Hello to all real estate estate investors in Hamilton Ontario!!
VACATION ALERT: while you read this, note that I’m far away somewhere in the Carribean on a big luxury cruise ship so please leave me some investment property for when I get back. Pretty Please!!
Living it up like a Rock Star
I choose none of the above
Now back to your regularly scheduled post…
That’s right! Invest those RSP’s!
That’s what I was telling one of my youngest clients, Evelyn at our recent coaching session whose goal is to purchase her second investment property this year but being young has made it difficult for her to raise another down payment. I advised her there are many ways to raise capital: money partners, spend less-save more, refinance, and dare I say invest your RSP’s????
Let’s explore RSP’s for a moment, I’m not a financial planner but I’ve done enough homework to make a more than educated decision and I’ll keep it simple. RSP’s make a ton of sense for the general population who plan on having little to no income after they retire so they can defer tax today and pay taxes at a lower-income bracket when they retire. Personally and those who think like me (which is most of you since you’re reading my blog) and intend for a life of financial freedom where my income will be greater when I retire than it is today so wouldn’t I be paying more in tax when I retire? Yes.
How are your investments within your RSP performing? For many, not well and management fees eat your gains or increase your losses. Are you at least beating inflation? Probably not. So you work hard for your money but your money does not work hard for you. Hence the reason I’m cashing in my RSP’s and investing the proceeds into real estate (they were part of my compensation at big blue) and suggested the same to Evelyn. “But I’ll pay penalties!” says Evelyn.
This is Evelyn, she'll have four properties before she's 30
I reply “you’re paying taxes but you’re going to have to pay them anyways and it will be higher in the future.”
“But I don’t like risk!” she says.
“How are your RSP investments performing compared to your real estate and if you stick with the system what would you expect? Can your RSP’s outperform your real estate investments?”
“….” (I can tell Evelyn is having an “Ah-HA” moment by the look on her face)
And guess what? We’ve now identified the capital to purchase another property.
Ev's first investment property. She insisted I post an updated pic
Ev’s homework following our coaching session is to speak to her mortgage broker, call the bank regarding her RSP’s, and start showing her friends how well she did on her first deal because that’s one way of attracting JV money.
So how much are you going to contribute to RSP’s? I’m contributing zilch.
Hope that helps! Till next blog post – happy Hamilton investing everyone!!
Erwin |Â MrHamilton.ca
PS: I wrote the above post close to two weeks ago.  Fast forward to this week and look what Evelyn is doing with her new-found down payment money.
Checking out West Harbour properties and writing an offer. She’s unstoppable!
PS:Â If you want to work with Mr. Hamilton, he is only accepting the best investors who are ready to act today and if you’re one of them please email Maria and she’ll set it up: Maria (at) MrHamilton.ca
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Erwin, great post, I agree RRSP are great if you have no real retirment plan or secondary income ideas. If you are into real estate they make little or no sense. People look at me like i have two heads when i tell them not to invest in RRSP’s.
Cheers
Asif
Hi Erwin,
I like your post but I don’t think all your readers know that you can’t use your RRSP’s to buy property yourself, instead you have to go through another investor (not a relative) to purchase property. I don’t know much about RRSP’s and would like to learn more as I would like to use my own to purchase more property. There is an article in RE Wealth magazine this month which explains a little of what you can do. I purchased my first properties last year (4 properties in Hamilton and 2 condos in TO) and am now trying to find joint ventures but it’s slow going right now.
Brian
Asif, you sure they don’t see three heads? Invest in Real Estate AND don’t invest in RSP’s?? Next tell them don’t invest in RESP’s. I’d rather buy a property and be in full control of my investment…
Brian, I believe you are referring to RSP mortgages and you are correct, they must be arm’s length transactions. However in Evelyn’s case, she was considering transfering her monies to an account outside an RSP so she can invest it as she pleases. If you would like to partner up with someone who will lend you RSP’s in exchange for you lending them yours let me know. I know a number of sophisticated, REIN, Hamilton investors who are buying excellent investment properties.
Cheers,
Erwin