Use Registered Funds to finance your next real estate investment
November 23, 2022

Use Registered Funds to finance your next real estate investment

In an investment market dominated by ETFs, publicly traded shares, bonds and hedge funds - private real estate investment is all too often underestimated. Canadians can leverage registered investments to grow their net worth and expand their wealth by investing in private real estate.

Introduction

In an investment market dominated by ETFs, publicly traded shares, bonds and hedge funds - private real estate investment is all too often underestimated. Canadians can leverage registered investments to grow their net worth and expand their wealth by investing in private real estate. 

Although real estate cannot be held within registered investments such as TFSAs,  RRSPs, or RRIFs, there are ways to put registered investment funds to work in the Canadian real estate market. The simple method is to open a self-directed investment account. Registered investments are an essential part of many Canadian investment strategies, offering numerous savings incentives and tax advantages when used thoughtfully. 

Let's go over the basics to help you get the most out of registered investments and into private real estate.

What are registered investments?

A registered investment account is one that the government has designated as tax-deferred or tax-sheltered. Income earned on the account is not taxed until withdrawal, or in the case of a TFSA, is typically not taxed at all. 

We’ll go over the 3 most common registered investment accounts:

A Tax Free Savings Account (TFSA) functions similarly to brokerage trading accounts, holding any combination of eligible investment vehicles, such as cash, stocks, bonds, GICs and mutual funds, the growth of which will be tax-sheltered. Investments within these accounts will incur no taxes, contributions can be made, and interest, dividends, and capital gains are tax-free for life. For 2021, the yearly TFSA contribution limit for each individual is set at $6,000. Unused contribution room from one year is carried forward and applied to the next year's TFSA contribution limit. Most people are unaware that they can use their TFSA accounts to invest in private real estate.

A Registered Retirements Savings Account (RRSP) is most often associated with post-retirement income, but they also help Canadians grow their wealth and diversify their portfolio before leaving the working world.  There are two major tax advantages to RRSPs. To begin, contributors may deduct contributions from their income. Second, RRSP investment growth is tax-deferred. Unlike non-RRSP investments, returns are not subject to capital gains, dividend, or income taxes. This means that RRSP investments compound on a pre-deferred basis. While traditional investments such as Mutual Funds and GICs are the most common holdings, lesser-known alternatives, like private market investments and exempt market securities are finally becoming more attractive as interest rates rise.

A Registered Retirement Income Fund (RRIF) is a registered account that provides you with income from the investments and savings in your Registered Retirement Savings Plan (RRSP). RRIFs, like RRSPs, provide a variety of investment alternatives, allow for tax-deferred growth of qualified investments, and monies are taxable as income when withdrawn. However, unlike RRSPs, you cannot make fresh contributions to an RRIF; instead, you may only transfer funds from an RRSP or another RRIF.

How to Invest in Real Estate with registered investment funds

Canadians can use registered funds to invest in private real estate through self-directed registered accounts. Self-directed registered accounts allow the owner to determine the asset mix held in the account and watch their portfolio grow tax-free. There are no tax penalties for moving funds from a registered investment account such as an RRSP to a self-directed registered account, because you are not cashing out the funds—merely transferring between registered accounts. The amount you invest in real estate will be determined by various criteria, including your risk tolerance, time horizon, liquidity requirements, and other real estate assets.

3 Simple Steps to Invest in Private Real Estate through Registered Funds

  1. Open a self-directed registered account. Request this from your financial institution (any Canadian chartered bank or trust firm).
  2. Fund your self-directed account with cash or funds from another registered account.
  3. Once the funds are in the self-directed account, instruct your financial institution to invest in the private real estate investment organization by way of a formal payment direction, which is a standard form available at your financial institution.

Why you should use registered funds to invest in private real estate

Using registered investment funds to invest in private real estate will provide better returns, a broader range of investment opportunities and the ability to exercise greater control. Investors are drawn to private real estate for its risk-adjusted returns. The attractive returns of this market offer strong earnings and stability, naturally garnering the attention and funding of those hoping to grow their investment capital and diversify their investment holdings, beyond the GIC’s, mutual funds, and bonds.

One of the most significant advantages of real estate is that it provides steady returns regardless of the situation of the stock market. A diverse asset allocation plan will help build a portfolio that is resilient and can withstand uncertain market conditions. Real estate investments are frequently used by investors to form a well-rounded portfolio, generating the maximum possible profits for customers. Long-term real estate investments can produce continuous cash flow immediately after a deal, particularly commercial and multifamily properties.

Real estate is an excellent illustration of how you can increase the wealth-generating power of your registered investment assets while retaining the tax advantages of registered investment funds.

Parvis can help invest registered funds into private real estate

Parvis uses pooled fund vehicles to enable investments from registered accounts, opening up a multi-billion market. Parvis uses an aggregate of capital to issue units secured by private mortgages, collects monthly interest, and passes that income to investors. It is considered a “mutual fund trust” by the Income Tax Act, whose units may be qualified investments for RRSPs, RRIFs, RESPs, or TFSAs. Parvis empowers its investors with a wide network of vetted issuers with offerings from private lenders, mortgage investments, real estate developers and, owners.

For those with registered investments - there are few opportunities to use funds in registered accounts to invest in real estate projects and properties. Parvis offers a wide enough range of quality properties with investment expertise. Parvis provides  access to institutional-quality real estate investments with strategies that create well-rounded, resilient portfolios that help build stronger financial futures. 

With Parvis, you control where your money goes. You can select specific properties for direct investment, rather than a blind investment in pooled offerings. Parvis’s platform streamlines the investing process, cuts out many fee takers, and passes on the savings to investors resulting in higher returns.

About Parvis

Parvis is building the next generation of real estate investing. Our digital platform democratizes access by bringing quality real estate opportunities to more individuals. Through exclusive access to diverse, high-quality investment projects on the North American market and a user-focused, state-of-the-art platform, Parvis is becoming the go-to marketplace for real estate investing. We are bridging the gap between traditional and digital finance by offering a marketplace that automates compliance tasks, providing in-depth analytics.

To learn more about our rental housing developments and other investment opportunities, view our properties or sign-up today.