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How Much Money Do I Need to Retire? Learn How Real Estate Can Help You Achieve Your Goals

Posted on August 10, 2021October 11, 2022 by Gregory M. Colford, B.A., J.D., C.I.M.®

Planning for retirement is a life-long process. Whether you’re 30 and just starting to climb the corporate ladder or you’re 80 looking to ensure you have the monthly income you require, you should be thinking about and planning for retirement. It’s never too early — or too late! — to save for retirement. Talking about money can be daunting, but we’re here to help.

Most people understand the importance of saving early, but many struggle with this question: How much money do I need to retire? Many factors determine how much money to save for retirement, which is why we recommend you speak to a licensed financial advisor to discuss your options. To get you started, here are a few things to keep in mind.

Key Points

The 25x rule shouldn’t be the only tool in your financial toolkit, but it might give someone who has yet to start saving a ballpark figure to aim for if they intend to retire around age 65.
There’s another major benefit to holding your retirement savings in a registered account that more investors should know about: You can use your registered funds to invest in real estate.
Having asset-backed investments like real estate provides greater security and lower risk to your portfolio.

How much you should be saving goes directly to how much you think you will need to live on each year that you are not earning an income.

How much should I be saving now?

There’s no cut-and-dried answer to this question, but you can make an educated estimate. The 25x rule invites you to calculate how much you think you’ll need in a given year in retirement, then multiply that number by 25. The 25x rule shouldn’t be the only tool in your financial toolkit, but it might give someone who has yet to start saving a ballpark figure to aim for if they intend to retire around age 65.

(Expected Annual Retirement Expenditures) x 25 = Required Savings Amount

How much should I withdraw from my retirement funds when I retire?

Financial advisor Bill Bengen created the 4% rule in 1994. It recommends an individual withdraw 4% in year one of retirement and adjust the fraction in subsequent annual withdrawals to reflect the rate of inflation. Due to lower inflation, he recently revised his recommendation to the 5% rule. Lower inflation means investors can “safely” pull out more than the 4% rule. That’s good news for investors seeking passive income. (Source: The Creator of the 4% Rule for Passive Income Just Changed it!)

The Modern Day Playbook For Super Successful Investing

How can a smart, modern investor get in on the real estate investing action, especially since going on your own may require prohibitive amounts of capital? Most people do not have the requisite knowledge or expertise to invest in real estate on their own.

How can I save early and wisely?

The vast majority of Canadians use their RRSPs (Registered Retirement Savings Plans) to make contributions to their retirement savings, whether in an individual or spousal plan. RRSPs have many advantageous qualities for individuals planning their retirement, including:

Contributions are tax-deductible – “RRSP Season” as we like to call it runs for the first 60 days of the year, just before “Tax Season.” During this time, you can make RRSP contributions with pre-tax dollars, allowing you to deduct RRSP contributions from your income each year. This provides immediate tax relief in any given year.
Earnings are taxed sheltered – If you use your RRSP to invest, any earnings made are sheltered from taxation as long as they remain in the plan.
Tax deferral – RRSP contributions and earnings will be taxed when you withdraw them. However, it is likely that upon withdrawal, your marginal tax rate will be lower than when you initially made the contributions.

There’s another major benefit to holding your retirement savings in a registered account that more investors should know about: You can use your registered funds to invest in real estate.

It’s important not to pigeonhole yourself into only investing in a handful of assets such as publicly-traded equities and bonds. This is where real estate can come into play! Many Canadians tend to focus their attention (and RRSP contributions) on a small handful of asset classes and are unaware that RRSPs can also be used to invest in:

Canadian mortgages
Mortgage-backed securities
Income trusts

Having asset-backed investments like real estate provides greater security and lower risk to your portfolio.

Fundscraper has numerous real estate backed offerings that are eligible for investment with your registered capital (RRSP, RRIF, TFSA, etc.), helping you contribute to your retirement savings.

Start Investing in Real Estate Backed Investments Today

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How to Evaluate MICs

Posted on August 10, 2021October 11, 2022 by Gregory M. Colford, B.A., J.D., C.I.M.®

Historically low-interest rates in recent years have become the driving force for many savvy investors to build wealth through one of Canada’s hottest private real estate investment products: mortgages. This is all possible through Mortgage Investment Corporations (MICs), which are designed to bring like-minded investors together to passively invest in real estate mortgages. Instead of owning “brick and mortar” and playing property manager, you’re a banker! But how well do they work? What considerations should investors note? Here, we show you how to analyze a MIC before investing in one.

Key Points

Historically low-interest rates in recent years have become the driving force for many savvy investors to build wealth through one of Canada’s hottest private real estate investment products: mortgages.
There’s more than one way to buy a property or buy a home. MICs are an accessible investment vehicle for many — especially those seeking diversification from traditional investments like mutual funds and the stock market.

The Modern Day Playbook For Super Successful Investing

Here’s Why You Should be Investing in Mortgage Investment Corporations

A MIC is a company that pools shareholder capital, lends that capital out as mortgages, earns income via interest and fees, and pays 100% of its net income (after management fees) back to the shareholders.

Dividends paid by the MIC are taxed as interest. Many MIC investors prefer to hold their shares in a registered account like an RRSP, RESP, RRIF, or TFSA.

An investment in shares of a well-managed MIC provides investors with:

Capital preservation
Regular dividend income
Potential for growth via reinvestment
Constant deployment of capital
Full-service origination and administration

Still have questions about how to invest in mortgage investment corporations? Schedule a call with us and we’ll walk you through it.

Types of MICs

MICs usually hold the majority of their assets in high-yield, uninsured residential mortgages. Unlike banks, these pools of capital are generally lending for much shorter terms, with 6 to 24 months being standard.

MICs lend money to people who would or have been turned down by more traditional outlets like banks, credit unions or large alternative lenders. As such, they are able to charge significantly higher interest rates on their mortgages (in some cases in excess of 10%). In a hot real estate market such as the GTA and Vancouver, many borrowers have sought money from MICs to purchase homes or bridge gaps in funding.

To understand the allure of MICs, compare them to other fixed income investments. It’s rare to find a GIC that pays even 2% for a one-year term these days. Government bonds offer similarly low yields, even for 10-year terms. Investment-grade corporate debt does pay more, but even with those bonds, 4.0% to 4.5% is pretty much the limit these days in Canada. Bottom line, if you’re slightly more adventuresome, MICs can offer a better return.

There’s more than one way to buy a property or buy a home. MICs are an accessible investment vehicle for many — especially those seeking diversification from traditional investments like mutual funds and the stock market.

Pros and Cons: What You Need To Know

Pros

Investing in a MIC spreads the investment across a large pool of mortgages, mitigating the risk from investing in single specific mortgages.
Fund managers actively manage the investments and mortgages, providing an investor with a hands-free investment experience.
MICs are required to comply with Federal regulations and the provisions of the Canadian Income Tax Act.
A MIC generates its return from monthly mortgage payments made by the borrowers. This provides investors a stream of income while their investment is secured against real property. An investor is relying on debt repayment; not rental income!
Under the Income Tax Act, taxable dividends paid to shareholders are taxed as interest income. A MIC does not pay any income taxes, provided that we distribute all of our taxable income each year.

Cons

The people receiving the mortgage may have low credit. With rates on prime mortgages so low, for someone to be paying on the order of 10% annually indicates that they’re a subprime borrower.
With housing prices so lofty, the underlying collateral behind these private mortgages may not be so sound. Should prices start to fall and a borrower defaults, the MIC may not recoup all of its money when it seizes and sells the asset.
There’s potential for a so-called liquidity mismatch: Most MICs are “private” meaning they do not publicly trade their shares. An investment in a MIC is not “liquid”. Investors who need easy access to cash should avoid investing in private MICs.

How to Analyze Mortgage Investment Corporations

Check track record and team expertise.
When planning to invest in a MIC, check out the track record and team expertise of those sponsoring/promoting the MIC. Anyone can set up a MIC (and there are hundreds!), but it takes skill to lend carefully and profitably. Get help – a licensed advisor can help you sift through the noise an help you find the folks that can deliver you the investment return you’re targeting.
Make sure the investment is suitable for your risk tolerance and investment goals.
Risk-averse investors should look for a mortgage pool that is lower in risk. The riskiness of a fund or pool can be judged by the pool’s underwriting criteria – is the pool made up mostly of first mortgages (suggesting it’s relatively conserbative), mostly seconds (oh, might be a tad risky) or is it some balance of the two? Sometimes it’s easy to find this information. A reputable issuer will have good disclosure documents like an offering memorandum (What’s an offering memorandum?) that will provide lots of detail. Again, a licensed advisor will help you find this information. If income and preservation of capital are your goals, you’ll likely lean toward a pool that has conservative underwriting criteria and consistently delivers modest but good returns and supports your personal finance. Learn more about our underwriting criteria here. Advisors like Fundscraper will help you find something suitable.
Understand the mortgage portfolio composition and concentration.
- Types of Mortgages
  There are a variety of types of mortgages – first, second, third and so on. A mortgage (also called a “charge”) is simply a registered notice to the world that in the event the owner of the property fails to pay back a debt owed, then the person that has the benefit of the mortgage/charge may force a sale of the property to satisfy the debt owed. Mortgages are ranked according to time of registration – first on title gets the first “kick at the can”! Only after the first is satisfied, can the next party step up! So, as you can imagine, the further down the line a lender might be,, the higher the risk is that the lender will not be able to be repaid by forcing a sale of assets as there simply may be no assets left to sell when that lender’s turn comes up! And that is how mortgages are generally priced: the higher likelihood of repayment the lower the rate of interest; the lower likelihood of payment, the higher the rate of interest!
  An asset manager like Fundscraper will create a mortgage pool to reflect risk of repayment. Our first mortgage pool only invests in first mortgages, which means Fundscraper has a greater likelihood of being made whole on its investments in the event a borrower fails to repay its debt owed.
- Terms of Mortgages
  The term of a mortgage is the length of time a borrower may use the funds advanced by a lender. A term may be any period of time. The private mortgage world a mortgage loan will typically be anywhere from six months to three years. The reason for the shorter term is that these mortgages are risky than traditional mortgages and lenders like to review terms more often then in a traditional setting. These shorter term mortgages will often renew. Mortgage pools that are populated with these shorter term mortgages benefit by the frequent renewals as changes in rates can be made and fees earned in the renewal process. For example, in Fundscraper’s Diversified First Mortgage Pool the terms of the first mortgages contained in that pool vary between 6-18 months.
- Geographical Location
  You should be wary of mortgage pools that have a high concentration of mortgages in one geographical location, because it is more sensitive to adverse local economic and real estate conditions. Our Diversified First Mortgage Pool is selective about real estate development, investing in single-family and multi-family residential assets in established neighbourhoods in southern Ontario.
Know the loan-to-value of the mortgage portfolio.
For most mortgage pool funds, a loan-to-value ratio of 75% is considered conservative (banks typically lend at a max. loan-to-value ratio of 75%). This means that the amount of the loan cannot exceed 70% of the property’s value. The difference between the loan and property value creates a safety cushion that protects investors from losses in the event of a borrower default that triggers a foreclosure and sale. Get a crash course on loan-to-value here.
Understand all fees.
Investors in mortgage pools sometimes pay higher fees that can reduce the payout amounts to you. Fees can be high and can include management fees, performance fees, and mortgage origination fees. The operating expenses of the mortgage pool are also funded from investor money. This means that a manager can earn a higher return than investors through the different types of fees. Our First Mortgage Pool has a 1% management or mortgage servicing fee and the fee details are disclosed in our offering memorandum.
Check for compliance.
Fundscraper Property Trust must comply with the rules of government agencies, which are described in its disclosure documents. The principal document is the offering memorandum, which contains information regarding the Trust’s structure and objectives and management team experience. Fundscraper Capital Inc., the promoter of the Trust, is strictly regulated as an Exempt Market Dealer.

Still not sure how to analyze mortgage investment corporations in Canada? Whether you want to buy a single-family home or rental property, invest in office buildings, are considering buying an investment property, or have questions about real estate investment trusts (REITs), our team can help you understand your options. Schedule a call with us and we’ll answer all of your questions.

Start Investing in Real Estate Backed Investments Today

Explore the investments available on Fundscraper.

How Do I Invest My RRSPs into Private Real Estate?

Posted on August 10, 2021October 11, 2022 by Gregory M. Colford, B.A., J.D., C.I.M.®

Private real estate investment is too often overlooked in an investment world dominated by hedge funds, ETFs, Principal Protected Products, publicly traded shares, and bonds. If you think private real estate investing is only for the wealthy or experienced, think again. Private real estate investing is for everyone, especially because you can use your RRSPs to invest. It’s an affordable, approachable way to get started. Not sure how to do that or what that means? We’ll explain.

Key Points

Most people don’t realize that they can invest in private mortgage investment entities like mortgage investment corporations and mortgage trusts, as well as mortgages directly, with their RRSPs.
What is evolving today is that the less risk-averse investor should actually be the one weighing their portfolio more favourably toward real estate than otherwise. This is because real estate is such a strong non-correlated asset class to the hoped for “high flyers” to which so many less risk-averse investors are attracted.

What is an RRSP?

RRSP stands for “registered retirement savings plan.” A “registered” plan means the plan, and the account associated with it, is registered (or held) by a service provided by the Canada Revenue Authority to manage accounts that benefit from the special treatment our federal and provincial government’s grant to these unique retirement savings plans. Other examples of “registered” plans are “Registered Retirement Income Funds” and “Tax Free Savings Accounts”. What is discussed below is applicable to RRIFs and TFSAs as well!

The majority of Canadians hold their retirement savings in registered accounts. Most often people invest their RRSPs in stocks, bonds, mutual funds, exchange traded funds and other public securities. Many people believe that is all they can invest in through their RRSPs, but that only scratches the surface of what’s possible.

Most people don’t realize that they can invest in private mortgage investment entities like mortgage investment corporations and mortgage trusts, as well as mortgages directly, with their RRSPs. If you’re interested in doing this, we can help.

What are the benefits? Considerations?

Investing in private real estate is an excellent way to diversify your portfolio. Savvy investors know not to put all of their eggs in one basket, and private real estate helps minimize risk of loss. It also helps generate return and preserve capital.

Investment advisors commonly recommend that a person’s portfolio have between 10% and 20% in real estate. It is generally thought that investors who are risk-averse would tend to hold a mix with more real estate and less risk-averse investors would tend to weigh stocks more heavily in their portfolio. What is evolving today is that the less risk-averse investor should actually be the one weighing their portfolio more favourably toward real estate than otherwise. This is because real estate is such a strong non-correlated asset class to the hoped for “high flyers” to which so many less risk-averse investors are attracted.

Most people don’t realize that they can invest in private mortgage investment entities like mortgage investment corporations and mortgage trusts as well as mortgages directly through their registered accounts.

How to determine which real estate investments are right for you

If you’re interested in investing your RRSPs in private mortgages, whether directly or through a mortgage investment entity like a MIC or mortgage trust, then the first thing you should do is seek expert advice if you have little experience in the private mortgage markets. The process is not difficult, but if you’ve never done it before, you’ll need an expert to walk you through it. That’s what we’re here for!

Your advisor should be a registered mortgage broker or an exempt market dealer focused on mortgages. At Fundscraper, we’re both. We begin by asking about your investing experience, investment portfolio to date, risk appetite, expectations, current needs, and future needs. This is called a suitability assessment, and it helps us determine whether private real estate is an appropriate investment for you at this juncture of your life. If yes, the next step is identifying a mortgage investment product that would be suitable for you.

How to invest RRSPs into private real estate

Once we have found something that is suitable for you, the next steps are setting up how you can acquire the private mortgage investment security with your current RRSP funds that are held by your bank or financial advisor. Those RRSP funds are likely tied up in mutual funds, exchange traded funds, and other RRSP eligible securities. We’ll help you with this process as much or as little as you need.

Fund your investment. Liquidate a fraction of your RRSP holdings to the cash amount you need to make your new investment.
Open a self-directed RRSP. Ask your financial institution (any Canadian chartered bank or trust company) to do this.
Transfer your liquidated funds to your new account. You’ll complete a “transfer instruction” whereby your new financial institution will request that your current RRSP institution transfers the liquidated funds to your new self-directed RRSP account. Once all the forms are completed, they are filed with the originating institution instructing it to transfer your cash portion to your newly created self-directed RRSP account with the new financial institution.

Learn More About Investing
Guide to Real Estate Investing

6 (Achievable) Ways to Earn Passive Income

How Do I Invest My RRSPs into Private Real Estate?
Wait for the funds to transfer. The transfer can take up to four weeks. In order to maintain RRSP eligibility, funds must move directly from one RRSP account to another. You cannot withdraw the funds yourself, take them to your financial institution, and deposit them.
Invest your RRSPs into private real estate. Once the funds arrive in your self-directed RRSP account, tell the self-directed RRSP account to fund your investment in the private mortgage investment entity. You do that by way of delivering to the financial institution a “payment direction” — the financial institution has a standard form of payment direction that it will provide to you. The payment direction tells the financial institution to invest in the private mortgage investment entity for you through the newly created self-directed RRSP account for the amount set out in the direction.

Investing your RRSPs in private mortgages is easy! Nevertheless, it’s important to have your advisor orchestrate the process on your behalf, as there are moving pieces that have to be coordinated.

How do I get started?

Your registered account savings are your nest egg. Be careful with how you employ and invest these funds. Work closely with reputable dealers to first determine whether investing in private mortgage securities is suitable for you and, if so, what the best private mortgage investment products are for you at the time you want to make the investment.

Start Investing in Real Estate Backed Investments Today

Explore the investments available on Fundscraper.

How to Invest in Real Estate

Posted on August 4, 2021January 12, 2022 by Gregory M. Colford, B.A., J.D., C.I.M.®

The wealthiest investors all have one thing in common: They invest in real estate. You can do it, too, even if you can’t afford a down payment. Read our latest article to learn how to invest like the 1%.

Think you can’t afford a real estate investment? Think again. Worried now isn’t the right time to add another property to your portfolio? It is possible, and we’ve got you.

Even if the extent of your financial experience is a high-yield savings account, you can—and should!—diversify your portfolio with real estate. Fundscraper will teach you how to invest in real estate like the 1% does. If you’re wondering how to invest in real estate, Canada is an excellent real estate market for both seasoned investors and newbies alike.

Here’s Why You Should be Investing in Real Estate

Most of us never get a chance to participate directly in a major real estate project — usually grabbed up by big players, like private equity firms, banks, insurance companies, pension funds, and government institutions.

We are mostly left to public mutual funds, real estate investment trusts (REITs), exchange traded funds (ETFs), and the like. Most people don’t think they have the means or personal finance to buy an investment property, a rental property, an office building, or a single-family home as an investment, but they very well might.

The bottom line isn’t necessarily where you think it is.

Every investor’s goal should be to build a more perfect portfolio designed for maximum rewards and minimum risk.

Consider the experience of and the lessons to be learned from the Yale University Endowment, which is one of the best performing investment portfolios in North America, having a current value in the range of $30 billion. The fund is known for its “20% rule” which recommends at least 20% be invested directly in private markets, such as real estate.

This invariably translates into significantly higher returns over time for real estate investors over those who employ a more traditional allocation based in public markets. One can only conclude that it makes sense to piggyback onto a tried and true paradigm of real estate investing established by the major players.

If you’re new to real estate investing, the idea of adding such a large asset to your portfolio may seem intimidating. But it’s easier and more attainable than you might think.

Is Investing in Real Estate a Good Decision?

Too often, the traditional portfolio mix fails to achieve optimum performance because of the under-representation of direct real estate investing. Our thesis is simple: You’ll likely be more successful if you put more emphasis on solid direct real estate investing, while at the same time maintaining a high degree of safety.

Being risk averse is a good thing. We’re risk averse, too! Most people are naturally risk averse. We’re drawn to what we know and hesitant of what we don’t know.

The average person knows more about traditional investments like stocks and bonds, so that’s where they put most of their money. But the investment environment, especially in the stock market and bond market, can be volatile.

If you’re risk-averse, you should know that limiting your investments to only the public markets is one of the biggest investing risks of all.

The Modern Day Playbook For Super Successful Investing

Why Investing in Real Estate isn’t just for the Wealthy Anymore

An investment property probably conjures images of the wealthy 1%, but we help make that dream accessible to many. Investing limited only to public markets risks the chance of devastation if the “bubble” precipitously bursts based on factors beyond our control, such as environmental disasters, inflation, or fluctuating interest rates.

Common sense tells us to spread our money out into a diversity of pots, hoping the ups and downs will balance out and we will enjoy a somewhat stable, if unspectacular, return on our investments. As such, to grow and build wealth, it’s a good idea to put a bigger emphasis on real estate investing.

You can add real estate to your portfolio without actually needing to buy a home, or even buy a property.

How to Invest in Real Estate Like a Pro: What You Need to Know

Direct real estate investing fluctuates quite distinctly from other conventional asset groups like stocks and bonds. For instance, real estate is tangible and is what lawyers call an “immovable.” It’s not a substitute that should take the place of other assets in your portfolio, but rather an asset group all its own.

Unlike stocks and bonds, real estate trades privately based on local factors such as location, supply, demand, and investment lifespan. It is often scarce, particularly in growing areas, which translates to a history of appreciating value. In your portfolio, real estate investing is a channel to investments backed by real hard assets providing a regular income stream and long term growth coupled with the benefits of diversification.

You can enjoy superior performance and diversity at the same time. This is especially true if you’re maintaining and growing the value of your retirement portfolio. Smart real estate investing can only enhance the prospect of enjoying the benefits of things like reasonable leverage (typically as much as 4 or 5 times) and the miracle of compound interest over an extended period of time.

Your investment portfolio can enjoy superior performance and diversity at the same time. You don’t even need to be a landlord or property manager!

Meaningful real estate investing is essential for a well-rounded and successful investment package, and the benefits go well beyond diversification. The most obvious benefit of real estate investment is the financial one.

Real estate earns attractive monthly returns and can provide a regular fixed income stream over a set time frame. Speaking of tangibility, that’s another benefit: Real estate is a hard permanent asset that can be easily securitized. It has value, and you can calculate that value at any given moment.

Take advantage of having solid real estate investing as a meaningful part of your portfolio. It’s a self-evident way to enjoy reasonable returns and balance out the vagaries and unpredictable fluctuations in public securities markets, both domestic and international. It’ll pay off in the long term while maintaining a high degree of safety.

Other benefits of real estate investment to note include:

The ability to take advantage of leverage
Tax deductions
A chance to create added value
An increased voice in the management of the asset

Now that you know more about how to invest in real estate in Ontario, Fundscraper is here to answer any further questions you have about how to invest in commercial real estate, real estate development, and more. It’s time you start earning passive rental income. Contact us today to get started.

Start Investing in Real Estate Backed Investments Today

Explore the investments available on Fundscraper.

Guide to Buying Investment Property Mortgages

Posted on August 4, 2021October 4, 2021 by Gregory M. Colford, B.A., J.D., C.I.M.®

Key Points

You can expect the interest rate on your mortgage for investment property, Canada specifically, to be at least 0.50% to 0.75% higher than the rate on your primary mortgage.
If you don’t want to manage real estate, or don’t have the money for the down payment and financing to buy the real estate, consider an alternative to a conventional mortgage.

Buying rental property can be a great way to invest for the long term and generate monthly income. Like any investment, research the pros and cons before making any decisions and be clear on your goals and risk appetite for owning rental property.

Investment Property Mortgages: What You Need to Know

Advantages

Disadvantages

You pay fewer taxes.

You can deduct certain expenses from your income, including mortgage interest, property taxes, insurance, maintenance, upgrades, property management, and more.

You take on the responsibilities and challenges of a landlord.

Rental units need repairs and dealing with tenants can be challenging.

You may be able to deduct losses for tax purposes.

If your expenses exceed your rental income, you may be able to deduct that loss from any other sources of income.

It may be difficult and costly to sell the property later.

Real estate is not a liquid investment. It can be time-consuming and pricey to sell, depending on market conditions.

You receive regular monthly income.

Other kinds of investments may pay out less often or income may be less predictable.

It may be difficult to finance the purchase.

You must have a down payment of at least 20% when you buy a second property.

What to Consider Before Buying an Investment Property Mortgage in Canada

What kind of property do you want?

Most first-time investment property buyers tend to start with condos and single-family homes.
With property, bigger is not always better. It likely means more taxes and more space to maintain.

What’s an ideal location?

Look for property close to schools, hospitals, public transportation, businesses, and retail.
Focus on neighbourhoods where demand for rental properties is strong and expected to remain so.

How is the local rental/job market?

A healthy job market will likely spur demand for housing and may result in rising rental income.
A growing area with major improvement projects planned could make the location more attractive to potential renters.

Does purchasing a property make financial sense?

Investing in rental property (or a rental property mortgage) should be considered a long-term investment that helps build capital.
Consider whether your real estate investment has the potential to provide a better return when compared with other investments.

Get the advice of experts

Assemble a team of professionals to advise you on real estate, legal, tax, and financial decisions.
Consider including an investment advisor on your team, as any property you buy will impact your asset mix and overall portfolio. That’s where Fundscraper comes in!

You can expect the interest rate on your mortgage for investment property, Canada specifically, to be at least 0.50% to 0.75% higher than the rate on your primary mortgage.

Getting to Know More About Investment Property Mortgage Rates on Loans

Mortgage interest rates will always be higher on investment properties than on your primary residence. Lenders add this upcharge because they consider a rental or investment property mortgage — Canada markets included — to be a riskier loan product.

To protect themselves against the extra risk that comes with investment property financing, lenders charge a higher interest rate and have stricter qualification rules for borrowers. That makes it extra important to shop around and make sure you’re getting a fair mortgage rate on your investment property before you buy.

Learn More About Investing

Guide to Real Estate Investing

6 (Achievable) Ways to Earn Passive Income

How Do I Invest My RRSPs into Private Real Estate?

Achieving Your Long-Term Goals with a Mortgage on an Investment Property

Everyone has their own reasons for getting into property investment. What are your long-term goals? Do you have an investment target – a certain amount of money you’re hoping to make? This adds purpose and structure to your plans.

If you know your financial goals but aren’t sure how to structure your plans to meet them, that’s okay. We all start somewhere! Consider looking at past historical data and making reasonable expectations for the future. If you have information on how much properties like yours have appreciated in value over the years, you can make educated guesses about your financial future and estimated mortgage payment.

Are You Ready for an Investment Property Mortgage?

Assess your current financial situation to see if buying investment property makes sense for you now. Consider these questions:

Can you afford the sizable purchase price of real estate and still cover your existing financial obligations?
Is your credit in good standing?
Do you have the minimum 20% down payment you’ll need to secure financing?
Have you factored closing costs into your expenses?
If any repairs are needed to a property before it’s rentable, do you have the money to pay for them and the mortgage until you’re able to rent it?
If you have a primary residence, could it, or a line of credit secured against it, be used as a potential financing source?
Don’t forget that lenders will employ either a “Rental Add-Back” or “Rental Offset” to assess your ability to repay their indebtedness. Learn about each, but know that rental offset will always leave you in a better position than rental add-back.
Know that mortgage insurers will not provide mortgage default insurance on investment properties. Generally, it’s only available on residential homes worth under $1 million.

If you don’t want to manage real estate, or don’t have the money for the down payment and financing to buy the real estate, consider an alternative to a conventional mortgage.

Passive real estate investing in a mortgage pool may be a better option for you. You can even use your RRSP to fund your mortgage, which we call a self-directed RRSP mortgage investment property.
Contact Fundscraper today to discuss your options for investment property mortgage, Canada and beyond.

Start Investing in Real Estate Backed Investments Today

Explore the investments available on Fundscraper.

The Role of the Credit Committee of an Exempt Market Dealer

Posted on July 31, 2021November 15, 2021 by John J. Pizale, BSc, JD

The Credit Committee, sometimes called the Investment Committee, is a panel of individuals ubiquitously found in financial institutions, pension and endowment funds, credit unions, banks, insurance companies, and the like. Here, we’ll focus on the role and inner workings of the Credit Committee of an Exempt Market Dealer offering real estate products to the public.

Key Points

An EMD is a firm that has been licensed to distribute investment securities that are exempt from the rigours of a prospectus normally required by the Canadian Provinces in which it is registered to carry on business
The Board of Directors of an EMD normally establishes the Credit Committee comprised of senior management individuals with authority and relevant skill and experience. They meet regularly to consider new investments and approve, amend or turn away investment opportunities being brought forward under the auspices of the EMD
The credit committee serves as a natural buffer or safeguard against an overly enthusiastic promoter. An essential part of its mission is to protect the ultimate consumer of products offered to the public under the umbrella of an EMD

What is an exempt market dealer (EMD)?

An EMD is a firm that has been licensed to distribute investment securities that are exempt from the rigours of a prospectus normally required by the Canadian Provinces in which it is registered to carry on business.

EMDs may act as dealers for prospectus exempt securities sold to qualified clients. Typically, an EMD offers products covered by an Offering Memorandum (OM) which need not be pre-cleared by a Securities Commission. An OM is an issuer-prepared document purporting to describe its business. OMs assist prospective purchasers in their decisions of whether to invest in the securities being offered by the Issuer.

The Credit Committee does much of the “heavy lifting” for investors in evaluating the underlying merit of any investment opportunity.

What is a credit committee and what does it do?

The Board of Directors of an EMD normally establishes the Credit Committee comprised of senior management individuals with authority and relevant skill and experience. They meet regularly to consider new investments and approve, amend or turn away investment opportunities being brought forward under the auspices of the EMD.

The Credit Committee has a broad range of duties and responsibilities, including the obligations to:

Ensure regulatory compliance for each investment
Review regularly investment policies and recommend to the Board of Directors changes in policies, procedures, internal controls and underwriting guidelines
Promote wise investment and credit management
Rule on investment opportunities, taking into account credit, market, operational and legal risks
Ensure any investment is consonant with the EMD’s published investment criteria and policies

What is a loan officer?

The Loan Officer assigned to any proposed transaction is an experienced underwriter charged with presenting the investment opportunity to the Credit Committee, including all the supporting research. An underwriter’s main task is to assess the quality of an investment, its sponsors, and its inherent risks. Oftentimes, the Loan Officer’s presentation to the Credit Committee will have been previously vetted and endorsed by the Loan Officer’s supervising manager.

Why is it called underwriting? The term comes from the historical practice of Lloyd’s of London Insurance of requiring each risk taker (often for a sea voyage with risks of shipwreck) to put their “written” signature “under” the total monetary risk they were willing to assume in return for a fee. Hence the term “underwriting.”

It’s the credit committee’s job to approve, amend, or disapprove of an investment application.

How does a credit committee evaluate an investment opportunity?

Over and above its general obligations, on a daily basis, the Credit Committee is charged with evaluating potential investment opportunities falling within the EMD’s jurisdictional orbit. The review begins with the Loan Officer’s discussion paper, which includes a profile of the people behind the deal, its proposed terms, detailed analyses, and recommendations.

After deliberating over the Loan Officer’s underwriting report and completing any follow up interviews, the Credit Committee can approve, amend, or disapprove of the investment application at hand.

If the application is turned down absolutely or with amendments, the Loan Officer will advise the applicant accordingly. If it’s approved, a letter of intent will be sent. Upon acceptance by the applicant, a term sheet and commitment letter prepared by the Loan Officer and approved by the Credit Committee is forwarded to the applicant for signature and acceptance. The Loan Officer then will confirm that all due diligence and funding requirements are in order and that arrangements are put in place to fund the transaction. The EMD’s Legal Counsel will be retained to prepare and register the mortgage and/or any other security documents and ensure all conditions have been satisfied before funds are released. Barring the need for an extension down the line, the work of the Credit Committee is now done.

At this juncture, the EMD moves on to fulfill its regulatory obligations and attends to matters related to qualification of investors, suitability, conflicts of interest, disclosure, and more. It’s a complex process; the full treatment of these tasks is beyond the scope of this paper!

The credit committee serves as a natural buffer or safeguard against an overly enthusiastic promoter. An essential part of its mission is to protect the ultimate consumer of products offered to the public under the umbrella of an EMD.

What is due diligence?

Due Diligence, as applicable, covers many things, including:

The credentials of an Issuer or Sponsor
The financial details of the proposed deal, including principal amount, yield, duration, and other salient features and conditions
Creditworthiness of the borrowers and/or guarantors, including credit checks, financial statements, personal references, and net worth statements
Third party reports such as valuation appraisals, architectural certificates, environmental reports, building condition assessments, geotechnical appraisals, and quantity surveyor reports
Leases, rent rolls, and estoppel certificates
Development budgets and construction schedules
Ability of the originator to fund budget shortfalls and need for a Deficiency and Cost Over Run Agreement
Zoning and building permits
Details of prior and subsequent encumbrances and availability of lender consents, if necessary
Assessment of loan to value ratios and other compliance with the EMD’s investment criteria
Evaluation of current competing market conditions for similar deals, including prevalent offerings by competitors
Timing of advances to the borrowers
Availability of collateral security
Builder’s risk and liability insurance
Validity of repayment schedules, as well as feasibility of exit route through refinancing or sale of underlying property
Evaluation of originator’s track record and project’s progress to ensure continued sustainability in case an extended term is needed
Location of the property, including marketability, condition, and value
Contemporaneous assessment of general economic and societal forces, including state of financial markets, existing and proposed government policies, local issues, and force majeure conditions
Review of commitment administrative and all incidental expenses and fees
Legal structure and supporting documentation

Meet the Fundscraper credit committee

Our team has over 125 years of experience in real estate development, finance, private equity, law, and technology. We’re proud leaders in our fields! Meet the Fundscraper credit committee here.

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5 Important Considerations Before Investing in a Mortgage Pool

Posted on July 31, 2021August 13, 2021 by Barbara Pucher

Key Points

Mortgage pools are attractive alternative investments, as their safety profile can be adapted to meet the investor’s appetite for risk.
Our first mortgage pool only invests in first mortgages, which means Fundscraper has a greater likelihood of being made whole on its investments in the event a borrower fails to repay its debt owed to the Trust.
Mortgage pools are typically more flexible in their lending terms and will provide shorter-term loans, generally ranging from 6-36 months, than those offered through traditional sources. It is because of this flexibility and the higher risk of these loans that they charge interest rates that are significantly higher than prime rates used by banks.
The general rule of thumb is the higher the interest rate, the higher is the perceived risk of the mortgage investment. One way of assessing risk is studying the loan-to-value.

Risk Tolerance and Investment Goals

Risk-averse investors should look for a mortgage pool that is lower in risk. The riskiness of a fund or pool can be judged by its underwriting criteria, which is usually described in the offering memorandum. If income and preservation of capital are your goals, pick a pool that has conservative underwriting criteria and consistently delivers good returns. Learn more about our underwriting criteria here.

Our first mortgage pool only invests in first mortgages, which means Fundscraper has a greater likelihood of being made whole on its investments in the event a borrower fails to repay its debt owed to the Trust.

Mortgage Portfolio Composition and Concentration

A mortgage is registered on a landowner’s title to the property. This registration is called a charge. The charge details the interest of the lender, namely what is owed to the lender by the landowner, and that if the landowner fails to pay, then the lender may take the property and sell it to satisfy the debt. The lender who is first to register its charge is the first entitled to be repaid.

Mortgage pools are typically more flexible in their lending terms and will provide shorter-term loans, generally ranging from 6-36 months, than those offered through traditional sources. It is because of this flexibility and the higher risk of these loans that they charge interest rates that are significantly higher than prime rates used by banks. While the loans may be initially structured as short-term loans, they typically get renewed multiple times turning into multi-year mortgages.

The terms of the mortgages within the Diversified First Mortgage Pool vary between 6-18 months with borrowers having an option for renewal.

You should be wary of mortgage pools that have a high concentration of mortgages in one geographical location because it is more sensitive to adverse local economic and real estate conditions. Our Diversified First Mortgage Pool invests in single-family and multi-family residential assets in established neighbourhoods in southern Ontario.

Loan-to-Value of the Mortgage Portfolio

For most mortgage pool funds, a loan-to-value ratio of 70% is considered conservative (banks typically lend at a max. loan-to-value ratio of 75%). This means that the amount of the loan cannot exceed 70% of the property’s value. The difference between the loan and property value creates a safety cushion that protects investors from losses in the event of a borrower default that triggers a foreclosure and sale. Get a crash course on loan-to-value here.

The general rule of thumb is the higher the interest rate, the higher is the perceived risk of the mortgage investment. One way of assessing risk is studying the loan-to-value.

Fees and Expenses

Investors in mortgage pools sometimes pay higher fees that can reduce the payout amounts to you. Fees paid to the manager can be high and can include management fees, performance fees, and mortgage origination fees. On top of these fees, the operating expenses of the mortgage pool are also funded from investor money. This means that a manager can earn a higher return than investors through the different types of fees.

Our First Mortgage Pool has a 1% management or mortgage servicing fee and the fee details are disclosed in our offering memorandum.

Compliance

Fundscraper Property Trust must comply with the rules of government agencies, which are described in its disclosure documents. The principal document is the offering memorandum, which contains information regarding the Trust’s structure and objectives and management team experience. Fundscraper Capital Inc., the promoter of the Trust, is strictly regulated as an Exempt Market Dealer.

Have more questions about investing in a mortgage pool? Still not sure what all of the financial lingo means? We’re here to help! Schedule a call to talk through your real estate investment options today.

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6 Achievable Ways to Earn Passive Income from Real Estate

Posted on July 31, 2021August 13, 2021 by Gregory M. Colford, B.A., J.D., C.I.M.®

When you think of the words “passive income,” people often picture a man or woman sitting on the beach with a margarita in hand, watching their bank balance rise. However, unless you stumbled into a large inheritance, for most people, this is not reality. Passive income, like all forms of income, requires time and effort — it doesn’t just happen overnight! Now that we’ve squashed your financial fantasy, let’s talk about what passive income really is.

Key Points

One of the biggest benefits of real estate investment is that it’s a source of passive income. Our team put together a guide on the different ways to get started. It’s time to make real estate investing your new side hustle!
Income can be divided into two main categories: Active and Passive.
Unlike REITs, where your investment is placed in physical properties, with a MIC, your investment is placed in property mortgages.

Active Income vs. Passive Income

Income can be divided into two main categories: Active and Passive. Active income is earned by exchanging services — including wages, taips, salaries, and business income — for money. Passive income is divided into two subcategories: real estate and portfolio income. Unlike active income, passive income requires little to no involvement in the generation of income and is typically earned on an ongoing basis.

Understanding that everyone has different preferences, needs, and risk tolerances, we’ve compiled a list of ways real estate can help you earn passive income to achieve your investment goals.

Real Estate Investment Trusts (REITs)

REITs are one of the most popular real estate investment vehicles amongst Canadians and come in many shapes and sizes. They’re trusts that passively hold interests in real property, with at least 75% of the trust’s revenue coming from rent or mortgage interest from Canadian properties, as well as capital gains from the sale of such properties. Modelled after mutual funds, REITs are the next closest thing to owning real estate and finance a wide variety of buildings, including many shopping malls, office buildings, and apartment complexes.

Unlike traditional mortgages, REITs offer broad diversification with both equity and debt investment opportunities. Equity REITs derive most of their revenue from rent collection and can be found on both the public stock exchange, as well as in public non-traded and private markets. Debt REITs earn most of their money from interest earned in their investments in mortgages and mortgage-backed securities and tend to do better than equity REITs when interest rates are rising.

Unit Trusts

Many Canadians use unit trusts as structured vehicles to invest in real estate and share returns. By investing into a unit trust, your investments are handled by a fund manager who then uses its expertise to invest your money into a portfolio of assets. At Fundscraper, this is our bread and butter, with the Fundscraper Property Trust (FPT) offering Canadians the opportunity to invest in pooled mortgages. Pooled Mortgages consist of one or more mortgages that offer a similar return and loan-to-value ratio, meaning that you can invest in numerous mortgages that align with your risk appetite through one transaction. Our investors earn a monthly return between 6-11%, without having to lift a finger or visit a property. Intrigued? Learn more about the Fundscraper Property Trust here!

Mortgage Investment Corporations (MICs)

MICs offer investors an opportunity to pool their money and buy shares in their MICs. Since they invest directly in mortgages rather than property, MICs are less susceptible to the same unforeseen issues that may arise in physical properties. Additionally, a MIC may invest up to 25% of its assets directly in real estate, but may not develop land or engage in construction, and must have at least 20 shareholders.

Unlike REITs, where your investment is placed in physical properties, with a MIC, your investment is placed in property mortgages.

Mortgages

For many, the “M” word can seem like more of a burden than an investment. But in reality, it’s an investment into what a building owner needs to buy a home. Homeownership allows you to build equity and in many cases, real estate will appreciate, depending on the local market conditions. Investing in a mortgage, especially someone else’s, means that you are essentially taking on the role of a lender and the borrower must repay the loan with interest, usually each month. If chosen properly, these monthly principal and interest payments can offer a steady and predictable stream of income.

Mortgages are the most common and significant type of debt held by Canadians. Approximately 40% of Canadians have a mortgage.

Syndicate Mortgages

Syndicate mortgages have two or more investors investing in one specific mortgage, pooling their resources together to own a “piece of the pie.” When you invest your money into a syndicate mortgage, you become a secured lender and are recognized as a part-owner of the mortgage. It’s a fairly straightforward arrangement, and investors hold in proportion to what they contributed.

While it can be a great investment opportunity, it’s also important to note that there is no guarantee that the project will pay off. Syndicate members are generally expected to be sophisticated mortgage investors as they are not relying on the efforts of anyone else for a return on their investment. Investing in mortgage syndicates is for experienced mortgage investors only!

One of the oldest real estate “plays” is buying an additional property to earn passive income.

Buying Income Producing Properties

Whether it’s buying a student house in a university town or renting out a duplex in a residential area, owning a property can be lucrative, but typically requires lots of planning, management, and a large down payment. Standard bank financing will typically top out at 75% loan-to-value. While property management isn’t for everyone, for the few willing to do the homework, owning and managing an income property can complement an investment portfolio geared to generate income.

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Due Diligence Checklist Before You Invest in Private Real Estate

Posted on July 31, 2021January 12, 2022 by Gregory M. Colford, B.A., J.D., C.I.M.®

Today, there’s a wealth of options for accessing the market for investors of all kinds. Many investors struggle with the private real estate investment due diligence process. It can be intimidating and stressful to know where to start, what information to review, and how to determine whether or not a property is a smart investment. We’re here to make that process a lot less intimidating by explaining essential due diligence to-dos for investors, whether you choose a fund, service, or platform.

Key Points

Many investors struggle with the private real estate investment due diligence process.
Past performance does not guarantee future results, but looking at track record is one way to gauge an organization’s expertise.
Make sure you understand a service’s fee structure and confirm that it makes sense in light of the value the investment manager is creating for you using your capital.
People turn to real estate to improve their portfolio’s overall diversification. Public REITs are terrific products, but if your investment portfolio is generally made up of publicly tradable shares, you may lack diversification.

See If You Qualify

Before spending too much time envisioning your future with a particular service, be sure to check and confirm which kinds of investors it admits. For example, some funds provided by famous private equity real estate companies, like Blackstone, have a history of only admitting investors that meet certain salary thresholds, while newer platforms, like Fundscraper through Fundscraper Property Trust, allow anyone to invest.

Learn More About Investing

Guide to Real Estate Investing

6 (Achievable) Ways to Earn Passive Income

How Do I Invest My RRSPs into Private Real Estate?

Check Past Performance

Past performance does not guarantee future results, but looking at track record is one way to gauge an organization’s expertise. How has the manager fared in prior years? Did they show responsible custodianship over investors’ funds in the past? What does their portfolio say about their investment biases? How is their portfolio weighted? Each of these factors can help you determine what your investment experience might be like with a particular service.

Understand the Fee Structure

Every real estate investment has built-in expenses. In order to generate dividends, a property incurs ongoing fees, such as property management and future upkeep. Make sure you understand a service’s fee structure and confirm that it makes sense in light of the value the investment manager is creating for you using your capital.

Make Sure You Can Manage Your Investment

One of the big advantages of investing in real estate directly is that you never have any doubt about what your money is up to or how to track it. On the other hand, when you invest through a third party like a fund, partnership, or corporation, you can only track what they make visible. Now that most investment services are online, make sure you can interact with, manage, and evaluate your investment to your desired level of involvement.

Consider Diversification

People turn to real estate to improve their portfolio’s overall diversification. Public REITs are terrific products, but if your investment portfolio is generally made up of publicly tradable shares, you may lack diversification.

Public REITs in Canada correlate very closely with our public markets. When the markets go up, so do the REITs; when the markets go down, the REITs follow. Private real estate investment does not correlate with the public market. It’s one of the important reasons folks look to “anchor” their investment portfolios with private real estate investment. It sits at the bottom of your portfolio and chugs along, regardless of what’s happening in the public markets.

At Fundscraper, part of our due diligence is making sure you understand yours. Download our due diligence checklist template for real estate property investment here.

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How to Invest TFSA

Posted on July 31, 2021December 15, 2021 by Gregory M. Colford, B.A., J.D., C.I.M.®

Private real estate investment is too often overlooked in an investment world dominated by hedge funds, ETFs, Principal Protected Products, publicly traded shares, and bonds. If you think private real estate investing is only for the wealthy or experienced, think again. Many people don’t realize they can invest their tax free savings account (TFSA) dollars in private real estate.

Key Points

Many people don’t realize they can invest their TFSA in private real estate. We put together a guide to walk you through the process and show you how to invest with a TFSA.
Private real estate investing is for everyone, especially because you can use your TFSA to invest and you don’t pay taxes on your profit!
Investing your TFSA in private mortgages is easy! Nevertheless, it’s important to have your advisor orchestrate the process on your behalf, as there are moving pieces that have to be coordinated.

What Is Investing with a TFSA?

Private real estate investing is for everyone, especially because you can use your TFSA to invest and you don’t pay taxes on your profit! In fact, TFSA investing is an affordable, approachable way to get started. Not sure how to invest with TFSA or what that means? We’ll explain.

Real Estate Investment Trusts (REITs): Investing with a TFSA

The majority of Canadians hold their retirement savings in registered accounts at major financial institutions. When folks open a TFSA they normally invest in stocks, bonds, mutual funds, exchange traded funds, and other public securities that trade on public stock exchanges. Many people believe that is all they can invest in through their TFSAs. But stocks, exchange traded funds, and the like only scratch the surface of what’s possible.

Most people don’t realize they can invest in private mortgage investment entities like mortgage investment corporations (MICs) and mortgage trusts, as well as mortgages directly, with their TFSAs. If you’re interested in doing this, we can help.

Not everyone knows how to invest TFSA funds. Interested in investing through TFSA? Fundscraper can help.

Investing with a TFSA in Mortgages

If you’re interested in investing with TFSA in private mortgages, whether directly or through a mortgage investment entity like a MIC or mortgage trust, the first thing you should do is seek expert advice if you have little experience in the private mortgage markets. The process of direct investing TFSA is not difficult, but if you’ve never done it before, you’ll need an expert to walk you through your due diligence. That’s what we’re here for!

Do you qualify? Find out your investor eligibility here.

Investing Through a TFSA in Commercial Properties

Your tax-free savings account is very flexible. First, determine your TFSA contribution limit. This is very important and easy to do. It’s important because you cannot invest more than the limit CRA imposes on your TFSA account. It is easy to find out what your maximum contribution limit is by going to your “MYCRA” account. You’ll find out there how much available room you have to invest in a TFSA in any calendar year. Unused amounts from previous years are carried over!

Once you know how much you can invest, you’ll need to know what investments qualify for your TFSA account. CRA provides a handy schedule of qualified investments for all registered accounts, including TFSAs, here: Qualified Investments for Registered Accounts. In this schedule, you’ll find that in addition to stocks and bonds, there are other types of investments such as mutual fund trusts and corporations, and special investment vehicles like MICs. If you want to hold a mortgage in your TFSA, you’ll see that certain “debt obligations” also qualify for your TFSA. You cannot hold property directly in your TFSA.

After you make contributions to a TFSA, the investment income that accumulates may be withdrawn by you tax free.

Learn More About Investing

Guide to Real Estate Investing

6 (Achievable) Ways to Earn Passive Income

How Do I Invest My RRSPs into Private Real Estate?

How to Invest with a TFSA Through a Private Limited Partnership

There are two ways to make an investment through your TFSA account.

If this is your first time, you will do the following:

Visit a bank, trust company, or credit union and ask to open a “self directed” TFSA account.
Once the account is open, deposit the amount of money you wish to invest into the account.
Next, you have to instruct the account what to buy. To do this, the financial institution will provide you with a “payment direction” that tells the financial institution, on behalf of the TFSA account held by the financial institution, what security to buy.
The financial institution will then purchase the security on behalf of the account pursuant to your instruction.

You may already have a TFSA account at a big bank. If you do, that account is likely capitalized with big bank sponsored products like big bank mutual funds and ETF. Once we have found something that is suitable for you, and you know precisely how much you need to make your investment, you will need to contact your big bank account manager. If you want to use what’s there to fund your private mortgage or investment fund investment, you have to take the following few steps. We’ll help you with this process as much or as little as you need:

Fund your investment. Instruct a big bank account manager to liquidate a fraction of your TFSA holdings to the cash amount you need to make your new investment.
Open a self-directed TFSA. Ask your financial institution (any Canadian chartered bank or trust company) to do this. If you are purchasing a private investment fund or shares of a mortgage investment company, those issuers will have registered account “service providers” who will help you open your new TFSA self-directed investing account.
Transfer your liquidated funds to your new account. You’ll complete a “transfer instruction” whereby your new financial institution will request that your current big bank TFSA institution to transfer the liquidated funds to your new self-directed TFSA account.
Wait for the funds to transfer. The transfer can take up to four weeks. In order to maintain TFSA eligibility, funds must move directly from one TFSA account to another. You cannot withdraw the funds yourself, take them to your financial institution, and deposit them. DO NOT WITHDRAW YOUR MONEY. TRANSFER ONLY.
Invest your TFSA into private real estate. Once the funds arrive in your self-directed TFSA account, as above, you will issue a payment instruction to tell the self-directed TFSA account to fund your investment in the private mortgage investment entity. The financial institution has a standard form of payment direction that it will provide to you.
The investment income that accumulates in your TFSA may be withdrawn by you tax free!

Investing your TFSA in private mortgages is easy! Nevertheless, it’s important to have your advisor orchestrate the process on your behalf, as there are moving pieces

Summing Up How to Invest with a TFSA

Your registered investment account savings are your nest egg. Be careful with how you employ and invest these funds. Not everyone knows how to invest TFSA funds. Work closely with reputable dealers to first determine whether investing in private mortgage securities is suitable for you and, if so, what the best private mortgage investment products are for you at the time you want to make the investment.

Start Investing in Real Estate Backed Investments Today

Explore the investments available on Fundscraper.