by Neil Mathieson, CPA, FICB
In my last newsletter we talked about Syndicated Mortgage Secured Investments. Many of you responded wanting to know more about the 8% annual return paid to you monthly. The Aurora Mills Development has met with great success and is expected to close in February. Should you be interested in this excellent investment opportunity, now is the time to act!
Since the RRSP season is fast approaching, I thought it would be helpful to discuss some of the different types of investment opportunities with which I can advise and provide you.
Many Insurance companies promise income for life, generally the contract provides for 5% on your invested capital. The funds are invested in mutual funds from which the insurance company pays you the 5%.
Returns above 5% are retained by the insurance company, meaning that your portfolio’s growth potential is limited. Your funds are charged a management fee of usually 2% to 3% annually.
Our syndicated mortgage provides an 8% return which is free from the ups and downs of the stock and mutual fund markets, with NO management fee. Both investments are secured whether it be through the insurance company at a return of 5% with fees versus real estate with a return of 8% and no fee. Need I say more?
TFSA Vacation Travel:
Tax Free Savings Accounts in 2014 permit $31,000 to be invested at 8%. This works out to $2,480 or, if both partners were to invest, a return of $4,960 in tax free dollars could be realised every year for your dream vacation. And your principal is still intact – not eroded. Select your destination and start packing or save up for your home renovation!
Wake up your RRSP! 8% for five years is secured growth of 40% with no fees.
Look back on the performance of your RRSP over the past five years. If you grossed 40% after management fees of 2%-3% yearly, you netted between 25-30%; that represents 25% less funds upon which to retire.
This time of year many institutions offer investment loans. Interest on a Loan to buy an RRSP is not a deductible expense. The CRA (Canada Revenue Agency) does permit interest expense of an investment loan to be a tax deductible expense, however the interest must be paid in the taxation year, the interest rate must be reasonable and the investment should usually generate income.
There are too many scenarios to discuss here, however if you are going to borrow to invest, feel free to give me a call so that we can review the process. We may be able to keep CRA from a surprise knock on your door.
Source; Mr. Neil Mathieson, CGA, FICB