Non-Residents purchasing property in Vancouver? What you need to know.
Buying real estate in Canada is very easy. There are neither restrictions to purchase real estate in Canada, nor are there extra fees or tax implications payable at the time of purchase/closing. All of the services required for non-residents of Canada are available locally to ensure a safe and stress free investment.
Once we find you a home or condo that you would like to purchase, the process is as follows.
Offer
I will write up a Contract of Purchase and Sale and I will present the offer on your behalf. This contract will have several subject clauses to benefit you such as subject to inspection and subject to financing which will allow you time to review the property and secure the necessary financing.
When subject clauses are removed, (typically 5 business days) it becomes a firm contract and a 5% deposit is required and held in trust until the completion date.
Mortgage
For a non-resident, the ratio is generally 65% mortgage and 35% as a down payment. Qualifying for the mortgage financing is probably the same as in other countries - interviews via phone, fax, e-mail to gather personal information which includes assets/liabilities, employment and/or income information. Each borrower's application will be considered on a case-by-case basis. I will be able to advise you on suitable mortgage brokers if required.
The mortgage approval may take approximately 24-48 hours after application and documentation has been submitted to the lender. The documentation generally required is income verification, tax returns, credit bureau or bank's report (letter from borrower's own bank stating that all accounts are in good standing to date), down payment confirmation via bank statements, copy of 2 pieces of ID and real estate appraisal. Foreign banks cannot register mortgages in Canada, so any mortgage would have to be raised via a Canadian mortgage broker.
The borrower will require the services of a Canadian lawyer or notary public to prepare the mortgage documents and registration at the Land Titles office. Documents can be couriered outside Canada for signing - this will need to be arranged with the lawyer and lender well in advance of the completion date. I will be able to assist you in finding you a lawyer or notary public if required.
Additional costs required when buying a property
Property Transfer tax
In British Colombia, the government charges a property transfer tax when purchasing a property. The fee is 1% on the first $200,000 and 2% on the balance i.e. a $300,000 home, Property Transfer Tax would be $4,000.
Goods and Services Tax
(GST) of 7.5% is only payable on newly constructed homes and is usually included in the quoted sales price. There is a rebate, to a maximum of 2.5%, if your home costs less than $450,000. There is no GST on resale housing unless the home has been substantially renovated, and then the tax is applied as if it were a new home.
Provincial Sales Tax
(PST) is 7% and is normally included in the quoted sale price.
Property Tax
Every property is subject to a local property tax of approximately 0.5% of the purchase price with is normally paid once a year.
Realtor's Fees
Are paid by the seller so there is no cost to you.
Lawyer's Fees
The fee will be approximately $700-$800.
Home Inspection
Fee is usually around $300Property Insurance which covers the replacement value of the structure of your home and its contents.
Condominium (Strata) Fees
Charged monthly and cover building insurance and maintenance. The building's property manager will provide you with the fee. These strata fees range from $200-$300 depending on the size and cost of the condominium.
Renting out the purchased property
When the property has been purchased and you wish to rent it out, a rental agent will be required to lease the property (typically a year in length), collect rent, make repairs when needed and provide monthly statements to the owner. The fee for leasing is normally 50% of the first month's rent and 5% of the rent each month thereafter.
Rental rates for a 1 bedroom condo in downtown Vancouver are approximately $1,300-$2,000 per month.
If you rent out the condo you purchase, you are required to fill out a tax return for the property to Revenue Canada. The cost to file the necessary forms is approximately $250 a year. Tax consequences are minimal as the mortgage interest, property taxes, repairs and maintenance can be deducted from the gross rental income.
A typical 1 bedroom condo in downtown Vancouver would cost $300,000. The following is an example of such a purchase.
Deposit required within 24 hours of subject removal (5%) $15,000 Balance of cash required on completion (30%) $90,000 Mortgage funds provided by the bank (65%) $195,000
$300,000
Funds required for a $300,000 purchase:
Deposit $15,000
Down Payment $90,000
Property Transfer Tax $4,000
Inspection of Property and Lawyer's fees $1,000
$110,000
Potential monthly rental cash flow
Approximate Rental Income: $1,700
Expenses:
Mortgage Payment (5%) $1,135
Strata Fees $155
Property Taxes $125
Property Management $85
$1,500
Cash Flow $200
For non residents planning to purchase with the intent to rent the property, condominiums tend to be the investment of choice because of the ease of management. There has been a steady trend in the past 4 years of people moving into the downtown core. This has caused a high demand not only in the Real Estate market, but also in the rental market with rental vacancy rates at or around .05%.
Condominiums currently represent approximately 65% of the real estate market in Vancouver.
For additional information feel free to
contact me.
