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If you are a foreigner looking for real estate investment in Canada, here is a great guide to the Canadian real estate market.
Why Invest in Canadian Real Estate?
The average home price continues to rise across Canada despite a pandemic, according to a Financial Post report.
Here is why you should purchase a property in Canada:
Open-Door Policy
The best thing about Canadian real estate is that foreigners get the same property rights as residents.
There are no restrictions on the number or types of properties you can buy.
However, you have to pay foreign buyers’ tax on each property. More on this later in the article.
Tax Benefits
Tax Benefits in Canada can enable you to invest with significant net returns. Canada offers the following tax benefits:
- 4% annual purchase price depreciation
- The attractive tax credit system
- Simple property income tax
- Foreigners can benefit from local financing options
- Foreigners are exempt from social security contributions
Attractive Property Prices
Compared to property prices in other countries in America and Europe, the square meter price in Canada is attractive.
A house in Ontario can cost you around $ 5,600 per square meter. (Source: numbeo.com)
Canada operates a free and transparent housing market. All of the information you need to know about investing in Canadian real estate is easy to gauge.
High Demand for Rental Properties
Canada has seen high levels of immigration from around the world. With a large number of renowned colleges and universities, the demand for student rental apartments is growing.
Canada is also one of the preferred emigration countries for young professionals.
The young and dynamic culture, the growing number of companies, and the liberal visa regulations have made Canada one of the most desirable countries for labor migration.
Check out this page if you are looking to invest in a rental property in Canada.
Investment Diversification
Diversifying your investments is one of the best ways to reduce your losses. Those who invest in real estate can geographically diversify ownership of their property through leverage.
It enables investors to get a high return on their investment by taking on additional debt.
In Canada, you can get leverage through refinancing, where an existing mortgage is replaced with a new loan.
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What are the Real Estate Investment Options for Foreigners in Canada in 2021?
There are many ways to invest in real estate in Canada; however, you should determine the purpose of the investment, analyze the affordability, cost of living, financing options, and lifestyle before deciding on an investment option.
Here are some of the most common ways foreigners buy real estate in Canada:
Primary Residence
If you are moving to Canada for work and want to settle there, the best way to invest in Canadian real estate is by purchasing a primary residence.
With this type of investment, you not only buy a house to live in but also create a long-term asset.
Typically, when you sell a property, you must pay capital gains tax to the CRA.
However, you are exempted from paying such tax if you sell your primary residence in Canada.
Purchase and Hold
It is another common strategy to build long-term equity. You can buy a property and hold it to earn rental income from it.
The longer you hold the property, the better are its chances of appreciation. When renting out your property, you have the following options:
- Buy a single unit home and rent it out to a family
- Buy a multiple unit home, live in one of the units, and rent out the rest
- Buy a multiple unit home and rent out all the units
With this option, you can eventually cover your mortgage cost and build an asset on the foreign land.
Rental Property
As a buy-and-hold strategy, you can buy a residential or commercial rental property and receive monthly rents from it; However, managing properties and tenants abroad can be challenging.
If your rental property earns a good rental income, you can hire a property manager in Canada to manage the property and tenants.
The potential rental income from commercial real estate is enormous in cities like Toronto.
According to a report, the average rental of a commercial facility in downtown Toronto is around $ 37.05 per square foot.
However, a rental property, especially a commercial one, requires a significant down payment and legal formalities. Thus, it may not be an attractive choice for foreign investors.
Other lucrative Canadian real estate investment options include:
Shares of the Real Estate Investment Trust (REIT)
REITs are companies that own income-generating properties and operate them in the real estate market.
By investing in their stocks, you can capitalize on real estate investments in Canada.
REITs generally own a large portfolio of multiple commercial and residential properties.
It’s a great way to get started with Canadian real estate investing without having to worry about buying real estate.
REIT stocks pay significant dividends and make real estate more accessible.
Do you get Financing Options in Canada?
Yes, you get many funding options in Canada as a foreign buyer, and the interest rates are as low as they are for the residents.
But a foreign buyer may have to pay a higher percentage of 35% of the property’s value as a down payment.
How Much is the Foreign Buyer’s Tax in Canada?
The primary difference between the real estate investment by a resident and foreigner in Canada is the additional taxes on non-residents like a 20% of foreign buyer’s tax on the property’s fair market value in the British Columbia region and 15% non-resident speculation tax livid in foreign entities and taxable trustees in the Ontario region.
Conclusion
Buying real estate in Canada is a profitable investment for residents and non-residents alike; However, if you are a foreigner looking to invest in Canadian real estate, it is best to contact a local realtor who is experienced in overseas real estate investments.
