Written By: Jacquelyn Annete García Vadnais
Montreal has started to attract a great deal of attention in the real estate sector since it typically has lower prices than cities such as Vancouver or Toronto. Real estate investors both from Canada and abroad are eyeing the Montreal market closely given the constant appeal that the market possesses. Investing in Montreal can provide a great deal of value to prospective real estate investors; however, it is essential to understand the potential benefits as well as the pitfalls to investing in the Montreal real estate market. In order to learn more about the benefits and pitfalls of investing in the Montreal market, please review the information below:
Benefits of Investing in Real Estate in Montreal, Canada
Lower Costs Than Toronto or Vancouver
Currently, the cities in Canada that have the highest real estate prices are Vancouver and Toronto. Montreal, while having great professional opportunities and a high quality of life, has lower prices. This is one of the factors that has driven the interest to invest in real estate in Montreal because there is a higher quality of residential or commercial real estate available for a lower price.
Taxation Benefits
Canada provides taxation benefits that can be appealing to foreign investors. By choosing to invest in Montreal, there is a potential to receive taxation benefits while simultaneously having a lower initial buy in price. Some of the potential tax benefits for investing in real estate in Canada for foreign citizens are: amortization of the purchase price of 4% per year, light taxation of property income, an attractive tax credit system, and exemption from social security contributions. These tax credits make it much easier for a foreign investor to get established in the Canadian market while making substantial returns.
Easy Access to Financing
In certain markets, it can be difficult for foreign investors to obtain access for financing, which makes them unable to take advantage of certain investment opportunities. Canada offers the potential for foreign investors to have access to financing. Since Montreal has more favorable pricing, it can also help foreigners because they may not need to take out larger amounts of financing.
Constant Market Growth
Montreal keeps seeing positive market growth even during the Covid-19 pandemic. The market grows on average by 5.5% each year, which is a reliable return for prospective real estate investors to consider.
Potential Pitfalls of Investing in Real Estate in Montreal, Canada
Profitable Properties Are Not Easy to Find
Even though affordable real estate is accessible in Montreal, it does not mean that each investment is going to be profitable. Profitable properties are not always easy to find in Montreal. This is particularly true for new real estate investors. Now that the market has gotten quite competitive in Montreal, newer real estate investors need to be careful that they are finding a property that is going to bring them a favorable return on their investment.
Be Careful of Taking Too Much Financing
Even though financing is available to foreign citizens, it needs to be used with caution. There can be a temptation to take a large mortgage with the prospect of having tenants. However, having tenants does not necessarily mean a property will be profitable. If the investor also has a large mortgage, the investment property can become cash flow negative. In a study by the Canadian Mortgage and Housing Corporation (CMHC), 57% of the condos owned in new condominium towers with more than 300 units were owned by investors; however, three quarters of those units were reported to be cash flow negative.
It Is Important to Understand the Difference Between Appreciation & Flipping a Property
Prospective real estate investors can get into trouble in the Montreal market by not setting realistic expectations of what they are intending to accomplish with the properties that they purchase. For example, Montreal is a very strong market to purchase property at a lower price, break even on rental payments, and then let the property appreciate over time. However, if an investor is attempting to flip a property, the substantial return they were hoping for may be much more difficult to find due to the surge in the market and the scarcity of properties available for quick flips.
Oversaturation
Even though Montreal is very appealing at the moment, it is possible that the market could become oversaturated by real estate investors. If this occurs, it has the potential to drive up the cost of real estate, which could make it more challenging for real estate investors to generate a profit. Real estate investors should consider carefully the prices in the market to be sure that they are paying a fair and realistic price that will maintain its value or increase in the future in order to avoid hasty investments in a market that currently has a great deal of interest.
Final Remarks
Montreal has a great deal to offer foreign investors due to the combination of favorable factors that it offers including favorable taxation, a better-quality property for a lower price, and the overall high quality of life that Montreal offers to its citizens. Montreal has many professional and educational opportunities that it offers to its citizens, which makes a market of consistent rental tenants that are looking for many different sizes of properties to rent. For prospective real estate investors, this is a very favorable market because there is something there for everyone given that the real estate investor sets realistic expectations of what they are hoping to achieve in the market. Montreal has not only stayed strong during the pandemic, but it has continued to grow. For this reason, Montreal is certainly worthwhile for prospective real estate investors to consider.
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Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
Montreal has started to attract a great deal of attention in the real estate sector since it typically has lower prices than cities such as Vancouver or Toronto. Real estate investors both from Canada and abroad are eyeing the Montreal market closely given the constant appeal that the market possesses. Investing in Montreal can provide a great deal of value to prospective real estate investors; however, it is essential to understand the potential benefits as well as the pitfalls to investing in the Montreal real estate market. In order to learn more about the benefits and pitfalls of investing in the Montreal market, please review the information below:
Benefits of Investing in Real Estate in Montreal, Canada
Lower Costs Than Toronto or Vancouver
Currently, the cities in Canada that have the highest real estate prices are Vancouver and Toronto. Montreal, while having great professional opportunities and a high quality of life, has lower prices. This is one of the factors that has driven the interest to invest in real estate in Montreal because there is a higher quality of residential or commercial real estate available for a lower price.
Taxation Benefits
Canada provides taxation benefits that can be appealing to foreign investors. By choosing to invest in Montreal, there is a potential to receive taxation benefits while simultaneously having a lower initial buy in price. Some of the potential tax benefits for investing in real estate in Canada for foreign citizens are: amortization of the purchase price of 4% per year, light taxation of property income, an attractive tax credit system, and exemption from social security contributions. These tax credits make it much easier for a foreign investor to get established in the Canadian market while making substantial returns.
Easy Access to Financing
In certain markets, it can be difficult for foreign investors to obtain access for financing, which makes them unable to take advantage of certain investment opportunities. Canada offers the potential for foreign investors to have access to financing. Since Montreal has more favorable pricing, it can also help foreigners because they may not need to take out larger amounts of financing.
Constant Market Growth
Montreal keeps seeing positive market growth even during the Covid-19 pandemic. The market grows on average by 5.5% each year, which is a reliable return for prospective real estate investors to consider.
Potential Pitfalls of Investing in Real Estate in Montreal, Canada
Profitable Properties Are Not Easy to Find
Even though affordable real estate is accessible in Montreal, it does not mean that each investment is going to be profitable. Profitable properties are not always easy to find in Montreal. This is particularly true for new real estate investors. Now that the market has gotten quite competitive in Montreal, newer real estate investors need to be careful that they are finding a property that is going to bring them a favorable return on their investment.
Be Careful of Taking Too Much Financing
Even though financing is available to foreign citizens, it needs to be used with caution. There can be a temptation to take a large mortgage with the prospect of having tenants. However, having tenants does not necessarily mean a property will be profitable. If the investor also has a large mortgage, the investment property can become cash flow negative. In a study by the Canadian Mortgage and Housing Corporation (CMHC), 57% of the condos owned in new condominium towers with more than 300 units were owned by investors; however, three quarters of those units were reported to be cash flow negative.
It Is Important to Understand the Difference Between Appreciation & Flipping a Property
Prospective real estate investors can get into trouble in the Montreal market by not setting realistic expectations of what they are intending to accomplish with the properties that they purchase. For example, Montreal is a very strong market to purchase property at a lower price, break even on rental payments, and then let the property appreciate over time. However, if an investor is attempting to flip a property, the substantial return they were hoping for may be much more difficult to find due to the surge in the market and the scarcity of properties available for quick flips.
Oversaturation
Even though Montreal is very appealing at the moment, it is possible that the market could become oversaturated by real estate investors. If this occurs, it has the potential to drive up the cost of real estate, which could make it more challenging for real estate investors to generate a profit. Real estate investors should consider carefully the prices in the market to be sure that they are paying a fair and realistic price that will maintain its value or increase in the future in order to avoid hasty investments in a market that currently has a great deal of interest.
Final Remarks
Montreal has a great deal to offer foreign investors due to the combination of favorable factors that it offers including favorable taxation, a better-quality property for a lower price, and the overall high quality of life that Montreal offers to its citizens. Montreal has many professional and educational opportunities that it offers to its citizens, which makes a market of consistent rental tenants that are looking for many different sizes of properties to rent. For prospective real estate investors, this is a very favorable market because there is something there for everyone given that the real estate investor sets realistic expectations of what they are hoping to achieve in the market. Montreal has not only stayed strong during the pandemic, but it has continued to grow. For this reason, Montreal is certainly worthwhile for prospective real estate investors to consider.
--
Jacquelyn Annete Garcia Vadnais is an Investment Consultant and field expert blogger for Barracuda Consulting.
Jacquelyn has a JD/ MBA from Suffolk University, an LL.M in International Law from the University of Miami, and a B.A. from the George Washington University in International Affairs with a Concentration in International Politics. Jacquelyn speaks English, Spanish, French, and Portuguese and has lived in ten countries. Jacquelyn has done work for firms such as Boston Consulting Group and has worked with firms based in over ten countries in the fields of Real Estate, International Law, Expat Living, International Business, Forex Trading, and Travel. She has also volunteered her time and expertise at the Victims Rights Law Center based in Boston, MA.
Please leave your comments below. If you would like to subscribe to our newsletter, click here: https://tinyletter.com/barracuda-consulting. To purchase a full real estate report, or to access a complete suite of investment advisory services please contact us: https://www.barracuda-consulting.net/contact.
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