All Forum Posts by: Brian Dean

Hey @Kim Wu, good question!  I'm not an expert on the subject (at all) but have been looking into this same question, as it seems far more complicated in Canada then in the States.  Rich Dad Poor Dad is American, so he's definitely referring to their system when talking about the tax advantages of buying through a corporation.

Buying in Canada does seem more specific to your situation, but I'll try to share the overall themes I've discovered (and people are welcome to correct me if I'm wrong on any points).
-There are essentially two types of corporations in Canada; passive and active.  Most business's are active, and get taxed at a relatively low corporate tax rate.  Most investment properties unfortunately fall under the passive company category in Canada (unless you have five full time employees).  A passive company gets taxed at 50% on money left in the company, however there is a 30% tax rebate when dividends are issued.  So this makes it hard to save up money in the business, which makes it hard to pool cash flow to buy other properties.  However if you take out dividends, the effective tax rate is 20%, and you'll have write-offs too, which can lower it.  Definitely reach out to a real estate accountant if buying property through a corporation, as they may even recommend how a tax lawyer should structure the company.  Keep in mind that a company will have more yearly fees to maintain than buying personally.
-If you buy rental properties in your own name, you pay income tax at your personal marginal tax rate.  You can write off the expenses, including the interest part of your mortgage.  Overall if you're in a lower bracket, it might make you more inclined to buy the property personally.  If you're in a higher bracket, it's more reason to buy through a corporation.  
-On a liability standpoint, you should always have good insurance in place, but yes, it is safer to buy in a corporation.  
-In regards to qualifying for mortgages, if you buy personally, then the lender will be looking at your personal income/expenses/debt/etc.  They don't factor in the rental income as much as you might like.  Over time, this can make it hard to grow the portfolio, especially because Canadian banks have varying limits of how many mortgages you can hold at a time.  When you buy in a corporation, your personal finances do still matter as you back up the corporation, but often a corporate mortgage takes into consideration the investment more, and it's likelihood to be profitable and cover expenses.

My personal overall summary would be that if you plan on buying one or two properties for relatively low amounts of money, it is far more simple to buy in your own name, and just make sure you have good insurance in place.  However if you plan on growing a portfolio of properties over time and can afford to properly set up and maintain the a corporation yearly without it eating most of your profits, then that is the better route.  As mentioned, generally you do get taxed higher in a corporation unless you take out dividends.

Hope that helps

Hi Sheldon, Unfortunately the prices in the Greater Vancouver area are mostly far higher than $225k.  You might be able to find the cheapest of apartments for under that price out in Abbotsford, but that will be over an hour away from YVR Airport.  It looks like the least expensive house in Abbotsford is pretty much a teardown for around $400k.  Most places well over $500k.
I live in Vancouver but choose to invest elsewhere, where the cap rates are better.  But if it's your primary residence, then that might be a different story if you really want to buy, are willing to commute, and may be able to get a second bedroom to rent out in Abbotsford for that price. 

Hi Keith, I own a couple small multi-family units in Windsor along with two others, and we live in Western Canada.  We have hired a property manager that takes care of all the day-to-day stuff, as well as tenants moving in/out.  The price varies depending on which property manager and what type of unit you have.  We go with Marda Management, and I believe their prices range from $150/month for a duplex to $250/month for a fourplex.  Personally I like having a property manager rather than self-managing as it not only saves a lot of time, but also helps you keep in the headspace of being an investment rather than it becoming more of a side job.  For a couple/few hundred bucks a month, I think it's worth it.

I agree with the comments above.  The only thing I would add is that it really depends on the city.  For multi-plex units you can often find around the 1% rule in certain areas like Windsor, or in Quebec, or in the Maritimes.  Single Family Homes are different, and closer to the GTA is different.  Just depends what you're buying and where you look.  Often you'll find that 1% properties also come with more risk than some other properties.  Risk based on areas of the city, tenants, vacancy rates, or most likely needing to fix the place up a bit.  So it's a bit of a tradeoff.

Hi Bara,  I can recommend Steve Jarrouge with the Vanguard Team as a realtor who specializes in small multi family units in Windsor.  It seems as though he does a large portion of these deals for Windsor.  Also, if you're looking for a management company, I've been fairly happy with Marda Management, and they're reasonably priced.  Feel free to message me if you want contact details.

Thanks for the input guys. For those who have done BRRRR's in Canada, do you find that Canadian lenders are harder to get a higher appraisal then in the States? From the podcasts it seems like people can pull most of their money out, but I get more of a sense that here in Canada people aim just to get reno costs back. Is that due to the specific properties or due to being in Canada?

Hi Mike, welcome to BP, I’m new here too. I’m not 100% sure so someone else can also back it up, but I’m pretty sure you need to be in the place a minimum of a year, and you do need to change everything to be your primary residence. The reno time would count if you are living there during it.

Thanks @Chris Ferreira, that makes sense. I’ll talk to my mortgage broker 

 Thanks Scott! How would that syndicate be structured if it’s someone else’s name on the property? Just with a partnership agreement done separately stating our ownership agreement? I guess that person would need to be able to qualify for the rental property individually?

Hi, I’m new to the BP forums as I wanted to hear more specifically from Canadians but I’m a long time podcast listener. 

Two friends and I together own two small multi-family units (Triplex and Fourplex) in Windsor Ontario, but live in BC. So far we’ve had good cash flow, like our property manager and would like to keep adding properties. Currently the two properties are owned personally, rather than in a corporation. It seems like Americans have it easy in this regard but far less advantages to incorporating in Canada. We’ve heard that it’s difficult to have your names on more than five rental properties. Over time we want to build a large portfolio of properties.

So my question is, in Canada how do you keep adding properties beyond those first five? Even if we incorporate, they would want us to personally back it, so it wouldn’t be very different, right? Is our only option private lending? Is there a way to get past this hurdle?  Thanks!