Investing In Real Estate With Your Registered Retirement Savings Plan in Canada is Possible

As you know, real estate historically has always been a solid performer. It rises with inflation, has cash flow, and can have “forced appreciation” through improvements, zoning, etc. Recently the Wall Street Journal, New York Times, and countless other publications have written stories about how the big Wall Street companies are jumping in and buying real estate rather than stocks… because they know they can get a better return.

So, why are most Canadians still trusting their own retirement reserves… RRSP’s… TSFA’s… RSP’s… to Mutual Funds and the stock market?

The answer is, Canadian’s don’t know there is any other way!

And secondly…the big banks don’t want Canadian’s to know either!

Before we dive into the good stuff… remember, we are not financial advisors and by no means should this guide be meant to act as financial, tax, or legal advice. It’s for informational purposes only. Consult your own professional advisors before you make any financial choices.

The Self-Directed RRSP for Real Estate

There’s something called a Self-Directed RRSP. They’ve been around for a while… and in the past several years, lots of people have realized that their RRSP’s aren’t earning them a darn thing (sometimes even losing money compared to inflation rates). So, those people (maybe this is you) have started to look for other ways to earn better returns with that same RRSP.

Enter the “self-directed RRSP”.

A self-directed RRSP is simple. It’s a registered retirement account that has the same tax benefits as a normal RRSP… but, you have more flexibility in deciding what you want your RRSP to be invested in.

You can invest in…

Real estate (commercial, income generating rental property, renovations, etc.)
Promissory Notes secured by mortgages (i.e. – private lending)
Limited partnerships
… and, of course, the “normal” investments like mutual funds, stocks and bonds that the big banks suggest (and make money hand over fist) to invest in

Basically, this opens it up so you can buy investment real estate with your RRSP… and the best part is the real estate deal(s) get reviewed and chosen by you instead of a nameless faceless corporation. Its your money, you should know exactly where it’s going.

Are There Restrictions?

Yes, there definitely are. Most times the financial advisor, banking institutions, or investment firms holding the RRSP has restrictions on what they think you can and should invest in. They will tell you flat out that you cannot and should not invest outside of the “norm”. But if the “norm” isn’t doing the trick, and these entities policies won’t allow you to invest elsewhere, then the very definition of insanity is doing the same thing over and over again and expecting different results…Enter a trust company.

A trust company? What’s that?

Great question!

Self-Directed RRSP Trust Companies

The CRA created the SD-RRSP (self-directed registered retirement savings plan) loophole to help investors take more control over their investments while at the same time still getting the tax benefits. But, at the same time… they don’t want people setting up these SD-RRSPs and carelessly investing in unvetted investments.

So there is a facilitator that they have in place… and that is a registered trust company.

They act as the “go-between” when you’re going to make an investment. Trust companies have guidelines from the Canada Revenue Agency (CRA) on how and what you can invest your Registered Funds in. Ultimately, the trust companies job is to direct your funds as per your request, and in the appropriate way as per CRA rules surrounding SD-RRSP’s.

You should do your homework and find the trust company that’s right for you.

Some have more expensive fees than others… and some give more flexibility than others.

What To Ask A Self-Directed RRSP Company Before You Work With Them

Before you sign on with an SD-RRSP company… ask them a few key questions.

What are your fees? – Fees can vary wildly. Some charge an annual fee based on the value of the account, some charge an annual fee, some charge large setup fees, etc. Find out what works for you. But, the idea is that by being able to invest in real estate with your RRSP… you’ll more than makeup for the fees you’re paying with your higher returns.
What’s the process for approving an investment? – Some companies can take up to 30 days+ to fund an investment after you send it in for approval. If you have an investment in mind the timeline could become an issue.
Are there any restrictions on what I can invest in? I want to invest in real estate and make private loans. – Some SD-RRSPs with larger more traditional companies like BMO, CIBC and RBC Royal Bank put restrictions on what your account can invest in. Some don’t allow real estate… while others do. Just ask.
Is my retirement account eligible to “roll over” into an SD-RRSP? – Not all retirement accounts can be rolled over into a self-directed RRSP. Just ask your financial advisor and ask the representative at the SD-RRSP company you’re working with.
How long will it take for my account to be up and running and have funds available for investment? – Some people wait way too long to get this process rolling. If you know you want to use your RRSP to invest in real estate… get the ball rolling on getting it rolled over into an SD-RRSP account asap. Some companies may take weeks or even over a month to have your account setup complete and ready to invest. So, don’t wait until you’ve found a great real estate deal to get started… get started today so your funds are ready to invest when you need them.

Getting Off The Sidelines And Getting Your Money Working For You

If you feel a self-directed RRSP may be a great way for you to invest a portion of your retirement in things you know (rather than the unpredictable stock market)… then dive in, take some time to educate yourself on the pros and cons of a SD-RRSPs, and call us if you have questions!

And if you have any questions on how you can work with us as an investor, putting your money into a hard asset that you can drive by and touch… just connect w/ us through our contact form or call us anytime at: (403) 613-8119. We will reach out to find out how we can help you reach your investment goals!

Happy investing! We’re here as a resource for you so don’t hesitate to connect with us anytime.