Picture being an income property owner. Now imagine a steady stream of anxious renters knocking at your door.
It sounds like nirvana, but that could be your reality if you welcome newcomers to Canada into your income property.
Canada is set to take in up to 1.32 million immigrants between 2022 and 2024. They’ll all need a place to live.
Generating Income From Property
Up to 50% of newcomers to Canada go to Ontario. That puts Ontario income property owners in prime position to profit long term from the federal government’s latest three-year immigration targets. Find Ontario settlement agencies that need housing.
Let’s be clear: capital appreciation is not top of mind for income property investors. Investment property is bought for its return on investment (ROI) and held until it goes up in value. Finding an income building for sale.
But unlike investment property that generates cash from quick flips, income property is a buy and hold strategy. It may even be a principal residence. Your income comes from renting or leasing residential or commercial revenue units.
How Do Investors Earn in Real Estate?
That’s easy to calculate.
Ontario’s average rents were $1,976 in October 2022. That’s a $209 a month increase over 2021 rents. Places closest to Toronto recorded the highest monthly rental rates, but smaller cities were also promising territory for investors. How to buy income property.
Toronto income property owners made an average of $2,478 per unit. Owning income property in Etobicoke brought in around $2,193 a month, compared to $2,091 in Mississauga. Landlords in Ottawa, Guelph, Brampton, and Kitchener were hovering between $2,000 and $2,100 monthly.
That’s a cool pre-expenses profit for owners of any multi-unit residential building (MURB) income property. Download the Ontario standard lease guide.
What an Income-Producing Property Looks Like
Take this example of an income-producing property.
Jason buys a five-unit income property in Sudbury for $579,000 with 10% down ($57,900).
- Land transfer tax costs $8,073.
- Legal fees and miscellaneous costs like title insurance are $1,500.
- He pays $500 for a home inspection.
- CMHC mortgage insurance is $16,179.21.
Jason’s expenses are $84,152.21.
Rental revenues, utilities excluded, are $2,800 monthly for two one-bedroom units and $5,625 for three two-bedroom suites. Jason’s expenses for property taxes, upkeep (1% per annum of $579,900), and a 10% fee to a property management company are $2,145 monthly. Monthly revenues are $6,255.
After mortgage payments of $3,253 (at 5.4% over 25 years), Jason’s monthly profits are $3,002. His ROI, or return on investment, is 4.28% annually: $36,024 in profits divided by $84,152.21 in out-of-pocket expenses.
Financing Housing for Newcomers to Canada
If Jason is interested in building a new, energy efficient income property instead, he could finance it through CMHC’s rental construction initiative. At least 20% of units must rent for less than 30% of the median total income of all families in the area. Find median total income by community.
Creating affordable rental housing for recent immigrants and refugees is a priority for Canada’s National Housing Strategy (NHA), and that makes the low-cost rental program desirable for income property developers. Apply for NHA rental housing loans.
More on Ontario Immigrant Nominee Program for newcomers to Canada
Why You Need a Real Estate Lawyer
Interested in being an income property owner? Be sure your offer to purchase income property for newcomers is legally valid. Axess Law reviews the agreement of purchase and sale to include essential clauses that preserve the right to a home inspection or to cancel if the sale isn’t right for you. Tips for purchasing income property.
Your realtor can advise you on making an offer, but only an Ontario licenced real estate lawyer can complete the sale. Bring your draft or signed agreement of purchase and sale to Axess Law. We’ll review the terms and conditions and advise you if changes are appropriate. Make offers to purchase legally binding.
If getting the mortgage you want, at an interest rate you prefer, takes longer than expected, your Axess Law real estate attorney negotiates with the seller’s lawyer to extend the completion date.
When you have the financing you want, our real estate lawyer searches title to property for construction liens or financial claims that could hold up the sale. For a minimal, one-time fee, we add title insurance to protect you from mortgage fraud. What title insurance covers.
Your Axess Law real estate lawyer can discharge existing mortgages and prepare legal documents your mortgage lender needs to buy or sell property in Ontario. We transfer the title to your name and add the lender to make your real estate transaction complete. Add family members to title when you purchase real estate.
Affordable Real Estate Lawyers, Anywhere You Are
Access lawyers for less in the Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
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Book Appointments Online or By Phone
Your Axess Law real estate lawyer can video conference online with you anywhere in Ontario. In-person appointments are available at our convenient Ottawa or Greater Toronto Area law offices. Make day or evening appointments by dialing our 647-479-0118 lawyer line (toll free to 1-877-402-4207). Booking online takes just minutes of your time.
Axess Law has onsite parking and easy transit access.