Canadian vs American Real Estate Investing

8 Replies

Hello everyone!

I currently reside in the GTA (Greater Toronto Area). I have been researching real estate investing lately, with the goal of purchasing rental properties, ideally multi-family, later this year. My initial thought is to start with plexes, then grow into buying small apartments. 

The entire Southwestern Ontario market seems to be red hot, making it seem like finding a unicorn would be easier than finding a cash-flow positive rental property, on top of needing a ridiculous amount of money for a downpayment. I have been looking at other markets (Alberta, Saskatchewan, Quebec, New Brunswick etc.) to start investing in, and there are definitely good deals to be found, but as a whole, the Canadian market seems to be red hot. This raises the question: Would it be smarter to start looking at rental properties in the United States? 

I understand there are a lot of other hurdles that one would need to go through (financing, taxes etc.). Based on there being additional opportunities to find cash-flow positive properties, and the ability to purchase multiple properties with less money, do the positives outweigh the negatives and make it a more attractive place to start investing?

If you were just starting out again, based on the knowledge you have now and what the current real estate market looks like, would you recommend to yourself to invest in Canadian real estate or American real estate?

Thanks in advance for any answers! 

@Mike Dovich   Welcome to BP!  We are in the process of refinancing Canadian MF properties to take advantage of the market and using this to buy property in less crazy markets in the USA. So... yes, it makes sense to look where properties cash flow. The world is a big place... 

I always find that the USA market seems to react more than the Canadian Market.  We have been up for years even when the USA went down in values.  And we still seem to be more stable and growing compared to USA.  I own in Davenport, Florida and in Ontario and in Nova Scotia.  All of my Canadian properties have grown incredible in value while the USA properties have grown yet not by as much.  And of course,  you have to consider the tax implications as well when investing in another country.  Good Luck

Hi Mike,I am currently working as a lender with a Canadian buyer for a Hawaii investment property- some things to keep in mind in terms of financing if this can be of any help. The rates are going to be higher for a foreign national- it you have no US credit expect rates to be more like 5-6%. Most loans will also have a minimum of a 30% down requirement. Let me know if you have any lender questions, happy to assist!

Hi @Mike Dovich You're right, SW Ontario doesn't make sense right now. There are several Ontario-based multifamily investors in the coaching program I'm in, and most are looking outside of Ontario, and like you, some are considering the US as well. I think it's hard to give advice without knowing more info, like how much time do you have to spend on your real estate investments? on traveling?How active do you want to be? What experience do you have already?

Right now we are focusing on new-build purpose-built multifamily in Edmonton (because I live here and know the market well), but I am considering the US too in the future, and if/when I venture there, I'm likely going to start off by investing as a passive investor or limited partner with someone who's already doing multifamily in the US. I will learn from them, and then will be better equipped (with knowledge and the right team) to do it myself. Best to invest with someone with a track record but not too huge of a company, where you are just 1 out of 100's of their investors and they wouldn't have any desire or time to teach you anything. There are other smaller companies/investors that have already figured it out, saving you time and lowering risk of making mistakes. 

Sorry to glom onto this thread, but thought it was relevant to the discussion.

Could someone provide a brief summary of how rental income in Canada, held under direct ownership (not corporation or another business structure) is taxed? I've read conflicting information on the subject.

Background: US citizen moving to BC (hopefully permanently)  later this year.

Hey Mike, to the extent that you have rental income after deducting all expenses including the Capital Cost Allowance, that income will be added to your overall income and you'd be taxed at the marginal tax rate. Its pretty much the same as in US.

I am a Canadian looking to purchase multifamily in the states. I think if you choose the right markets (landlord friendly & high liquidity) and asset class, you can achieve better cash flow and scalability in the U.S. I don't buy single family homes or duplexes or fourplexes anymore. My advice would be to partner with someone who you can trust and is local to the area you are investing.