Real Estate Investing For Canadians For Dummies, 3rd Edition
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Interested in adding Canadian real estate to your investment portfolio? Give yourself a head-start by brushing up on your real estate terminology, discovering how to identify profitable properties, and knowing where to turn for reliable help online.

Investing in real estate: From dream to reality

From scouting properties to making your investment, some of the common steps you’ll take as a real estate investor include the following:

  • Get ready. Determine what you’re looking for in a property and which type of property best matches your expertise, investment criteria, and goals.
  • Get help. Select a mentor to guide you through your first property investment. Choose a real estate agent who has experience working with investors to identify potential listings and represent your interests to a vendor. Depending on the purchase, you may also wish to enlist an accountant, financial planner lawyer, appraiser, and other advisers.
  • Get financing. Determine the amount of mortgage financing for which you qualify and the amount of debt you’re comfortable carrying. After you’ve figured out your mortgage preferences, obtain pre-approval for mortgage financing from your financial institution or a mortgage broker.
  • Get focused. Determine where you want to invest and research the options available in the target geographic area. Shortlist properties of interest, noting the pros and cons of each with the help of your advisers. Arrange to view shortlisted properties to confirm or correct your initial impressions.
  • Get moving. Draft an offer for the property with the assistance of your real estate agent and the lawyer you’ve engaged to oversee the transaction. With their advice, include appropriate conditions in your offer that will both satisfy outstanding concerns you may have about the property or your ability to secure adequate financing. Determine the potential costs of closing the deal and budget for them.
  • Get answers. Proceed with due diligence and don’t remove any conditions on the sale until you’re fully satisfied with the purchase. This includes ensuring the property inspection is satisfactory and that all outstanding concerns with regards to title are clear. Obtain title insurance for additional security and peace of mind.
  • Get investing. Proceed with the property purchase, close the transaction, and take possession. Depending on the kind of property you’ve bought, you may be moving in and renting out the basement, or introducing yourself to the tenants and working to make their lives better and your property more profitable.

Real estate investing terms for Canadians

Wondering what the acronyms CREA, MLS, or CMHC stand for? Decode the real estate jargon and brush up on your real estate investing vocabulary with these key terms:

  • Adjusted cost base (ACB): The value of the real property established for tax purposes. This equation can help you understand how it’s calculated:

Original Cost + Allowable Capital Improvements + Certain Acquisition Costs + Mortgage Interest Costs – Depreciation

  • Amortization period: The actual number of years it will take to repay a mortgage loan in full. It can be well in excess of the loan’s term. For example, mortgages often have 5-year terms but 25-year amortization periods.
  • Canada Mortgage and Housing Corporation (CMHC): The federal Crown corporation that administers the National Housing Act. CMHC services include providing housing information and assistance, financing, and insuring home-purchase loans for lenders.
  • Capitalization (cap) rate: The percentage of return on an investment when purchased on a free-and-clear or all-cash basis.
  • Equity: The dollar-amount difference between the fair-market price for which a property could be sold and the total debts registered against it.
  • Multiple Listing Service (MLS): A service licensed to member real estate boards by the Canadian Real Estate Association. The MLS aggregates information about properties listed for sale.
  • Pyramiding: The process of building real estate wealth by allowing appreciation and mortgage principal reduction to increase the investors’ equity in a portfolio of properties.
  • Title insurance: This insurance covers the purchaser or vendor in case of any defects in the property or title that existed at the time of sale but weren’t known until after the sale.

Scouting Canadian properties for your real estate investing portfolio

Considering a few practical elements may help you choose between an adorable rental property in the middle of nowhere or a tear-down shack with long-term potential. Keep these factors in mind when you’re evaluating a property:

  • Price: Compare the asking price of a property to the average sale price for similar properties in the same area. An undervalued property in a good neighbourhood stands a better chance of rising in value than an overpriced home in a neighbourhood that’s going nowhere.
  • Condition: You may be getting a great deal on a property, but if you haven’t counted on the cost of long-overdue maintenance, you may face a losing proposition. You may be able to make something of a property, but if the cost of improvements cancel the potential return, what’s the point?
  • Cash flow: Research the potential to attract tenants to a property if you’re counting on cash flow from your investment property. Remember to balance the projected revenue against operating costs to ensure your income stays ahead of expenses.

Finding Canadian Real Estate Investing Help

Whether you’re looking for the latest information on housing starts, rental rates, or mortgage rates, the following sites can provide the information you need to keep pace with the market:

  • Canada Mortgage and Housing Corp.: Need to know how many homes are being built in your area or what rental rates are like? Need information on financing and incentives for renovations? You can find it all and much more here.
  • Canadian Real Estate Association: Get connected with your local real estate association, find property listings, and discover what it takes to sell real estate. Packed with useful information, this site is an online primer for home buyers and the residential properties.
  • Bank of Canada: The online home of Canada’s central bank. You can find key information here regarding interest rate trends, fiscal analyses, and calculators to help you calculate the impact of inflation on your investments.
  • RateHub: Whether you’re shopping around for a mortgage or sizing up historical trends and future options, the data aggregated here provides a snapshot of current mortgage rates at major lenders and calculators needed to figure out which one will suit your needs.

About This Article

This article is from the book:

About the book authors:

Douglas Gray, LLB, is a retired real estate lawyer and the author of 25 best-selling books. He is also a speaker and columnist. Learn more at homebuyer.ca. Peter Mitham has more than 20 years' experience writing about Canadian real estate for national and international publications.

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