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  • Writer's pictureJasveen Puri

Using your RRSP or TFSA to invest in real estate

Not many people know that you can use your RRSP or TFSA accounts to also invest in real estate. Yes, believe it or not, mutual funds and stocks are not the only investments that are RRSP eligible! And no, I am not talking about buying publicly listed stocks that are in real estate.

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What are these other ways to invest your RRSPs or TFSAs? Most people don’t realize that mortgages are one of the qualified investments that you can hold in a self-directed RRSP (or TFSA) account. Providing you understand the risks, using your self-directed RRSP account to invest in mortgages can be a lucrative way of making returns of 8 to 12% on your money, tax free!


Your first step is to find a borrower who needs a mortgage loan. To do this you can attend real estate investor seminars where you will meet mortgage professionals who are looking for alternative lending sources for their borrower clients. Many of these borrowers turn to alternative or private financing because the strict lending criteria of big A-banks limits their ability to borrow. These borrowers are willing to pay higher interest rates and will be happy to borrow from your RRSP account.


But before you can lend, you must realize that not all financial institutions even have the option to let you invest your RRSPs or TFSAs in mortgages. Olympia Trust and Community Trust are few examples of trustee institutions that let you do this. You will have to open a self-directed RRSP or TFSA account (or transfer your existing funds) with these institutions. This process is quite simple and typically involves completing some paperwork to fund the account with the amount you want to have in the self directed fund.


Of course, you want to do your due diligence before lending money to anyone. Do your research on the borrower’s financial history by asking for their credit report. Study the property’s appraisal (make sure its from an accredited appraiser!). Complete your research by looking at property pricing trends, days on market, vacancy rates etc. to determine you are lending in a market where the underlying economics are strong. HouseSigma is a fantastic website that can helps you do this. A lawyer will also be required to complete the paperwork involved in closing the deal with your trustee (the borrower incurs the cost of the lawyer’s fee). The lawyer also ensures you are protected by registering a legally enforceable interest on the title of the property.


Lastly, enjoy watching your wealth and retirement funds grow tax-free, as you receive your fixed interest payments on a periodic basis.

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