Using RRSP to lend?

[jabjab]

I don't know if I'm reading this right but can people use their RRSP to lend out as a private mortgage? Found this article below but someone I loosely know said he did this and getting 16 percent interest paid monthly to him for 1 year.

https://equityapproved.ca/knowledge/...gage%20lending.

[ercchry]

Yup, you can. PM me if you want help setting it up.

You need mortgage insurance if you lend “non-arm’s length” but beyond that it’s pretty standard for individual investors

[jwslam]

Hmm... the last bit talks about mortgage brokers?

Is @TimLacroix still around?

[jabjab]

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Yup, you can. PM me if you want help setting it up.

You need mortgage insurance if you lend “non-arm’s length” but beyond that it’s pretty standard for individual investors

Is there a catch? Why wouldn't everyone do this? If someone had 100k in RRSP and they can get 16 percent on it why not do it?

[Buster]

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Is there a catch? Why wouldn't everyone do this? If someone had 100k in RRSP and they can get 16 percent on it why not do it?

You need to ask yourself why these borrowers can't get access to cheaper capital. That will answer your question

[ercchry]

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Is there a catch? Why wouldn't everyone do this? If someone had 100k in RRSP and they can get 16 percent on it why not do it?

Well… there is risk, also origination and administration costs (typically passed onto the client) but also, you need to find someone willing to pay that, and either they won’t, then you have the hassle of recouping costs via foreclosure (and nothing else, as this would be a no recourse mortgage in this province) or they are responsible enough to pay it back, and will do it quickly enough that this isn’t a passive strategy as you will need to consistently turn over clients

There is also plenty of competition. I know this market very well, if there is a decent property in a decent area (ie: major urban) there is bottomless funds at sub 65% LTV and under 10% yield… and there is enough money that even at 85% LTV, in 2nd place that 14%+2% fee is market rate. Is there guys out there lending worse? Yup… but those deals are dogshit, and if you only have $100k… I would not put it in that basket

The other thing to note is that APR cannot exceed 35%, most brokers (and you need a broker as you need to be licensed in mortgages to deal in them) will have a minimum fee, typically at least $2k. Usually one represents the lender and one the client, you can do both but need to disclose the conflict. Then legal costs, and admin costs for whatever trust company you have…

So basically if you want a yield of 16% on your money you need to lend at least $37k/loan… and the only way you will demand that is high LTV in second place on a weird property or a questionable borrower.

Plenty of MICs out there were you just give them your RRSPs and sit back and get a solid 8-11% YoY with your money spread over 1000s of properties and borrowers

Non-arms length on the other hand is an interesting proposition… as you can essentially loan yourself (or family) money and dictate your rate of return into a registered account… but only one insurer will insure it, and that’s an additional cost of course. Few parameters that need to be met as well (like you need to be able to lend the full loan amount for the property). That makes it difficult if you don’t have a huge rrsp to begin with

[ExtraSlow]

Everyone loves free lunch.

[asp integra]

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Plenty of MICs out there were you just give them your RRSPs and sit back and get a solid 8-11% YoY with your money spread over 1000s of properties and borrowers

More on this...

[ercchry]

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More on this...

Calvert Home mortgage - originally Alberta, exposure to other provinces now. Good group, smart guys with great risk mitigation
Altawest - also originally Calgary, have gone through some management changes (founder retired)
Fisgard - big BC group, lends in most markets
VWR - same idea as fisgard
Capital Direct - household name with all their advertising
Amur capital - parent of another household name - they put all the high risk stuff with private investors, the funds they manage are very conservative, but half their exposure is Ontario about $1b AUM between their 3 funds

Tons of smaller guys out there too, and private funds… but those are usually closed off to a handful of big money investors.

[suntan]

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Is there a catch? Why wouldn't everyone do this? If someone had 100k in RRSP and they can get 16 percent on it why not do it?

r/borrow if you think you're so smart.

[asp integra]

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Calvert Home mortgage - originally Alberta, exposure to other provinces now. Good group, smart guys with great risk mitigation
Altawest - also originally Calgary, have gone through some management changes (founder retired)
Fisgard - big BC group, lends in most markets
VWR - same idea as fisgard
Capital Direct - household name with all their advertising
Amur capital - parent of another household name - they put all the high risk stuff with private investors, the funds they manage are very conservative, but half their exposure is Ontario about $1b AUM between their 3 funds

Tons of smaller guys out there too, and private funds… but those are usually closed off to a handful of big money investors.

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

[killramos]

What could possibly go wrong

[max_boost]

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What could possibly go wrong

anytime someone asks me to borrow money or invest in an opportunity

[bjstare]

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.

[ExtraSlow]

The one weird hack financial planners don't want you to know!

[max_boost]

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The one weird hack financial planners don't want you to know!

private equity
not for us poor ppl lol

[Buster]

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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.

I agree with this...although the key word is "everyman investor". There is a shit-ton of stuff going constantly that "breaks" the risk return correlation, but they would never be accessible to the public.

[littledan]

Hmmmm... taking my retirement savings and growing it by lending to someone who cant get money from a bank, but really really promises to pay me back sounds like a solid plan.

brb shopping for cardboard boxes to live in when I retire

[Buster]

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Hmmmm... taking my retirement savings and growing it by lending to someone who cant get money from a bank, but really really promises to pay me back sounds like a solid plan.

brb shopping for cardboard boxes to live in when I retire

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.

[bjstare]

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I agree with this...although the key word is "everyman investor". There is a shit-ton of stuff going constantly that "breaks" the risk return correlation, but they would never be accessible to the public.

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