BOOM
Magazine b e s t
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m a r k e t
issue 14
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Housing Outlook: 2013
New year, new beginning. According to Ipsos Reid poll, Canadians are generally optimistic about the 2013 economy. This article will tell you what expect in 2013 in terms of economic challenges, housing prices and why we will not experience a US-style housing crash.
How Many Properties Do You Really Need to Retire Rich?
Many investors have been conditioned to believe that owning as many properties as possible is the key to retiring rich, but how many properties are we talking about here? In this article, you will learn how to calculate this number once you’ve determined how much income you need after retirement. You may be relieved to find that you don’t actually need as many as you think you do!
Looking Ahead to Retirement Through Real Estate
To many Canadians, their home or primary residence is their biggest financial asset and are relying on their home equity to financially support them after retirement. In this article, the author compares two property types: single-family dwelling (“SFD”) and multi-unit residential property (“MURP”) and discusses the advantages and challenges of each.
4 Steps to Reaching Your Retirement Goals Through Real Estate Before you start planning your retirement, you need to know exactly how much you need at retirement. Once you’ve figured that out, remember to take inflationary rate into account. Then, you are ready to start planning the steps ahead. This article will show you the 4 steps you need to follow in order to achieve financial freedom in your golden years.
Getting the Money for your Real Estate Deals
While the “no money down and no bank needed” strategy to finance your investments may seem attractive, it is not as pretty as it sounds. In this article, our expert shares her strategies she uses to fund and finance her investments: Vendor Take Back Mortgages, Private Money, RRSP Mortgages and Joint Venture Partners.
about BOOM Magazine BOOM Magazine is all about property investment. When this magazine was conceived, the market lacked some real content relating directly to property investment. It seemed like just about every realtor could contribute an article about selling your home, and it would be in blogs and magazines all over the place. BOOM Magazine was created for the property investor, by the property investor. Each month, you will see contributions from professionals in the market as they share their experience in the field. Within BOOM Magazine, you can expect the very best of our market - whether it relates to property investment, financing and leveraging or the different asset types, BOOM Magazine will be sure to have it as an editorial. Would you like to contribute to BOOM Magazine? Email editor@bestofourmarket.com and we’ll talk. Would you like to influence the direction of the magazine? Register to subscribe and vote on the polls on what type of articles you would like to see more of.
contributors Julie Broad
Paul M. Hecht
Julie Broad has been investing in residential real estate for over a decade across Canada. She’s a featured keynote speaker and an award winning real estate blogger with a passion for helping others transform their financial future with real estate investing.
Paul M. Hecht is an investor, speaker, award winning Real Estate agent, Best-Selling Author of EVERYDAY Real Estate MLILIONAIRES™ How Average People REALLY Do It and Canadian Real Estate Wealth Magazine’s “Ask the Expert” columnist.
Connect with her at: www.revnyou.com
www.PaulMHecht.com
Sylvia Sigurdson
Paul Kondakos
For over 14 years, Sylvia has been assisting people with their mortgage needs, originally as a licensed realtor and now as an Accredited Mortgage Professional (AMP) at Mortgage Depot in Victoria, BC since 2004. She has specialized in helping her clients acquire investment real estate as part of a wealth-building strategy and excels at structuring mortgages with the greatest tax advantage in mind. www.mortgagecanada.com
VivianWu Vivian is a passionate real estate blogger who specializes in housing market in Canada. She has had much success educating the masses on the Alberta real estate market, specializing in real estate investment. Her main area of expertise involves analyzing economic fundamentals of various investment locations, such as population trends, job growth, gentrification, and area development. Vivian is a graduate of the Beedie School of Business at SFU. Connect with her at: vivian@viproperties.com
Paul Kondakos, BA, LL.B, MBA, has over a dozen years of experience in locating, financing and managing multi-unit residential apartment buildings within Canada. www.realtyhub.ca
Housing Outlook: 2013 New year, new beginning. According to Ipsos Reid poll, Canadians are generally optimistic about the 2013 economy. This article will tell you what expect in 2013 in terms of economic challenges, housing prices and why we will not experience a US-style housing crash.
Housing Outlook: 2013 By Paul M. Hecht Many people look at a new year as a new beginning, a fresh new page. So do investors. Well, at least we’d like to think that way. While 2012 was quite a turbulent journey in the real estate market, it is time to put that behind us and look forward. We are all curious as to how 2013 is going to look. With falling numbers of housing starts, overall economic distress, and debates on whether the Canadian market is headed for a soft landing or hard crash, things are not looking good for us, eh? There is no doubt that in 2013, we have more challenges ahead of us. That being said, according to an Ipsos Reid poll conducted recently, it is suggested that most Canadians are optimistic about the 2013 economy and are anticipating a “good” year. Let’s explore what is expected in the year to come and decide whether it will be a “good” year (or not). First of all, let’s discuss the economic outlook of 2013. According to forecasters, real output growth is expected to be around 2%. However, the uncertainty of global economy continues to make Canadian market vulnerable. On top of that, our greatest concern at home is that we’ve used up pretty much all our cards (traditional monetary and fiscal policy tools) in steering our economy in the right direction. Compared to other developed countries, Canada did pull through better during the recent world economic crisis. Although Canada’s output performance is similar to the US, we experience a better employment growth than the US. Moreover, we are one of the few developed countries that have not gone through a massive decrease in housing prices. Our debt also stays relatively low. Another challenge we face is the low profitability of oil and gas. The combination of US demand for oil lowering within 10 years and the country possibly becoming a net natural gas exporter brings Canada’s export of these resources to a test. This means that
prices may go south as costs continue to go up, affecting resource-rich areas in Canada such as Alberta, Saskatchewan and Newfoundland. However, significant growth is expected in these areas in 2013. In Royal LePage’s latest report, average home prices had a 2%-4% increase in the last quarter of 2013 compared to same time last year. However, when compared to the third quarter of 2012, average prices went down, which indicates that the tightened mortgage rules have discouraged buyers. There were fewer homes listed in the second half of 2012 since some sellers wished to stay put until the market becomes more stable. This allowed inventory levels to stay low and in turn supported home values. While decreases in sales and home prices in both Vancouver and Toronto will contribute largely to the lowered national average this year, resourcerich provinces like Alberta and Saskatchewan will see significant growth. Growth in these regions will help offset the slowdown in Vancouver and Toronto. One thing Canadians do not need to worry about is a US-style housing crash. Both Bank of AmericaMerrill Lynch and Royal LePage have agreed that it is unlikely for Canada to experience a similar crash. According to Royal LePage, “[t]he housing market is well into a cyclical correction, fears of a sharp or drawn out collapse are unwarranted. Home prices have risen faster than salaries and wages for three years and the market requires time to adjust.” Although our fears of a US-style real estate crash can be dismissed, 2013 will still be quite a roller-coaster ride for Canadians as it is filled with uncertainty. When it comes to the direction of the housing prices in 2013, experts have different opinions. In its recent report, BofA-ML states that prices for Canadian housing will fall by 5% in 2013 and it suggests
that housing prices are approximately 5% to 15% overvalued, making Canadian home prices relatively high when compared to other economic fundamentals. While BofA-ML predicts a decline in Canadian home prices, Royal LePage expects a slight increase of 1%. The Canadian brokerage also believes that home prices will experience a “very modest” appreciation in the next couple of years as economic sectors in the US and Canada slowly pick up the pace and as family incomes increase. Although we are expecting more challenges in 2013, it is good to see that Canadians are positive and hopeful for the new year. The economic growth for 2013 may seem sluggish, but keep in mind that we are recovering from recession and moving forward. 2012 was an economically chaotic year for countries around the world and Canada pulled through in a relatively good shape. There will be reports and forecasts released every day that may spark fears in us but remember to keep that positive mindset, Canadians!
Many investors have been conditioned to believe that owning as many properties as possible is the key to retiring rich, but how many properties are we talking about here? In this article, you will learn how to calculate this number once you’ve determined how much income you need after retirement. You may be relieved to find that you don’t actually need as many as you think you do!
How Many Properties Do You Really Need To Retire Rich?
How Many Properties Do You Really Need To Retire Rich? By Paul Kondakos As investors, we’ve been conditioned to believe that we should acquire as many rental properties as we can. Then hold them for 25 years until the mortgage is paid off and retire on the cash flow. So, how many do you really need for this plan to work…20, 50, 100? The question itself can be daunting. Don’t get me wrong. Buying rental property and letting the tenants pay off the mortgage is time tested and proven to work. The concept itself is very simple. However, devoting your entire life to buying as many properties as humanly possible with no end in sight is likely going to produce unhealthy results in your social life, family life and personal health. Let’s be realistic here. After all, who wants to deal with 100 tenants for 25 long years? How do we realistically ensure a solid retirement and know when enough is enough? My perspective is this. Buy long term hold properties as soon as you can with a realistic target of how many you actually need. In order to determine how many you need, simply determine how much income you’ll need in retirement. It’s not an exact science and you have to make some general assumptions in order to make your calculations. Assumption #1 - In 25 years your principal residence should be mortgage free therefore you won’t have that payment anymore. Assumption #2 - Children have typically left the nest after 25 years so you won’t have that expense either. Assumption #3 – No kids equals a smaller personal residence with smaller maintenance and smaller utility bills. Assumption #4 – Expenses will increase over time
and so will rents. A $1,900 property tax bill could be $4,000 in 25 years. Today’s rent of $1,900 could also be $4,000 in 25 years. It’s all relative. So, we’ll use today’s dollar amounts for our calculations. Let assume that your total family household expenses including a mortgage or rent are currently around $5,000/mo or $60,000/yr. Without a mortgage, kids or a large home, that number could be closer to $3,000/mo or $36,000/yr. How do we replace $3,000/mo or $36,000/yr in retirement with real estate? Here’s a simple, quick and easy calculation to use. First, add up the total gross rents on all your rental properties. Then deduct 30%-35%% of the gross income for ongoing expenses that will still need to be paid even after the mortgages are paid off and the property is free and clear. These include property taxes, insurance, repairs and maintenance, and property management. That leaves 65%-70% of the total gross income left over which has been going towards mortgage financing payments. Since the mortgage will be paid off in 25 years, you will no longer have the financing expense leaving 65%70% of the total gross income in positive cash flow every month. If the 65%-70% is equal to or greater than your current income, then you don’t need any more long term rentals or tenants. You’ll be fine in retirement. Assuming that each of your rental properties produces gross rents of $2,000/mo and the tenants pay all the utilities, then 65% of $2,000 equals $1,300/ mo or $15,600/yr. In order to replace $36,000 you will need exactly 2.3 rental properties that currently produce $2,000/mo in gross rents. Yes – you read that right – you only need 2.3 rental properties to retire!
Formula: Retirement Income ($36,000) ÷ Cashflow ($15,600) = 2.3 Properties If you want to be safer and assume that you will still have a mortgage, kids and a large home in retirement or you want to travel more and require $60,000/yr, then you will need 3.8 rental properties earning $2,000/mo in gross rent. Every rental property beyond these numbers is gravy.
Formula: Retirement Income ($60,000) ÷ Cashflow ($15,600) = 3.8 Properties So before you go on a major buying spree to acquire your empire, first consider how many rental properties you really need. 3.8 properties is a much easier goal to achieve than struggling to acquire 100 properties or more. Once you have acquired your 3.8 properties then consider re-setting your goals higher, if you want. Don’t get overwhelmed and fall into the trap that you need to build an empire of 100 properties or more in order to secure your retirement. Figure out your own number first. Then get out there, buy the first one and accomplish 24% of your retirement goal instantly. What will you do with all your free time if you no longer need 100 properties or more? Simple - enjoy a balanced life and sleep well at night knowing that you’ll be fine in retirement. For those who may get bored waiting while your tenants are busy paying off your mortgages, you may want to consider combining midterm investment strategies for large sums of cash while you wait. Paul M. Hecht is an investor, speaker, award winning Real Estate agent, Best-Selling Author of EVERYDAY Real Estate MLILIONAIRES How Average People REALLY Do It and Canadian Real Estate Wealth Magazine’s “Ask the Expert” columnist. To learn how to make money in any market, visit www.PaulMHecht. com today.
Looking Ahead to Retirement through Real Estate If your lender declines your application for finance, what options do you have? To many Canadians, their home or primary residence is their biggest financial asset and are relying on their home equity to financially support them after retirement. In this article, the author compares two property types: single-family dwelling (“SFD”) and multi-unit residential property (“MURP”) and discusses the advantages and challenges of each.
Looking Ahead to Retirement through Real Estate By Paul Kondakos The way the retirement process has typically worked over the past few decades included working at the same company for most of your employable years, investing in RRSP’s, stocks and mutual funds along the way and then retiring at age 65 with a full company pension. Fast forward to present day and eroding job security and poorly performing markets have put that process in jeopardy. As a result, more and more individuals are looking to take matters into their own hands and are opting to invest in real estate to make their retirement more secure and comfortable.
(I have focused on these specific types of properties as they are considered to be among the safest asset classes by banks and financial institutions.) So the question becomes: “What type of real estate is most advantageous for your retirement years?”
In a recent BMO Retirement Institute Report (Oct. 2012), it was stated, “[d]ue to a lack of savings for retirement, Canadians are using their home as a source of retirement income. Interestingly, 41% of Canadians consider equity in their home an option to save for retirement. The reliance on home equity to fund retirement is no surprise, given that 47% of Canadians said their home or primary residence is their biggest financial asset, and on average it accounts for 51% of their total net worth.”
Round 1 - Mortgage Paydown While both the SFD and MURP build equity through mortgage paydown, the MURP has a distinct advantage as its mortgage payments are funded by the MURP itself. The SFD on the other hand requires perpetual cash injections for its mortgage payments.
In fact, rather than down-sizing, empty-nesters are actually up-sizing homes as part of their retirement strategies. For instance, if a couple owns a $500,000 home with $200,000 in equity, they are selling their existing home and using that equity to buy an $800,000 home.
To make that determination we will examine some of the most important factors to consider when comparing the SFD to a MURP. While this is an overly simplistic approach, it will help illustrate the benefits and challenges of each property type.
Advantage: MURP Round 2 - Cash Flow SFD by their nature do not generate income (assuming there is no rental unit). On the other hand, a good MURP investment will provide consistent and predictable cash flow. Advantage: MURP
Over the past decade the Canadian real estate market has delivered double and triple digit returns that have dwarfed other investments such as stocks, bonds and mutual funds. It is no wonder that real estate as a means to retirement has become so prevalent.
Round 3 - Appreciation Both SFD and MURP have historically appreciated over time. MURP’s have a slight advantage as appreciation can be forced by cutting expenses or increasing income.
All real estate, however, is not made equal. The major distinction between real estate is whether it is income producing or non-income producing as there are significant differences between an owner occupied single-family dwelling (“SFD”) and an incomeproducing multi-unit residential property (“MURP”).
Advantage: MURP
SFD and MURPs begins to decline. SFDs have a slight advantage as residential rates tend to be lower than commercial rates. Advantage: SFD Round 5 - Tax Consequences When selling an SFD, any capital gains are not taxable assuming it is your principal residence. Income generated from MURPs are considered taxable income and when selling, capital gains are also taxable. Advantage: SFD Round 6 - Real Estate Downturn In times of real estate downturn, SFD values can be severely impacted. While MURPs may see their values drop, they continue to operate and provide cash flow. In fact, vacancy rates, as witnessed in the US dropped as more people become renters instead of home-owners. Advantage: MURP
Round 4 - Interest Rates
While there are benefits to both approaches, I think the best approach is a hybrid. Referring to the example above, my personal preference would be to keep the $500,000 home and instead of up-sizing, take any existing equity and invest in a MURP. The MURP will provide cash flow which becomes ever more important as you approach retirement age. If you start off investing at a younger age, you have the advantage of being able to re-finance MURPs every few years and use that equity to purchase another MURP, and so on, until you have a nice portfolio providing great cash flow in your retirement years.
Interest rate fluctuations can adversely affect both SFD and MURP. As interest rates rise, the value of
Paul Kondakos is a professional real estate investor from Realtyhub.ca
4 Steps: to Reaching Your Retirement Goals Through Real Estate
Before you start planning your retirement, you need to know exactly how much you need at retirement. Once you’ve figured that out, remember to take inflationary rate into account. Then, you are ready to start planning the steps ahead. This article will show you the 4 steps you need to follow in order to achieve financial freedom in your golden years.
4 Steps: to Reaching Your Retirement Goals Through Real Estate By Sylvia Sigurdson One of the most important questions to first ask yourself about your retirement is, “How much do I need?” Until you have a clear monetary goal laid out it’s very difficult to plan the steps required to get you there. A good financial planner can work with you to sort out the details of those needs and base those figures on inflation (the future value of money). For example, if you think $4,000/month is a comfortable income, you would need to earn $7,000/month (almost double) in 20 years (based on a 2.75% average inflationary rate). If your goal is to have income in addition to your pension when you retire, owning your own home and one other unit could achieve that. But if you don’t have a pension to rely on, or you’re wanting to do more than merely boost your retirement income, owning two or more rental properties would likely be needed. Let’s assume you have no pension, or the $7,000 inflated income is what you will need to earn in addition to any pensions. How can you generate that much income through real estate investing? Step #1: Own Your Own Home Investing in your own home is one of the best retirement strategies out there. By buying your own home today, you can pay off your mortgage by the time you reach retirement. Being mortgage or rent free when you retire dictates how much money you’ll actually need in order to be financially comfortable. And adding a revenue suite to your own home is a great way to pay off your mortgage even more quickly.
goes up in value. Is this true over short stretches? Not necessarily. But in 10, 20, 30 years? History has proven itself over and over again – as a long-term investment, it is hard to beat. Second, mortgages are paid off over time, even in 10 years, tenants help pay down the mortgage and in turn build up your equity. And thirdly, if you own a revenue property or a rental suite in your home, rents also go up with inflation. Even if you have the same tenants for 10 years, when they eventually move out, the future market rents will be significantly higher than they are today. They could be 30% higher in 10 years and almost double in 20 years, just using averages in Canadian inflation. Here’s an example of the future potential of purchasing a $400,000 property today: Today 20 Years From Now 1) $400,000 Value: $800,000 (based on a conservative 3.5% increase/year) 2) $2,000/mo Rent: $3,500/mo (based on a 2.75% average inflation rate) 3) $400,000 Mortgage: $0 (using increased rents to pay down mortgage)
Step #2: Buy Investment Real Estate Now – the Power of Compounding
Let’s say you purchase a revenue property today, and it has a neutral cash flow – neither positive nor negative. Using a rate of less than 3% for inflation, your $2,000 rent today would be over $3,500 in 20 years. If you refinance the property every five years and take any rent increases and add them to the mortgage payment, instead of taking 30 or even 35 years to pay off the mortgage, you would be able to do it in 20 years or less.
Investing in real estate has a triple benefit in its compounding effects. First, in time, real estate eventually
By purchasing one property today – 20 years from retirement – the $3,500/month in future rents puts
you halfway there. If you were able to purchase two properties today (using the above example), and using the same rates of inflation, you could have $1,600,000 worth of real estate and gross rents of $7,000/month before expenses. And that’s not taking into account that you followed Step #1 – owning your own home. Step #3: Pay Off Your Own Mortgage First Any extra money you have to throw at your mortgages needs to go towards paying off your own home (the nontax deductible debt) first. This also includes any positive cash flow from any rental properties. Once your own home is paid off, or you’ve converted the debt to taxdeductible debt, you can then pay off any of your mortgage debt. Step #4: Downsize If you decide to buy the most expensive home you can afford when you’re first starting out, by the time you’re ready to retire, you will likely be ready to downsize. The biggest benefit to this is that you won’t have to pay any capital gains tax when you sell your own home (based on today’s rules). If you decide to purchase something smaller, it will likely also be less expensive. That extra money can be used to pay off any mortgage debt you may still have on your revenue properties, or it can put away into a safe investment and the monthly return can help supplement your retirement.
Even if you don’t have 20 years before retirement, Steps #1 through #4 can still help get you to where you want to go financially. In 10 years, you may still have mortgages on all three properties, but your net worth could be much higher, giving you many more options. Once you take the first couple of steps, you may find that it is easier than you thought, and you may decide to become a more dedicated investor. Start small, if that’s more within your comfort. But definitely start soon...
Getting the Money for your Real Estate Deals
While the “no money down and no bank needed� strategy to finance your investments may seem attractive, it is not as pretty as it sounds. In this article, our expert shares her strategies she uses to fund and finance her investments: Vendor Take Back Mortgages, Private Money, RRSP Mortgages and Joint Venture Partners.
Getting the Money for your Real Estate Deals By Julie Broad Even after 4 years of running our real estate investment business full time, eleven years of history of never missing a mortgage payment on any property, and a substantial net worth, we still find it challenging to finance our investments. In September we bought a beautiful, cash flowing triplex. In order to finance it with the bank we had to show 3 years of mortgage and interest payments just hanging out collecting dust in a bank account. That’s on top of the 25% down payment required in a bank account for 30 days before we even apply for the mortgage. If you are starting to think about becoming a full time real estate investor and leaving your job, I encourage you to finance as many properties as you can while you have what the bank perceives to be a secure job. The good news is that you do have some options when the bank rejects you because you don’t have hundreds and thousands of dollars sitting around. If you watch late night infomercials you’ll probably feel some attraction to the no money down, no qualifying at the bank strategies. We’ve been right there with you, not once but twice. We’ve invested almost $40,000 into learning “no money down” and “no bank needed” investment strategies. The biggest lesson I can share with you is that just because you can do deals with no money down doesn’t mean you won’t need money. Sandwich leases are a popular one these days for Canadians that want to do no money down and no bank needed type deals. A sandwich lease is simply where you find someone who will allow you
to lease option their home from them and you turn around and offer it as a rent to own to someone else. You pocket the difference in monthly cash flow and option fee. In theory this is a great strategy. The reality isn’t as pretty. It takes a lot of marketing effort to find the deals as well as educating and explaining what you’re doing to the seller. Finally, you’ll find the houses are generally in a state of disrepair and need some investment to improve them so you can attract good rent to own tenants. How much money do you want to put into a house you don’t own? The final issue is that it rarely works out that your lease option term aligns with the term that your rent to own tenants are able to buy within. It’s tricky. Your upside is limited in this type of deal and while you CAN do it without the bank, we find most investors get into this type of deal really excited and work hard for a year or two and then look for something new because it’s so much work for a minimal payday. Generally when we did creative deals – whether it was a sandwich lease, wrap mortgage or some sort of seller financed strategy – we ended up with problem properties and challenging tenants. We basically created a full time babysitting job for ourselves. That is because the kind of deals you can do creatively generally are not the great properties in good areas. They don’t attract the best caliber of tenant nor do they have minimal maintenance requirements. The no money down and no bank needed strategies work but they didn’t work for the life and business we wanted to create.
The strategies we use to fund and finance our deals include Vendor Take Back Mortgages, Private Money, RRSP mortgages and joint venture partners. Sometimes we use a combination and other times we just use one. These strategies allow us to focus on doing great deals in areas that attract the best tenants. Our tenants typically love our homes like they were their own, apologize when they are late with rent or give us a heads up that it might happen, and rarely call us with problems. That’s because we focus on doing the deals that allow us to create a business and life we love instead of doing deals just because we can do them creatively or with little money down or no banks. Vendor Take Back Mortgages Seller financing, more commonly called a VTB or vendor take back mortgage is simply where the seller (Vendor) of a property is willing to provide some (or all) of the mortgage financing on that
property. Seller financing can take several different forms. We’ve done deals where the seller provided the entire mortgage, which amounted to 80% of the property value. We paid her 6% interest amortized over 25 years for a 3 year term with no prepayment penalties and an option to renew. She was able to sell her house in a slower market and made more money from it than she otherwise would have through three years of interest payments. We also have used seller financing to top up traditional bank financing. Private Money Private money is simply money from an individual. It’s different than hard money. Hard money lenders finance deals for real estate investors as a business. They are more sophisticated in their investment terms and will typically seek quick re-
payment at high interest rates. With private money you can have more control over the terms of the loan. You can offer terms that suit your needs and offer a good return for your private lender. The easiest way to find private money is to call your favourite mortgage broker and ask if they have any private lenders. That money is expensive, though. The upfront fees on those funds alone are usually 1-3% of your mortgage amount. On a $250,000 mortgage that means up front you can start off with a $7,500 fee plus pay at least 7% interest on the loan. That’s ok if you’re in a pinch with a strong cash flowing property, but our preferred source of private funds is to raise them ourselves. We find that a lot of folks have paid off their homes and are willing to put a line of credit on the property and loan that money out for a premium. One of our favourite strategies is to borrow $350,000 from someone’s line of credit to buy and renovate a property. We paid them 5% + their line of credit costs RRSP Mortgages Mutual funds and stocks are not the only investments that are RRSP eligible. A mortgage can be held in a self directed RRSP (or RESP, LIRA, or RRIF) account. This is probably the largest untapped source of funds available to real estate investors because very few people know this option
exists. Master this and you’ll always be able to find the funds for your deals. With no management fees or advisor commissions to pay, RRSP holders could be making a stable and predictable 6, 7, even 10% or more return on their money inside their RRSP. There are some additional rules around using RRSP funds though. For example, you can’t borrow funds from your immediate family to fund your investments. It needs to be arms length. You also can’t use the RRSP funds for a down payment directly on a property. You’ll need to put the funds on a different property as a first or second mortgage and then use those funds on the new investment. Joint Venture Partners This is the most powerful strategy in our investment tool box. It’s the strategy that has allowed us to comfortably add a new property to our portfolio almost every month. Our joint venture deals typically are structured so that we find the deals, oversee all work and management and split the proceeds 50% / 50% with our partner. In exchange for all experience and efforts, our partner puts in the cash required to close on the property and puts their name on title so they qualify for financing from the bank.
If anything goes wrong with the property and requires cash we are partners and split the costs 50% 50% just like we split the proceeds. Busy people love this option. They don’t want to spend the hundreds of hours we’ve spent learning an area, building a team and digging up deals. And they definitely don’t want to take calls from tenants or handle issues around the property management. They can get into real estate without the hassles of being a landlord. There are a lot of ways to fund your deals – even if the banks say no. The key is to know where to look, what to say, and what choices make the most sense for you and your goals.
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