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Expat Investor Advice

B

burwelbo

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Hi



I am a Canadian Expat living in Saudi Arabia but looking to start investing in property in Canada. We were hoping to purchase a few properties over the next few years but I was looking for some advice from Brokers on what would be the best way to do that. As an Expat, its very difficult to get a conventional mortgage (we had to put down 30% for our cottage) and interest rates are generally higher. I would like to put the standard 20% down and hopefully get the going interest rate. Would I need to get a Canadian partner to do that? Are there other sources of funds that I am not thinking of? Whatwould be the best strategy to accomplish my goals.

Thanks in advance

Bruce
 
I have worked with a couple non-residents as clients and it is very tough to get around the 30% down threshold. Neither of the two I worked with last year could do so.



You are also going to be subject to witholding tax on the rents - that means 25% of your rents are withheld and your property manager will have to remit directly to the government.



A few months ago I would have suggested you invest as a money partner - a joint venture or a limited partnership. Unfortunately it's no better because if there is even one non-resident in a limited partnership the whole partnership is subject to withholding tax. On my last deal I had to turn away several hundred thousand dollars of capital due to this.



You do have options... you just won't like them. You can't have your cake and eat it too... with all they money you are saving on taxes you can probably afford to pay another 10% ;)
 
I have been looking in the Southern Ontario area (Kingstone, Belleville, Ottawa). The withholding tax doesn't really bother me because you really only pay it once and I am not expecting to net that much anyway to make it an issue. Yes paying 30% down is an option but that takes away from the amount of leverage I can use. If I buy a 500 k building, thats another 50k in downpayment. What if I take a loan from a relative, ask for a vendor take back mortgage, take on a partner, etc. Any creative ideas?
 
I'm not going to advise you to do anything because I am not an expert in this area. From your post I can tell you that if you want to gift to a family member it will have to be them (not you) that qualifies for the loan entirely. If you are co-signing you're looking at 30% unless you get a mortgage broker that can somehow get around that.



'Creative' ideas in such cases need to be checked with an accountant
before you actually do any of them. The ideal person to talk to would
actually be a tax lawyer. Your partners should do the same. The CRA is very weary of non residents investing in real estate not just for tax reasons but also for money laundering and terrorism funding. They look at these types of deals much more closely and it is not something to be taken lightly. If your name is going on a purchase contract and you are buying through a realtor they will need to disclose your name, location, passport ID number etc. If you refuse to provide that they are obligated to report it.
 
Hi Bruce,



Simplest way is to be the money partner with a Joint venture contract on title for mortgage and you protect yourself with caveat on title of rental.



you can also do rent to own deals where you only "control" the title and rent and flip the property out. This is a more senior type of investing and is another option.



But I agree with Brett, talk to tax lawyer for tax purposes. Getting the deal done is the easy part.
 
It's not as simple as being a money partner John. non residents have a different set of rules they have to abide by and there can be some pretty strict tax consequences if they are in as a silent partner. Unless they are willing to 'gift' the money to someone they can't invest like you would think they can. JV agreements, caveats on title = withholding tax implications.
 
Hi Bruce,



Withholding tax not withstanding. There is a form you can fill out with the CRA so you do not have to pay it off gross income.



What type of properties are you looking at? You might want to look at the commercial route as the norm is 25-30% down and higher rates.



Regards,
 
I'm in the same situation as Bruce. My research has shown that 35% and no less (99% of the time and who knows how to access that 1% exception) is required of non-resident Canadian expats. Investment/mortgage/etc. rules that apply to residents of Canada do not apply to non-residents (as Brett stated there are a whole new set of rules). It has been extremely hard to find people to deal with (Realtors, Brokers etc) who are familiar with the non-resident Cdn expat rules and procedures. There are lots of us out there, who need 'expat' advice about RE investment in Canada because we don't have pensions to come home to...By the way Bruce, my Cdn expat neighbors mortgage their properties through their parents...the only way they've found the banks will consider giving them a conventional mortgage.

Pindy
 
Is there any particular reason you are choosing Ontario. The Ontario RTA and LTB are extremely tenant friendly which makes operating your business extremely difficult to do from a distance. Hiring a PM is obviously the best route however PMs have been known to be less than satisfactory for some making managing a PM from afar even more difficult.

Personally I would avoid Ontario and even if investing out west do so only with a partner that can be hands on with the management end.

Tough business to operate in my opinion without trusted eyes in the field.
 
I agree with Greg's post above except I'd add that there are great PM"s to be found if you look

I've seen many happy owners that have been out of area
 
As an expat you have two choices : do it yourself and then likely but down 35% minimum. Or work with a Canadian JV partner that takes a % of profit and you provide $s only. No right or wrong way .. Just two choices to evaluate !
 
[quote user=housing rental]I agree with Greg's post above except I'd add that there are great PM"s to be found if you look

I've seen many happy owners that have been out of area








That is definitely true Adam but it takes contacts or diligent searching to be in a position to trust.

I still don't understand how a investor is able to oversee a PM from out of country but then I have trust issues when it comes to business and money. Many horror stories of PMs simply renting to anything with a pulse in this province.

I still believe it's always best to have a partner close by properties just in case.
 
I am choosing Ontario because I am from Ontario and just feel more comfortable it being there. I go home every summer and can take a look. I have recently found out that the RBC offers a mortgage for 25% down but they also charge a 1% lender fee on the mortgage amount. Its something I can live with. thanks for all the advice.



Bruce
 
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