RRSP Eligibility

An RRSP is a Registered Retirement Savings Plan. Many Canadians have invested in RRSPs and some plan-holders don’t know what their RRSP funds are invested in. Do you know where your RSP’s are invested?

Did you know that not all investments are RRSP eligible? For example, you cannot buy a piece of real estate as an investment and hold it inside your RRSP.

However, there are a few different ways to use your RRSP to invest in real estate indirectly. Depending on your personal situation, one or more may be appropriate for you.

REIT

Investing in a Real Estate Investment Trust is similar to buying shares of a company. Typically, the REIT’s business involves buying, operating and selling real estate. The value of the REIT shares (units) fluctuates based on the value of the company, which is influenced by several factors, including not only the value of the real estate, but also stock market conditions which could cause the REIT’s market value to be less than its net asset value.

Mortgages

Under certain conditions, RRSP-holders are allowed to lend money to a property owner using a mortgage. However, this is really a secured loan and not a real estate equity investment since the RRSP-holder earns not from the overall performance of the real estate but instead earns interest on the loan. The lender and the property owner set the terms together and the loan is secured by the real estate. Some RRSP holders are unaware that they can do this.

Limited Partnership

Certain Limited Partnership structures allow an RRSP-holder to use RRSP funds to invest indirectly in the equity side of real estate. Profits are based on the overall performance of the real estate. Many RRSP-holders are unaware that they can invest their RRSP funds in a Limited Partnership and benefit from the real estate equity gains.

Just because an investment is RRSP eligible doesn’t necessarily mean that only RRSP funds can be used to invest. Many RRSP eligible programs also accept cash investments.

At Pulis Investment Group, all of our offerings are open to both RRSP investors and cash investors (both subject to qualification).