The strong Canadian dollar and recent corrections in the U.S. real esate market have made properties south of the border an attractive investment. Many Canadians are flocking to the U.S. to buy investment properties, at discounts of up to 60 and 70% of 2007 prices.
I recently worked as a consultant and mortgage advisor for a group of clients who pooled their Canadian funds, with the intention of buying a portfolio of properties in the United States. I do not arrange U.S. mortgages, however, my role was simply to assist with the application process and provide advice.Their dilligent research uncovered that many potential properties would produce positive cash flow from rental income, with a down payment of as little as 5%. However, when it came time to obtain a mortgage in the U.S., they ran into some major road blocks. Unfortunately it’s not possible to obtain a mortgage from a Canadian bank or lender on a U.S. property. When my clients approached both U.S. banks and mortgage brokers, they were told that getting a mortgage was simple and they could likely be approved with as little as 20% down payment and in some cases less. Once they actually went through the application process in preparation to begin offering on properties, the reality was quite different.
The banks, upon reviewing the application, all declared that a down payment of 30% would be required, due to their non-resident status. Furthermore, being a foreign purchaser entailed higher than normal rates, in some cases up to 3% higher. Another issue they came across during the purchasing process is that many of the subject properties were in a foreclosure type situation, controlled by the courts or an organization and they were not receptive to foreign buyers requiring a mortgage to complete the transaction. Needless to say, they felt their offers did not receive fair consideration and they would have had to pay quite a bit more than a local, cash buyer.
I am certainly not trying to discourage anyone from purchasing in the U.S. Provided you’re prepared to hold the property for 5 to 10 years or more, I believe there are many attractive investment opportunities down south. I do think it’s important for one to investigate the process before attempting to make such a purchase. This would include speaking with more than one bank or mortgage specialist, finding a qualified realtor with experience in purchasing for foreigners and also seeking advice from a lawyer and an accountant, to be made aware of any liability and taxation issues.
For more information on purchasing in the U.S., click the following link for a detailed report:
If you are considering buying in the U.S., please feel free to contact me, as I’d be happy to share more information on my experiences.