Foreign Nationals

Can Canadians buy property in the U.S?

By Colin McMahon

March 20, 2024 6 min read

Table of contents
Can Canadians buy property in the U.S?

Can Canadians purchase property in the U.S? The short answer: absolutely yes. In fact, they've not just been participants, but standouts in the U.S. real estate market, consistently securing their position as one of the top foreign investors for decades. In 2023 alone, Canadians proudly claimed the third spot, right behind China and Mexico, pouring an impressive $6.6 billion into U.S. properties. This represented 10% of all foreign purchases, highlighting a significant and growing trend of Canadian interest in American soil. With 8,500 existing homes snapped up last year, at an average price leap from $485,000 in 2022 to $779,300 in 2023, the message is clear: Canadians are more than just curious about U.S. real estate—they're actively shaping its landscape.

What Type of U.S. Property is Right for You?

When considering an investment in the U.S. real estate market, Canadian investors have a variety of property types to choose from, each serving different purposes and preferences. Alongside understanding these options, recognizing how immigration status impacts your ability to purchase and enjoy these properties is crucial.

  • Single-Family Homes: Ideal for those seeking privacy and space, these standalone structures offer a traditional living experience. They're suitable for investors wanting a primary residence in the U.S. or a vacation home that feels like a second home, offering ample room for family and guests.
  • Condominiums: These units within larger buildings are perfect for investors seeking a low-maintenance property. Condos are favored for vacation homes due to their on-site amenities (like pools and fitness centers) and the community living experience. They can also serve as rental investments, particularly in high-demand urban or resort areas.
  • Townhouses: Offering a blend of the single-family and condo lifestyle, townhouses are multi-story units with shared walls. They strike a balance between the privacy of a single-family home and the convenience of a condo, making them versatile for personal use or rental properties.
  • Multi-Family Units: Buildings designed to accommodate multiple families, from duplexes to large apartment complexes, present an opportunity for significant rental income. They appeal to investors looking to actively manage properties and generate steady cash flow.
  • Vacation Homes: Specifically intended for leisure and short-term stays, vacation homes can be any of the above property types located in desirable areas. These properties offer a retreat for personal use while also serving as potential rental income sources when not for personal use.

Immigration Status and Property Purchase

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Canadians do not need U.S. residency to purchase property in the United States. This means that regardless of whether you are a visitor, hold a non-immigrant visa, or have no current U.S. visa, you can own property in the U.S. However, there are a few key points to consider:

  • Visa Requirements: Owning property in the U.S. does not change your visa requirements or allow you to stay in the U.S. longer than allowed by your visa or the Visa Waiver Program (typically up to 6 months within a 12-month period for Canadians without a visa).
  • Financing: While Canadians can purchase U.S. property outright, financing the purchase through a mortgage may require a larger down payment and come with a higher interest rate compared to U.S. residents. Lenders may require more documentation from foreign investors, including proof of income and creditworthiness.
  • Tax Implications: Owning property in the U.S. does have tax implications. For example, rental income from a U.S. property owned by a Canadian must be reported to the U.S. Internal Revenue Service (IRS), and possibly in Canada as well, although tax treaties may offer relief from double taxation. Additionally, when selling U.S. property, foreign investors are subject to the Foreign Investment in Real Property Tax Act (FIRPTA), which can impact the tax treatment of any gains.

It's essential for Canadian investors to consult with a real estate professional or legal advisor familiar with both U.S. and Canadian tax laws and real estate regulations to fully understand the implications of their investment and ensure compliance with all legal requirements.

This refined approach should provide a more accurate understanding of how immigration status impacts Canadians looking to purchase property in the U.S. and highlights the importance of professional guidance in navigating these waters.

How can I finance my U.S investment property as a Canadian?

Navigating the financing landscape for Canadians looking to invest in U.S. real estate reveals a variety of options, each with its own set of advantages and challenges. Understanding the distinctions between financing through Canadian banks, local U.S. banks, and direct lenders like Milo is crucial for making informed investment decisions.

Canadian Banks: Traditionally, Canadian investors have faced hurdles with home banks, including stringent eligibility criteria and a focus on the investor's personal income and existing financial obligations. This conservative approach can limit the purchasing power of investors, confining them to what their current income can support. Furthermore, the process often requires in-person meetings and comes with lengthy processing times, making it less convenient for those looking to move quickly on U.S. investment opportunities.

Local U.S. Banks: Turning to local U.S. banks offers the advantage of dealing with institutions familiar with the local real estate market. However, Canadians might find these banks' requirements stringent, as they often require a substantial down payment and proof of U.S. credit history, which can be a significant barrier for foreign investors without a financial footprint in the U.S.

Direct Lenders: Direct lenders like Milo represent a paradigm shift in financing for Canadian investors. Recognizing the unique challenges international buyers face, Milo offers a fully remote, online mortgage application process that significantly simplifies buying U.S. property. Unlike traditional banks that primarily focus on personal income, direct lenders may consider a broader financial picture, allowing for greater flexibility and potentially more favorable terms. This approach not only streamlines the financing process but also expands Canadians' investment horizons, enabling access to the U.S. real estate market without the need for all-cash purchases.

The U.S Mortgage Process

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Navigating the U.S. mortgage process for Canadians involves a series of steps, each critical for the successful purchase of property across the border. This journey, from initial exploration to final acquisition, can be simplified into key phases, accompanied by specific requirements and possibilities for remote completion.

The process generally unfolds as follows:

  • Pre-qualification and Pre-approval: Initially, investors should seek pre-qualification or pre-approval. Pre-qualification gives a quick estimate of borrowing capacity based on the financial information provided. In contrast, pre-approval involves a more in-depth review but is a stronger indicator to sellers of the buyer’s financial readiness. -** Property Search and Offer Submission**: Investors can search independently using online platforms or work with a real estate agent for tailored searches and negotiation support. Making an offer includes submitting earnest money to show commitment.
  • Mortgage Application: Options include working with Canadian banks, U.S. banks, mortgage brokers, or direct lenders. Each has its nuances, with direct lenders often providing a more streamlined online process. -** Loan Processing and Underwriting**: This involves verifying financial documents and assessing the property and borrower's creditworthiness. Technology-driven lenders like Milo can expedite this phase for international clients.
  • Closing: The final step, is where ownership is transferred. It typically involves signing legal documents and paying closing costs. Remote closing options are available, allowing for the process to be completed without being physically present in the U.S.

Key considerations and documents needed during this process include:

  • Financial Information: Proof of income, assets, debts, and employment status.
  • Property Details: Information on the chosen property, such as address, price, and type.
  • Credit History: Details of any financial obligations or issues.
  • Closing Costs: Budgeting for costs ranging from 2% to 5% of the home's purchase price, which covers various fees.

The closing process can often be completed remotely, especially with lenders like Milo, who have adapted to the needs of international buyers. This flexibility is crucial for Canadians investing in the U.S., ensuring that the property acquisition journey is as smooth and efficient as possible, regardless of physical location.

Best Places to Invest in the U.S. (according to Canadian investors)

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Canadian investors have long shown a strategic preference for U.S. regions that promise economic stability, potential for growth, and lifestyle appeal. Notably, Florida stands out as a prime destination, particularly Miami-Dade County, where Canadians constituted 4% of foreign transactions in 2023, with a total investment of $252.6 million. This demonstrates a clear preference for the Sunshine State, known for its warm climate, vibrant tourism, and robust property appreciation potential. Other popular states for Canadian investments include Arizona and California, both offering unique draws: Arizona with its desert landscapes and retiree-friendly cities, and California with its diverse economies and coastal lifestyle. These states, along with New York for urban condos and Texas for its economic growth and no state income tax, highlight the varied investment landscapes favored by Canadians.

These preferences reflect a blend of seeking greater value for their dollar, as seen in the disparity between property prices in Canada and more affordable rates in U.S. cities, and a desire to diversify investments across vibrant economies and appealing locations.

The bottom line

Canadian investors, you are more than welcome in the U.S. real estate market. With a variety of opportunities across states like Florida, Arizona, and California, the potential for growth and investment success is significant. Direct lenders like Milo specialize in international financing, offering straightforward, tailored solutions to navigate the complexities of buying property in the U.S. Whether it's understanding financing options or selecting the ideal location for your investment, Milo is here to assist every step of the way, ensuring Canadians can confidently and efficiently invest in U.S. real estate.

Source: Miami Realtors; National Association of Realtors

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.

Author

Loan Consultant Sales Team Lead

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