A mortgage is a loan, secured by real estate. It is not real estate. However, a mortgage is a fairly safe way to invest in real estate, but you do not participate in the overall performance of the real estate through this financial instrument. Your TFSA or RRSP becomes the lender. You are the bank.

You can hold:
a single mortgage
a share in a single mortgage, called a syndicated mortgage
shares in a MIC, a Mortgage Investment Corporation. An MIC pools many mortgages and allows the individual investor to co-own a share of multiple mortgages in their RRSP or TFSA.

The risk of this investment, namely payment default by the borrower, has to be compared to the fixed return of this investment. The fixed return over time can vary from a low of perhaps 4% to usually in the high single digit range to perhaps the lower double digit range for more risky assets.

A second consideration is if the mortgage is on a to-be-constructed property or an existing property. As a broad rule of thumb, a to-be-constructed property carries a much higher risk of non-payment, as the development of the property has not yet occurred, thus reducing the ease with which the lender could sell it if necessary. The interest rate on this mortgage should be much higher to compensate for this additional risk. Consider return OF your capital before you consider return ON your capital when evaluating this first type of RRSP or TFSA eligible investment option.

A tertiary consideration is the position of your mortgage on the property title. If you are in 1st position, and the mortgage is unpaid, you are first in line to get paid from a foreclosure action. Even then loss of capital is possible, especially in a construction mortgage. If you are in 2nd or in 3rd position, other lenders get paid first. Thus, the risk of non-payment increases with the increase in position on title. Some trustees or MICs don’t allow 2nd or higher position mortgages, but some do. Therefore, before you invest, do your homework on the risk of the loan and then gauge whether the offered interest rate compensates for this risk.

Fill out forms to open an RRSP (or LIRA or TFSA) Account with Olympia Trust.
Transfer money into this new account, via a new contribution or from an existing RRSP account at another firm.
Fill out a form instructing Olympia Trust to use the account to buy RRSP/TFSA-eligible bonds from Armour Development. These bonds may be accruing interest or paying it quarterly, for example for income seekers or folks with a RIF – your choice.
Send the forms (and possibly accompanying cheque made out to your new RRSP account at OlympiaTrust) to your Exempt Market Representative.

On both the US and Canadian stock exchange there are a number of firms that invest in real estate. Some invest in apartment buildings. Some in commercial properties like industrial parks, office buildings or retail malls. Others invest in hotels, campgrounds, trailer parks or recreational properties. Some invest internationally, all over the world, and some only in certain cities. Some hold existing properties, other invest in land projects or construction.

A common sub-class of these publicly traded firms is a REIT (Real Estate Income Trust). A REIT pays out the majority of its income monthly, and as such can be an excellent vehicle for retirees or those folks seeking monthly income.
Then there is the expensive brother of the real estate stock or REIT, a mutual fund, or its less expensive, diversified relative, the index fund or ETF.

All these publicly traded vehicles provide the benefit of instant liquidity, quarterly reporting and regulatory oversight. On the other hand they have severe downside risks that comes with stock market investing in general, namely market sentiment, and market manipulation by insiders. REITs are subject to wild, unexpected swings because some politician said something, or a report came out that was less positive than expected, or there was buy/sell manipulation by insiders or panic selling due to rumours or opinions by market analysts or newspaper articles, which may or may not be accurate.

Many people seek an investment vehicle outside the often irrational stock market. They move to co-own real estate with a private firm. This type of investment follows accurate real-world real estate performance. Real estate has been the key reason why the vast majority of millionaires have become rich. People have to live somewhere if the market is rising or falling. People go shopping, albeit less frequently if the market is down, and someone has to own this mall or retail centre. Trucks need repair facilities owned by someone. Office workers need leased space owned by someone, and so on.

To buy or build real estate requires much expertise and money. Therefore, the idea of coupling expertise with money partners in a corporation or partnership makes perfect sense.

Armour Development limited partnership brings together one party that has the expertise to analyse, purchase, develop and manage apartment buildings with other parties that have money to invest, seeking a fair return, but lack the expertise, time or the desire to analyse, purchase, develop and manage assets. One party invests, the other party does the work, and profits are split according to a pre-determined, and annually inspected, formula. Since this corporation or limited partnership owns real assets, in the real world, with real money changing hands for real assets, the values can be established relatively readily, without the often irrational stock market value swings. It can provide a better alternative to investing in the publicly traded market.

Thus, Armour Development, in conjunction with industry experts, accounting and legal firms has created an RRSP and TFSA eligible investment vehicle that allows you to participate in the performance of our multi-residential buildings.