Canadian real estate

Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes

Hello BP!

My name is Alex from Ontario and I'm a new and aspiring real estate investor. Looking for guidance on opening up business accounts for someone starting in their personal name.

Which Canadian business accounts do you suggest I open?

Which products are more real estate friendly?

Any specific business card perks I should be shopping for?

I believe I should have one account for incoming rent, a second account for expenses going out and a third account for capital expenditures, holding security deposits, and savings. I would love to apply for a business credit card as well.

Let me know your thoughts and how you would suggest I start. Reply or DM please.

Thank you!

Alex

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Account Closed

Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes

@Alex Carpio welcome to BP! While it is critical to keep personal and business finances separate, there is no need to have multiple bank accounts for one property. Income and expenses are tracked in accounting software or in spreadsheets, not by having multiple bank accounts (with multiple sets of banking fees). I use my local credit union for business banking as they are easy to deal with and offer good service with minimal fees.

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Account Closed
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y

@Alex Carpio welcome to BP! While it is critical to keep personal and business finances separate, there is no need to have multiple bank accounts for one property. Income and expenses are tracked in accounting software or in spreadsheets, not by having multiple bank accounts (with multiple sets of banking fees). I use my local credit union for business banking as they are easy to deal with and offer good service with minimal fees.
7 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Account Closed I appreciate the kind welcome, replying to my post and responding to my DMs. I was originally thinking that having multiple accounts would make it easier to track. I believe your suggestion is better. I didn't even consider accounting software. There is a credit union near my workplace and I am going to have the conversation. Thank you for the advice!

2 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
4y
Are you looking at single family rentals or apartment complexes? For single family, put everyone in one bank account. You are meant to keep security deposits in a separate account, but as long as you pay them interest on it, it really doesn't matter. Keep it simple.
3 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Theresa Harris I am looking to BRRRR 2-4 unit residential multifamily properties in Alberta, Saskatchewan, New Brunswick and Nova Scotia using creative financing for buy and hold or flip. Since I will be starting in my personal name, it seems like opening one business bank account is the way to go. I will keep it simple. Thank you for the advice!

2 Reply
Roy Cleeves
Residential Real Estate Broker · Kitchener, Ontario · Member since 2014 · 687 posts · 370 votes
4y
Hi Alex: Great advise from the group above.
If you want some consultation for anything in Nova Scotia let me know as that is where I am investing.
Best Wishes
3 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Roy Cleeves I will keep that in mind. Thank you Roy I appreciate that. Cheers.
1 Reply
Mei Hutchinson
Mississauga ON, Canada · Member since 2022 · 6 posts · 6 votes
4y
Apologies for hijacking your post @Alex Carpio but how did you manage to post to this category? I am trying to make posts and the category options do not include Canadian Real Estate. Any help would be appreciated.
2 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Mei Hutchinson I could not figure it out on desktop. I was able to do it on the Mobile App. Categories > Local Real Estate > Canadian Real Estate. Hope that helps.
1 Reply
Account Closed
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y
I have forwarded this thread to BP Support so that they can fix...
2 Reply
Mei Hutchinson
Mississauga ON, Canada · Member since 2022 · 6 posts · 6 votes
4y
Thanks Alex and Chris. I'll try the mobile app until a solution is found.
It should be noted that none of the locations include any Canadian options, too.
2 Reply
Account Closed
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y
This is the link to the Canadian Forum:
https://www.biggerpockets.com/forums/90-canadian-real-estate

3 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
Quote from @Mei Hutchinson:

Thanks Alex and Chris. I'll try the mobile app until a solution is found.
It should be noted that none of the locations include any Canadian options, too.

Hopefully they fix it for the desktop version soon. Feel free to ask your question here if you cannot post your own. No worries.
0 Reply
Steven Leca
Member since 2022 · 10 posts · 7 votes
4y
Hey Alex,
There is no particular account that you need to open. On a side note, you won't be able to open a business account unless the business operating under your name was created under a sole proprietorship. If you didn't make a sole proprietorship and are operating solely under your name, you would need to open a regular bank account.
If this is the case, I would suggest that you open an account at another bank away from your personal account and operate as if it's a business bank account. You should request a new credit card from the new bank, which you will use for your rental business. I would suggest that you stay away from credit unions and stick with the bigger banks when applying for a mortgage. Credit Unions tend to have added fees to their mortgage, which bigger banks don't add. You want to select a bank which you could see yourself working with in the future.
As for opening three accounts, you only need two accounts. The first one is for the rent(income) + expenses, and the second one is for capital expenditures. The first account should be set up as a chequing account and the second as a saving account. It would be best if you tried to put aside 10% of your monthly income for future capital expenditures as something will eventually need to be repaired or replaced.
4 Reply
Steven Leca
Member since 2022 · 10 posts · 7 votes
4y
@Alex Carpio I suggest that you start with something local as getting funds for an out-of-province investment might be difficult. Next, for your first investment property, it's best to keep it nearby (2-3 hours away max) to learn the ins and outs of the business before you look at going outside since issues will arise. You will want to learn to deal with them first instead of hiring a property management company to manage your units, which will cut your profit margin.
2 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Steven Leca Hey Steven. I appreciate your long and detailed reply as there is a lot of useful information here. I didn't know that I needed to at least be a sole proprietor to get a business account and will be looking into this.

I have a question. Is it actually necessary to open up business specific account? Or could I skip creating a sole proprietorship and open up separate personal bank account? Or would that complicate things for me down the road?

With this new information, I am assuming that just as long as you keep records or used accounting software, it does not matter whether you open up a business or an additional personal account. Just as long as I don't use my actual personal account. Please clarify if I am wrong.
To address the other advice you mentioned, I will be talking to a broker for my mortgage. I will most likely open up a chequing and a savings account like you suggested. Lastly, I originally wanted to start local but I simply cannot afford buying locally, I won't meet my cashflow goals, among other factors that are deterring me.

Thank you Steven!
0 Reply
Account Closed
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y

@Alex Carpio, what is important is that you keep your personal and business finances separate. If you are operating your properties under a formal business relationship (sole proprietor, partnership, corporation,etc.) you should open a business account. Otherwise, personal account is fine. I don't agree with @Steven Leca on having a separate account to save for capital expenditures. Money sitting in a bank account is losing value (interest paid < inflation) and it could be deployed elsewhere. Look at getting a LOC to cover capital expenditures and / or include known needed upgrades in your mortgage ask
3 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Account Closed Thank you for the update. Love both of these incredible advices "Money sitting in a bank account is losing value (interest paid < inflation) and it could be deployed elsewhere. Look at getting a LOC to cover capital expenditures and / or include known needed upgrades in your mortgage ask"

I love the concept of good debt and want to take advantage of all my opportunities. For example, my buddy Ryan wants to buy a Jaguar SUV $60k cash. I've been trying my best to convince him to put a small down payment on the vehicle and use the remaining $40-$50k for some sort of investment vehicle where he could easily make his interest plus more. People will forever think cash is king.

As for the upgrades, I originally intended on using a LOC for the rehabs but didn't know that I could ask my broker to include this in my mortgage. I thought this FHA 203k mortgage product was only allowed in the states.

Thanks again Chris.
0 Reply
Account Closed
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y
Tell your buddy Ryan to read Rich Dad Poor Dad.... $60k on a depreciating doodad is not wise (but it is what 99% of people do). I bought a 6-plex with $50k down 5 years ago and it cash-flows enough to make car payments on a Jag. Not something I would do personally, but it's what Rich Dad advocates (let your assets buy your toys).
3 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
Quote from @Account Closed:

Tell your buddy Ryan to read Rich Dad Poor Dad.... $60k on a depreciating doodad is not wise (but it is what 99% of people do). I bought a 6-plex with $50k down 5 years ago and it cash-flows enough to make car payments on a Jag. Not something I would do personally, but it's what Rich Dad advocates (let your assets buy your toys).
I am trying my best to convince him! I even broke it down and wrote it out on a piece of paper. Even investing in a simple ETF will net him positively. Some people don't want to listen. As far as Kiyosaki goes, I remember my mind being completely blown away when I first read the first chapter almost a year and a half ago. I'm actually trying to get my 14 year old to read it before she goes into high school next year. Never conceptualized the idea of assets before that book and I've pivoted my mindset ever since. Not to go too far off on a tangent but I want to be able to buy back all the time in the world so I can spend it with my daughter. Thanks as always Chris.

0 Reply
Michael Deering
Rental Property Investor · Lehigh Valley, PA · Member since 2017 · 200 posts · 191 votes
4y
Welcome, good luck, and hope they don't freeze and seize your accounts and property.
1 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
Quote from @Michael Deering:

Welcome, good luck, and hope they don't freeze and seize your accounts and property.

Hey Michael. Could you help me understand what would merit a freeze and seize of my accounts and property? Is it because I am starting in my personal name and this has to do with personal liability? I apologize for not knowing what you mean specifically and I'm just asking for clarification. Thank you.
0 Reply
Account Closed
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y
Quote from @Michael Deering:

Welcome, good luck, and hope they don't freeze and seize your accounts and property.

Huh ????
0 Reply
Account Closed
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y
"but if you can at least cover your expense with local investment, it will be a better investment than positive flowing out of Province property since you can tend to it"

A contrasting opinion:
1) Invest where the numbers make sense... this may not be local and that's OK.
2) Use a property manager instead of self-managing
0 Reply
Steven Leca
Member since 2022 · 10 posts · 7 votes
4y
Quote from @Account Closed:

"but if you can at least cover your expense with local investment, it will be a better investment than positive flowing out of Province property since you can tend to it"

A contrasting opinion:
1) Invest where the numbers make sense... this may not be local and that's OK.
2) Use a property manager instead of self-managing

I agree with you, but for first-time investors, I find it's best to go local before you expand unless you have the funds to go big right out the door; then, it's all about the numbers at that point.
0 Reply
Alex Carpio
OP
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
Quote from @Account Closed:

"but if you can at least cover your expense with local investment, it will be a better investment than positive flowing out of Province property since you can tend to it"

A contrasting opinion:
1) Invest where the numbers make sense... this may not be local and that's OK.
2) Use a property manager instead of self-managing

Going to have to agree with Chris on this one @Steven Leca. I want to go where the numbers make sense and unfortunately it isn't around here for my strategy. The appreciation in my radius has skyrocketed to where there is no cashflow. I also think that doing things remotely will help remove my emotions and personal opinions while also serving as a more effective use of my time.
Just for argument's sake, the closest price per door market in Ontario that makes sense for me, where I can use private lending and BRRRR a property, is a 4 hour drive away. Let's say I see a listing in Sudbury and the roof and siding look "out of shape" so I want to have a closer look. That's an 8-hour round trip drive. Even still, what value can I add by going there? I'm a beginner. I know nothing about shingles or vinyl siding. I rather just look up work permits, find out when or what work was actually done and get a contractor's opinion on what work needs to be done to get the property up to comps.
The idea for me is to build an investor focused team where I can rely on their expertise instead of wasting time formulating my own. I don't believe in success without your team. While learning about every detail is good in a sense, I rather be building my business, evaluating deals and empowering my team to do what they are good at.

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