Stocks, bonds, GICs, mortgages, call-options, cash or mutual funds are among the various eligible investment portfolios where RRSP or TFSA may join.  Indeed, a treasure trove of investment possibilities could be harnessed from RRSP or TFSA.

Thomas Beyer, President of Prestigious Properties, in a recent article mentioned that he observed that RSSP or TFSA are not directly involved in real estate investment, which promises higher returns.  Beyer expressed that despite restrictions, investing on the right real property and whether done inside or outside of RRSP or TFSA, promises excellent long-term dividends.

He shared three existing broad options where one could invest on real property within RRSP or TFSA, namely: (1) mortgages; (2) publicly traded stocks that invest in real estate; and (3) private firms that invest in real estate.

Mortgages

Considering that real estate transactions are generally facilitated through mortgages, RRSP or TFSA could stand as the lender.  Beyer explains that the RRSP or TFSA holder may hold either of the following:

a single mortgage; or

a share of many mortgages, called a syndicated mortgage; or

shares in a MIC, a Mortgage Investment Corporation. A MIC pools many mortgages and allows the individual investor to co-own a share of multiple mortgages in their RRSP or TFSA.

However, Beyer advises that before investing through this option, one must research well on the risk of the loan and evaluate well whether or not the offered interest rate compensates for this risk.

Publicly traded stocks that invest in real estate

Real Estate Income Trust or REIT is one publicly traded firm where RRSP or TFSA could be invested into.  Beyer stated that REIT pays out the majority of its income on a monthly basis.  He opines that REIT can be an excellent vehicle for retirees or those folks seeking monthly income.

While investing on REIT gives the benefits of instant liquidity, quarterly reporting and regulatory oversight, Beyer cited that this can be affected dramatically when negative unfounded speculations would cause panic selling, buy/sell manipulations by insider, and other unexpected market  swings, resulting to drop in stock market values.

Private firms that invest in real estate

RRSP or TFSA holders may invest via limited partnership with real estate experts who have reputable track record in buying and managing apartments.  Beyer explained in his article that: “One party invests, the other parties does the work and profits are split according to a pre-determined, and annually inspected, formula.”

He cited that because this corporation or limited partnership owns real assets, in the real world, with real money changing hands for real assets, the values can be established relatively readily, without the often irrational stock market value swings.  Thus, a stable business investment with assurance of returns could be expected from investing with private companies that invest in real estate.

Are you wary of swindlers and you are on the lookout for serious operators? Check out the websites post on “8 Mistakes to Avoid When Investing in Real Estate Syndicates“.  This will give you tips on how to spot the difference.

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