Is real estate investing for cash flow still possible in Canada?
Hi, I am new to Bigger Pockets and would love to hear your opinion.
My partner and I would like to buy our first property for house-hacking in Canada to start our journey in real estate.
We have been researching markets in British Columbia (Vancouver, Nanaimo, Victoria, Kelowna), Ontario (mainly Ottawa) and Nova Scotia (Halifax). It doesn’t seem that any numbers work for house-hacking nor for rentals – we cannot even find a property where we would break even, which makes me wonder if real estate investing into MTR or LTR is still possible in Canada or is it working only in USA at this point?
We are considering 2 options: Our preferred option is buying a duplex, live in one part and rent the other half. There are not many multi-family properties on Zillow and other webpages, so we didn’t get much progress in researching this option.
The second option is to buy a 2 bdr apartment for us and then another separate 2 bdr apartment for MTR or LTR. Unfortunately, even in cheaper markets such as Ottawa, the cost of the 2 bdr is approximately 350k – 400k and rent seems to be around $2,300. With home association fees $500 - $1,000 monthly plus mortgage plus taxes and all expenses – the cashflow comes always negative. Even without home association fees, the calculations barely came even. We are open to move anywhere in Ontario if the numbers make sense. Ottawa was the only cheaper-ish market that we found so far.
If you are experienced realtor in Ontario, what other towns/locations would you recommend?
In British Columbia, well, real estate investing seems impossible. With the current prices being double of those in Ottawa, we would only be able to pay the downpayment for one property (for us to live in) and there would be nothing left for investing into the rental. Not to mention high crime rates in Kelowna, Nanaimo and Vancouver.
Our employer doesn’t allow relocation outside of British Columbia, where we currently live. If we want to move to Ontario, we will have to completely re-root our lives and careers. A proper market research and a belief that real estate investing in Canada still makes sense is very important to us before both of us take such fundamental steps.
Can anyone advice where would you start in this situation? What strategies do people in Canada use if cashflow is so significantly negative?
How do we find good real estate agents in Ontario and/or in BC who have access to off market opportunities or at least pre-market? (BP Agent Finder offers only US options).
We bought online courses and books on Canadian mortgages, MTR and listening to BP podcasts, but we are still quite lost since the theory from the US books and podcasts doesn’t match the financial calculations with today’s prices in Canada. And there are so many books that we haven’t read yet, that I worry I might fall in trap of reading and not taking action.
If USA is the only option to invest for cash flow, does anyone here have an experience in investing in USA while still living in Canada?
Any advice will be highly appreciated. Thank you.
I think cash flow in major cities in Canada is hard to find. They are out there but usually in the 'not the best' neighborhoods. Real estate in Canada vs. the US is wildly different. Finding something cash-flowing as soon as you buy would be challenging in the locations you mentioned. You need to look for something you can handle while paying the mortgage and waiting for rent to appreciate. So eventually, your mortgage payment will be lower, and the rents will be higher, then you can cash flow. Hopefully, at the same time, your property has also appreciated a bunch!
Hi @Lubica J., unfortunately it's very difficult to find a property where you can house hack and cashflow, especially in larger/more expensive cities.
Typically house hacking is a way to subsidize your cost of housing, not cover it completely. A house with a suite that might rent for $2,500 upstairs and $1,500 downstairs, might generate a bit of cashflow, but if you live in one of the units and lose the $1,500 or $2,500 income from that unit, it almost certainly will not cashflow. The rental income will simply help cover costs.
One suggestion would be to buy a house with a suite and rent the upstairs as a STR or MTR. It would be easy to manage because it's so close, and you can get about double the rent as a STR or LTR. Renting a 3 bedroom upper unit to students or healthcare workers might work well.
I'm an investment focused realtor in the mid Vancouver Island area. If you have any questions or want to know any local strategies, let me know!
Quote from @Stevo Sun:
I think cash flow in major cities in Canada is hard to find. They are out there but usually in the 'not the best' neighborhoods. Real estate in Canada vs. the US is wildly different. Finding something cash-flowing as soon as you buy would be challenging in the locations you mentioned. You need to look for something you can handle while paying the mortgage and waiting for rent to appreciate. So eventually, your mortgage payment will be lower, and the rents will be higher, then you can cash flow. Hopefully, at the same time, your property has also appreciated a bunch!
Thank you, @Stevo Sun - this brought me the clarity on how people invest in Canada. Thank you for your advice.
Quote from @Jason Ridout:
Hi @Lubica J., unfortunately it's very difficult to find a property where you can house hack and cashflow, especially in larger/more expensive cities.
Typically house hacking is a way to subsidize your cost of housing, not cover it completely. A house with a suite that might rent for $2,500 upstairs and $1,500 downstairs, might generate a bit of cashflow, but if you live in one of the units and lose the $1,500 or $2,500 income from that unit, it almost certainly will not cashflow. The rental income will simply help cover costs.
One suggestion would be to buy a house with a suite and rent the upstairs as a STR or MTR. It would be easy to manage because it's so close, and you can get about double the rent as a STR or LTR. Renting a 3 bedroom upper unit to students or healthcare workers might work well.
I'm an investment focused realtor in the mid Vancouver Island area. If you have any questions or want to know any local strategies, let me know!
Thank you, Jason, much appreciated. I now realize that I had a bit skewed view based on the US books I read/listened to. It is of course appropriate when tenant covers just a part of the mortgage, depending which part of the house they live in. I need to do a bit more research about what my employer will or will not agree to, but so far it seems that we will have to stay in BC. In which case I'll get in touch with you soon.
Thank you again for your time and advice.
You can make anything cash flow with a big enough down payment... What are you trying to achieve by investing in real estate? Are you looking to lower your cost of housing (you mentioned house hacking)? Are you buying for cashflow? Are you hoping for appreciation? Start with your goals and then see what is feasible in REI.
#3 Managing Your Property Contributor
You have to find the right market. The ones you listed (I don't know about Halifax) are all expensive especially three of the BC ones. If you are house hacking, you are unlikely to do better than breaking even. When you live there, if you can live for free (ie break even), you are doing pretty good.
Condos may seem good because they are cheaper, but as you found out once the condo fees are included, they aren't such a good deal any more.
Jason knows Vancouver Island well, I think Port Alberni was less expensive. Try Ladysmith or Prince George. Look for a place with a legal suite and live in the smaller unit and rent out the larger unit (either long term or short term rental). I have places on the island, but bought them a while back when prices were about half of what they currently are.
One other thing to consider are property taxes. In BC you get a homeowner's grant that decreases the taxes. I'm in AB and we don't get that. Our property taxes are higher (even without the home owners grant). BC seems to be about 0.5% of the assessed value while in AB it is closer to 1%.
Hey Lubica
As a fellow Canadian I feel your tension as well. The cities you listed are the expensive ones in the country (I am not sure about Halifax). I am from Ontario and have also lived in BC.
My strategy it to invest in one of the small cities currently. I am finding that I have to make a deal work. i.e. if I buy a duplex and convert it to a triplex then it becomes a cashflow monster (2-3% rule). I have also found in the past year the rent rates have not increased at the same rate the house prices have increased at. This results in it being more difficult to find a good cashflow deal 'out the gate'.
If you are house hacking I would recommend going the route of finding a property that can have an ADU in it. Ontario is behind BC when it comes to having ADU's on properties but the zoning and by-laws are starting to catch up. If you can live in the ADU and rent out the main house then you will start to see numbers getting closer to that breakeven number.
My last thought is you make money 4 ways in real estate: Cashflow, Appreciation, Tax Write-off, and Mortgage pay-down. Figure out how to get the tenant to cover as many of those as possible.
Hi Lubica
From your post it seems important that you first decide if you want to move your residence out of BC. As you said - your employer requires that you remain in that province.
If you plan to stay - then look for places in that province where the numbers can work even if it is more remote from the big cities. Probably best to find something that can work as a duplex or more units. That way you can house hack.
If you decide that you will reset your life then you have a lot more research to do. You have to find out what work you could do in the other provinces that would allow you to move to them and still be gainfully employed.
Good luck!
Great to read all this amazing advice on the thought that has bothered me too. I, being relatively new in this market, cannot add any further to the above, however, tagging @Hai Loc who is an experienced professional in Ontario region with whom I happen to discuss this topic recently, in case he'd like to share his thoughts :)
Quote from @Lubica J.:
Hi, I am new to Bigger Pockets and would love to hear your opinion.
My partner and I would like to buy our first property for house-hacking in Canada to start our journey in real estate.
We have been researching markets in British Columbia (Vancouver, Nanaimo, Victoria, Kelowna), Ontario (mainly Ottawa) and Nova Scotia (Halifax). It doesn’t seem that any numbers work for house-hacking nor for rentals – we cannot even find a property where we would break even, which makes me wonder if real estate investing into MTR or LTR is still possible in Canada or is it working only in USA at this point?
We are considering 2 options: Our preferred option is buying a duplex, live in one part and rent the other half. There are not many multi-family properties on Zillow and other webpages, so we didn’t get much progress in researching this option.
The second option is to buy a 2 bdr apartment for us and then another separate 2 bdr apartment for MTR or LTR. Unfortunately, even in cheaper markets such as Ottawa, the cost of the 2 bdr is approximately 350k – 400k and rent seems to be around $2,300. With home association fees $500 - $1,000 monthly plus mortgage plus taxes and all expenses – the cashflow comes always negative. Even without home association fees, the calculations barely came even. We are open to move anywhere in Ontario if the numbers make sense. Ottawa was the only cheaper-ish market that we found so far.
If you are experienced realtor in Ontario, what other towns/locations would you recommend?
In British Columbia, well, real estate investing seems impossible. With the current prices being double of those in Ottawa, we would only be able to pay the downpayment for one property (for us to live in) and there would be nothing left for investing into the rental. Not to mention high crime rates in Kelowna, Nanaimo and Vancouver.
Our employer doesn’t allow relocation outside of British Columbia, where we currently live. If we want to move to Ontario, we will have to completely re-root our lives and careers. A proper market research and a belief that real estate investing in Canada still makes sense is very important to us before both of us take such fundamental steps.
Can anyone advice where would you start in this situation? What strategies do people in Canada use if cashflow is so significantly negative?
How do we find good real estate agents in Ontario and/or in BC who have access to off market opportunities or at least pre-market? (BP Agent Finder offers only US options).
We bought online courses and books on Canadian mortgages, MTR and listening to BP podcasts, but we are still quite lost since the theory from the US books and podcasts doesn’t match the financial calculations with today’s prices in Canada. And there are so many books that we haven’t read yet, that I worry I might fall in trap of reading and not taking action.
If USA is the only option to invest for cash flow, does anyone here have an experience in investing in USA while still living in Canada?
Any advice will be highly appreciated. Thank you.
Lots to take in here and some great feedback so far. My suggestion would be take a really close look and consideration of @Chris Baxter comments.
Why are you investing in real estate? What specifically are you trying to achieve by doing that? How do you know its the best choice for you to achieve said goal(s)?
You listed some of the most desirable places to live literally in the entire world. Kelowna, Victoria, and Vancouver have exceptionally savvy and competitive real estate markets. This isn't meant to be negative either, it can work out really well in your favor. These places have an excellent long term outlook and many many reasons to consider them which is what makes them competitive.
I can't say for sure if you will be able to find yourself a deal, but I can say with some certainty that if you are to define what you are trying to achieve it will provide you some direction. Defining what a good deal is will make it easier to find :)
Reach out to me if there's anything I can do to help. Good luck
You don’t have to invest where you live!
How do investors make it work in Canada? Where’s the cashflow? They choose affordable markets where people are moving to, where jobs are being created, and where there is strong infrastructure. The affordability of a market is what you need to look at, not the just the price. Where are people making good wages (and are able to afford higher rents) compared to the average house price? Many cities in Alberta and Saskatchewan come to mind! CMHC has done all this research and they publishes a list annually.
Completely agree though that’s it’s tough to provide good advice when we don’t know your goals. There are thousands of investors in Canada making it work for them.
I’m a Canadian investing in Alberta and Texas, if you want to explore that.
Seek out Canadian books and podcasts - they’re out there!
Welcome to RE investing Lubica.
As an investor in Ontario and Ohio I can totally relate to your frustration. It is not that the books or US focused podcasts are incorrect. Its just that they seem to be behind the interest rate increase wave. It was easy to find a cashflowing property when rates were 1.5%. Now at 5-6% the same task is nearly impossible.
When reading your post I recalled Robert Kiyosaki's books. Not sure which one covers it, but he mentioned that him and his wife waited 4 years at some point to buy their real estate. That time went into market research, negotiation, saving up some cash, etc. There is no need to jump into the market when cashflow is negative! Personally I've been on sidelines for 2 years already, constantly assessing deals and not buying anything yet. There will be an estate sale, a foreclosure, a duplex (or better a triplex) that will make the cut and we'll pick it up. As Warren Buffett famously said: imagine you have a card with only 20 holes to punch. You'd be very careful about what to buy if you could only make 20 buy decisions in your lifetime. Speaking of Buffett - he's been sitting on piles of cash for 12 years before making a couple of purchases in the last few years.
To be a bit more action biased I'd look at Alberta where prices are still low-ish; at houses without any condo fees where you could carve out 3 units to rent instead of just one; perhaps STR-MTR in cottage country where you could negotiate a good deal. Those seem to be the only options on the table now in southern Ontario. As for US - Florida short-term rentals are clearly cashflowing if you'd be willing to invest in US. Nothing is keeping you in Canada from investing perspective. I've gone to US a long time ago and its been amazing. Just pick a landlord-friendly state and see how different an eviction process works as compared to our %^&& LTB up here.
Thank you everyone for all your support and amazing advice.
@Chris Baxter, @Christopher H., and @Zorya Belanger: my long-term goal is to become financially independent in approx. 7-10 years. Having enough income for both my partner and I to be able to live of it.
My short-term goal is just to start somewhere, buy something that I can handle financially and skills-wise and build up from there. I need to solve 2 problems at once: I need to live somewhere and later I need to figure out what will eventually bring me to financial freedom over longer period of time. For that, I am collecting information both on US and Canada and since I could not figure out Canada’s market at all, I started this discussion.
As @Roy Cleeves suggested, my first step is to talk to my employer since everything will depend on if I can move to US. From what I am reading here, it seems that there are more opportunties for deals in US than there are in Canada. Easier buyer market is very important for a beginner buyer like me, though I realize that US is much more difficult option personaly (employment uncertentainty; obtaining work visa; getting mortgage while Canadian credit score is not accepted and having no US credit score yet; at-will employement; healh care; moving car and property across continent…and many more).
After reading all comments, buying a house and renting out a part of it seems to be the best first step for a novice. I realize that this will not bring any cashflow. The house will help me to start building equity and when rents catch up on my mortgage payment 7 to 10 years later, it might even start cashflowing a little bit. Plus, we will have a place where we can live and can invest the rent we are currently paying towards our own mortgage.
In the meantime, I will keep saving money and once I get more experience in real estate, I will start looking into more advanced strategies that @Bryce Fairburn suggested: adding ADU to the property or buying a duplex that can be converted into a triplex. However this takes skills, knowledge and contacts in the industry that I still need to work for.
Thank you for suggesting CMHC report, @Zorya Belanger, I downloaded it and I am going to read through it. I am also going to research the remote investing more, as suggested.
Thank you for your great advice everyone, it helped me immensely.
Quote from @Paul Sverdlin:
Welcome to RE investing Lubica.
As an investor in Ontario and Ohio I can totally relate to your frustration. It is not that the books or US focused podcasts are incorrect. Its just that they seem to be behind the interest rate increase wave. It was easy to find a cashflowing property when rates were 1.5%. Now at 5-6% the same task is nearly impossible.
When reading your post I recalled Robert Kiyosaki's books. Not sure which one covers it, but he mentioned that him and his wife waited 4 years at some point to buy their real estate. That time went into market research, negotiation, saving up some cash, etc. There is no need to jump into the market when cashflow is negative! Personally I've been on sidelines for 2 years already, constantly assessing deals and not buying anything yet. There will be an estate sale, a foreclosure, a duplex (or better a triplex) that will make the cut and we'll pick it up. As Warren Buffett famously said: imagine you have a card with only 20 holes to punch. You'd be very careful about what to buy if you could only make 20 buy decisions in your lifetime. Speaking of Buffett - he's been sitting on piles of cash for 12 years before making a couple of purchases in the last few years.
To be a bit more action biased I'd look at Alberta where prices are still low-ish; at houses without any condo fees where you could carve out 3 units to rent instead of just one; perhaps STR-MTR in cottage country where you could negotiate a good deal. Those seem to be the only options on the table now in southern Ontario. As for US - Florida short-term rentals are clearly cashflowing if you'd be willing to invest in US. Nothing is keeping you in Canada from investing perspective. I've gone to US a long time ago and its been amazing. Just pick a landlord-friendly state and see how different an eviction process works as compared to our %^&& LTB up here.
Thank you for your support and encouragement, @Paul Sverdlin, I really appreciate it. I have been hearing that Canadian house market bottomed already (they say US market did not yet) and is about to start rising again, so I admit that I feel the pressure. I believe that it is better to buy cheaper and pay more on mortgage, because I can always adjust the mortgage later (if I have a full -feature mortgage), but I cannot fix the high purchase price if I buy when everyone else jumps into the market.
I am also VERY risk averse and have been reading financial books regularly for over 15 years, though I admit that I don’t recall nearly as much of their content as you do. I was always too scared to take action. However the pain of not doing anything grows over the time and I am now at the point when the pain of inaction is bigger than the fear of failure. I am absolutely determined to find answers to all of the million questions I have and to buy my first property this year even if the market is not right – I will try to put more hours of work and research into it to compensate for the more difficult conditions. I also don’t believe that I could time the market correctly, so I might as well jump in, I just need to find the best way to do it.
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA?
Love your advice on landlord friendly states – I’ve seen some scary enviction troubles on YouTube. I am going to research remote investing and setting up local teams (cleaners + handyman etc) more both for Canadian provinces and US, so I’ll look into Florida numbers closer.
Would you know, are there any additional taxes for foreign investors purchasing US properties that local residents do not pay?
Thank you again.
#3 Managing Your Property Contributor
Quote from @Lubica J.:
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA.
It really depends where you are in Alberta. In Calgary, Edmonton and 'the north' it definitely depends on oil. In the south (eg Lethbridge), not so much.
Quote from @Theresa Harris:
Quote from @Lubica J.:
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA.
It really depends where you are in Alberta. In Calgary, Edmonton and 'the north' it definitely depends on oil. In the south (eg Lethbridge), not so much.
Oil and gas comprise about 20-25% of Alberta's revenue base. So it is a massive factor in the economy's overall health here. I can promise you when oil crashes, the housing market is very depressed. The reason is that the oil and gas sector has always had very high-paying jobs; when those jobs get cut the overall economy in Alberta suffers. Think about all the consumer/retail/hospitality industries that serve the major population centers (Edmonton and Calgary); those will take a huge hit too.
So I think as long as you are prepared for the cyclical nature of AB and know there will be good and bad times, you will do fine.
#3 Managing Your Property Contributor
Quote from @Stevo Sun:
Quote from @Theresa Harris:
Quote from @Lubica J.:
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA.
It really depends where you are in Alberta. In Calgary, Edmonton and 'the north' it definitely depends on oil. In the south (eg Lethbridge), not so much.
Oil and gas comprise about 20-25% of Alberta's revenue base. So it is a massive factor in the economy's overall health here. I can promise you when oil crashes, the housing market is very depressed. The reason is that the oil and gas sector has always had very high-paying jobs; when those jobs get cut the overall economy in Alberta suffers. Think about all the consumer/retail/hospitality industries that serve the major population centers (Edmonton and Calgary); those will take a huge hit too.
So I think as long as you are prepared for the cyclical nature of AB and know there will be good and bad times, you will do fine.
I agree it is important, but there are cities in the south where it doesn't affect housing. I can tell you that as I live in one of them and have for almost 20 years. When prices went down about 10 years ago, that didn't happen where I live.
Quote from @Theresa Harris:
Quote from @Stevo Sun:
Quote from @Theresa Harris:
Quote from @Lubica J.:
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA.
It really depends where you are in Alberta. In Calgary, Edmonton and 'the north' it definitely depends on oil. In the south (eg Lethbridge), not so much.
Oil and gas comprise about 20-25% of Alberta's revenue base. So it is a massive factor in the economy's overall health here. I can promise you when oil crashes, the housing market is very depressed. The reason is that the oil and gas sector has always had very high-paying jobs; when those jobs get cut the overall economy in Alberta suffers. Think about all the consumer/retail/hospitality industries that serve the major population centers (Edmonton and Calgary); those will take a huge hit too.
So I think as long as you are prepared for the cyclical nature of AB and know there will be good and bad times, you will do fine.
I agree it is important, but there are cities in the south where it doesn't affect housing. I can tell you that as I live in one of them and have for almost 20 years. When prices went down about 10 years ago, that didn't happen where I live.
As you mentioned Lethbridge is definitely one of them.
Feel free to DM me and we can connect directly.
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA?
Love your advice on landlord friendly states – I’ve seen some scary enviction troubles on YouTube. I am going to research remote investing and setting up local teams (cleaners + handyman etc) more both for Canadian provinces and US, so I’ll look into Florida numbers closer.
Would you know, are there any additional taxes for foreign investors purchasing US properties that local residents do not pay?
From what I hear Alberta is less and less dependent on oil, it is clearly diversifying, but I am no expert in that area. Just heard from multiple sources that compared to Ontario there are better deals to be had there.
Think through tenant-landlord laws carefully. In ON you can't raise rent beyond government set limits (which are capped at max 2.5% per year even when inflation is 9%). We can't remove tenants if we want to sell the house since they live in it; making it nearly impossible to show a nice looking renovated home to prospective buyers. Since raising rents is hard - tenants tend to stay longer, meaning that you may end up renting your unit for $1000 below market and won't even be able to sell it if the tenant refuses to show the unit to prospective buyers. Any kind of issues with non-payment of rent will take 8-12 months to resolve through our Landlord Tenant Board and you'd have to carry the house, pay for legal advise, etc while the tenant will employ a free lawyer from Legal Aid. There is no "security deposit" which can be applied towards damages and suing the tenant for damages is pointless as they have no money usually. Etc-etc-etc. In AB or in US the laws are much more landlord friendly. There is no "security deposit" which can be applied towards damages and suing the tenant for damages is pointless as they have no money usually. Etc-etc-etc.
There are no additional taxes in the US for Canadians that I am aware of, however you will need a legal structure, a bank account, you need an ITIN from IRS, you need to file taxes in Canada and US (and pay accountants extra due to complexity). Luckily US tax will be considered when you pay Canadian taxes to avoid double taxation, yet there are some cases when that's an issue to be carefully researched. Most of those points are one-and-done hindrances though, you can set up the system once and let it serve you for decades.
Quote from @Paul Sverdlin:I'm from Québec and it's a similar situation as well over there. This is one of the reasons why I love investing in Alberta, a lot of people don't even realize how good we have it here compared to other provinces. But it just so happens that on top off all those landlord/tenant laws benefits we also have better cashflow than other larger markets. I've been investing here for over 10 years and I keep doing so for these 2 main reasons.
Feel free to DM me and we can connect directly.
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA?
Love your advice on landlord friendly states – I’ve seen some scary enviction troubles on YouTube. I am going to research remote investing and setting up local teams (cleaners + handyman etc) more both for Canadian provinces and US, so I’ll look into Florida numbers closer.
Would you know, are there any additional taxes for foreign investors purchasing US properties that local residents do not pay?
From what I hear Alberta is less and less dependent on oil, it is clearly diversifying, but I am no expert in that area. Just heard from multiple sources that compared to Ontario there are better deals to be had there.
Think through tenant-landlord laws carefully. In ON you can't raise rent beyond government set limits (which are capped at max 2.5% per year even when inflation is 9%). We can't remove tenants if we want to sell the house since they live in it; making it nearly impossible to show a nice looking renovated home to prospective buyers. Since raising rents is hard - tenants tend to stay longer, meaning that you may end up renting your unit for $1000 below market and won't even be able to sell it if the tenant refuses to show the unit to prospective buyers. Any kind of issues with non-payment of rent will take 8-12 months to resolve through our Landlord Tenant Board and you'd have to carry the house, pay for legal advise, etc while the tenant will employ a free lawyer from Legal Aid. There is no "security deposit" which can be applied towards damages and suing the tenant for damages is pointless as they have no money usually. Etc-etc-etc. In AB or in US the laws are much more landlord friendly. There is no "security deposit" which can be applied towards damages and suing the tenant for damages is pointless as they have no money usually. Etc-etc-etc.
There are no additional taxes in the US for Canadians that I am aware of, however you will need a legal structure, a bank account, you need an ITIN from IRS, you need to file taxes in Canada and US (and pay accountants extra due to complexity). Luckily US tax will be considered when you pay Canadian taxes to avoid double taxation, yet there are some cases when that's an issue to be carefully researched. Most of those points are one-and-done hindrances though, you can set up the system once and let it serve you for decades.
Quote from @Lubica J.:
Quote from @Paul Sverdlin:
Welcome to RE investing Lubica.
As an investor in Ontario and Ohio I can totally relate to your frustration. It is not that the books or US focused podcasts are incorrect. Its just that they seem to be behind the interest rate increase wave. It was easy to find a cashflowing property when rates were 1.5%. Now at 5-6% the same task is nearly impossible.
When reading your post I recalled Robert Kiyosaki's books. Not sure which one covers it, but he mentioned that him and his wife waited 4 years at some point to buy their real estate. That time went into market research, negotiation, saving up some cash, etc. There is no need to jump into the market when cashflow is negative! Personally I've been on sidelines for 2 years already, constantly assessing deals and not buying anything yet. There will be an estate sale, a foreclosure, a duplex (or better a triplex) that will make the cut and we'll pick it up. As Warren Buffett famously said: imagine you have a card with only 20 holes to punch. You'd be very careful about what to buy if you could only make 20 buy decisions in your lifetime. Speaking of Buffett - he's been sitting on piles of cash for 12 years before making a couple of purchases in the last few years.
To be a bit more action biased I'd look at Alberta where prices are still low-ish; at houses without any condo fees where you could carve out 3 units to rent instead of just one; perhaps STR-MTR in cottage country where you could negotiate a good deal. Those seem to be the only options on the table now in southern Ontario. As for US - Florida short-term rentals are clearly cashflowing if you'd be willing to invest in US. Nothing is keeping you in Canada from investing perspective. I've gone to US a long time ago and its been amazing. Just pick a landlord-friendly state and see how different an eviction process works as compared to our %^&& LTB up here.
Thank you for your support and encouragement, @Paul Sverdlin, I really appreciate it. I have been hearing that Canadian house market bottomed already (they say US market did not yet) and is about to start rising again, so I admit that I feel the pressure. I believe that it is better to buy cheaper and pay more on mortgage, because I can always adjust the mortgage later (if I have a full -feature mortgage), but I cannot fix the high purchase price if I buy when everyone else jumps into the market.
I am also VERY risk averse and have been reading financial books regularly for over 15 years, though I admit that I don’t recall nearly as much of their content as you do. I was always too scared to take action. However the pain of not doing anything grows over the time and I am now at the point when the pain of inaction is bigger than the fear of failure. I am absolutely determined to find answers to all of the million questions I have and to buy my first property this year even if the market is not right – I will try to put more hours of work and research into it to compensate for the more difficult conditions. I also don’t believe that I could time the market correctly, so I might as well jump in, I just need to find the best way to do it.
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA?
Love your advice on landlord friendly states – I’ve seen some scary enviction troubles on YouTube. I am going to research remote investing and setting up local teams (cleaners + handyman etc) more both for Canadian provinces and US, so I’ll look into Florida numbers closer.
Would you know, are there any additional taxes for foreign investors purchasing US properties that local residents do not pay?
Thank you again.
@Lubica J. "I am also VERY risk averse and have been reading financial books regularly for over 15 years, though I admit that I don’t recall nearly as much of their content as you do. I was always too scared to take action. However the pain of not doing anything grows over the time and I am now at the point when the pain of inaction is bigger than the fear of failure. I am absolutely determined to find answers to all of the million questions I have and to buy my first property this year even if the market is not right"
This is a very important realization, but you need to take it a step further. Inaction is still a choice and what has not taking action cost you? You will never find the answers to the millions of questions you have, especially if you don't start taking action.
I'm not suggesting you take unnecessary risks, but if you wait until you know everything before you buy, you'll never buy.
I'm a huge fan of Josh Dorkin's saying "If knowledge was the key, we would all be rockstars with 6 pack abs." We all know exactly how to get six pack abs. Lots and lots of situps. So why don't we all have 6 pack abs? We don't do the action.
Knowledge isn't your problem.
I bought my first investment property in Prince George. I had never set foot in Prince George and I bought it sight unseen. I had a good idea what it would rent for and calculated the basic expenses. My calculations we pretty close to reality and it's generated a steady profit for 6 years now. I could have spent months or years researching migration trends, the economy of PG, historic vacancy rates, blah, blah, blah. I could have found a million reasons to talk myself out of buying. What I learned from the first one, I used to buy 3 more in PG and then 4 on Vancouver Island.
When you're calculating whether or not to take action, if you're going to calculate the cost of a bad investment, be sure to calculate the cost of not taking action as well. There's risk to inaction.
There a lot more people that have failed to take action, and lost out on great investments, than there are people that were too bold and took action when they shouldn't.
Quote from @Jason Ridout:
Quote from @Lubica J.:
Quote from @Paul Sverdlin:
Welcome to RE investing Lubica.
As an investor in Ontario and Ohio I can totally relate to your frustration. It is not that the books or US focused podcasts are incorrect. Its just that they seem to be behind the interest rate increase wave. It was easy to find a cashflowing property when rates were 1.5%. Now at 5-6% the same task is nearly impossible.
When reading your post I recalled Robert Kiyosaki's books. Not sure which one covers it, but he mentioned that him and his wife waited 4 years at some point to buy their real estate. That time went into market research, negotiation, saving up some cash, etc. There is no need to jump into the market when cashflow is negative! Personally I've been on sidelines for 2 years already, constantly assessing deals and not buying anything yet. There will be an estate sale, a foreclosure, a duplex (or better a triplex) that will make the cut and we'll pick it up. As Warren Buffett famously said: imagine you have a card with only 20 holes to punch. You'd be very careful about what to buy if you could only make 20 buy decisions in your lifetime. Speaking of Buffett - he's been sitting on piles of cash for 12 years before making a couple of purchases in the last few years.
To be a bit more action biased I'd look at Alberta where prices are still low-ish; at houses without any condo fees where you could carve out 3 units to rent instead of just one; perhaps STR-MTR in cottage country where you could negotiate a good deal. Those seem to be the only options on the table now in southern Ontario. As for US - Florida short-term rentals are clearly cashflowing if you'd be willing to invest in US. Nothing is keeping you in Canada from investing perspective. I've gone to US a long time ago and its been amazing. Just pick a landlord-friendly state and see how different an eviction process works as compared to our %^&& LTB up here.
Thank you for your support and encouragement, @Paul Sverdlin, I really appreciate it. I have been hearing that Canadian house market bottomed already (they say US market did not yet) and is about to start rising again, so I admit that I feel the pressure. I believe that it is better to buy cheaper and pay more on mortgage, because I can always adjust the mortgage later (if I have a full -feature mortgage), but I cannot fix the high purchase price if I buy when everyone else jumps into the market.
I am also VERY risk averse and have been reading financial books regularly for over 15 years, though I admit that I don’t recall nearly as much of their content as you do. I was always too scared to take action. However the pain of not doing anything grows over the time and I am now at the point when the pain of inaction is bigger than the fear of failure. I am absolutely determined to find answers to all of the million questions I have and to buy my first property this year even if the market is not right – I will try to put more hours of work and research into it to compensate for the more difficult conditions. I also don’t believe that I could time the market correctly, so I might as well jump in, I just need to find the best way to do it.
I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA?
Love your advice on landlord friendly states – I’ve seen some scary enviction troubles on YouTube. I am going to research remote investing and setting up local teams (cleaners + handyman etc) more both for Canadian provinces and US, so I’ll look into Florida numbers closer.
Would you know, are there any additional taxes for foreign investors purchasing US properties that local residents do not pay?
Thank you again.
@Lubica J. "I am also VERY risk averse and have been reading financial books regularly for over 15 years, though I admit that I don’t recall nearly as much of their content as you do. I was always too scared to take action. However the pain of not doing anything grows over the time and I am now at the point when the pain of inaction is bigger than the fear of failure. I am absolutely determined to find answers to all of the million questions I have and to buy my first property this year even if the market is not right"
This is a very important realization, but you need to take it a step further. Inaction is still a choice and what has not taking action cost you? You will never find the answers to the millions of questions you have, especially if you don't start taking action.
I'm not suggesting you take unnecessary risks, but if you wait until you know everything before you buy, you'll never buy.
I'm a huge fan of Josh Dorkin's saying "If knowledge was the key, we would all be rockstars with 6 pack abs." We all know exactly how to get six pack abs. Lots and lots of situps. So why don't we all have 6 pack abs? We don't do the action.
Knowledge isn't your problem.
I bought my first investment property in Prince George. I had never set foot in Prince George and I bought it sight unseen. I had a good idea what it would rent for and calculated the basic expenses. My calculations we pretty close to reality and it's generated a steady profit for 6 years now. I could have spent months or years researching migration trends, the economy of PG, historic vacancy rates, blah, blah, blah. I could have found a million reasons to talk myself out of buying. What I learned from the first one, I used to buy 3 more in PG and then 4 on Vancouver Island.
When you're calculating whether or not to take action, if you're going to calculate the cost of a bad investment, be sure to calculate the cost of not taking action as well. There's risk to inaction.
There a lot more people that have failed to take action, and lost out on great investments, than there are people that were too bold and took action when they shouldn't.
@Lubica Jamecna The opportunity cost (cost of inaction) is real. As Jason said, you will never know all the answers, even veteran real estate investors don't and it's ok. The most important is to get started, get that first property and you will learn along the way. Is it possible you will make mistakes? Yes, it's actually very likely you will make some mistakes on your first investment but that's ok. The only guarantee is if you don't invest you won't make any profit.
You will not find cash flow where you are looking. Tier A cities are appreciation only.
Look into mid side interior cities. Winnipeg, Regina, etc
Thank you, Paul. This was very eye-opening. And scary. Ontario is definitely off my list now. Thank you again!
Hello all! I'm new to BiggerPockets as well as Real Estate Investing. I live in Montreal QC and from what I've read it seems to be a nightmare to invest here. It's not a true free market driven by supply and demand, rather there are a lot of heavy regulations and bureaucracy that tends to favour tenant rights. If you have reasonable grounds to evict a tenant for example you will still have to fight tooth and nail with Régie to make it happen.
I would like to build a portfolio that generates passive income in the range of 5-10k per month within the next 10 years. The strategy that appeals to me is first house-hacking a multi-family home, pivoting into BRRRR to acquire apartment complexes and eventually easing into a debt-snowball strategy to start to maximize the cashflow of the rental properties after we've hit critical mass.
My background is in starting and scaling technology companies. One of my companies is about to be acquired (it's a modest exit) and I just want to start preparing for this. Another asset class I'm exploring is private equity, specifically starting an angel syndicate fund. The only problem is this does not generate passive income because you only recoup on investment through a liquidation event or selling in the secondary market during a later round of investment.
I'm pretty done with startups and tech-related work because it's just been so extremely demanding of my time, energy and mental health. Ideally I would work in an NGO and focus on starting a family with my partner at this point. But I mean at the same time building cashflow and equity.