Investing in real estate is one of the safest options to increase your net worth. Buying a profitable rental property in Canada is an excellent way to boost your earnings, and there are plenty of options for making an income this way. Also, consider buying a property in one or more major cities. This is smart in terms of diversification as it saves you from putting everything on the line for only one investment. The Canadian real estate market is a very attractive area for economic activity. Currently, the real estate market in this country is seeing a rise in first-time buyers and offers many reasons to invest in real estate in Canada.
How to Invest in Real Estate in Canada
Here are a few ways you can invest:
- A practical way to invest in real estate in Canada is by investing in REITs or real estate investment trusts. REITs are mutual fund trusts and trade as units rather than ordinary shares. They are the lowest-maintenance way to start real estate investing in Canada. The Income Tax Act provides favourable tax treatment for qualified REITs. In simpler terms, REITs own real estate and lease it out to various tenants. They can own apartment buildings, malls, or industrial sites. REITs pay nearly all of their taxable income to stakeholders, making them highly attractive.
- Another way to profit from real estate investment is to rent out a portion of your principal residence in Canada. You can rent out a room or create a basement unit and maximize an asset you already own.
- Depending on your skillset and time, you could also consider house flipping. Although banks have become much stricter on lending for income properties, it is still a solid idea for the more adventurous.
Buying Property in Canada as a Foreigner
There are no legal restrictions for foreigners investing in Canada. There are also no residency or citizenship requirements for owning a property in Canada. For non-resident foreign investors, the only requirement is to file an annual tax return with the Canada Revenue Agency (CRA).
Primary Residence Property Investment
When you purchase a residential property, its status is a vital tool for your financial planning. This is a long-standing approach to investing in real estate. When buying a primary residence, in addition to having a place to live, you are making a solid long-term investment. The great news is that The Canada Revenue Agency (CRA) gives tax exemption from any profits earned by selling a principal residence. This exemption is crucial because, when you sell a property in Canada, you are liable to pay capital gains tax on half the profit made from selling it. However, if you are selling a primary property, the CRA provides you with a complete exemption on all capital gains tax.
Tax Advantages When Investing in Real Estate in Canada
Canada’s real estate market has had steady growth for over 20 years. Overall, Canada is a favorable destination to invest in and build up a real estate portfolio over the long term.
Tax advantages are another great reason to invest in real estate in Canada, such as:
- An attractive tax credit system
- An increasingly growing real estate market
- Light taxation of property income
- Remuneration of the purchase price of 4% per year
- The opportunity for foreigners to benefit from local financing
- Exemption from social security contributions
- Possibility to make a real estate investment with substantial net returns
Accessible Prices of Real Estate
The average price per square foot in Canada ranges between $90 and $265, which is significantly lower than in many European countries at the moment. Canada has a transparent and free market. All the information you need to invest in the Canadian real estate sector is available and accessible. In addition to that, Canada offers favorable conditions for foreign investors. Canadian law does not impose any special requirements on foreigners, making it all the more attractive to real estate investors.
If You Are Moving to Your New Home
The opportunities for investing in a primary residence in Canada are immensely attractive to property buyers. If you find a property you like in another part of Canada, professional movers can handle relocation across the whole country on your behalf. Such a massive move is no small undertaking for even those experienced in moving frequently. Uprooting your entire home and the possessions you have amassed over many years can be overwhelming. In addition to that, you need to transport all this far away across the country. It entails careful packing, heavy lifting, and driving a large vehicle for hours, even days. Experienced professionals can take care of all those aspects for you—from packing to unloading at your final destination. Doing so can allow you to focus on other aspects of your big undertaking with a lot less stress and worry.
Investing in Commercial Real Estate in Canada
Commercial properties are anything from office buildings to shopping malls and everything in between, and there are many great reasons to invest in real estate in Canada. Although this investment is not for the faint-hearted, as it requires a substantial initial investment, property owners can earn significant income through rent. The earning potential for commercial property is massive. The average rent for office space in Downtown Toronto can go as high as $37 per square foot. A 2,200 square foot office space can rent for $81,510 per month. That is almost $6,800 of monthly income for the property owner. Keep in mind that commercial real estate is an active investment as you need to manage the property and deal with tenants.