As the summer approaches, I start to get inquiries from Canadian non-resident or expat clients, inquiring about how to purchase properties in Canada.
Many of these clients are Canadian citizens but they are working and living abroad in countries, such as, Dubai, Singapore, Abu Dhabi and England just to name a few countries. Canada, luckily enough is very favourable to foreign investment, and while these clients are not considered foreigners, once they live outside the country for a number of years, and no longer pay taxes at home, they are not considered citizens and thus do not enjoy the same financing benefits for residents of Canada.
Thus, I thought a good primer would be good. Let’s look at a recent example.
Jenny and John, have been living in Singapore for the last 3 years both teaching at the international school. They receive a tax-free income and don’t pay taxes in Singapore or Canada. They have been amassing quite a nest-egg in a Canadian bank as they cannot purchase properties in Singapore, as they are not citizens of that country either.
Most of these countries mentioned, with the exception of the UK, will not allow foreign workers to buy property so needing to put their money to work for them, most of these clients will send their money home. However, like you and I, the return on that money sitting in a Canadian bank is very low, so the best use for their money is to invest in real estate. While they are abroad, they can rent this property out, earning good cash flow, and second, they take advantage of the fact that when they come home in a few years, they will have a place to live and that home will have appreciated and also gained equity.
Jenny and John, started working with a local realtor I regularly work with, who based on their requirements started sending them properties weekly for review. They had specific requirements, such as a single-family home with 3 bedrooms, 2 bathrooms and an in-law suite. The home also had to be in a specific school district as they were planning to come home in 3 years, when their child was ready to start school. The in-law suite was great as it allowed for more cash flow in the meantime, however eventually Jenny’s mother would be living with them to take care of their child, therefore reducing the need for daycare. Furthermore, they were looking in the north end of Brampton.
After 5 weeks of looking, they found the property, which fit their requirements perfectly.
When it comes to financing, expat clients are limited to two lenders – TD and Scotia.
TD requires 35% down, 12 month’s rent reserves, and a host of paperwork, while Scotia asks for 50% down but does not require that much paperwork. It is important to note that the funds for down payment must be in a Canadian bank account 90 days prior to closing and that depending on which country you are living in, the paperwork will change, as some countries don’t have credit bureau’s like other’s might.
Just a side note, if you are looking to invest but living in a country that was not mentioned, please reach out and I can forward you the list of documents that are specific to your country.
Here’s what the numbers’ looked like:
Purchase price $650,000
Down 35% $227,500
Term 5 years
Amortization 25 years
Monthly Mtg $1,932.87
Transfer Tax $9,475
Legal Fees $1,200
*please note that the appraisal and inspection costs are paid out of pocket and the land transfer tax and legal fees are deducted from the mortgage.
The shift from a seller’s market to a buyer’s market is especially helpful to non-resident buyers. Since the last mortgage rule change a few weeks ago, there are more properties available and the bidding wars we were seeing last summer, have almost come to an end, which means that you will have a better time this coming summer to look for an investment property.
If you need assistance to find a property, analyze a market area or specific property or perhaps you are interested in non-property investments that can yield you 8%, then please reach out for a discussion – I would be happy to help!