Canadian real estate has significantly increased in value over the last decade which has been greatly beneficial for investors but makes expanding a portfolio or getting into real estate increasingly difficult. An investment avenue not commonly explored by Canadians is just south of the border with the broader and higher potential U.S. real estate market. U.S. real estate offers Canadians a myriad of opportunities beyond just coastal properties and timeshares. According to the Canadian Real Estate Association (CREA), 78% of Canadians investing in U.S. real estate do so for both vacationing and as a rental or investment property.
There is a plethora of factors that make U.S. real estate an enticing proposition for Canadian investors, beginning with favourable prices. The average U.S. home price is half that of Canada, around CAD 480,000 for U.S. homes versus $816,000 for Canadian homes. This lower barrier to entry, coupled with comparable rents to Canada, provides Canadians with the potential for significantly higher returns on investment.
Another major consideration for Canadians looking to invest South of the border is that there are no ownership restrictions. Canadians face no restrictions on the types of U.S. real estate they can buy, be it a ski chalet, apartment building, or commercial property. While mortgage lending may have some restrictions, there are various cross-border financing options available, offering flexibility to Canadian investors.
Additionally, US real estate offers a compelling Return on Investment (ROI). Forbes reports that U.S. residential properties yield an average annual return of 10.6%, commercial properties at 9.5%, and Real Estate Investment Trusts (REITs) around 11.8%. These returns are on par with and often surpass, similar investments in Canada. An additional perk is that the ROI is earned in U.S. dollars, providing an automatic boost of income when considering the exchange rate that has placed 1 USD at roughly 1.29 CDN over the last decade.
For Canadians ready to explore the U.S. real estate market, financing may be a concern. Traditional Canadian banks may not provide mortgages for foreign properties, but companies like Pro Funds Mortgages with US affiliates specialize in cross-border financing, offering access to favourable rates through private or institutional mortgages with a widespread network of lenders.
If you are considering a move, looking for a new investment opportunity, or looking to renew a mortgage on a U.S. property, scheduling a call with a mortgage broker, such as Pro Funds Mortgages, is a crucial first step. The Pro Funds team looks forward to assisting in the next steps of your real estate endeavours, whether they are in the U.S. or Canada.
