Pros and cons of Canadians buying property in the U.S.

The allure of investing in U.S. real estate for Canadian investors is stronger than ever, thanks to a range of benefits that extend from favorable pricing to potentially high returns. However, navigating the process involves overcoming some hurdles, which, with the right knowledge and tools, can be transformed into manageable steps toward successful investment. In this article, we explore the advantages of buying property in the U.S. as a Canadian investor and provide practical solutions to common challenges encountered along the way.

Pros of Investing in U.S. Property as a Canadian

• Cost Efficiency: One of the most compelling reasons to consider U.S. real estate investment is the cost efficiency of properties. On average, the price per square meter for U.S. properties is significantly lower than that in Canada. For example, Toronto's and Vancouver's average property costs per square meter soar to $10,825.13 and $13,422.43 respectively. Meanwhile, U.S. favorites like Miami offer a much more approachable $5,952.44 per square meter, with even Los Angeles at $12,885.17, presenting substantial savings. This price difference not only makes the initial acquisition more affordable but also opens the door to higher returns on investment. The lower entry barrier allows investors to diversify their portfolios or even acquire multiple properties for the price of one in some Canadian markets.

• Market Diversity: Beyond cost benefits, the U.S. real estate market serves up a smorgasbord of investment opportunities across states like Florida, California, Arizona, Washington, and Texas. Florida, capturing 50% of Canadian investments, is particularly attractive with its no-state income tax and strong rental market. California, with 19%, shines with its tech industry and high quality of life. Arizona offers affordability and a warm climate, while Washington and Texas bring unique economic growth and lifestyle benefits. This geographical and economic diversity allows Canadians to tailor their investments to match their goals.

• Favorable Rental Yields: Generally, the U.S. market offers more favorable rental yields compared to Canada. This is due to a combination of lower property costs and the potential for higher rental income, particularly in areas with strong demand for housing. Investors can capitalize on this by strategically purchasing properties in high-demand locations, leading to a robust passive income stream.

Cons (and solutions)

While the advantages are compelling, there are challenges to consider. Yet, for every obstacle, there's a viable solution.

• Challenge: Obtaining a Loan Getting a mortgage as a Canadian can be daunting due to the conservative loan options from Canadian banks and the extensive documentation required by traditional U.S. lenders, including a U.S. credit history. Solution: Specialized direct lenders like Milo offer a way forward. These lenders are adept at working with foreign nationals, providing loans that bypass traditional hurdles. For example, Milo, leverages technology to streamline the mortgage process, allowing for a seamless, remote application and approval experience.

• Challenge: Closing the Deal Traditionally, closing on a U.S. property required the buyer's physical presence, a significant inconvenience for international investors. Solution: The post-Covid era has seen many states permanently adopting remote closing practices. Direct lenders, including Milo, facilitate remote closings in participating states, making the process convenient and efficient.

• Challenge: Managing Property from Abroad Overseeing a property from another country can seem daunting, from maintenance issues to tenant relations. Solution: Modern property management services have evolved to address these concerns directly. Options range from full-service management companies to Airbnb's co-hosting service, offering solutions for marketing, maintenance, and tenant management, all tailored for remote landlords.

The bottom line

Investing in U.S. real estate as a Canadian offers a promising avenue for portfolio diversification and income generation, with the potential hurdles being far from insurmountable. By leveraging specialized financial services for foreigners, taking advantage of remote closing opportunities, and employing property management solutions, Canadian investors can navigate the challenges and capitalize on the advantages that the U.S. real estate market has to offer. This approach not only simplifies the investment process but also maximizes the potential for success, making U.S. property investment an attractive option for Canadians looking to expand their real estate portfolios.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.