Using RRSP`s for revenue property

[MarkTorgerson]

Hello

I have several revenue properties but have never gone the route of RRSP money from either myself or a JV partner for the cash down.
I wanted to run a scenario; I have $100,000 in RRSP`s and a partner has $100,000 in RRSP`s. We both have more than $100,000 equity in our homes. Could we register that RRSP money on each other`s property as a 2nd mortgage? Then we would basically have $200,000 to go invest. Is this viable and legal?

Thanks

 

[dwb]

QUOTE (MarkTorgerson @ Mar 20 2008, 10:56 AM) Hello

I have several revenue properties but have never gone the route of RRSP money from either myself or a JV partner for the cash down.
I wanted to run a scenario; I have $100,000 in RRSP`s and a partner has $100,000 in RRSP`s. We both have more than $100,000 equity in our homes. Could we register that RRSP money on each other`s property as a 2nd mortgage? Then we would basically have $200,000 to go invest. Is this viable and legal?

Thanks

Yes it is. Aas long as you are not related then it works.

 

[MonteDobson]

Hi Mark,

As long as it is an "Arms Length" transaction (ie. not directly related by blood or marriage etc), then you should be good to go. An RSP 2nd mortgage can be placed on just about any property and you essentially act as the bank and set the terms and conditions of the loan.

First step is to set up a self directed account thru a trustee that allows RSP mortgages. We have had good success with Olympia Trust and TD Waterhouse. Then get a lawyer who is experienced with RSP 2nd mrotgages to draft up the documentation and complete the transaction.

It usually takes about 3-4 weeks to complete the transfer from your existing RSP account so you would want to get started on that right away.

Any further questions, feel free to send me a message.

Regards,

 

[RussellWestcott]

Mark be very careful here, you are treading on Grey areas... That can be considered RRSP swapping, and you potentially be in violation of the non arms length feature of the RRSP investing in Real Estate.

At the end of the day the RRSP second mortgage in order to be viewed as arms length has to be invested based upon its own merits of the investment (your intention). Based upon your intention described above the merits of each of your RRSP investment is to `swap` the investment with another person... therefore you may not be in arms length anymore, and risk collapsing each others RRSP (and that is not a fun process)

Before going forward, you will want to provide full disclosure to the deal and scenario and get an opinion from CRA and the RRSP trustee that will be holding the self directed RRSP mortgage. If you provide the full disclosure and both of these agencies give you a green light then you should be off to the races.

But based upon the scenario you painted above, you are treading on the edge, because the only reason why you are investing your RRSP money into your partners home is because he is investing in your home...

 

[MarkTorgerson]

QUOTE (RussellWestcott @ Mar 20 2008, 11:18 AM) Mark be very careful here, you are treading on Grey areas... That can be considered RRSP swapping, and you potentially be in violation of the non arms length feature of the RRSP investing in Real Estate.

At the end of the day the RRSP second mortgage in order to be viewed as arms length has to be invested based upon its own merits of the investment (your intention). Based upon your intention described above the merits of each of your RRSP investment is to `swap` the investment with another person... therefore you may not be in arms length anymore, and risk collapsing each others RRSP (and that is not a fun process)

Before going forward, you will want to provide full disclosure to the deal and scenario and get an opinion from CRA and the RRSP trustee that will be holding the self directed RRSP mortgage. If you provide the full disclosure and both of these agencies give you a green light then you should be off to the races.

But based upon the scenario you painted above, you are treading on the edge, because the only reason why you are investing your RRSP money into your partners home is because he is investing in your home...

Thanks for everyone`s feedback. Seems like the interpretation of the legalities of this varies with each person. That was my concern in the first place as it does seem like a grey area. Does anyone have a recommendtion for a person to talk to that deals with this on a daily basis? Any other suggestions to getting our $200,000 out to go investing?

 

[RussellWestcott]

Just a thought contact Peter Kinch`s team (Canadian Mortgage Team) regarding their exclusive second mortgage line of credit program up to 80% of the value of the properties. Refinance with second mortgages at Prime and interest only payment ... As talked about a couple of times at the REIN™ meetings

 

[MarkTorgerson]

QUOTE (RussellWestcott @ Mar 20 2008, 11:41 AM) Just a thought contact Peter Kinch`s team (Canadian Mortgage Team) regarding their exclusive second mortgage line of credit program up to 80% of the value of the properties. Refinance with second mortgages at Prime and interest only payment ... As talked about a couple of times at the REIN™ meetings


Thanks Russell
Already going that route as well. I guess I am being a glutton and buying as much as I can.