Pssst . . . Have I got a deal for you!

Ron Prefontaine knows the deal he's talking about is strictly legit. But with so few real estate investors knowing they can put their registered retirement savings plan (RRSP) money to work in real estate, Prefontaine sometimes feels like he's hawking one of those products the skeptical investor will equate to an offer by a shady street vendor with an arm wrapped in faux-logo watches.

Prefontaine is a Calgary-based mortgage broker who works specifically with investors. An investor himself, Prefontaine got his brokerage licence after experiencing first-hand what it's like to convince traditional lending institutions that self-employed investors, including small-business people and commission sales people, qualify for business loans, particularly for real estate investment.

More recently, Prefontaine has been talking to his clients about the advantages of Canadian tax legislation that enables investors to use self-directed RRSPs to generate retirement income at much higher returns than traditional investments.

Larry MacDougal, Business Edge
Mortgage broker Ron Prefontaine, in front of a rental property he owns, enjoys his hands-on role.

Prefontaine says his own RRSPs, which are transferred into RRSP-eligible bonds against which he borrows investment dollars, now generate returns of about 13 per cent. "This is a way to finance yourself," says Prefontaine, a renovation contractor turned mortgage broker, whose own real estate portfolio includes about a dozen Calgary properties.

The challenge is that few people know how their RRSPs can be used in the real estate market and there's no reason for traditional RRSP fund managers to promote that information, says Greg Habstritt, president and founder of InvestorsAgent. Like Prefontaine, Habstritt's business focuses on real estate investors, including some who get involved in joint venture deals where other partners actually manage the properties.

And that business is booming, says Habstritt. InvestorsAgent, with its headquarters on 17 Avenue S.W., started about two years ago and specializes in real estate deals involving everything from single-family homes to multi-family units up to 24-unit apartment buildings. Any bigger than that and condominium conversion companies and trusts are likely to be interested.

Because some of these companies can afford lower returns on their investment, these deals are economically less accessible to Habstritt's client base and what he terms the "average" real estate investors expect.

Today, InvestorsAgent employs three full-time real estate agents (including Habstritt) "and we're going to add a few more over the next few months," says Habstritt, whose company recently started offering preferred clients group tours of investment properties in Calgary.

The tours strengthen the investment network and Habstritt views the excursions as a sign of this market's growing sophistication.

With growing employment, the bright light on this province's economic horizon, and low interest rate hikes, "I'm very bullish on the Alberta real estate market," notes Habstritt. "Right now, real estate seems like a safe, stable investment."

Like Prefontaine, he expects the real estate market's continued strength to boost the number of real estate investors who use eligible self-directed RRSPs to build their retirement nest-eggs with real estate investments. The right property can be a very low-risk investment, yet generate returns of plus-10 per cent, says Habstritt, who's also divested his own stock portfolio in favour of real estate investments using RRSP-eligible bonds.

"People seem to think that holding a mutual fund or a stock is less risky than holding a piece of real estate (but) stock investing is one of the most active investments people can do," says Habstritt, who likes playing a hands-on role in his own investments.

He and Prefontaine agree investors need to educate themselves about RRSP eligible bonds - and that means taking the time to go to people outside traditional RRSP institutions.

They also urge investors to get legal and accounting advice on the issue before making the big switch to an RRSP, where the mortgage is secured by Canadian property as a qualified investment.

Habstritt, whose portfolio includes several properties from single-family homes to a 21-unit apartment building, says the need for qualified advice cannot be over-stated.

Although he knows people who make real estate deals without a lawyer, it's a path Habstritt won't walk down.

Using RRSP money for real estate investment - and real estate investment in general - demand a business plan that acknowledges personal limits, adds Prefontaine. At this point in time, Prefontaine's personal threshold for a real estate investment's cash return is $300 a month.

Habstritt doesn't share a dollar amount, but insists there's no reason to invest in real estate that just breaks even. He also dismisses investments based on long-term property appreciation as an unnecessarily dangerous pursuit. Investors need to be clear about whether they're after income or growth. But, he adds, "appreciation is just one of those things that you can't guarantee."

(Joy Gregory can be reached at joy@businessedge.ca)