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Real Estate Investment Tips for Canadian Investors

3 Investment Tips Every Real Estate Investor Can Benefit From

I’ve learned a few real estate investment tips from my mum that I would like to share with you, whether you’re working in property development finance in Melbourne, or if you’re based up here in chilly Canada!

My mom is my superhero. She’s inspired me to be a real estate investor and entrepreneur. Thanks to her, I had little fear when I bought my first condo. It was a real boost to the confidence I had at the time, and she continues to be a great supporter of my efforts.

So, here are 3 real estate investment tips every real estate investor can benefit from:

    1. Cash rebate received on new mortgage and renewal

In Canada, when you sign up for a new mortgage after going to someone like Mortgages For Less for the best rates, or when you renew a mortgage, you simply sign, and that’s the end of the story.

In Hong Kong, the banks are so competitive that they will offer you incentives/rebates if you sign up.

For example, my mom would get a 1% rebate on the mortgage amount, essentially lowering her effective interest rate to just above 1%. (Rates in Hong Kong are slightly lower than ours.)

One of her property’s mortgage renewal just came up. Her bank offered the same rebate again!

In Canada, some bank still offers this type of rebate. However, the mortgage rate will go up.

From a tax perspective, this type of rebate is taxable in the investors’ hands. The only way for you to know whether or not you can get a rebate is to look into your mortgage before renewal. If you want to do this, see when your renewal time is coming and check your mortgage.

    2. No capital gain tax in Hong Kong (and many other countries)

We often talk about tax when you sell your properties.

My mom still owns a rental property in Canada, and I explained to her how she would be taxed when she sells the property eventually.

She’s a bit shocked to find out that she needs to pay tax. There’s no such thing as the capital gain tax in Hong Kong, and in many other countries such as New Zealand and Switzerland.

According to Fraser Institute, zero tax on capital gain increases savings and discourages entrepreneurs/investors from making more investments.

Mom dressing up at Pirate Show

Imagine Canada has no capital gain tax? Imagine what it will do to our property pricing? Just imagine the type of economic growth we will get?

Mom thought that because she had one property only, she could be exempted from paying capital gain tax.

That’s a myth!

She would still need to report the sale of her rental property as an investment, pay capital gain tax on it. I went through the quick calculation I have here to prepare her for the amount she needs to pay.

    3. A will is necessary, even if you own one property.

My grandparents were farmers. They were ranked bottom under the communist form of China. This meant that they received minimal resources from the government.

Thankfully, my mom and one of my aunts decided to “move to” Hong Kong, which was a British colony back then.

They both worked hard and saved some money.

Eventually, they together provided the money for my grandparents to buy a place closer to the border.

Fast forward to 20 years later today, this same condo unit is old and a bit out of shape. But this same unit is in the centre of the town. Rumor is that it will be taken back by the Chinese government for redevelopment.

Instead of buying you out, the Chinese government will give you a unit in the brand-new building when the redevelopment has finished. They will also reimburse you for the rent you incur during this inconvenience. Crazy, isn’t it?

Rumor is that the new unit will be worth a lot more than the old one.

When there’s money to be made, there’s conflict inflicted. One of my aunts wanted to make sure that the property will be split up properly when my grandparents pass away.

This also stirred up the pot causing the rest of the siblings to ask for some. ? My mom is one of 7 children.

It was an uncomfortable conversation to have, but they finally reached a conclusion how this fortune will be split up.

CN Tower With Mom

They will sign a piece of paper specifying the arrangement. In Canadian terms, it’s the will.

Erwin and I are in the process of drafting up our wills as well. Certain conversations are difficult to have, but you still need to have them to clear things up.

Without the will and the conversations ahead to explain why you allocate your asset the way it is, this can trigger conflict among siblings and family members.

Be sure to set this up ahead of time. 

I hope you found my 3 real estate investment tips useful!

Until next time, happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA

Your Real Estate Accountant