What’s the downside?
We know buying a condo in Ontario can be risky so think about how risky
it could become buying a condo 1,200 miles (2,000 km) away in a
So not only do you need to put your trust in a real estate agent, a
lawyer and a home inspector, but you will have to put in a lot of time
checking on the condo corporation that you are considering buying.
If you decide to buy an investment property, you will need to hire an
agent to find, screen the tenants and arrange for emergency maintenance
and look after the property. All you need to do is pay the bills.
If you are a snowbird, you will pay twelve months expenses to live
there six months a year and pay the same on your Canadian residence.
However, you know that before you buy.
If your condo is going to be a vacation property, unless you rent it
when you are away, your unit may become an expensive vacation retreat.
You will need to know if the condo corporation allows short-term
rentals and if if it has a quota on the number of units that can be
In any case, you will not know your board members and you may have only
a general feel on how well the building is being managed and if there
are any hidden problems that can result in a hefty special assessment.
should think twice about buying in Florida
27 February 2015
I came across two surprising statistics in the papers recently. The
first was a report from the Florida Department of Tourism that 3.8
million Canadians visited the state in 2014. That’s more than 10 per
cent of our entire population!
The second was buried in an article on the comeback in Florida’s real
estate industry since the credit crunch of 2008-09 caused prices of
residential homes to plunge, in some cases by more than 50 per cent.
The story noted that valuations haven’t come all the way back but the
market was looking healthier than at any time since the Great
Recession. A large part of the reason, one real estate broker said, was
foreign buyers. Almost as an afterthought, it was mentioned that about
500,000 Canadians own property in Florida.
I know from personal experience that a lot of us have purchased a
Florida residence. But half a million? That’s a lot of loonies flowing
south. It also means big profits for anyone who bought after the crash.
Not only have Florida home prices rebounded, but the plunge in the
value of our currency means those U.S. dollar residences are worth up
to 25 per cent more than people paid for them, depending on the timing.
However, that doesn’t mean you should grab the next flight to Miami
with a suitcase full of loonies. The Florida housing market appears to
have stabilized, at least for now, so more big gains like those we’ve
seen are unlikely in the near future.
think twice before buying a Sunbelt
Plus, there are a lot of reasons to think twice before buying a Sunbelt
property. Here are a few:
Getting a mortgage is tough. If you have a decent credit rating, you
can probably get a mortgage in Canada in about two weeks. In Florida,
TD Bank warns that four to six weeks is the norm. Ever since the 2008
crash, U.S. banks have tightened up their credit checks significantly.
Be prepared to supply accountant-verified information about your income
for the past three years, all the costs relating to your Canadian home,
all assets that have been “seasoned 60 days”, passport/visa
information, and much more.
They’re wary of foreigners. Yes, a lot of Canadians own Florida
property, but that doesn’t make U.S. bankers less wary of us. We’re
asked to put up 30 per cent of the house price before we’ll be
considered for a mortgage loan (Americans only have to put down 20 per
cent). When it comes to credit history, we might as well be living on
Mars. If you don’t have a credit record in the U.S., you don’t have
The loonie is down. Buying a distressed Florida property when the
loonie was flying high was a true bargain. Now, with our dollar at
around $1.25 (U.S.), it’s another story entirely. That $200,000 Florida
property will now cost $250,000 (Canadian). Suddenly, it may not look
like such a great deal.
Estate planning is a concern. The U.S. can’t seem to figure out what to
do about its estate tax laws. During the presidency of George W. Bush,
the tax was phased out, only to be resurrected in 2011 under a sunset
clause. Now it’s back in force with a top rate of 40 per cent.
According to the website TaxTips.ca, a U.S. estate tax return must be
filed if a Canadian dies with American assets worth more than $60,000.
However, if your worldwide assets are less than $5.43 million (U.S.),
your estate will likely not have to pay any estate tax. Your estate
will be hit with a Florida probate tax, however. It’s a good idea to
get advice from a specialist in cross-border taxation before proceeding.
Insurance is expensive. You’ll probably pay about twice as much for
insurance on a U.S. residence than for a comparable one in Canada.
That’s because hurricane insurance is a must and flood insurance is
required in coastal areas. Also expect to be hit for high property
taxes and a variety of other expenses you don’t have at home, such as
Tighter length of stay restrictions. You’re not supposed to spend more
than 182 days in the U.S. in any given year or you could be considered
a resident of that country for tax purposes. They can even catch you
using a complex formula if the total number of days over the past three
years adds up to more than that number. Until recently, however, there
was no effective way for authorities to monitor your time in the
Sunbelt. But now Canada and the U.S. have agreed to exchange
information about when people leave and return, and it’s all stored in
their computers. Big Brother is watching!
So even if the bitter winter is tempting you to buy a Sunbelt retreat,
think twice. Spring is just around the corner.
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