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Want to Invest in Canada When You Live Overseas? Here’s How to Do It

Want to Invest in Canada When You Live Overseas Here’s How to Do It
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Canada’s real estate market has been booming for a while, leading to more foreign investors snatching up hot properties. If you live overseas and have been interested in breaking into the Canadian market, it is still a good time. Of course, you must understand the taxes, regulations and procedures when you’re buying property as a foreign investor. Here’s a guide to investing from overseas.

Table of Contents - Want to Invest in Canada When You Live Overseas? Here’s How to Do It

Understand the tax implications

Although Canada is quite happy to let foreign investors spend their money on real estate, there are certain taxes applied. Ontario and British Columbia have long since levied a foreign real estate buyer tax, and now the concept is about to go national. Currently, according to Reuters, the details of the new tax rules will be revealed in the spring of 2021. This could add a tax somewhere around 15 to 20 percent (the amounts Ontario and British Columbia charge) to your total real estate investment bill.

There will also be land transfer taxes, which vary from province to province. These usually top out at 2.5 percent. If you’re buying a newly-built home, you may also be subject to a Goods and Services Tax or a Harmonized Sales Tax. This is something you should discuss with your real estate broker when adding up the total costs of a sale.

Finally, if you’re planning on collecting rent, know that foreign investors are subject to a 25 percent tax on the gross rent received. You may be able to offset that cost by claiming expenses, such as property taxes and mortgage interest, repairs and maintenance. Talk to a real estate attorney to learn more about how this can work, and whether it’s in your best interest to try to offset costs.

Discussing the tax implications isn’t meant to discourage you from investing. As we all know, the truly savvy investor knows how to identify and analyze all the costs, fees and taxes when buying a property—otherwise, you might not make a wise investment.

A question of residency

If you’re planning to invest from overseas, it’s worth considering how long you might visit your property or properties. If you plan to spend six months or less in the country, you’re still considered a visitor. However, if you plan to spend more than that, for whatever reason, you must apply to be a resident.

Buying property in Canada does not entitle you to citizenship or residency in and of itself. Be sure you keep these residency requirements in mind when you’re planning trips to your new investments.

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Find the right place to purchase

Next, you’ll need to decide where you want to buy. (The Canadian Real Estate Network blog highlights many parts of Canada where you might wish to expand your portfolio. Be sure to read these articles for real-estate focused overviews of each province, major cities and some hidden gems.) You may already have an idea of which province or general metropolitan area you’d like to invest in.

Once you’ve identified your target market(s), it’s time to research. Find out everything from how the market is performing to which taxes and regulations are applicable. There’s a vast wealth of information online, but joining real estate investment groups—especially ones for foreign investors—will be most enlightening. It’s always a good idea to find a mentor and learn from their experience.

Buying from overseas

The rest of the real estate process is similar to what you’d experience if you were a Canadian resident—only with more paperwork, and conducting most of your business over the phone.

Find a realtor

Working with a reputable realtor is a good way to help search for the right property. Your realtor will help preview the properties for you if you can’t travel to see them. Make sure that you work out an agreement with the seller that they pay your realtor’s fees, if and when the sale goes through.

Find a real estate attorney

Not everyone needs a real estate attorney, but when you’re investing overseas it’s wise to have one. As you likely already know, investing in real estate requires a lot of technical documentation, which can be confusing. Working with an attorney early on in the process can help you spot and reduce any risks before you make permanent commitments. If you don’t have a recommendation from your Canadian real estate investment groups, ask your realtor to recommend one. Try to find someone who specializes in overseas buyers.

Get financing

You should try to get pre-qualified for a mortgage early on in your process. This will give you the best idea of what you’re able to afford and where you can purchase. Keep in mind that foreign investors are often asked to make a higher down payment, often around 35 percent of the total purchase price. We have investment mortgages available to foreign buyers through our sister company LendCity Mortgages.

Make an offer

Finally, you’ll make an offer. Between you, your realtor and your attorney, you should be well prepared to invest in a suitable property. As long as everyone has done their due diligence—and understands the full cost of the property, as well as your rights and responsibilities—this should be one of the simplest parts of the process.

Conclusion

Buying from overseas is a matter of doing your research, making the appropriate financial calculations and working with experienced, reputable professionals. Since you’re putting a lot of trust in your realtor and attorney, make sure you vet them thoroughly. With their help, you can easily expand your real estate portfolio in Canada. You’re sure to find an excellent investment (or several). Each time you invest, the process will get even easier.

How To Manage Overseas Property


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