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Investing in US Real Estate from Canada [A Quick Guide]

As the Corona pandemic has resulted in flattening of valuations in both residential and commercial real estate in the US, the market presents a novel opportunity for Canadians looking to investing in the US real estate from Canada. As property ownership also comes with maintenance costs and taxes, a number of owners are trying to divest and also get the best break-even value for their property lest the prices fall further. Hence, the time is opportune for investors from Canada, who are looking to invest in the US real estate sector. So, what if you are ready for investing in US real estate from Canada? Is it viable, especially in the current environment? Investors reading this may be surprised to know that investing in US property from Canada is easier than you may consider, and has a big payoff if you play your cards right.

Truth be told, it is quite simple to invest in US real estate from Canada, so long as you are aware of the pros and cons of investing in US property while you are operating from another country. Here are a few points one must bear in mind when investing in US real estate from Canada or elsewhere for that matter:

Financing your investment

PROS: In light of the market conditions and prevalent uncertainty, liquidated investments are much more feasible now. If the agenda is to flip the property and you have the cash for it, then the US property market can offer you some great options in various price brackets and property categories. Given the softening buying trends, most property sellers or renters are putting up their assets on the market for low prices and flexible terms.

In order to secure a loan from any bank for property investments, one has to go through paperwork, prove their line of credit and/or show a portfolio with success in international property investments. So, seeking a loan from a US-based bank as a Canadian investor will require a fair amount of research on your part, followed by the actual process of getting the loan. It would certainly be easier to apply for a loan to a Canada-based banking institution and then liquidate the same to pay off the investment in the US property.

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Investing in US Real Estate from Canada with the right partner

You can partner up with another investor so you do not have to bear the brunt alone if the property remains vacant and idle on the market due to the present slowdown in transactions and flattening of prices. It is very much advisable also for Canadian investors to partner with someone from the US. Finding an investment partner who is based in the US will ensure due diligence in property selection and inspection before investment, without you having to rush down from Canada amidst the lockdowns, especially! It also improves your chances of securing financial assistance from American banking institutions.

The right partner can help make a deal, just as the wrong partner can break it. So, you need to ally yourself with an investor who will not only help you bear the cost of investment but also help you sail past the bad tidings of the market. It may be difficult to find a US-based investor with a robust portfolio to co-invest with someone interested in the market from beyond US borders. A sensible resolution would be to conduct research for a US-based investor for partnering on the proposition before seeking out US properties.

Hire a turnkey property broker

A turnkey brokerage company in layman’s terms is an entity that flips the company to you! Hiring a good turnkey property broker to act on your behalf can help smoothen the process of investing in US real estate from Canada; especially, if you are short on liquid capital for immediate investment and also lack a partner who may be closer at home to the US property in which you wish to invest. You can pay the broker their fees and the investment cost in due course and they are bound to have a better standing with a US-based financing platform.

A turnkey broker option is probably the last one you want to opt for because of the added work in finding the right broker for the job. To avoid misgivings and bad judgement calls one must regularly follow up with their broker- especially when you are investing in US property as a Canadian investor. But, hiring a good broker should not be a slippery slope as long as you have the right broker at your disposal. In this case, the onus is on you as the primary investor to thoroughly cherry-pick the ideal turnkey brokerage company for the job. So you can rest assured that they will truly pick an asset worthy of investment.

US property taxes

Taxes are inescapable regardless of what kind of US property you want. When you are a Canadian buying property in US pros and cons very much go head-to-head in terms of taxes. There are several perks to paying taxes on US-based properties, as you get a healthy deduction/write-off for maintenance, advertisement, property taxes, and mortgage taxes. There are also tax write-offs available on the mortgage of the secondary asset, and deductions for non-real estate properties. There may be some leniency in the process if you have a broker or US-based co-investor to help you read between the lines.

It is important to note that you do have to pay taxes twice, once as per US law, and the other as per Canadian; the only trouble you may have to incur in this regard is to find a financial service provider- who understands both the US and Canadian law- to help do your taxes. Use the internet forums and listings to find a good financial service provider who can streamline your financial paperwork and help you secure a healthy sum in deductions. Also, if you find a property that yields more than these taxes and the miscellaneous costs involved then you are certainly going to sail away with a healthy profit margin on your investment.

Research for investing in USA real estate

Technology is your best friend when you are investing in US Real Estate from Canada. The positive news is that there are plenty of multifamily investing syndication where you can find for the right asset.

The worrisome part is only the arduous, time-consuming research it might take to find a broker, or a partner to co-invest with you. Research and scrutiny is of utmost importance as you need to be certain about hiring the right brokerage service or co-investment partner to offer you a profitable property investment experience. Research and due diligence are an obvious for everything- be it assets, brokers, or co-investors, because it is the bare minimum legwork required for if you want solid capital gains from investing in international real estate, in the US.

To summarize it all, investing in the US real estate market can certainly help you reap dividends if you have the patience and foresight to navigate past the pitfalls and trenches on the way. The process to investing in USA real estate from Canada is really smooth if you partner-up with the experienced investors who have a successful track record.

If you require any further information about investing in the US real estate, do not hesitate to contact us. You are welcome to sign-up for the free education available here: 

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