Recreational Homes in the United States a Viable Option for Canadians
With the high cost of owning property in any major city or popular vacation destination in Canada, the United States real estate market continues to offer a tempting alternative for buyers looking to enter the real estate market. Whether the motive is to establish a home-away-from-home as part of an annual trip to warmer climates or generate a recurring source of revenue, the U.S. offers a number of investment advantages to Canadians—specifically millennials who struggle to enter the Canadian real estate market.
Canadian interest in recreational properties is significant. A recent RE/MAX study shows that 40% of Canadians are in the market for a recreational property. In addition, 30% say they would use a recreational property for themselves or as an investment opportunity. There is, however, a prevailing misconception amongst Canadians that U.S. properties are more expensive because of the exchange rate. But a review of the housing market numbers indicates that is not the case in many prime recreational locations. According to a 2019 National Association of REALTORS® (NAR) study, the median purchase price among Canadians purchasing U.S. real estate was $280,600 U.S. ($373,000 CAD).
In some cases, annual mortgage payments will come in at less than the cost of a vacation rental. For example, a monthly condo rental in a warm weather location might cost $3,000 during the peak season whereas the monthly mortgage payment to purchase the same property might be $900. Even when factoring in additional condo fees and maintenance, ownership can still be an attractive investment, given the potential to offset the costs with the rental income.
However, there are key differences between the two countries Canadians need to consider when purchasing a property in the U.S. For example, the average down payment in the U.S. is 20% higher than in Canada. This is offset by the fact the U.S. offers a lower mortgage rate environment and longer amortization.
Here are a few other considerations buyers should be aware of when considering the U.S. for their recreational property needs:
Potential restrictions on rentals: It is critical to ask whether the property is zoned for short-term rentals. Some jurisdictions or homeowner associations restrict rentals to a specific number of times a year, length of time or do not permit short-term rentals at all.
Understanding U.S. property taxes: There are additional costs to consider including property management services and tax implications of a U.S. home purchase and rental income. Taxes don’t need to be over complicated, but awareness of what they are from the outset is key. The best course is to work with Canadian professionals with experience in cross-border tax accounting who understand allowable deductions and how to avoid double taxation.
Balancing time across the border: To avoid paying U.S. income taxes, Canadians can spend up to six months (182 days) in the U.S. in any 12-month period, so long as they have the resources to support themselves, do not work while in the U.S. and return to Canada for the remainder of the year. Buyers planning to spend extended amounts of time in the U.S.—whether vacationing or travelling for business—need to be aware of the maximum number of days they can spend in the country and the impacts of staying longer than the allocated amount.
Financing vs. cash: According to the same NAR study quoted earlier, an overwhelming 78% of Canadians who purchased a home in the U.S. purchased the home as an all-cash transaction. But, it’s prudent to note there are one-time currency exchange savings to be had when financing the purchase versus paying all cash up front. As an example, a $400,000 U.S. home can equate to savings of $102,300 when financed (assuming an exchange rate of $1 U.S. = $0.75 CAD).
Hidden fees: There are currency exchange, financing and mortgage options that can help to reduce significant upfront exchange costs. Also, all loans in the U.S. are open, meaning there are no prepayment penalties, which can make a significant difference in the decision-making process. However, some U.S. lenders charge an “origination fee” that can equate to 1% of the loan, in addition to closing fees.
The right partners: A combination of the right financial and real estate professionals who are familiar with the rules and regulations is essential for foreign investors. You can be that expert partner by learning how to help Canadian buyers navigate the U.S. mortgage process.
Submitted by Alain Forget. Alain is Head of Sales and Business Development for RBC Bank. He is a Canadian expat residing in Florida who also has his real estate license in the state of Florida.
Alain Forget, Director U.S. Business Development
RBC Bank (Georgia), N.A. 500 East Broward Blvd.,
Ft. Lauderdale, FL 33394
T: 954-766-7185 / firstname.lastname@example.org
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So, You Think Using a Free Personal Email Address Doesn’t Matter?
I have worked with thousands of real estate professionals who are stressed out and wasting valuable time trying to find information they know they updated or put somewhere, but can’t find it in their inbox.
This leads to an excess of unnecessarily wasted time and money. Think about it: If you spend an hour a day trying to find things in your inbox that’s 365 hours a year wasted. Multiply that by your hourly wage and you might be astounded.
In my opinion, every real estate professional should get an email address like YourName@YourWebsite.com.
Often, real estate professionals don’t understand the impact of using a free and personal email account (such as @shaw, @telus, @aol, @gmail, @yahoo, @outlook, @icloud) to run their business.
Is this you? Here are a few issues you might have because of this email setup:
Your contacts and calendar are messed up. When you update a contact’s information on your computer, it doesn’t update on your iPhone, iPad, Android or Customer Relationship Management (CRM) tool and vice versa.
Your email and email folder structure are not in sync. That means when you move an email on your phone, it still shows elsewhere on your computer.
You need to access different emails on different platforms.
Your email doesn’t work when you are on vacation.
You are using role-based email addresses like info@, help@, or contact@. These email addresses are associated with high bounce rates, high spam complaints and spam traps. I never recommend using them.
You are using an internet service provider email like Shaw, Telus or AOL. What happens to your email address when you want to switch to another internet provider? Yes, it’s gone!
You have multiple email addresses. The most I’ve ever seen is 27 email addresses. Can you imagine trying to keep those all up to date and how much time it takes to manage them?
You update your CRM contacts but it doesn’t update your phone, Outlook, Macmail or anywhere else you have contacts saved. You have to remember where you updated it and then update it everywhere else. Which means you are managing multiple databases of contacts/leads.
You are an Apple user and don’t know that, by default, Apple saves yourcontacts and calendar info in iCloud, and the implications of that.
You can’t find an email. True story: An agent sent an email to another agent (they were using a personal email account) and said, “We just received an offer, are you in?” She never got it, so the client and the agent both lost out.
Are you losing deals but don’t know why? It could come down to a professional vs. private email address. For example, if you are researching a lawyer and get two recommendations:
Which one are you more likely to use? According to the Small Business Owner and Customer Survey (February, 2016), 75% of consumers say an email address matching your domain is critical to trust and professionalism.
This is also the subject of the November 27, 2019 CREA Global webinar. Join us and have your questions ready! If you can’t make it, you can book a 30 minute free call at www.agenttechmastery.com/strategysession.
Article submitted by Darci LaRocque,Tech Guru to Agents/Brokers and International Speaker and Consultant.
See You in San Francisco!
We are looking forward to seeing all our Global Affiliates at the largest global real estate conference next month.
The 2019 REALTORS® Conference & Expo will be held in San Francisco November 8-11. This busy conference, hosted by the National Association of REALTORS® (NAR), will offer plenty of opportunities to network and meet Canadian REALTORS®. Stop by the Canadian Real Estate Association (CREA) booth during the expo to meet with Canadian REALTOR® ambassadors and see what’s new in their markets.
The Expo is also host to a global networking area with a specific showcase time for each country. Canada will have its time to shine Saturday, November 9 from 12:30 p.m. to 1:15 p.m. Be sure to mark it in your schedule!
Finally, you are invited to attend the best networking reception with Canadians – The Canadian Delegates and Global Affiliates Welcome Reception on Friday, November 8 from 5:30 p.m. to 7:30 p.m. in the Gold Room of the Hotel Fairmont San Francisco (950 Mason Street). Get ready to grow your contacts! This is a great time to connect with Canadian REALTORS® you have met virtually via the affiliate program or meet new REALTORS® from across the country.
With such a busy schedule here are a few tips on what to pack to help you get ready for San Francisco:
your phone, so you can add new contacts and mark your calendar for Canadian events;
your best smile and two-minute elevator pitch;
the right mindset—everything goes better when you’re in the zone; and
an energy bar to keep you fueled while you’re busy networking.
See you there!
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