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Hanson
Joined: 20 Oct 2004
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 Posted: Fri Jan 19, 2007 12:52 am Post subject: Owning/Buying Real Estate in Canada - Questions |
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So, I've been here for almost 7 years and I've saved up a little money, enough for a downpayment on a house. I'm toying with the idea of buying a house in Canada and renting it out, so that in theory the mortgage pays itself while the value of the property increases while I'm here.
What are the ramifications of owning property in Canada on taxes on my revenue outside of Canada? In other words, would I have to pay Canadian taxes on my Korean salary? I've heard that "planting roots" in Canada, or showing intent to return, can allow Revenue Canada to audit and collect on back-taxes.
What kind of taxes would I be facing per year. I know in Montreal (where I'm looking), they have a "Welcome Tax", which is fairly hefty. Welcome, my butt! I'm imagining somewhere in the 4-5,000$ per year in various taxes? I haven't even thought of insurance...
Also, I've read a little about getting a management company to take care of tenants'/repair needs for a fee. Anyone know what kind of fee we're talking about?
I'm basically looking at this as an investment while I'm in Korea for the next 5 + years. I'm sheepish about the stock market, and I'd like to set myself up for when I make the eventual move back with the family, with a bit of equity and a head-start on the home-owning side of things.
Admittedly, I have to do more research and I've just started thinking about this more seriously. If anyone has relevant info, or even links to info, it would be much appreciated. I'm sure there are a few other posters out there who have thought about this, but not acted yet. |
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Darkness
Joined: 12 Oct 2006
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| Posted: Fri Jan 19, 2007 3:05 am Post subject: |
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| You've been here 5 years, and only NOW have a deposit for a house in Canada? You know you only need 5% right? Some you dont even need a down payment.... |
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RachaelRoo
Joined: 15 Jul 2005
Location: Anywhere but Ulsan!
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| Posted: Fri Jan 19, 2007 3:06 am Post subject: |
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This is the link the to Revenue Canada's site about what determines non-residency status (in other words, non-taxpaying status).
http://www.cra-arc.gc.ca/tax/nonresidents/individuals/nonres-e.html
It does seem that owning property in Canada makes it likely that you will have to pay tax on your Korean income.
However, I have heard that there are ways around this. What you need to do is speak to a lawyer in the municipality you are interested in. A good lawyer could probably make this work for you. It'll cost you about $200 an hour but one hour might be all you need to find out what your best option is. I think there's some way to keep your ownership at arm's length to avoid being classified as a Canadian resident.
Call the lawyer referral service of Quebec (Montreal) at 514-866-2490 and try to find a lawyer who is experienced and specializes in tax matters for non-residents. |
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Hanson
Joined: 20 Oct 2004
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| Posted: Fri Jan 19, 2007 3:12 am Post subject: |
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| Darkness wrote: |
| You've been here 5 years, and only NOW have a deposit for a house in Canada? You know you only need 5% right? Some you dont even need a down payment.... |
Yeah, I have a bunch tied up in Chun-se, and I have a few other things on the go (not many, but...). However, my questions weren't about how much deposit I need to put down. Good old assumptions...
| RachaelRoo wrote: |
This is the link the to Revenue Canada's site about what determines non-residency status (in other words, non-taxpaying status).
http://www.cra-arc.gc.ca/tax/nonresidents/individuals/nonres-e.html
It does seem that owning property in Canada makes it likely that you will have to pay tax on your Korean income.
However, I have heard that there are ways around this. What you need to do is speak to a lawyer in the municipality you are interested in. A good lawyer could probably make this work for you. It'll cost you about $200 an hour but one hour might be all you need to find out what your best option is. I think there's some way to keep your ownership at arm's length to avoid being classified as a Canadian resident.
Call the lawyer referral service of Quebec (Montreal) at 514-866-2490 and try to find a lawyer who is experienced and specializes in tax matters for non-residents. |
Now that's what I'm talking about! Thanks a bunch Rachel, that's sweet info.
Any more info, anecdotes, links out there? |
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ttompatz
Joined: 05 Sep 2005
Location: Kwangju, South Korea
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| Posted: Fri Jan 19, 2007 4:36 am Post subject: |
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| Darkness wrote: |
| You've been here 5 years, and only NOW have a deposit for a house in Canada? You know you only need 5% right? Some you dont even need a down payment.... |
Hmm.... 5% down is a high ratio mortgage and one of the requirements is that it is your PRIMARY residence.
If the OP is looking at real estate as an investment rather than his primary residence he will require 25% down.
As a non-resident he is also subject to a 25% tax on net revenue while it is rented out and a 50% capital gain tax on the net gain in price if he sells it before taking up residence in it.
Management fees are typically 10% of the gross rental price based on a one year lease. |
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Homer
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| Posted: Fri Jan 19, 2007 5:11 am Post subject: |
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Hanson,
We bought a house a few years back in Canda. We are renting it out and it we put it on a 10 year morgage. In fact, it will be paid off quicker than the 10 years because the rent more than covers the payments.
We sure do not pay 25% in tax on net revenue nor did we need to put 25% down on the house when we bought it!
As for the management fee...we pay less than 10% of the rental value but we have a friend who looks after the place while we are out of Canada.
Revenue Canada site will tell you what you need to know and if you want more information just pm me. |
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SuperHero
Joined: 10 Dec 2003
Location: Superhero Hideout
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| Posted: Fri Jan 19, 2007 5:12 am Post subject: |
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| Darkness wrote: |
| You've been here 5 years, and only NOW have a deposit for a house in Canada? You know you only need 5% right? Some you dont even need a down payment.... |
5% down is foolish - the interest alone would kill you. The more down the better. I personally would say 15% minimum, but preferably 25%.
Like the OP I'm interested in buying property in Canada but the tax thing is preventing me. |
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Darkness
Joined: 12 Oct 2006
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| Posted: Fri Jan 19, 2007 7:04 pm Post subject: |
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| The interest will get you no matter what, I dont see how that's stupid. If you have a house and only put 5% down who cares, ya it would be even better if you had 100% to pay the whole house off, but things dont work like that. |
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Hanson
Joined: 20 Oct 2004
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| Posted: Sat Jan 20, 2007 2:38 am Post subject: |
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| Darkness wrote: |
| The interest will get you no matter what, I dont see how that's stupid. If you have a house and only put 5% down who cares, ya it would be even better if you had 100% to pay the whole house off, but things dont work like that. |
The bigger the downpayment, the better mortgage you get, the less interest you end up paying on the property over the years...
So, Homer, you bought your property before coming here (to Korea) and/or have it under someone else's name, right? |
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Homer
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| Posted: Sat Jan 20, 2007 5:42 am Post subject: |
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Hanson,
No..we bought the property during a vacation in Canada a few years ago. We had scoped out the areas we liked via the internet and had several properties lined up before arriving. We visited them and purchased the property.
We put it on a 10 year morgage to pay less interest overall and because the rent revenue would be higher than the morgage price. Mind you this was before the realestate boom...so the price we paid was pretty darn low.
As for the other details, I am not about to discuss them in a public forum..sorry. |
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