Investing in US real estate is an excellent opportunity for Canadians aiming to diversify their investment portfolios. This guide explores all the key considerations that any Canadian looking to invest in American real estate must know about.
Why Should Canadians Invest in American Real Estate?
The United States real estate market is ideal for Canadian investors who want to reduce risks associated with investing in highly volatile assets like crypto and stocks.
As a Canadian, if you buy an American property in the right location, it will appreciate in value over time, thus helping you build equity. In the US, property owners’ equity has more than tripled over the past thirteen years.
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Real Estate Market Growth
The US real estate market has a higher potential to grow over the coming years than Canada’s. That’s due to the growing population, which boosts the demand for houses.
For years, real estate has been known to provide a safe and stable long-term investment since it isn’t prone to inflation, nor is it volatile.
The rental rates in the United States are surging. Over the last two years, those rates have increased by 15%. That said, the American real estate market offers Canadians an opportunity to create a steady cash flow.
How Much Have Canadians Invested in the US Real Estate?
Data from the National Association of Realtors (NAR) indicates that Canadians account for 6.5% of the property bought in the United States by foreigners since 2021. From that year to date, Canadians have invested at least $9 billion. So, where in the US do Canadian investors purchase property? They prefer Florida the most. Other locations popular among Canadians include Arizona, Ohio, Texas, Georgia, Texas, California, and New York.
Tax Implication for Canadians Investing in American Real Estate
Income tax – If you buy an American investment property as a Canadian, you will be required to pay US state and federal taxes on generated rental income.
Capital gains tax – If you wish to sell your American property, the US government will require you to pay capital gains tax on the realized profit.
Estate tax -In the event you pass away while still owning American property, it may be subject to estate tax.
Canadian Real Estate vs American Real Estate
Market size – American real estate is bigger than Canada’s. That means more investment opportunities are available. The value of the US real estate market stands at $230 billion, while Canada’s is about $69 billion.
Investment options – You can find a wide range of investment options in United States real estate, which include commercial buildings, multi-family and single-family homes, among others.
Price Appreciation – Over the years, the American real estate market has seen a higher price growth than Canada’s.
Population growth – The population growth rate in the United States is higher than in Canada. This also means that the demand for houses in the US is greater than in Canada.
Financing options – US lenders are usually willing to grant loans to foreigners on favorable terms and conditions. By comparison, foreign investors in Canada find it hard to secure mortgages.
Required Documents for Buying Property in the US as a Canadian
Passport – For identity verification purposes, you need to provide a copy of your valid passport.
Proof of residency or Visa – As a Canadian in the US, you must submit proof of residency or visa status.
Credit history – If you want to finance your American property purchase with a mortgage, a US lender will require you to submit a credit report from a Canadian credit bureau.
Proof of income – Whether you are a government employee or self-employed, you need to provide proof of income when obtaining a mortgage. You will be requested documents like pay stubs or bank statements.
Property information – When securing a mortgage, you must provide details, like the location and price of the property you plan to purchase.
That said, it is important to work with an experienced real estate agent when acquiring an American property to guide you through the complicated buying process.