So you want to move to Canada, eh? Beautiful and lotsa wild, Canada has everything from rugged coastline to forested bays, wide waves of golden grain as far as the eye can see and mega-metropolitan modern cities. Hockey rules, cultures converge, and Canada reaches clear to the North Pole – really. With a thriving economy and land to expand, it seems like a great real estate investment opportunity. I looked and learned our neighbors to the north have a whole lot going for them, and they plan to keep it that way.
- I can just move to Canada if I want, right?
- Lots of people move to Canada for quality of life
- Canada is not the most expensive place in the world to live – but close
- You have a lot of ground to cover figuring out where the best place to invest in real estate is in Canada
- Oh! Canada Real Estate is Expensive
- Is real estate a good investment in Canada?
- Can US citizens buy investment real estate in Canada?
- Where is the best place for a US citizen to buy real estate in Canada?
- Taxes and fees are a big thing in Canada, especially for non-residents
- What happens when I sell investment property in Canada?
- From a Canadian perspective, rental yield rates & rental income jump
- Is buying a resort property in Canada an option?
- Are REITs an option for buying property in Canada?
I can just move to Canada if I want, right?
Moving to Canada is a standing comment in the US, during every election or military conflict. After all, they are just like us, right? and speak English, right? and they don’t really care if Americans come up there, they took all the Vietnam protestors, right?
Canada will let you spend your real estate investment funds there, and pay your taxes there, and come vacation. Then as a rule they want you to go home.
Moving to Canada is a lot harder than you might think. First, Canada is it’s own country, not an extension of the US like a lot of people seem to think. They make their own regulations and they are protective of their land and citizens. It is far easier for a British Commonwealth citizen, someone from a country the Crown has under their umbrella, to move to Canada and work than anyone from the US.
To move to Canada, you have to possess job skills that are in high demand and unable to be filled by a Canadian. Generally a Commonwealth citizen with those skills will get preference first. Since Canadians tend to be pretty well educated, and attract citizens from Commonwealth abroad, there is a limit to what is available – mostly specific IT, medical, and engineering jobs.
Getting a visa is hard, period. Canada wants to know you can pay your bills, what your intentions are, and why you are there. And they will ask a lot of prying questions and will expect answers. It is a long process that is costly and time consuming with no guarantees for a work permit, let alone residency then citizenship application request.
Lots of people move to Canada for quality of life
While Canada falls mid-scale for quality of life regarding social services and the like, it still far outweighs the US for things like national health care, maternity leave, national assistance with job placement, and employment insurance. Canada protects jobs for Canadians first when a foreign company lands needing employees, and there is a rigid ratio and hiring system.
When quality of living standards are viewed, nearly every major town in Canada including Montreal, Toronto, and Vancouver all ranked well above any US city. They have universal healthcare, an active and progressive government, are multi-national and pretty comfortable about it, and have something for just about everyone from skiing to the arts to great cities. It is just nicer to live in most places in Canada, and they look out more for their citizens. It does come with a cost, though.
Canada is not the most expensive place in the world to live – but close
You can almost bet if you are live in a British Commonwealth country, your cost of living is going to be high. That holds true in Canada. Canada is one of the most expensive countries in the world to live in when compared world wide, and 5thamong Commonwealth nations. That said, there is still some balance when compared to the US due to healthcare and education.
Gasoline, food, housing, all are well above U.S. prices by about 40% when you look country-wide. While it is true that average Canadian wages exceed the US by about 22%, it doesn’t make up what increased costs are for basic items. If you figure in health care and higher education, however, there are arguments for biting the bullet on the housing and food costs. Canadians walk and bike more than you might expect given the weather, and public transport is a hot topic for increasing availability in major metro areas. Utilities are nationalized, so the price is about the same but much more stable than US prices.
One of the big challenges for cost of anything in Canada is the strength of the US dollar and exchange rate. A lot of Canada’s trade is based on agriculture and raw fuel materials. That means their economy is heavily tied in some ways to what is going on in the U.S. When the US economy/dollar is strong, Canadians suffer with their dollar dipping. When the US has an economic downturn, Canadians win as their dollar is worth more than ours.
You have a lot of ground to cover figuring out where the best place to invest in real estate is in Canada
Canada is a lot larger than most people realize. Wider than the continental US, there are 10 provinces and 3 territories touching 3 oceans and encompassing Hudson’s Bay. Canada is larger in total landmass than the US, but has about 11% of the population. That makes for a lot of not so well charted territory.
Oh! Canada Real Estate is Expensive
The high median sales price for houses in most metropolitan areas of Canada keep many from being able to qualify for a mortgage. In 2018, the average price in Victoria BC was just under $1.1 million (you read that right), Toronto, ON $766,000, Calgary, AB $431,000, and Ottawa, ON, the nation’s capital, in at $382,000, all CAD. These kind of prices are across the board and consistent in ratio with wages earned. That is why finding a bargain real estate investment anywhere in Canada can be a big challenge, if not close to impossible.
Buildings are built to last in Canada – because building codes are tough
If you look for raw land in major metropolitan areas, expect to pay dearly, and if in rural areas, know unemployment is extremely high. The later is especially important to know if there will be a market to sell, or if people can afford to rent there.
Building codes are extensive and strict in Canada. Far more is regulated than in the US, including everything from how deep your insulation is required to be to efficient, high output heating systems so winters don’t freeze ya’. Skilled construction labor does not come cheap, as much as $50/hr, and materials are not either mostly due to transportation. The building code compliance is monitored closely by lenders and insurers to make sure rules are met and requirements as well, or you will not be able to pass a house appraisal, insurance inspection, or assessment.
Is real estate a good investment in Canada?
While it is possible to write a mortgage for investment real estate in Canada as a non-citizen, Canadian financial institutions charge higher interest, require verification of income, meeting the mortgage viability, and other information from non-residents. They also require at least a 35% down payment and you have to be able to prove where it came from for at least 90 days back. They also will require it be on deposit in a Canadian bank for at least 30 days. And, all Canadian banks require you to be in person to open an account.
Keep in mind that finding insurance as an out of country real estate investor can be difficult. You cannot write a mortgage in Canada without property insurance. Make sure you have solid quotes that are verifiable and viable before you make any offer or sign any contract on property of any type in Canada if you have to mortgage it or you intend to insure it. It is especially important since 5% is most often the minimum escrow amount you need to put up in cash, so its a lot to loose if you can not write insurance.
Find out if the lender will allow an extended power of attorney to sign documents for you. Many Canadian firms, banks, insurance companies, require you to be physically present to sign forms. Ask first so you are not surprised by an unplanned expensive trip or two.
While Canada has no federal law restricting a foreign investor to a maximum number of properties, there are limits on the number of mortgages some lenders will allow per foreign investor.
Mortgage interest is well below averages in the US, but right now, everything is pretty low when it comes in mortgage interest. The most important thing is can you invest profitably in Canada – which requires a very intense look by a qualified tax accountant and maybe a real estate attorney used to dealing north of the border.
Can US citizens buy investment real estate in Canada?
It is relatively easy for a US citizen to purchase property in Canada, as long as you are willing to pay the appropriate fees and provincial taxes. Since 2017 a number of developed areas, such as Toronto, charge a non-resident speculation tax of 15% due at closing when purchasing property. (Non-resident Canadian citizens do not have to pay this.) This also applies to commercial and business property. Since many of the areas are the most expensive places to purchase property, this can prove a substantial amount. Some new construction properties carry additional fees and taxes as well.
You must posses a current passport or NEXUS card to travel to Canada. Owning property in Canada does nothing to help with immigrations. You can buy the unit to stay in, but must complete the necessary immigrations paperwork and requirements if you want to stay longer than six months. (A Canadian who lives away from Canada more than six months has the same rules apply as a non-Canadian, interestingly.) A “super visa” can be applied for allowing you up to 2 years of stay, and is easier to obtain if you have a child or grandchild in the country. It is possible to apply for a work visa, which is hard to obtain, or a Skilled Work Permit for high need areas.
Know, though, most programs to defer property taxes and fees do not apply to non-Canadians who purchase property, and each area sets its own rules. Check carefully to make sure you get no rude surprises at the closing or post-purchase. You also must file an annual Canadian income tax statement and pay taxes on any increase in value or income derived from the investment. Alternative country reporting is not an option, so your taxes would have to be filed back home, too.
There is some really grey area in Canadian immigration policy, though, if you are operating a business, i.e. real estate investments for rental income, and not a Canadian citizen. A variety of special permits can be applied for as an entrepreneur, but nearly all assume you intend to live in the country, and if not, will hire at least one Canadian full time and/or lease a business location for at least one year.
While several of the permits are helpful for gaining a work permit if you intend to immigrate, others are not. None of those permits talk about at home businesses, either, in their general information. It is best to seek the counsel of an international business attorney if you plan to conduct business in Canada, or start a new one.
Where is the best place for a US citizen to buy real estate in Canada?
Detached housing, as free standing, single family homes are referred to in Canada, leads to many families looking at outside areas from large cities with considerable commutes, or job changes, in order to be able to qualify for a mortgage. One area has been Brantford, ON, where several European and Japanese food companies and two colleges with satellite campuses have boosted the local economies. The 100 kilometer drive from downtown Toronto is deemed worth it to some when they can sell a suburb house, move to Brantford or another area of the “Golden Horseshoe”, and buy for 60 cents on the loonie (slang for Canadian dollars). A bargain house is considered $420,000. Wow. That’s loonie, all right! The 11 year ROI on a Brantford house is 4.1%. I regularly make 80-90% ROI on my lead gen sites. Here’s some info https://www.bestrealestatedirectory.com/lead-gen/
If you are willing to chance a more desolate, or stand alone area, like Regina, Saskatchewan, you can buy for $303K, and even parts of Ontario are below $200K CAD. If you like coast and islands, Prince Edward Island, New Brunswick, and Nova Scotia have some bargains, too. The problem is there is nearly zero work there for anyone. You must fish, log, mine, or be self employed in a business that does not rely on regular mail service for shipping in most areas.
Know that buying property as a non-resident with a Canadian resident is not a work around. The requirement of 35% down payment stands, as well as proof of income and the other information. They may be a bit more lenient if that person is a spouse. And, if you own rental property, only Canadian rental property will be considered part of income. Canadian financial institutions will not consider any out of country rentals as part of your viable income, period.
Taxes and fees are a big thing in Canada, especially for non-residents
Due to the nature of national and provincial governance, Canada has what they call a harmonized sales tax. This is kind of like sales tax mixed with use and luxury tax. Everyone gets a piece of the sales tax, though, and it runs as high as 13% depending on province.
Capital gains tax apply to gains you make on property purchased for rental income, and many investors underestimate these and maintenance costs. It is important to realize property taxes throughout Canada are based on the market value of a parcel, not the assessed value as in most of the US. This means your property taxes can be substantially higher there, and you are not entitled to discounts as a non-resident.
Income tax for a non-resident is 25% of the gross property rental per year. You may or may not be able to recover some of that amount through capital and operating expenses in subsequent years, but only after depreciation is taken. You can, however, claim any interest paid on a Canadian mortgage on rental or investment property as a deduction.
What happens when I sell investment property in Canada?
The Canadian government keeps a 50% withholding tax on your sale. The capital gain also has to be reported on your US income tax, as a foreign tax credit. The seller must provide the buyer a clearance certificate from the Canadian Revenue Authority showing all the taxes and withholding was paid. If the seller does not, the buyer is allowed to withhold part of the purchase price in case they have to cover any of the outstanding taxes. If you have moved to Canada, and then leave, you are liable for “deemed disposition” costs. Those costs also apply to heirs for non-resident owners.
Are you tired yet, or boggled in the amount of paperwork, forms, and fees it will take to safely purchase and hold property in Canada? I sure was.
It is so much easier to just earn my money the good old-fashioned way and let someone else deal with all the paperwork if I just have to have property north of the border. Honestly, though, I cannot see after all the charges that a non-resident can make any decent ROI on any real estate investment in Canada. And if you live in Canada, you need income to be able to buy a place to start with.
I like earning my own income first, and this is how I did it https://www.bestrealestatedirectory.com/lead-gen/
From a Canadian perspective, rental yield rates & rental income jump
In nearly every city of any size at all, rental rates are going up – substantially – across Canada, regardless of province. Rental rates as well as increase in property valuations steadily see anywhere from 8 – 22% annual increases. This is one reason the cost of living is so high in Canada, because housing is wicked expensive.
If you are going to rent in Toronto, Calgary, Montreal, or Vancouver, expect to pay upwards of $1600 up for a multi-bedroom place. But then, in New York, Los Angles, or Miami you are looking at $3-4K/mo for a similar property in a prime downtown area. When compared to US major metropolitan areas, rent is actually a lot cheaper in Canada than in the U.S., while the upfront cost of buying the rental is much higher. Translation – lower yield.
If you are a foreign owner, and hold rental property, you will most likely have to hire a property management company to handle tenant procurement and management, maintenance, and accounting and banking. Canada has less available resources as a rule of this type, especially in cities of small to moderate size. That does not mean it comes with less regulation, though. Government oversight is strong and runs deep in Canada, and provincial governance far outstrips what US citizens are used to on a state’s rights level. Provinces run a lot like their own country, and the Canadian government more like a commonwealth.
Is buying a resort property in Canada an option?
If you are an outdoors type, you might think a resort is a great option to combine a hobby and investment. Appreciation is usually far slower on resort properties than on homes, especially away from any urban area. Canadians tend to live very concentrated, large populations around major cities. Due to the increase in metropolitan populations, issues that plague any large city are prevalent, from street crime to infrastructure issues like sewerage and other utilities. Traffic is a serious problem in some larger areas like Montreal and Toronto, as Canada is trying to catch up but has not made it yet for full public transportation.
The rural areas are spread out and sparse, partly due to the vastness of the country, part due to agricultural, mining, forestry interests, and part just simply due to the topography and old man winter. There are some populated areas that may provide decent rental investment options, though, as more and more foreign capital comes to areas in Ontario and elsewhere to build manufacturing plants, thus attracting workers. In particular, food industries have moved into southwest Ontario where access to transportation by rail and ship are both available due to proximity to all the Great Lakes.
Are REITs an option for buying property in Canada?
There are a number of real estate investment trusts available for property in Canada, but know that legislation has made figuring out what your return will be quite challenging. A mix of passive income and investment income has to be retained by the trust to comply with Canadian law, and being able to really get a handle on how much your return will be is nearly impossible. It has to be a long-term strategy to gain any decent return due to those laws.
This is all way too much work with way too little return. When I looked into Canadian real estate investment property, I learned the average ROI for a non-resident is 4.5-6%. That does not even begin to interest me when I regularly make 80-90% on my lead generation websites. Since they are digital real estate, I don’t have all these fees, taxes, and mumbo-jumbo to go through. Let me quickly explain what I mean.
When I graduated from college I took a $35K/yr corporate gig that I quickly realized was getting me nowhere. I started to look for a side business to make some decent money so I could invest in my future. First I got a lot tied up in MLM’s, which quickly proved only profitable for the guy at the top, plus I irritated a lot of friends and family. Then I tried drop-shipping. That was better, but I had an apartment full of stuff, was working stupid hours, and still did not have money to put away or even take a vacation – besides, I was tied down having to be home to pack and ship orders every night after work.
I was searching for the ticket after several long, discouraging years of this when I ran across a blog one night talking about a guy who had written a training program teaching how he was building lead generation websites for businesses that did not know how to gain customers from the Internet. That got my attention, as I knew the web was the future, period. I checked the guy, Dan, out, and everything I ran into sounded really solid, so I clicked this link https://www.bestrealestatedirectory.com/lead-gen/ and made an appointment to ask questions.
Dan was really up front and explained it took some work, but also showed me real data about how well it was working for him. I decided I had nothing to loose and a lot to maybe gain, so I paid the tuition and started studying. The first week I wrote this website in about six hours:
It was actually easy to do, and I rented the leads out the first week for $750/mo. Five years later I still get paid every month by the same client who loves what I provide, matching up customers already hunting what he does. My expenses are minimal, I hardly touch the site. I have cleared over $36,500 in the last five years on just this one site!
I quite the corporate job with all my bills being paid in 5 months.
Five years later, I just turned 30. My income this year will be well into 7 figures, 80-90% of it profit. I travel when I want, work when I want, party when I want. Yes, it was work at first, and I still work – but I am my own boss and it is on my terms.
Are you willing to put in a little work for a solid future for yourself and your family? To make your dreams realities?
To cross some stuff off the bucket list? You can.
Click this link to set up an appointment and get some information https://www.bestrealestatedirectory.com/lead-gen/
There is no obligation. You will not get on any solicitation lists.
I just know there is way more business than I can ever think about scratching the surface of out there.
You want a nice condo in BC overlooking the bay to whale watch? Pay cash for it.