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Building returns in your portfolio

by CRE on 01 Jun 2017

As the house prices in certain Canadian cities continue to rise, more people are being forced to – and are choosing to – live in more suburban settings. This shift creates a good opportunity for real estate investors and many are reaping the benefit investment vehicles that provide access to residential developments in suburban settings: Bonds.

Similar to other real estate bonds, RealProperty Bonds only invest in a project when all of the legal approvals are received and the financing is secured. However, unlike other bond-type instruments, real property bonds give investors the ability to choose between two varying profit streams.

“The investor can either choose a 50% return or a 100% return,” explains George Lawton, CPA, CA, CEO, North American Home Finance Inc. “The bond retuning 50% is a five-and-a-half year investment and the 100% version has a seven-and-a-half year term. The investor is able to decide how much profit they want to make based on which bond suits them best. And, unlike conventional bonds, the majority of this profit is earned as a capital gain which provides the investor better after tax returns, which is really the thing that matters most at the end of the day.”

Lawton believes that, due to the way they’re structured, real property bonds eliminate the uncertainty that is part and parcel of most investment strategies. The investment is secured directly against the land by the trust company that holds the mortgage, providing the sort of peace of mind that every investor is searching for. “Unlike investing in a stock market, where a financial advisor will hope the investment will go up by a certain amount each year, RealProperty Bond investors pick how much profit they want,” Lawton says. “Based on the value of the property on day one, that profit is already covered. There is a lot more predictability to the return: it’s not a ‘what if’, it’s a contractual return that the bond holder is set to receive.”

RealProperty Bonds are sold by offering memorandum which means investors are not required to be accredited. They’re an affordable way for investors to enter the market, but they also play an important role in affordable creating homes. “We are focused on increasing the capital available for housing development,” Lawton says. “We care about housing and believe that all Canadians should have the opportunity to own; that’s our purpose.”

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