The only important thing for investors to consider as an opportunity cost is that you are only obtaining minimal growth inside your RRSP. Sometimes as low as 2-3%. Yes, you are able to increase the return on your TFSA substantially, but the overall return on your assets is still only 10-12%. The other thing to consider is that private lending certainly does not come risk free, especially when considering these types of loan agreements. Definitely a unique way to enhance investment returns within your TFSA, but one must consider at what cost. Great video overall and very well illustrated though. Thanks for sharing!
When I first learned about private lending through your registered accounts I was mindblown, now hearing about the TFSA maximizer strategy my jaw has dropped yet again. Thank you Darren!
@@Beautifulisnature I'm by no means a tax expert but when I first came to Canada I was a bit naïve to the US tax system abroad and with some extra cash in my bank account RBC suggested a TFSA; sounded great right? Problem is that US citizens have to file taxes every year regardless of there they reside or work (one of few countries that taxes on citizenship). You can write off foreign earned income one of two common ways so it isn't an issue there, but the US has tax treaties with countries for things like retirement and education plans. The RRSP is basically equivalent to a 401K and is designated as a retirement account so the tax treaty allows US citizens in Canada to use RRSPs. Because the US does not have an equivalent to the TFSA it is considered a foreign trust and is tax free in Canada, but taxed in the US, so you would end up paying US tax on the gains in a TFSA. I am sure there are some special cases where it is "worth it" to still use a TFSA but again I am not an expert. While it costs a bit of money it is best to get a good cross border CPA and financial advisor that can guide them with all of the "rules"; better that than wasting your time and money investing in something that doesn't actually benefit you.
Just discovered your video. Fantastic concept, thorough explanation, I completely understand! Will be calling my accountant about it tomorrow. Major thanks
You forgot to mention that second and third mortgages are risky investments. If the borrower defaults, the primary lender gets the proceeds from the sale of the home and you be screwed
If you have no mortgage you can actually use this strategy to transfer your rrsp to your tfsa by using your own home...basically loaning yourself money
Like the analogy, however what is the probability of default in a 3rd mortgage position? At some point the borrower is going to default and the 1st and maybe the 2nd mortgage holders will get paid out and as an investor in 3rd position you will lose your whole investment If you are willing to assume that risk the strategy works
Daren, thanks for the video really helpful stuff! I saw you speak in Waterloo a few years back and that was the first ever real estate event I had ever attended. Since then I’ve hit the ground running and haven’t looked back. Keep the good content coming, always appreciated.
Correction...!! You not need to be a Canadian citizen to open a TFSA account. As a permanent resident also and they encourage new immigrants to open TFSA accounts ASAP.
Wait. The most important part of your strategy is: how do we find someone crazy enough to accept a 20% interest when they can get 1.8% at the bank? I can only think of people who gets refused by the banks because they have too much debt and so it would be risky as they could default on your loan too... Did I get something wrong? How come im the only one who's critical about this strategy?
Talk to a few mortage broker or accountants. Real estate investers will buy fixer-uppers that most A lenders (big banks) will not touch. These investers are looking for short term loans, fix up the property and refinance out of the high interest loan within a year once the property is stabilized.
@@zanxu3918 But if they succeed at fixing the house and reselling within a year so that they dont pay interests, then it means that ill get 0% instead of 20%. It makes even less sense now. And in the scenario where they don't succeed at selling the house within a year, they would end up with a huge negative cash flow and a higher chance that he'll default on your loan. You are crazy if you think that your money is in good hands with someone foolish enough to accept a 20% interest loan.
@@billb5379 where are you getting the 0% from? Borrowers start paying interest immediately, not after 12 months. If they sell after 12 months they still had to make 12 monthly payments to the lender. The lender is still getting the x% return every month regardless. This doesn't solve the real problem- finding a legit borrower who's going to pay such a high interest rate. Banks are throwing money around like its nothing. If someone can't get a loan from a major bank there's a very good reason why and as a private lender using their hard earned savings, you'd be a fool to take on that risk. Everyone wants to be a loan shark but no one has the muscle to make sure said loan gets paid. You're not Joe Pesci in some Scorcese film.
No one is paying 20% here. You're paying an overall rate of 12% on your funds which investors do on a SHORT TERM basis all the time. Obviously if you can qualify for mortgage rates of 1.8% you're not borrowing at 12%. The 20% number is what is being allocated to your TFSA and the 4% is what is being allocated to your RRSP.
Great job on explaining it! I’m a Real Estate Investor and we do use OPM (Other People’s Money) exactly like this strategy to fund our deals. I have to admit that it’s not always easy to explain this strategy to potential lenders. I’m loving this video and will definitely be using it with people having a hard time understanding this amazing concept. So many people don’t know about this amazing way to get an amazing return on your investiment. You’re doing a way better job at explaining it than I ever will Hahahaha. Thanks for sharing, I really appreciate it 😊👍👍 Will you allow me to share this video?
Glad you found it helpful. I think it's much easier to have someone else explain things to potential partners than explaining it yourself. Feel free to share this with as many people as you'd like.
You can't hit the like button multiple times. 😂 Amazing videos. I am learning so much from all your videos and would love to talk to you as I am starting my real-estate journey.
Thank you Darren for your excellent input wow I never thought that something like this would be possible within a TFSA! One way to try and cut that umbilical 9 to 5 cord!
Amazing video about TFSA and the creative strategy of splitting the interest rate on the loaned amount. Way better to earn money in a TFSA then RRSP. So much more flexibility
This is great advice and a great strategy! Only this is assuming that you have an equal amount on the other half to be lending at 4%.... so if you’re lending the $267k at 20%, there has to be another $267k available to lend out at 4%... in order to average out the 12% to the borrower
Hey Rob. Glad you enjoyed the video. Yes, you're right in principal. We have a lot of flexibility on private lending or real estate investing in general. It really depends on what your goals are. If you don't have $267k in your RRSP and are hoping to make 20% on your money, there are other options. Land development, private equity, private debt, etc. Some have cash payouts regularly and some have lump sum payouts at the end of the terms. So many options and possibilities.
thats the key isnt it, its very easy to make videos and say collect 20 % interest, why stop therE? why not 50% why not 100% . the rub is this is all math, not reality. The real information is all missing.
@@kingtenzins2595 I think that anyone willing to pay 10-20% likely got rejected by the banks and is in a high-risk category. I think the video is good but should have focused more on the amount of risk you take to get the income he talks about. Just my thoughts.
I don't think you understood the video. You're not paying 20% interest. It's an effective rate of 12% which is very attainable with private lending. We borrow at these rates often and lend at them as well.
Well, it can work, but he's downplaying the huge downside. Plus the CRA might consider this to be a commerical activity and invalidate the applicable tax benefit. I agree that most people who try this are going to lose their money.
@@DarrenVoros Trust me it was worth it, like reading a book, though everything is right in front of you, got to read it over a few times to let it sink in... Thank you for this!!
I was told that only interest, dividends, and capital gains earned in a TFSA are tax-free for life. Otherwise, you're technically still paying taxes for your TFSA funds. Isn't it?
Hi Aditya. I believe this is true but that pretty much covers everything that you would pay tax on. Everything else is a contribution made by you and therefore is not subject to tax. Speak to your accountant if you're unsure of exactly what does and doesn't qualify. I hope that helps.
As opposed to the super stable stock market :) The risks are always around the borrower, the loan to value LTV and the conditions of the loan. If you're secured against a property and your loan to value is in check, it's a much more secure transaction.... but there is risk in ANYTHING we do with investing.
Thanks for elaborating on this Darren. I have your Optimized Distribution structure video which was great. Would definitely be interested in lending with this strategy.
You transfer your TFSA to a self-directed account. You're not withdrawing it, you're just transferring it to a different financial institution so there are no penalties. Check out this video that explains it well th-cam.com/video/af2dYvZfUFA/w-d-xo.html
Love you and your videos, just a small thing I'd like to point out, you said you have to be a Canadian citizen with SIN... this is partially true, the SIN part. I'd like to point out for new comers, that you don't have to be a full fledged citizen ( with passport) and can open one while you're a permanent resident/ maybe even on certain visas
Great video and an excellent job of explaining the concept. I do have a bit of a question mark about your calculations at the end where you are adding 6K of your own money and then including that in your return to pump up the numbers. Maybe I need to watch it again!
Ok so if this private borrower is willing to take up your deal at 20% interest. The loan must be risky as fuuuuuuuuuuuuu...!!! What is your guarantee that the load will be paid back, with the interest on top??! 🤔 If you lose that precious TFSA contribution room, you're screwed out of your tax free investment vehicle. Yikes!
High interest loans don't have to be risky. It depends on your LTV, your experience and what kind of asset. Remember too that's it not technically 20%, it's 12% it's just allocated differently.
I just stumbled upon your video as I was looking into strategies to earn passive income. This information is phenomenal and well put together. I had two questions with regards to the RRSPs and TFSAs. I think because of the profession I'm in, RRSP didn't seem worth it, because of the overall pension. However, your maximizer technique is making me re-evaluate. My question is with RRSP you are taxed on what you take out, but when we are lending are we not technically "taking it out"? This may be a stupid question, but wanted to clarify this point. My second question, for married couples, does the TFSA account have to be joined?
So say I have the 6k room to invest, I buy 6k worth of a stock in January in my TFSA, then by September it grows to 8k. If I sell that position but don’t withdraw the funds from my TFSA, can I now hold all 8k in my account in holdings/cash, or would I need to withdraw 2k to stay in the 6k allowable contribution until the following year? Hope that makes sense! You got yourself a sub 👍 Edit: I know it’s not related to real estate, I’m looking for additional ways to use the TFSA. Excellent tips in this video!
If you still have cap room, which should be about 70k if you were 19 when TFSA started. So if you have only 6k in there and it grows to 8 and you sell, you're still well under the max. Cap room only grows by 5 or 6 k a year but you can put in any amount up to the total limit at any time.
Just want to be clear...when you say take out money for private lending..this mean you withdraw it from TFSA and by year end if you earned 10K you pay taxes on that income..right? So basically you cannot invest back 10K completely that you are getting as interest.
CRA website is hard to navigate. Where can we find this policy or rule? The borrower will have to be willing to work with the trust company and use this strategy.
Hey Darren... awesome video. Couple of comments. Some numbers misquoted on 3-4% example regarding RSP returns (typo in text and once mis-spoke near end). It is also important to note that the TFSA account must be a SELF-DIRECTED TFSA (Olympia Trust, CommunityTrust, etc)... much like the SD RSP account. Individuals can not open a traditional TFSA account with an "A" lender bank and register it in a 2nd/3rd position on a mortgage. In actual fact, the Trust company (Olympia, Community) holds the mortgage on behalf of the SD TFSA (or SD RSP) owner, for the specific property. At least that is how I understand it. :)
20% interested rate?! I am spectacle. Get ready to loose everything at some point. 10-15% gain achievable in stock market. Dont try to get rick quick. Build a solid foundation. The more money your have you would want to diversify And preserve The wealth. Took me 4 years to build a $600 Monthly dividend. My plan is to build a $1000/monthly dividend with in next 3 years.
If this is true , we like to be a part of it. Can you give us which private lender or mortgage broker willing to pay us 20% or even 4% in TFSA account?
Very good information. Quick question Darren. For eg. If I contribute 6k in 2021, and withdraw the same in Dec 2021. Can I invest 12k in TFSA on Jan1st 2022? Or Do I have to wait for the CRA to update the information in my CRA Accountwith the 6k withdrawal and 12k eligibility info and then proceed to invest after March 2022. Hope my question make sense.
is it reasonable to find someone willing to borrow at 20% interest 1 year term like the scenario in 4:09? not only that but you're praying they don't default because your not the primary lender in this case?
Hi Darren, really interesting. I just don't understand how you can lend from a TFSA as a private lender? What paperwork does this entail to give to the banks or am I missing something here? Thanks for the stretegy!
You have to take your existing TFSA if you have one and move it to a self-directed TFSA . Once it's set up as a self-directed TFSA then you can use it to lend on real estate. The big banks won't allow you do this. It has to be done through Olympia Trust of Community Trust or a similar financial institution. Hope that helps.
I may have missed something but if you take out money from the tfsa to lend to someone at interest are you not withdrawing from the tfsa and then will be taxed on the interest you earned while it is out? I don't understand how you are doing this.
Hey Darren,as a 23 year old uni grad fresh out of school with a stable income would you recommend I prioritize contributing to my TFSA or my RRSP? Would love to see a vid on this!
Can a Canadian sell stock options in a TFSA account. I live is the US and I sell weekly options against stocks I own. This is working out about $800 per week at a delta of about .22 on TSLA. TSLA is at $600 per share and to sell the option I need 100 shares or $60,000. $800/$60000 is 1.3% per week or 1.3 x 50 weeks = 60% per year non compounded.
This strategy would only work if you had a similar amount of money in your RRSP as your TFSA right? Since your TFSA would be growing at a faster rate than your RRSP, you wouldn't be able to lend your entire TFSA because you need to be lending the same amount in your RRSP as well which is growing at a slower rate. Just wondering because as a small business owner myself, I generally pay myself in dividends, so I have not accumulated a lot of RRSP room so this strategy might not work for me.
Great points Ken. There are limitations with this strategy as you need to keep injecting cash into the RRSP portion to keep in flush with the TFSA portion.
I was wondering the same. Each year would get more and more difficult to reach those RRSP maximums. And your contribution limit on your RRSP a quickly becomes a limiting factor.
On point as always Darren! Your videos are time well spent! Does your approach for the TFSA work for an incorporated entity (either and OpCo or Holdco) rather than funds held personally? Thanks in advance good sir!
From what I understand, corps can't hold TFSA funds. Those are only allowed to be held personally so this would not apply there. You can lend funds to a corp from your personal TFSA but there would still have to be an arms length separation in there. So you can't lend your TFSA to your own corp for instance. I hope that answers your questions and as always when it comes to taxes and legal matters, make sure you always consult your professionals.
Hey, Darren, what happens if you are too old to have an RRSP? Can I do some version of this with my TFSA? In 2016 I had $46,500 available room in my TFSA. I invested in bonds producing 12% interest monthly for four years. That was calculated as withdrawals of $22,320. Unfortunately, the company declared insolvency last year so the face value of the bonds is zero. But I will be receiving a return of capital over five years. I now have $51,200 maximum room available. Is there a way can I make this work to recover monthly interest income I lost? I had other bonds with this same company but the trust company said I could not transfer them into the TFSA. I had a total of $190,000 invested in three tranches of bonds. What can I do now?
How can you take money out of your RRSP to lend as a private 2nd mortgage? I thought you could only take out 25000 towards a first-time homebuyer? Thank you
Hi Cathy - If I may input to your question, you cannot transfer a LIRA to a TFSA. But, as Darren illustrates, you can structure the loan so the majority of the proceeds are directed to your TFSA. Pretty powerful idea.
Absolutely love your videos! Thank you for sharing! My question is would my son and I be able to structure this kind of deal with my RRSP and his TFSA?
I would have to agree with Mike P but in these situations I always refer to my accountant to make sure all is above board with the CRA before doing anything. Hope that helps.
No one is paying 20%. You're paying an overall return of 12% on your money which is very attainable. You structure it in a way that you're allocating 4% to your RRSP and 20% to your TFSA but that doesn't mean you're paying a 20% interest rate. I hope that helps clarify.
Love the education Darren, thank you. One question (which may be a no-brainer to others), when I contribute $6,000 each year to my TFSA, do I equally have to contribute $6,000 to my RRSP? Thanks.
@@DarrenVoros but doesn’t the strategy you’re laying out depending on your rrsp growing at an equal rate so you can keep lending it as the other half at 4%?
Seems to me like this only works for ppl who are well connected in the real estate world. Otherwise how could you consistently find ppl who are legit enough to have safe deals and be able to trust them to lend huge amounts of cash.
Hey Darren, great video. Any private borrowers you can provide access to that need money right now or a broker that has consistently brought deals? I'm live in the GTA.
ya good luck. This is all bullshit that doesn't work in the real world. Everyone is a multi-millionaire in TH-cam fantasy land but actually just living in a fixed up basement and pretending to be Warren Buffett.
@@DarrenVoros You cannot just transfer money from an RRSP to a TFSA without penalty. This does not make sense. The money you originally put in the RRSP was never taxed, so why would you be able to put it into a TFSA without penalty? You gotta pay tax on that money at some point.
This is an interesting strategy for sure. But you present it in a disingenuous way. You are not doubling your money if you are adding 18k over 3 years to the pot. That is capital out of pocket does not count towards earnings.
Great question Ed. When the lawyers are setting up the mortgages there's not that much difference in the costs. The paperwork is pretty much the same. There are additional registrations of loans but those fees are usually under $100. Check with your lawyer to confirm.
The contribution room accumulates carries year after year. Look up the cra website what each year contribution limit is starting from the year you turned 18, if you haven't contributed a single penny since you turned 18 then you can deposit up to that full limit until it's maxed. After it's maxed then your contribution limit is whatever cra announces for each year.
@@chhaytee435 Understood 'but' if you have contributed the max this strategy would not work. And if you can't afford the max TFSA contribution your likely not in any position to utilize this strategy.
I have a segregated Funds that has been averaging at least 8-10%, no hassle, creditor protected and probate fee exempt...plus who pays 20% mortgage interest? 7-8% average rate on mutual fund, that's balanced fund, why not go aggressive if the client is intending the fund for retirement anyways... aggressive fund last year in the middle of pandemic grew 13%, how much more if there is no pandemic or market challenge...
Im still permanent resident & not a Canadian citizen yet but i opened an TFSA account no problem.
The only important thing for investors to consider as an opportunity cost is that you are only obtaining minimal growth inside your RRSP. Sometimes as low as 2-3%. Yes, you are able to increase the return on your TFSA substantially, but the overall return on your assets is still only 10-12%. The other thing to consider is that private lending certainly does not come risk free, especially when considering these types of loan agreements. Definitely a unique way to enhance investment returns within your TFSA, but one must consider at what cost. Great video overall and very well illustrated though. Thanks for sharing!
Why a borrower pays 20% to you?
When I first learned about private lending through your registered accounts I was mindblown, now hearing about the TFSA maximizer strategy my jaw has dropped yet again. Thank you Darren!
Fantastic! Glad you are finding value in the videos. Thanks for the comment.
2:35 - It’s not just for citizens, applicable to permanent residents...
Thanks for the correction.
Also be careful if you are a US citizen with PR or dual, TFSA's are viewed as foreign trusts for your US tax purposes.
@@mcarson5184 what does that mean? Curious because I know someone with this situation that starting to contribute
@@Beautifulisnature I'm by no means a tax expert but when I first came to Canada I was a bit naïve to the US tax system abroad and with some extra cash in my bank account RBC suggested a TFSA; sounded great right? Problem is that US citizens have to file taxes every year regardless of there they reside or work (one of few countries that taxes on citizenship). You can write off foreign earned income one of two common ways so it isn't an issue there, but the US has tax treaties with countries for things like retirement and education plans. The RRSP is basically equivalent to a 401K and is designated as a retirement account so the tax treaty allows US citizens in Canada to use RRSPs. Because the US does not have an equivalent to the TFSA it is considered a foreign trust and is tax free in Canada, but taxed in the US, so you would end up paying US tax on the gains in a TFSA. I am sure there are some special cases where it is "worth it" to still use a TFSA but again I am not an expert. While it costs a bit of money it is best to get a good cross border CPA and financial advisor that can guide them with all of the "rules"; better that than wasting your time and money investing in something that doesn't actually benefit you.
Also works for working visa, as long as you have a social number you are free to open an rssp and tfsa account.
Just discovered your video. Fantastic concept, thorough explanation, I completely understand! Will be calling my accountant about it tomorrow.
Major thanks
Let me just say thank you for having your TV being level with your fireplace
Haha. I got the laser out for that one.
You forgot to mention that second and third mortgages are risky investments. If the borrower defaults, the primary lender gets the proceeds from the sale of the home and you be screwed
That's not how it works.
If you have no mortgage you can actually use this strategy to transfer your rrsp to your tfsa by using your own home...basically loaning yourself money
Only issue I see with this is building the RRSP amount to match the TFSA amount as the years go by…
Like the analogy, however what is the probability of default in a 3rd mortgage position? At some point the borrower is going to default and the 1st and maybe the 2nd mortgage holders will get paid out and as an investor in 3rd position you will lose your whole investment If you are willing to assume that risk the strategy works
Awsome Darren good to know that you can combine RRSP and TFSA on different rates , you are genius.
Thanks Jasvir. I had my eyes opened to this just under a year ago too so I wanted to get it out there.
Daren, thanks for the video really helpful stuff! I saw you speak in Waterloo a few years back and that was the first ever real estate event I had ever attended. Since then I’ve hit the ground running and haven’t looked back. Keep the good content coming, always appreciated.
That's amazing Dan. Glad to hear you are loving real estate investing.
Clear as mud on a foggy day.. lol
his tvset being off set in that room is driving me mental
Correction...!! You not need to be a Canadian citizen to open a TFSA account. As a permanent resident also and they encourage new immigrants to open TFSA accounts ASAP.
Thank you for catching this!
Wait. The most important part of your strategy is: how do we find someone crazy enough to accept a 20% interest when they can get 1.8% at the bank? I can only think of people who gets refused by the banks because they have too much debt and so it would be risky as they could default on your loan too... Did I get something wrong? How come im the only one who's critical about this strategy?
Talk to a few mortage broker or accountants. Real estate investers will buy fixer-uppers that most A lenders (big banks) will not touch. These investers are looking for short term loans, fix up the property and refinance out of the high interest loan within a year once the property is stabilized.
@@zanxu3918 But if they succeed at fixing the house and reselling within a year so that they dont pay interests, then it means that ill get 0% instead of 20%. It makes even less sense now.
And in the scenario where they don't succeed at selling the house within a year, they would end up with a huge negative cash flow and a higher chance that he'll default on your loan.
You are crazy if you think that your money is in good hands with someone foolish enough to accept a 20% interest loan.
@@billb5379 where are you getting the 0% from? Borrowers start paying interest immediately, not after 12 months. If they sell after 12 months they still had to make 12 monthly payments to the lender. The lender is still getting the x% return every month regardless. This doesn't solve the real problem- finding a legit borrower who's going to pay such a high interest rate. Banks are throwing money around like its nothing. If someone can't get a loan from a major bank there's a very good reason why and as a private lender using their hard earned savings, you'd be a fool to take on that risk. Everyone wants to be a loan shark but no one has the muscle to make sure said loan gets paid. You're not Joe Pesci in some Scorcese film.
No one is paying 20% here. You're paying an overall rate of 12% on your funds which investors do on a SHORT TERM basis all the time. Obviously if you can qualify for mortgage rates of 1.8% you're not borrowing at 12%. The 20% number is what is being allocated to your TFSA and the 4% is what is being allocated to your RRSP.
Are you doing something wrong Bill? Ya. Watch the whole video. 12% interest for a third mortgage is not out of the question.
Great job on explaining it! I’m a Real Estate Investor and we do use OPM (Other People’s Money) exactly like this strategy to fund our deals. I have to admit that it’s not always easy to explain this strategy to potential lenders. I’m loving this video and will definitely be using it with people having a hard time understanding this amazing concept. So many people don’t know about this amazing way to get an amazing return on your investiment. You’re doing a way better job at explaining it than I ever will Hahahaha. Thanks for sharing, I really appreciate it 😊👍👍 Will you allow me to share this video?
Glad you found it helpful. I think it's much easier to have someone else explain things to potential partners than explaining it yourself. Feel free to share this with as many people as you'd like.
Holders of PR and protected person status are also eligible for TFSA and RRSP
You can't hit the like button multiple times. 😂 Amazing videos. I am learning so much from all your videos and would love to talk to you as I am starting my real-estate journey.
I tried to hit the like button 47 times but it only let me register one great advice!
Thank you! You can stop hitting the like button after it goes blue :)
Thank you Darren for your excellent input wow I never thought that something like this would be possible within a TFSA! One way to try and cut that umbilical 9 to 5 cord!
Glad it was helpful! I think that's the end goal for many is to get away from the 9-5 and I'm happy to help in any way I can.
Amazing video about TFSA and the creative strategy of splitting the interest rate on the loaned amount. Way better to earn money in a TFSA then RRSP. So much more flexibility
100% agree! Why earn equal portions in a taxable environment if we can earn in a tax free situation.
This is great advice and a great strategy! Only this is assuming that you have an equal amount on the other half to be lending at 4%.... so if you’re lending the $267k at 20%, there has to be another $267k available to lend out at 4%... in order to average out the 12% to the borrower
Hey Rob. Glad you enjoyed the video.
Yes, you're right in principal. We have a lot of flexibility on private lending or real estate investing in general. It really depends on what your goals are. If you don't have $267k in your RRSP and are hoping to make 20% on your money, there are other options. Land development, private equity, private debt, etc. Some have cash payouts regularly and some have lump sum payouts at the end of the terms. So many options and possibilities.
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Oh yes!! Thanks so much Darren. That’s so great. I had no idea the money stayed in the RRSP. Awesome all around!
Glad you enjoyed it Michele!
wow Darren, very informitive.
Hey Darren, very informative but I'm just curious as in to why people would borrow money at a 20% interest rate? That sounds like a terrible loan.
thats the key isnt it, its very easy to make videos and say collect 20 % interest, why stop therE? why not 50% why not 100% . the rub is this is all math, not reality. The real information is all missing.
@@Thananjanthevarajah hmm I’ve been waiting for someone to reply but now I’m just wondering where the information is
@@kingtenzins2595 I think that anyone willing to pay 10-20% likely got rejected by the banks and is in a high-risk category. I think the video is good but should have focused more on the amount of risk you take to get the income he talks about. Just my thoughts.
I don't think you understood the video. You're not paying 20% interest. It's an effective rate of 12% which is very attainable with private lending. We borrow at these rates often and lend at them as well.
Love it Darren. But who's paying 20%. Have you been doing this?
I'm paying this on some deals coming up.
Mindbuildingsolutions approved.
Excellent content and video.
Anyone who thinks this strategy would actually work in the real world has never made a penny in investments.
Well, it can work, but he's downplaying the huge downside. Plus the CRA might consider this to be a commerical activity and invalidate the applicable tax benefit. I agree that most people who try this are going to lose their money.
How much of this applies OUTSIDE of Canada
Love this strategy to create a source of passive income. Thanks for putting this video together.
No problem. Glad it was helpful.
Thank you Darren!!! You are truly brilliant...fast talk so I needed to listen a few times over but Wowwww!!! Love it 🙏🏿
Hi Elsa. Thank you for the kind words. This is a pretty quick video so I know many have watched it a few times :)
@@DarrenVoros Trust me it was worth it, like reading a book, though everything is right in front of you, got to read it over a few times to let it sink in... Thank you for this!!
I was told that only interest, dividends, and capital gains earned in a TFSA are tax-free for life. Otherwise, you're technically still paying taxes for your TFSA funds. Isn't it?
Hi Aditya. I believe this is true but that pretty much covers everything that you would pay tax on. Everything else is a contribution made by you and therefore is not subject to tax. Speak to your accountant if you're unsure of exactly what does and doesn't qualify. I hope that helps.
do you think this is a safe strategy in our current economic climate? what are the some risks to consider?
As opposed to the super stable stock market :) The risks are always around the borrower, the loan to value LTV and the conditions of the loan. If you're secured against a property and your loan to value is in check, it's a much more secure transaction.... but there is risk in ANYTHING we do with investing.
That's a great video Darren,
Thanks! Glad you enjoyed the video Rolando.
Yesss! Love your videos. Looking forward to meeting/ doing a deal with you one day👊
Thanks Christian. Glad you liked it. And yes, when we get out of lockdown, hope to connect with more investors like yourself.
Thanks for elaborating on this Darren. I have your Optimized Distribution structure video which was great. Would definitely be interested in lending with this strategy.
Ya this strategy is a game changer for many people
How do you lend the money inside the TFSA without withdrawing the money? I seem to have missed this step
You transfer your TFSA to a self-directed account. You're not withdrawing it, you're just transferring it to a different financial institution so there are no penalties. Check out this video that explains it well th-cam.com/video/af2dYvZfUFA/w-d-xo.html
Tfsa also doesn't allow for tax lose selling. Witch would have been nice thus year.
Love you and your videos, just a small thing I'd like to point out, you said you have to be a Canadian citizen with SIN... this is partially true, the SIN part. I'd like to point out for new comers, that you don't have to be a full fledged citizen ( with passport) and can open one while you're a permanent resident/ maybe even on certain visas
Thanks for the input. I pulled the requirements right off of the government of Canada website but I'm sure there are exceptions if you really dive in.
Thank you for this info. I learned something new. 👍
Does bank accept money in TFSA for second mortgage at higher rate of interest ?
Not sure I understand your question.
Mortgages are not a placement allowed in tfsa. Not like bonds, listed securities, cash or mutual funds
Sorry my friend you’re 100% incorrect. You can absolutely do it. You just have to use the right administrator. Look at Olympia Trust.
Great video and an excellent job of explaining the concept. I do have a bit of a question mark about your calculations at the end where you are adding 6K of your own money and then including that in your return to pump up the numbers. Maybe I need to watch it again!
Ok so if this private borrower is willing to take up your deal at 20% interest. The loan must be risky as fuuuuuuuuuuuuu...!!! What is your guarantee that the load will be paid back, with the interest on top??! 🤔
If you lose that precious TFSA contribution room, you're screwed out of your tax free investment vehicle. Yikes!
High interest loans don't have to be risky. It depends on your LTV, your experience and what kind of asset. Remember too that's it not technically 20%, it's 12% it's just allocated differently.
Another excellent video Darren! Love this strategy!
Thank you so much. I appreciate the support.
I just stumbled upon your video as I was looking into strategies to earn passive income. This information is phenomenal and well put together. I had two questions with regards to the RRSPs and TFSAs. I think because of the profession I'm in, RRSP didn't seem worth it, because of the overall pension. However, your maximizer technique is making me re-evaluate. My question is with RRSP you are taxed on what you take out, but when we are lending are we not technically "taking it out"? This may be a stupid question, but wanted to clarify this point. My second question, for married couples, does the TFSA account have to be joined?
Great information. Could you please share process how to lend money as 2nd mortgage and earn interest.
Thanks
Opal
Sure thing! I will see what I can do, thank you so much for the feedback Shahid.
Sounds good in theory, practically, it’s not so simple.
Can you please clarify what you mean by lending money out for 20% interest? How do you find people to lend money and charge them 20%?
You did not factor in the Withholding Tax on withdrawals from RRSP in your video. That changes things right?
Thanks once more Darren! Great info,
My pleasure! Happy to help in any way I can.
So say I have the 6k room to invest, I buy 6k worth of a stock in January in my TFSA, then by September it grows to 8k. If I sell that position but don’t withdraw the funds from my TFSA, can I now hold all 8k in my account in holdings/cash, or would I need to withdraw 2k to stay in the 6k allowable contribution until the following year?
Hope that makes sense! You got yourself a sub 👍
Edit: I know it’s not related to real estate, I’m looking for additional ways to use the TFSA. Excellent tips in this video!
If you still have cap room, which should be about 70k if you were 19 when TFSA started. So if you have only 6k in there and it grows to 8 and you sell, you're still well under the max. Cap room only grows by 5 or 6 k a year but you can put in any amount up to the total limit at any time.
Just want to be clear...when you say take out money for private lending..this mean you withdraw it from TFSA and by year end if you earned 10K you pay taxes on that income..right? So basically you cannot invest back 10K completely that you are getting as interest.
CRA website is hard to navigate. Where can we find this policy or rule? The borrower will have to be willing to work with the trust company and use this strategy.
How to transfer rrsp to tfsa account without paying taxes?
You can't do it. You can transfer an RRSP to another RRSP but you can't move RRSP to TFSA.
What happens if the borrowers default on their payments?
Hey Darren... awesome video. Couple of comments. Some numbers misquoted on 3-4% example regarding RSP returns (typo in text and once mis-spoke near end). It is also important to note that the TFSA account must be a SELF-DIRECTED TFSA (Olympia Trust, CommunityTrust, etc)... much like the SD RSP account. Individuals can not open a traditional TFSA account with an "A" lender bank and register it in a 2nd/3rd position on a mortgage. In actual fact, the Trust company (Olympia, Community) holds the mortgage on behalf of the SD TFSA (or SD RSP) owner, for the specific property. At least that is how I understand it. :)
Thanks for your comments.
Excellent video.
Thank you very much!
20% interested rate?! I am spectacle. Get ready to loose everything at some point. 10-15% gain achievable in stock market. Dont try to get rick quick. Build a solid foundation. The more money your have you would want to diversify And preserve The wealth. Took me 4 years to build a $600 Monthly dividend. My plan is to build a $1000/monthly dividend with in next 3 years.
If this is true , we like to be a part of it. Can you give us which private lender or mortgage broker willing to pay us 20% or even 4% in TFSA account?
Excellent video...liked and subscribed
Thanks for the sub!
How do I find a private lender?
Very good information. Quick question Darren. For eg. If I contribute 6k in 2021, and withdraw the same in Dec 2021. Can I invest 12k in TFSA on Jan1st 2022? Or Do I have to wait for the CRA to update the information in my CRA Accountwith the 6k withdrawal and 12k eligibility info and then proceed to invest after March 2022. Hope my question make sense.
Thanx. Explained very well
is it reasonable to find someone willing to borrow at 20% interest 1 year term like the scenario in 4:09? not only that but you're praying they don't default because your not the primary lender in this case?
Hi Darren, really interesting. I just don't understand how you can lend from a TFSA as a private lender? What paperwork does this entail to give to the banks or am I missing something here? Thanks for the stretegy!
You have to take your existing TFSA if you have one and move it to a self-directed TFSA . Once it's set up as a self-directed TFSA then you can use it to lend on real estate. The big banks won't allow you do this. It has to be done through Olympia Trust of Community Trust or a similar financial institution. Hope that helps.
@@DarrenVoros Yes it does help, thanks so much for the time and content!
@@DarrenVoros Why won't the big banks allow this? Makes my spidey senses tingle
I guess u need to make a new video explaining it more briefly on a piece of paper side by side. Alot of people are confusing here.
I will take this feedback into consideration, thank you Ran!
I'm curious what you find to be a good amount of $ to start lending like this?
Do you need to pay income taxes on the interest income earned from the private loan?
I may have missed something but if you take out money from the tfsa to lend to someone at interest are you not withdrawing from the tfsa and then will be taxed on the interest you earned while it is out? I don't understand how you are doing this.
Hey Darren,as a 23 year old uni grad fresh out of school with a stable income would you recommend I prioritize contributing to my TFSA or my RRSP? Would love to see a vid on this!
TFSA. Ignore your RRSP.
TFSA 100%, it's harder to withdraw funds from your RRSP because it's for when you retire. Put more in your TFSA, and a little in your RRSP
Until the last second I did not believe you will say all those numbers. lol
Glad I kept you on your toes!
@@DarrenVoros you did! I am not disappointed! haha
Bravo!
Thank you!
Can a Canadian sell stock options in a TFSA account. I live is the US and I sell weekly options against stocks I own. This is working out about $800 per week at a delta of about .22 on TSLA. TSLA is at $600 per share and to sell the option I need 100 shares or $60,000. $800/$60000 is 1.3% per week or 1.3 x 50 weeks = 60% per year non compounded.
Day trading isnt allowed
This strategy would only work if you had a similar amount of money in your RRSP as your TFSA right?
Since your TFSA would be growing at a faster rate than your RRSP, you wouldn't be able to lend your entire TFSA because you need to be lending the same amount in your RRSP as well which is growing at a slower rate.
Just wondering because as a small business owner myself, I generally pay myself in dividends, so I have not accumulated a lot of RRSP room so this strategy might not work for me.
Great points Ken. There are limitations with this strategy as you need to keep injecting cash into the RRSP portion to keep in flush with the TFSA portion.
I was wondering the same. Each year would get more and more difficult to reach those RRSP maximums. And your contribution limit on your RRSP a quickly becomes a limiting factor.
Still, a GREAT strategy non the less. I’m still going to be running the numbers and seeing how I can use this strategy for me and my wife.
On point as always Darren! Your videos are time well spent! Does your approach for the TFSA work for an incorporated entity (either and OpCo or Holdco) rather than funds held personally? Thanks in advance good sir!
From what I understand, corps can't hold TFSA funds. Those are only allowed to be held personally so this would not apply there. You can lend funds to a corp from your personal TFSA but there would still have to be an arms length separation in there. So you can't lend your TFSA to your own corp for instance. I hope that answers your questions and as always when it comes to taxes and legal matters, make sure you always consult your professionals.
Lol if you cheat you might get away with it. But I pitty the poor souls that take your advice and pay the price for it and loose everything.
Hey, Darren, what happens if you are too old to have an RRSP? Can I do some version of this with my TFSA? In 2016 I had $46,500 available room in my TFSA. I invested in bonds producing 12% interest monthly for four years. That was calculated as withdrawals of $22,320. Unfortunately, the company declared insolvency last year so the face value of the bonds is zero. But I will be receiving a return of capital over five years. I now have $51,200 maximum room available. Is there a way can I make this work to recover monthly interest income I lost? I had other bonds with this same company but the trust company said I could not transfer them into the TFSA. I had a total of $190,000 invested in three tranches of bonds. What can I do now?
How can you take money out of your RRSP to lend as a private 2nd mortgage? I thought you could only take out 25000 towards a first-time homebuyer? Thank you
If you look through comments some ppl answer this question.
Can I take money from a LIRA and put it into a TFSA?
Hi Cathy - If I may input to your question, you cannot transfer a LIRA to a TFSA. But, as Darren illustrates, you can structure the loan so the majority of the proceeds are directed to your TFSA. Pretty powerful idea.
Mike P to the rescue! Thanks for jumping in Mike and answering Cathy's question.
@@DarrenVoros Sorry, got a little excited when I found your page.
Absolutely love your videos! Thank you for sharing! My question is would my son and I be able to structure this kind of deal with my RRSP and his TFSA?
If I may answer - yes you can. My wife and I co-mingled registered accounts on private mortgages without issue.
@@mikep4869 Thanks for that reply!
I would have to agree with Mike P but in these situations I always refer to my accountant to make sure all is above board with the CRA before doing anything. Hope that helps.
@@DarrenVoros Thanks Darren I will also check with our accountant.
You make some giant leaps here to get to that amount. Who the hell is going to borrow that money from you at 20 percent?
No one is paying 20%. You're paying an overall return of 12% on your money which is very attainable. You structure it in a way that you're allocating 4% to your RRSP and 20% to your TFSA but that doesn't mean you're paying a 20% interest rate. I hope that helps clarify.
Wait, but don't you get charged for being over your TFSA limit even from investments?
No the limit only applies to your deposits. You dont get penalised for great returns
Love the education Darren, thank you. One question (which may be a no-brainer to others), when I contribute $6,000 each year to my TFSA, do I equally have to contribute $6,000 to my RRSP? Thanks.
No you can contribute to your TFSA independent of anything else. Hope that helps.
@@DarrenVoros but doesn’t the strategy you’re laying out depending on your rrsp growing at an equal rate so you can keep lending it as the other half at 4%?
Seems to me like this only works for ppl who are well connected in the real estate world. Otherwise how could you consistently find ppl who are legit enough to have safe deals and be able to trust them to lend huge amounts of cash.
You definitely need to know your borrower. You can do this through a broker but it doesn't take away the need to do your due diligence on someone.
Can I lend money for my rental property morgage?
nobody is going to pay you 20% on a 1 year mortgage. Thats basically loan sharking. No chance.
Watch the video - the borrower isn't paying 20% - the rate is 12%.
RRSP = 4%
TFSA = 20%
Average = 12%
Yes, you are correct. Thank you for making the clarification!
Hey Darren, great video. Is there a way you can loan the money to yourself for an investment property flip?
Hey Darren, great video. Any private borrowers you can provide access to that need money right now or a broker that has consistently brought deals? I'm live in the GTA.
ya good luck. This is all bullshit that doesn't work in the real world. Everyone is a multi-millionaire in TH-cam fantasy land but actually just living in a fixed up basement and pretending to be Warren Buffett.
Nice explanation sir
Thank you!
please just get to the topic
Is there a way to transfer RRSP to TFSA without the huge tax hit
Yes, you don't withdraw funds from your RRSP. That would trigger taxes. You transfer them (without penalty) to a self-directed RRSP or TFSA.
@@DarrenVoros You cannot just transfer money from an RRSP to a TFSA without penalty. This does not make sense. The money you originally put in the RRSP was never taxed, so why would you be able to put it into a TFSA without penalty? You gotta pay tax on that money at some point.
This is an interesting strategy for sure. But you present it in a disingenuous way. You are not doubling your money if you are adding 18k over 3 years to the pot. That is capital out of pocket does not count towards earnings.
Thanks for the feedback Michael!
wtf do mortgage have to do with this? I can't follow
So in the TSFA MaX, the borrower has to pay the costs of setting up 2 mortgages?????
Great question Ed. When the lawyers are setting up the mortgages there's not that much difference in the costs. The paperwork is pretty much the same. There are additional registrations of loans but those fees are usually under $100. Check with your lawyer to confirm.
how can you contribute $13K into a TFSA when the max is $6000.00 YR
The contribution room accumulates carries year after year. Look up the cra website what each year contribution limit is starting from the year you turned 18, if you haven't contributed a single penny since you turned 18 then you can deposit up to that full limit until it's maxed. After it's maxed then your contribution limit is whatever cra announces for each year.
@@chhaytee435 Understood 'but' if you have contributed the max this strategy would not work. And if you can't afford the max TFSA contribution your likely not in any position to utilize this strategy.
Is 20% an average?
An average return? No, it's definitely above average.
@@DarrenVoros Thank you for your eye opening channel, as well as your expedient reply.
Yo do you know the Voros twins?!? Theyre wrestlers?
No but they sound like might be the best in the business with that last name!
I have a segregated Funds that has been averaging at least 8-10%, no hassle, creditor protected and probate fee exempt...plus who pays 20% mortgage interest? 7-8% average rate on mutual fund, that's balanced fund, why not go aggressive if the client is intending the fund for retirement anyways... aggressive fund last year in the middle of pandemic grew 13%, how much more if there is no pandemic or market challenge...
No one is paying 20%. It's a blended rate of 12%. And there are plenty of people out there paying 12%. I'm one of them.