Real estate in Canada has a reputation for being rather expensive. However, that doesn’t mean it’s impossible for first-time buyers to get on the property ladder with the eventual goal of investing in more real estate. Overall, the price of real estate in Canada has steadily risen over recent years, with only minor fluctuations occurring. Now is the perfect time to consider investing in Canadian real estate, as inventory is low, but demand is constantly rising.
How to Invest in Real Estate
There are many different ways to invest in real estate. Some people may start their journey in real estate by renting a spare bedroom on Airbnb or owning their own home, renovating it, and then selling it on for a small profit before doing the same with other properties – commonly referred to as ‘house flipping’. Whatever way people enter the world of real estate investment, it’s generally accessible for people in Canada.
The most important thing you need to invest in real estate is capital. Disposable income is a necessity for investing in real estate, as even though property is generally one of the least risky investments in the grand scheme of things there is always a minute risk. That being said, one of the most common misconceptions is that you need to be earning considerable sums of money. The truth is a bank’s underwriting process plays a massive part in the investment process. Working closely with a broker that understands investment is critical and can help you massively when you’re starting off.
Many people are put off investing through fear of failure. The key to overcoming this is combating that fear with knowledge. The best way to gain this knowledge is by working with an industry professional.
One of the key points that not many people realize until they employ an expert is that if they can afford one the mortgage on one rental property, they can afford several. 40 percent of your verifiable income is the most that a reputable lender will want to see you spending on personal debt. This means that if you’re trying to buy a rental property with a break even or positive cash flow and you have the ability to pay for this without exceeding 40 percent of your income, you may be able to qualify for a mortgage on that rental property. If your budget can accommodate one mortgage that creates a positive cash flow, you can begin to expand your portfolio by investing in similar properties.
Carrying Multiple Mortgages
There’s no limit to how many mortgages one person can have. Taking out additional mortgages to buy more properties isn’t really that different to taking out a mortgage on your primary residence. If your credit score meets suitable requirements, you should find this process to be relatively straightforward.
Popular Real Estate Markets in Canada
Data from the Canadian Real Estate Association states that the average price of a house in Canada is currently $480,743. This amount obviously varies from region to region. There are several local real estate markets in Canada that can present a lucrative opportunity for investment. Some of the most popular are:
Toronto Real Estate Market:
The average price of a home in Toronto is well over the national average and sitting close to a million dollars at $987,787. The demand for homeownership is persistent in Toronto and looks set to continue for the foreseeable future. Some of the most desirable neighbourhoods in the area are Yonge and Eglinton, Liberty Village, and the Harbourfront.
Montreal Real Estate Market:
The average house price in Montreal is $434,720. While this is lower than the national average, it is steadily creeping up on a yearly basis so now could be the best time to invest. Pointe-Clare is the heart of Montreal West and is by far the most desirable neighbourhood in the city. Other popular areas include Brossard and Mont-Royal.
Calgary Real Estate Market:
The average price of a home in Calgary sets you back just under $440,000. Some of the more popular neighbourhoods in the city are Brentwood, Bowness, and Huntington Hills.
Ottawa Real Estate Market:
The price of the average home in Ottawa sits almost perfectly in line with the national average at around $480,000. Like in most other parts of Canada, house prices in Ottawa are steadily rising. Desirable neighbourhoods in the area include Westboro, The Glebe, and Centretown.
Vancouver Real Estate Market:
Vancouver is the most expensive place to live in Canada. At $1,298,332, the average home here costs well over double the national average. There are several neighbourhoods in Vancouver where homes fetch well into tens of millions of dollars. As such, it’s probably best to invest in up-and-coming neighbourhoods.
Halifax Real Estate Market:
Halifax is an affordable place to live with the average home costing around $352,946. This area is one of the more affordable places to live in Canada and there are plenty of investment opportunities to suit all budgets.
Real Estate Investing FAQ
Do I need to be a high earner to invest in real estate?
No, there are many ways which you can invest in real estate. The majority of which are accessible to people with average salaries and good credit scores.
I’m self-employed, can I invest in real estate?
Yes, there are many brokers and lenders who are experienced in helping self-employed people make smart investments.
How can I finance my first real estate deal?
Traditional lenders, for example, big banks, are often the most convenient course of action to obtain a mortgage. Some people prefer to work with private or hard money lenders.
Are there any tax benefits that come with real estate investment?
There are several benefits that you can receive when you’re a real estate investor. The simplest way is by owning a rental property. Depreciation, repairs, and taxes related to the property can be deducted as expenses.
Can I invest with no money?
It’s not possible to invest in real estate with no money. However, it can be possible to invest in real estate without using your own money. Prospective investors can often find private money lenders to help fund their endeavours.
Is real estate still a good investment?
Real estate is a great invest in the long term because of the appreciation of property. As available space decreases in cities, the price of property should continue to steadily rise.