Using RRSP to lend?

[Buster]

This quote is hidden because you are ignoring this member. Show Quote

Yes. And I have taken the giant leap to include OP in the "everyman investor" category. Crazy, I know.

OP is significantly less competent than average.

[Xtrema]

This quote is hidden because you are ignoring this member. Show Quote

It's funny when people think they've found some type of loophole or hack to get high return/low risk. Risk/return are always directly correlated (for the everyman investor at least). It's like the laws of physics, it doesn't change.

Measly 16% when Bitcoin is 60% YTD!

[jabjab]

This quote is hidden because you are ignoring this member. Show Quote

OP is significantly less competent than average.

I never claimed to know about this topic, I was simply asking. Sounds like I'm going to stay away from this type of "investment" and will leave my RRSP in the market funds I have.

- - - Updated - - -

This quote is hidden because you are ignoring this member. Show Quote

Measly 16% when Bitcoin is 60% YTD!

I'm up up to 300 percent on some of my AI coins

[arcticcat522]

This quote is hidden because you are ignoring this member. Show Quote

It's the type of thing that sounds good to unsophisticated investors.

And regulatory bodies, if "the big short" taught me anything

[Buster]

This quote is hidden because you are ignoring this member. Show Quote

And regulatory bodies, if "the big short" taught me anything

the people working at the regulators are usually not very bright. Canada is really bad, because they are all provincial....some of the smaller population provinces literally have a handful of half retarded people doing the job, most of them having been working there for decades.

The problem with regulation, especially in financial services is that it gives people a false sense of security that they are being protected. The only thing worse than being not protected, is being not protected and thinking you are.

[arcticcat522]

Buster for president!

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

Can you access these inside an existing rrsp or have to deal with them directly?

Most likely directly. I know some of them are starting to offer products to financial advisors, but most of them need the rrsp in a specific account (like Olympia trust)

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

the sleight of hand in these things is the idea that you can "diversify" by having a lot of mortgages bundled together. "Our MIC is great because we have thousands of mortgages, so the risk is less".

It's the type of thing that sounds good to unsophisticated investors.

To be fair…

The default rate is low, and the losses even lower on individual loans, so having your funds spread over multiple properties is going to reduce risk.

Ie. fund has 100 loans, 50 at sub 50% LTV, 9% yield, 25 at sub 65% 11% yield (all 1st position) then 25 at 80% LTV, 2nd position at 16% yield…. That mix will be a much better risk profile than a guy with $100k going out and putting that on a single property in 2nd trying to get max return, and not being a seasoned underwriter of loans.

You’d be surprised at how risk adverse many of these funds are vs say… the tax payer backed insured loans that big banks lend out at 95% LTV. Even worse is the balance sheet lending Alt lenders do to 80% LTV without insurance… with the big banks money

[Xtrema]

This quote is hidden because you are ignoring this member. Show Quote

Buster for president!

Buster is bright enough to know he doesn't want that job.

[suntan]

This quote is hidden because you are ignoring this member. Show Quote

To be fair…

The default rate is low, and the losses even lower on individual loans, so having your funds spread over multiple properties is going to reduce risk.

Ie. fund has 100 loans, 50 at sub 50% LTV, 9% yield, 25 at sub 65% 11% yield (all 1st position) then 25 at 80% LTV, 2nd position at 16% yield…. That mix will be a much better risk profile than a guy with $100k going out and putting that on a single property in 2nd trying to get max return, and not being a seasoned underwriter of loans.

You’d be surprised at how risk adverse many of these funds are vs say… the tax payer backed insured loans that big banks lend out at 95% LTV. Even worse is the balance sheet lending Alt lenders do to 80% LTV without insurance… with the big banks money

It's a fairly high risk.

Still same asset class, not sure how many loans they would actually have but 100 isn't enough to mitigate risk.

If these funds all invest just in Canada they're subject to the insane whims of the LPC.

[bjstare]

This quote is hidden because you are ignoring this member. Show Quote

It's a fairly high risk.
.

Exactly. There's a reason it returns >10% (when it works).

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

It's a fairly high risk.

Still same asset class, not sure how many loans they would actually have but 100 isn't enough to mitigate risk.

If these funds all invest just in Canada they're subject to the insane whims of the LPC.

Most of these guys that I listed originate 100/week or two… it was an example of loan mix. As equity is the key component to equity lending.

You guys would be surprised though on the client profile of an equity lender vs a bank (alt or prime). If the house of cards that is Canadian real estate crumbles, this segment is the least of our worries

[Buster]

This quote is hidden because you are ignoring this member. Show Quote

To be fair…

The default rate is low, and the losses even lower on individual loans, so having your funds spread over multiple properties is going to reduce risk.

Ie. fund has 100 loans, 50 at sub 50% LTV, 9% yield, 25 at sub 65% 11% yield (all 1st position) then 25 at 80% LTV, 2nd position at 16% yield…. That mix will be a much better risk profile than a guy with $100k going out and putting that on a single property in 2nd trying to get max return, and not being a seasoned underwriter of loans.

You’d be surprised at how risk adverse many of these funds are vs say… the tax payer backed insured loans that big banks lend out at 95% LTV. Even worse is the balance sheet lending Alt lenders do to 80% LTV without insurance… with the big banks money

The entire mortgage/RE industry in Canada is retarded in terms of its view on risk. People peg their risk/return calculations to big banks, which have the implied backing of the Canadian taxpayer. (Although admittedly, the average Canadian taxpayer is larger too stupid to realize it).

[suntan]

This quote is hidden because you are ignoring this member. Show Quote

Most of these guys that I listed originate 100/week or two… it was an example of loan mix. As equity is the key component to equity lending.

You guys would be surprised though on the client profile of an equity lender vs a bank (alt or prime). If the house of cards that is Canadian real estate crumbles, this segment is the least of our worries

I'm ready to be surprised. Surprise me.

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

The entire mortgage/RE industry in Canada is retarded in terms of its view on risk. People peg their risk/return calculations to big banks, which have the implied backing of the Canadian taxpayer. (Although admittedly, the average Canadian taxpayer is larger too stupid to realize it).

Yeah, the shit the banks get up to is comically high risk, they’re all just using different mechanisms to create a profit out of leveraging their depositor’s funds. Cost of capital stays low with marginal rates for savers… you could say equity lenders are just the true cost of capital.

1:1 dollars deposited to what they lend(well, more like 0.8:1). The investor gets the full yield (interest rate on loan) and they profit via origination and administration fees.

I dunno… something about the simplicity of it gives me more transparency than whatever the fuck the banks are doing with all their different instruments. Feels like a shell game. Especially once you start peeling back the layers of who’s money backs what… yup, it’s probably bmo, rbc, or national bank

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

I'm ready to be surprised. Surprise me.

Well, step one is home equity… which takes either a high net worth or time in the market. So these people have demonstrated some sort of self control with their finances.

Then comes credit, sure… some poor credit applicants get lending, but the major mitigating factor here is equity. A MIC is not going to extend more than 65% LTV to someone with a history of missed payments. Banks? Alt will do 80% with no minimum beacon, prime will let you buy if insured (95% LTV) with a minimum of 600… refinance, only 680 (to 80% max thanks to regulators or they would probably go higher).

Property: huge part of equity lending, pride of ownership, tenure, location, marketability, everything. Banks? Well the computer tells em a value, sight unseen… if that value isn’t enough, then an appraisal. They’ll also lend in weird, obscure markets with very little RE active.

Income… this is really the big difference. Banks want either an employer to tell them they get a set amount, or rely heavily on what’s personally been filed for two years with the CRA. Equity lenders? Nah. Common sense approach to repayment. Could be anything that lets them feel comfortable that there is capacity to repay. Could be the exit strategy, could be their second uncle’s payment for renting the shed out back. Don’t care. Cause if you don’t pay, they foreclose. They can foreclose and not take a loss, cause they have minimum property values and maximum loan to values that allow the costs of this to be factored in. They also do it quickly before the property can degrade. They will also do inspections mid-term (term being usually only 1-2yr) and can also request a fresh appraisal before extending a renewal offer. Unlike the banks, who only require a signature to renew, your credit could go to shit, you could be unemployed, your house could be underwater. Fuck it, just sign. Can’t pay? Okay, we will defer your payments and work with you to catch up, heck… we’ll reduce your payment to interest only!

So in closing, it’s typically a sophisticated self employed individual who probably tax shelters more than the average individual, or someone with a large amount of worth that’s getting approved…. It’s not that “everyone is approved if you own a house” no… those loans are off loaded it unsophisticated private individuals

[suntan]

Very impressive.

So how much money you got with them?

[ercchry]

This quote is hidden because you are ignoring this member. Show Quote

Very impressive.

So how much money you got with them?

Rrsp’s are about 50/50 that and self directed trading account