay any taxes while you hold, as you depreciate the house by 4% to offset any income or positive cash-flow, and the equity creation through mortgage paydown and value appreciation accumulates tax free, TAX PREFERED - until you sell !
You pay LESS taxes of real estate on exit than taking cash out of an RRSP, namely capital gains, ie. only 50% of the gain is taxable income, if the asset is held for rental income purposes (and not flipping).