In 2018, ‘Canadians purchased approximately 27,400 residential real estate properties in the U.S. valued at $10.5 billion dollars…. The average purchase price was $383,900 and the median price was $292,000. Canadians were responsible for about 10% of all foreign real estate sales in the U.S.,’ according to CanadatoArizona. This is amazing since Canadian currency is weaker in the U.S. So why do they continue to buy in the U.S.? And where?
What Types of Properties Do Canadians Own in the U.S.?
- 40% of purchases in the U.S. are for a vacation property or second home, these are known as Snowbirds
- 23% of purchases are primary residence, they have a desire to become permanent residents of the U.S.
- 15% of purchases are purely for investment properties, such as long-term rentals
- 16% of purchases are intended for part-time home and part-time rental uses – like Airbnb
- Approximately 68% of Canadian buyers purchased single family homes
- 22% purchased condominium properties
- 8% purchased townhomes
- 2% purchased residential land
Canadians purchasing single-family homes has been on the rise and is a new trend in the U.S. real estate market. We are also seeing a trend toward the purchase of new construction because it offers the latest in amenities, technology and there is less required maintenance.
Where Are Canadians Buying Properties in the U.S.?
Not surprisingly, most Canadians are purchasing properties in the sand states such as; California, Florida, Arizona and Nevada. The state with the fifth highest Canadian real estate purchases is New York, with additional purchases being made in Texas, Michigan and Washington.
No doubt this is a thriving market and Canadians aren’t the only foreigners participating. However, there are a couple of things which should be taken into consideration when buying real estate from or selling to an expatriate or foreign buyer.
Laws and Logistics of Purchasing U.S. Property From/Selling to Expats/Foreigners
Many properties purchased by foreign buyers or expats are often purchased in cash. They are simply unaware that they can apply for a U.S. mortgage and that it could be a great option for them. It is usually easier for them to secure a mortgage loan if they have a Green Card or a valid work visa.
The U.S. allows most foreigners to purchase and own property. However, rules can differ from state to state and at the municipal levels, so this should be checked. Buyers will also need to apply for a taxpayer ID number. The purchase and sale of property in the U.S. is subject to U.S. tax laws.
Management and expenses
Buying the property isn’t the end of the expense for foreign real estate buyers. In fact, it’s just the start. There are continuing expenses and management costs which must be accounted for, even if the property isn’t used as a rental.
Additional expenses when you own real estate:
- Utilities, which can vary by area and property type
- HOA or Community Fees, if the property is new construction or a Condo/Townhouse there will be monthly fees to maintain the infrastructure and grounds, for example
- Taxes, local property taxes and, if it is a rental property, there is the possibility of income taxes
- Home Security, installing a security system and/or professional monitoring service
- Management Company, to manage tenants and maintenance of the property if it is a rental
For more information about buying or selling out of your local area click here. Remember the world just keeps getting smaller.
Diana D. Hill – Diana@OTARealEstate.com