Real estate is undoubtedly one of the most common types of investments out there. In fact, most people consider it an extremely profitable choice. That’s clearly reflected in the statistics. The percentage of people choosing to place their money into real estate as a long-term investment recently climbed to 31%. This is nearly a full third of the American public.
Of course, there are many ways to invest in real estate. If you’re interested in starting out, many are picking a Canadian company to invest in. That’s because the Canadian rental market is booming at present. American investors are taking a close look at companies that already have their feet on the ground.
If you want to join this movement, though, you need to ask some questions up-front. These 5 questions will help you enter the field with your eyes wide open, make your final choice profitable, and help you avoid common pitfalls.
1. Am I Allowed to Invest as a Non-Resident?
This is the most important question to ask when you’re investing across country lines. That’s true in all countries, even when the nation is as close as our northern neighbor. If you don’t currently live in Canada, are you allowed to invest in Canadian real estate?
For the most part, the answer is yes. There are no general laws against investing as a non-resident, and there may even be certain options and waivers that can allow you to pay taxes on your net real estate income, rather than your gross income.
It is important to remember that when you earn income in Canada, you’ll have to file a tax return with the Canada Revenue Agency. This is like Canada’s IRS. The good news is that if you pay taxes in Canada, you may be able to give this information to the IRS so that you don’t have to pay taxes twice on your real estate investment income.
2. What Does Investing Grant Me?
Next, you should ask what investing does for you as a shareholder. Different companies will offer different benefits to shareholders. Most of those benefits usually depend on how many shares you personally own, giving bigger benefits to those who own more shares.
Buying just a share or two may give you insight into shareholders’ meetings. Meanwhile, personally meeting with a company and choosing to buy up a significant portion of their shares may entitle you to making important decisions regarding the future of that company.
Are you planning to invest in more than just a few shares? Then it’s a good idea to reach out and talk with the company directly about it. The company may be able to build a personal relationship with you, allowing you both to benefit even more from the investment process.
3. What Taxes and Fees Do I Need to Think About?
For some, this is the hardest part of real estate investment, especially across country borders. Asking this question in advance will save you time, headaches, and even penalties. Remember, tax organizations don’t care if you genuinely didn’t know about something; you’ll end up paying tax penalties either way.
Of course, taxes and fees become more prominent if you’re moving into a more concrete section of the Canadian real estate market. When you sell a home as a non-resident, for example, the Canada Revenue Agency typically takes 50% of the sale as a withholding tax.
Regardless, there are still taxes you will need to pay when you invest in a Canadian company. The company itself may direct you to more specific resources about taxes and fees in their section of the Canadian market. Whether you’re buying real estate or you’re investing in a real estate company, there are many types of taxes you might be responsible for.
4. What Is the Company’s Growth Strategy?
A real estate growth strategy can be one of the most important elements of making sure your investment ends up paying off. This is something the company produces, and it gives information about how they hope to grow. Growth strategies tend to include information about the following:
- When a company may purchase a new real estate investment
- How the company protects its branding
- How it gains market shares over time
Many real estate companies have this information on their website. If you’re planning to make a marked investment, contact the company directly for more information about their growth strategies
5. What Are the Minimum and Maximum Options for Investment?
It’s especially important to ask questions about minimum and maximum investments if you’re interested in making a large investment. However, anyone interested in a small investment can still explore the minimum options.
There are many choices available for share purchasing. Some organizations allow you to buy part of a share, so you don’t have to pay for an entire thing. This is called fractional investing. On the other hand, some organizations require that you buy complete shares of their products.
If you want to go all-out with your investment options, it’s a good idea to check with the company. You can see how much stock is available and get information about whether you can buy fractional shares to invest in the company.
Conclusion
Investing in Canadian real estate can be a great way to boost your investment portfolio. However, there are multiple different ways for you to invest in Canadian real estate, all with different benefits. For example, you can:
- Engage in more concrete Canadian real estate investments, through methods like personally purchasing real estate and renting or selling it
- Invest in a company that’s doing that work for you
- Utilize a combination of these tactics to invest in multiple different ways
No matter what, Canadian real estate investment can really bolster your investment portfolio, especially over the long-term. Make sure you ask the necessary questions before you start, so you can be prepared for anything.
