Buying a House as a Real Estate Investment in Vancouver

Planning to purchase an investment property in the Greater Vancouver area? Watch our latest video to learn how to make smart decisions when it comes to purchasing an investment property.

Real estate in Vancouver is a hot commodity for investors and buyers. However, certain banks may limit the amount of properties buyers can purchase, due to financing restrictions. Thinking of taking the leap to purchase an investment property in the Greater Vancouver area? Here are some valuable things to note:

Some valuable things to take note of:

When purchasing a real estate investment, it is important to calculate the value of your expenses – in comparison to the value your tenant may pay you in return. This determines whether or not you are able to make any profits from your investment. It is also important to outline any strata fees, property taxes, and additional costs that may be associated with the property. For example: Does a tenant require a new appliance? Or is a property assessment required?

Good investments are made by making smart decisions. It’s all about the math and setting yourself up to be cash-positive is the goal. Be prepared knowing that you may not always make an investment income. Think and plan for long term in regards to your investment property.  Be responsible and do your research before making a purchase. There is often a 20-35% down payment fee for homes purchased for investment purposes. In addition, higher interest rates may apply.

To qualify for pre-approval of your home, most financial lenders will consider 50% of the rental income, combined with your gross income, along with any accrued debt you owe. Some banks will also require rental agreements with your tenant. Do note that investors with a 20% down payment or more may be eligible for a 30-year amortization mortgage. Get approved for an amortization in order to bring down your mortgage payments on a monthly basis.

Good investment properties provide cash flow in four different ways:

1. Monthly cash flow
2. Appreciation
3. Improvements
4. Equity built up

Taxes, taxes, read all about it:

However, in order to establish good cash flow, you must also understand all the associate taxes for your investment:

1. Property transfer tax – made up of 1% off of the first 200,000 of the purchase price and 2% on the remaining balance (up to 2 million dollars)
2. GST – this is charged on brand new homes if you are purchasing directly from the developer or a property that has never been resided in
3. Income tax on your rental income
4. Non-resident tax – 20% tax on all properties purchased in Canada for non-residents
5. Capital gains – This only applies when you sell your home. 50% of the equity (50% on the money you will make on your home) will be taxed at your marginal tax rate.

Know the difference between renting and living:

As an investor, there may be limitations to qualify for any government programs, such as buyer grants. If you decide to live in this property – rather than renting it out –  the requirements for financing are different. Your down payment costs could be reduced to 5%, instead of 20%, with lower interest rates as well.

Think you’re ready to make a leap into an investment? Visit your local bank, or speak to an accountant for more information regarding property taxes for investments. Ask them to go in-depth about capital gain, rental income, and more!

Please feel free to contact us and we will be happy to go into detail about those things.

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If you’re looking for an agent that will understand your needs in the best way to help with your sale or purchase call West Coast Lifestyle Group today for a free, no-obligation consultation at 604-789-8202 or visit us on our website: VanCityProperties.ca