Property Investment for Non-Residents in Canada

TORONTO, ON, February 19, 2014 (Press-News.org) Canada's open door policy has enriched not just its cities such as Toronto, Mississauga and Brampton that thrive in a multi-cultural environment but also its real estate investment market.

What's lesser known is that Canada invites non-residents as warmly as new immigrants, allowing them real estate investing opportunities with non discriminating policies. This is quite unlike several European and Asian countries that observe more restrictions for International real estate investors.

Frequently visiting and vacationing foreigners find it very easy to buy a home in the Greater Toronto Area (GTA) without applying for residency. It is equally easy for foreign investors to rent out property in the GTA without having to reside here.

All you need is an experienced local real estate broker to manage the property and tenants for you.

Canada is also one of the world's most welcoming places for business ventures. Foreign and first time buyers find both Toronto and Mississauga affordable by International standards.

In Toronto, coveted resale condominiums in prime locations have prices ranging from $550 per square foot to $700 per square foot for newly built luxury condominiums. However, high-end luxury towers such as the Four Seasons Residences, One Bloor Street and The Trump Tower are expectedly priced higher.

Prime resale condominiums in Mississauga start from $350 p.s.f while newly built luxury condos average out at $450 p.s.f. to start with.

So for International buyers looking for a second or third investment opportunity, Toronto & Mississauga offer a safe real estate investment haven in North America.

Real estate investors in Mississauga and downtown Toronto filter in both from the domestic and international borders, many of who come from India, Iran, Pakistan, UK, UAE, China and Russia.

Regarding rentals, Mississauga condos may make better sense for landlords than Toronto's condo properties when it comes to the gross rental yield i.e. the return on investment before taxes, maintenance fees etc.

Overall in Ontario, tenant protection laws are strong and somewhat pro tenant. Hence, before entering the tenancy contract, it serves well for landlords to be connected to a diligent real estate broker and eliminate the "bad apples" to avoid complications later.

Below are some frequently asked questions on real estate investing in Toronto and Mississauga by non-residents in Canada, addressed by Amit Kalia, a real estate broker in Mississauga.

FAQs for Mississauga /Toronto non-resident investors

What is the cost of living in Ontario?
The cost of living in Ontario is relatively lower than Western Europe, UAE and other oil rich Middle Eastern countries. However, it weighs about the same as the United States. International visitors are usually pleasantly surprised at the cost of fresh produce in Toronto.

Can one apply for permanent residency?
Yes, one can apply for permanent residency if you meet the criteria. Once the tenants move in, the landlord and tenant generally settle out the day-to-day issues between themselves. This helps the landlord save costs on hiring a professional management company, thus increasing the cash flow.

Are there any restrictions on home ownership for non-residents?
No, there are no restrictions on home ownership for non-residents. You are free to own a home in Ontario. Withholding tax is payable however on earned income (such as rent) or sales proceeds in accordance with the terms of the tax treaty between Canada and the non-resident's country.

As a non-resident can I work in Ontario?
To work in Ontario you are required to have a Social Insurance Number (SIN). To find out more please visit the Government of Canada web site.

What types of residential properties are offered in Mississauga or Toronto?
Speaking for himself here, Amit says he can help home buyers with investments in single homes, townhouses, condo apartments and multi residential apartment complexes in downtown Toronto and Mississauga.

Amit also deals in pre-construction properties (to be ready in a couple of months or a few years) from the date of purchase, resale property and ready to move in investment properties bought for rental income. Some investors use their property as a holiday home while waiting for the value to appreciate before they rent it out.

What are the taxes and rates payable on property purchase?
Newly constructed homes are subject to Harmonized Services Tax (HST). Land transfer tax and Toronto Land Transfer Tax (for Toronto City only) are also payable when buying property in Ontario. An experienced real estate agent like can put you in touch with professional accountants and tax advisors.

What is the minimal down payment required for real estate investing in Mississauga or Toronto?
As a non-resident of Canada, you may be asked to pay 35 percent or more of purchase price as down payment for Mississauga real estate investing or property investment in Toronto. However, every bank has its policies. It's always prudent to speak to the lending institution and get pre-approval for mortgage. The balance of the purchase price can be borrowed from financial institutions against the mortgage of your property. The rate to borrow is same as any other Canadian or Permanent Resident.

What other costs are required for real estate investing in Mississauga or Toronto?
Apart for your monthly mortgage payments, you are liable to pay monthly condominium fees (approx. $0.55 cents per square feet, say for a 1,000 square feet apartment, you would pay $550.00 per month) and property management costs if you choose to hire a professional property management company for your property. Most utilities (except hydro or electricity) are included in the condo fees that are payable by tenants, if applicable.

How much is the annual property tax?
Property taxes are approximately 0.9% of the property's current value assessment in downtown Toronto and Mississauga.

What are the taxes required to sell the property?
If the property was used as a principal residence, the owners are exempt from capital gain tax. If the owner is a non-resident, the sales proceeds will be subject to withholding tax. This not very complicated and can be easily sorted out by an experienced tax advisor and lawyer.

Can the property be leased out?
Yes, the property or condo can be leased out to a qualified tenant with a good credit and job history reference for a year or even shorter term. Professional real estate brokers like Amit are often asked to manage the property to ease things out for investors.

What tax is levied on rental income?
Rental income is taxed under the Canadian law. Rental expenses (condo fees, interest portion of mortgage, property taxes, property management fees, real estate fees, repairs etc.) can reduce gross rental income. Tax advisors are happy to provide more information on rental and real estate investing in Mississauga and Toronto if required.

How easy is it to repatriate income from real estate investment property in Toronto?
Providing that withholding tax and certificates are remitted to Revenue Canada, there are no other requirements needed for the tax authorities.

What are the tax implications to buy a property in a company name?
A non-resident corporation must file a corporate income tax return with Revenue Canada if the corporation has carried out business in Canada or disposed of a taxable Canadian property in the tax year. Tax advisors and lawyers can throw more light on this subject.

What about legal protection for foreign investors in Toronto or Mississauga?
Foreign investors are provided the same legal protection as any Canadian citizen.

How much will the legal costs amount to?
Legal costs to buy an investment property in Toronto Mississauga, including land transfer taxes, lawyer fees and other closing costs can amount to anywhere between 3% to 5% of purchase price.

How long does one need to be in Toronto to invest in a property?

The process can be summed up in three easy steps.
1) The mortgage approval is first required (3-4 days) followed by transfer of funds, as per FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) prevailing laws.
2) Next is to hunt out the right property that can take about a week or so, depending upon the investment goals and neighbourhood choice.
3) The last step is to meet with a real estate lawyer, an accountant and a property management company. The mortgage approval process (mentioned above) can be initiated even before one arrives in Canada.

Can property be bought under the name of one's child's who is an international student in Canada?
Yes, property can be bought under the name of one's child provided he/she is 18 years or older. Property can also be bought in joint names, subject to the bank's approval. If you or your child is a Permanent Resident of Canada, you can qualify for first time buyer rebates, subject to other conditions.

Is it better to invest in Mississauga condos or downtown Toronto condos?
According to Amit, Mississauga offers lower prices and better returns for investors. Downtown Mississauga is a hip and happening condo hub with a number of conveniences as well as shopping and scenic attractions.

Amit's blog condopundit.com can provide further insight on real estate investing.

For more on investing opportunities in the GTA, landlord tenant laws or the best locations for you etc. Amit can put you in touch with bankers, real estate lawyers and tax accountants.

Amit Kalia, Broker, RE/MAX Legacy Realty Inc., Brokerage in Mississauga. Amit has been serving as a full time REALTOR in Mississauga, Toronto area since 2003.

This content is compiled by Joyeeta Dutta Ray, Partner/Editor of Creative Joy Consultancy (Toronto) ca.linkedin.com/in/joyeetaray/ with information provided by Amit Kalia.