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Published on Jan 17, 2014
What do RRSP, LIRA & real estate investing have in common? Well, with your RRSP and LIRA return on investments in mutual funds, stocks, bonds and investment certificates are at their lowest levels in years, if you want money for retirement, you might want to look at real estate investing for income and capital appreciation. One or more income properties can provide you with positive cash flow and an appreciating asset that you can always sell at some point in the future.
Did you know you can use your RRSP to finance a mortgage? You set it up so that your payments go back into your RRSP. The cash flow from your rental property pays the interest on the mortgage, and suddenly your RRSP can be making 4% or 5% on a relatively risk free investment. What are the odds of you defaulting on your own RRSP payments? It doesn't matter if the stock market goes up or down, people still need places to live so real estate provides a great vehicle for a passive investment.
If you are going to pull your cash out of a company pension fund and put it into a LIRA, there is going to be a chunk of cash come out with it that will require you to pay tax on. What are you going to do with that money? Make sure you time it so that you pay as little as possible. For instance, don't pull your money out in December, when you have a full year of income to declare as well. The closer to January 1st you take your money out, the less income you will have. And instead of placing all of your non-registered cash into a mutual fund or two, think about purchasing an income property. And income property allows tax deductions for expenses, and can show capital appreciation relatively quickly, with the right kind of imporvements. The cash you get from cashing in your LIRA may allow you to finance two or more properties, with low risk mortgages, and you can enjoy the benfits of very low rates.