Quote:
Originally Posted by esquire
How does that work? Where do they find people in financial distress to invest in their project? Where do people in financial distress even get the money to put into these? I don't get it.
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If you can believe it, Fortress syndicated mortgages qualify as RRSP eligible. Often, more sophisticated financial instruments are only sold to accredited investors. And that's a defined term within each provincial Securities Act that generally stipulates income and net worth at a certain level with both being used as proxies for: i) You'll be fine if you lose your shirt, and; ii) Your income level indicates you have at least some savvy. And it's not a perfect system, but nothing ever is.
Lost in all of this is that syndicated mortgages at the core are complex instruments. That goes doubly when you start layering different levels of financing. There's very little chance that even the reps have any idea what they're selling. The fact that they're RRSP eligible signals to people that they're safe, regulated, and endorsed by the government when none of those three things is true. When people in their 40s and 50s are getting annualized returns of 3%, they start getting antsy. All of a sudden 8% using a transfer-in-kind (to avoid the taxation implications) looks like a good idea.
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