Real estate has long been considered one of the best ways to create long-term passive income. And it’s clear why that’s been the case over the last few decades. Interest rates have been so low that if you have the cash, a mortgage can latch onto interest rates that are practically nothing!
But things have changed over the years. If you have $1 million, it might still get you a lot, but only in some places. So let’s look at why real estate could possibly still be a good investment and where this might actually be the case.
Why real estate could work for you
Historically, real estate prices in Canada have generally increased over time. This offers a strong long-term capital gains investment for those looking to buy, rent, then sell property. This can be a great way to create wealth and even outpace inflation.
What’s more, it’s a tangible asset. You can own it and use it, or even rent it out for more passive income. That income can create a steady stream which can pay down your mortgage, and even offset the costs of your own mortgage payments and property taxes.
What’s more, this type of passive income investment has tax benefits. In Canada, you can deduct certain expenses from your rental income while lowering your overall tax bill. So overall, it sounds great! However, given today’s market conditions and interest rates, it’s a bit more difficult to buy those cheaper homes and create passive income. So now, let’s look at what $1 million might get you across the country.
The numbers
For this, we’re going to simply look at the capital city of each province and territory, and on average what you can get from a $1 million purchase. You can find this in the chart below.
| Province/Territory | Capital City | Possible Real Estate Options |
| Newfoundland and Labrador | St. John’s | Detached house with 3-4 bedrooms, waterfront property |
| Prince Edward Island | Charlottetown | Large, detached home with character or in a desirable neighbourhood |
| Nova Scotia | Halifax | Detached home with 3-4 bedrooms in a good neighbourhood, executive condo/townhouse downtown |
| New Brunswick | Fredericton | Spacious detached home with a large yard, unique property like a heritage home |
| Quebec | Quebec City | Large condo/townhouse in a desirable area, potentially a smaller detached home further out |
| Ontario | Toronto | Two-bedroom condo downtown, detached house further out in suburbs |
| Manitoba | Winnipeg | Large, detached home with a yard in a desirable neighbourhood |
| Saskatchewan | Regina | Luxurious, newer detached home in a sought-after neighbourhood |
| Alberta | Edmonton | Spacious, detached home with 3+ bedrooms and modern features, infill home in a trendy area |
| British Columbia | Victoria | Detached home with some character or in a good neighbourhood, potentially a smaller condo downtown |
| Nunavut | Iqaluit | Limited housing options, could potentially buy a single-family home in a newer development |
| Northwest Territories | Yellowknife | Detached home with 3+ bedrooms in a desirable neighbourhood |
| Yukon | Whitehorse | Large, detached home with a yard in a desirable neighbourhood |
As you can see, it varies quite widely. While in Toronto you can only get a two-bedroom condo, in Regina you can get a luxurious brand-new home! Which is why investing might be a better option.
Why investing might be for you
As mentioned, a lot of issues come up with buying a home right now, especially in sought-after areas. Which is why investing could be much easier. First off, diversification is key for investing in anything, and you don’t get that with real estate. Invest even in one exchange-traded fund (ETF), however, and you’ve got access to everything in one click.
Furthermore, you don’t need $1 million to get started! Put in even a few hundred bucks and you can make passive income. Plus it doesn’t cost you to invest when it comes to maintenance costs or upkeep, simply professional management fees, if that! Finally, it’s also way easier to take out the cash when you need it, with extra change from any higher returns.
If you take this option, I would consider an ETF like the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY). It offers a 4.65% dividend yield, with shares up 16% since bottoming in November. And that dividend comes out every month!
