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Americans investing in Canadian real estate?

hakrjak

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With the US dollar buying you $1.30 Canadian right now, I have been thinking a lot about buying a piece of Canadian real estate to diversify my portfolio, and as a hedge against the US dollar falling again in the future. My wife and I have been vacationing a lot in BC, and enjoy the scenery + that 30% discount on everything, thanks to a strong dollar. Even if we don't turn a profit, I wouldn't mind just having a second home, or condo as a get-away.

Are there any Americans here who have done this, and do you have any tips to share?


What I think I know so far:
  • American's can own Canadian real estate without any special taxes, penalties, licenses, etc
  • If you rent your Canadian real estate, you must file a Canadian tax return (And possibly claim a foreign tax credit on your IRS tax forms)
  • If you're using Canadian real estate as a second/vacation home, you can write off mortgage interest on your IRS tax return.
  • When selling your real estate, if there is a capital gain, it looks like the Canadian government keeps 50% of the gain?
  • Certain major cities in Canada such as Vancouver seem to be in a real estate "Bubble" right now, so picking a city carefully is important.
Cheers,

-Hakrjak
 
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D

DeletedUser394

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Yeah, like you said. The majority of the larger cities (all 5 of them lol) are in a bubble.

Most people can't even afford their homes to begin with. If and when interest rates rise, it will pop.

Canada runs on the commodity sector. The sector which is currently getting decimated. I would wait until the bottom falls out. We're already seeing month over month declines in high end real estate, but the lower/medium end is still largely unaffected.

Went biking with another fastlaner today, and on a relatively short 'posh' street there were 13 properties for sale. Worked out to every 6th or so house.
 

hakrjak

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Yeah, like you said. The majority of the larger cities (all 5 of them lol) are in a bubble.

Most people can't even afford their homes to begin with. If and when interest rates rise, it will pop.

Canada runs on the commodity sector. The sector which is currently getting decimated. I would wait until the bottom falls out. We're already seeing month over month declines in high end real estate, but the lower/medium end is still largely unaffected.

Went biking with another fastlaner today, and on a relatively short 'posh' street there were 13 properties for sale. Worked out to every 6th or so house.

It's definitely an interesting phenomenon. I sat next to a guy in a bar in Vancouver recently who turned out to be a Canadian "HUD" (Whatever you call it up there) real estate analyst. When I asked him what could justify the insane prices of Vancouver real estate, he was speechless for a few minutes. Then the only response he could muster was, "There are really good jobs up here -- You can make over $100k", but I quickly responded that there is no way a $100k income can justify a $2mil property. He did mention that some out of country money has been flowing in from China, Hong Kong, etc -- and that may play a factor as well.

I've got my eye on an area inland a bit from Victoria, where you can get a condo on a golf course in the $200k range. No rush to act, and I appreciate your recommendation to wait. If prices drop in a year thanks to oil falling, etc -- that would work well with my time table. I've met many guys in BC that fly to work in the oil patch, and bring that oil money home -- so when that dries up, I imagine prices will finally fall. The current US dollar vs. CAD is the only thing that is pressuring me to act, because I don't know how long that will last.

Cheers,

-Hakrjak
 

SenGracic

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On the East Coast one of the best places you can buy a home is in Boucherville,Quebec... One of the lowest unemployment rate , a lot of industries and not too far from Montreal ( about 30 min ).
When it comes to prices it's around the 250/300k range for a standard family home.
 
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Kevind88

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With the exception of Vancouver and Toronto, home prices have started to dip in other cities across Canada like Calgary, Saskatoon, Ottawa, Halifax, Edmonton. I would stay away from Vancouver right now as home prices are way overvalued.
 

Bila

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I dont know about a second home in Canada ..... When you have the option to go south and buy way cheaper.

Land on the other hand is something i would consider.
 

Andrewski

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Here in Canmore we have "hotel condos". It's a bunch of condos all run by businesses that operate as a hotel. It's fully managed for you and all the condos are apart of a rental pool so everyone that owns one for that group all make the same money minus how much you use it for yourself. A 2 bedroom goes for $200/night so If your going for 3 weeks a year you'd save $4000 and as a investment you pretty much only make 5-10% but you have no headaches and get to use it whenever you want. Canmore is a really nice spot too, lots of golfing, ski resorts and 1.5 hours from calgary airport.
 
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xmartel

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Canada, eh!
  • When selling your real estate, if there is a capital gain, it looks like the Canadian government keeps 50% of the gain?

We can't write off our mortgage interest here. But when we sell a home that is our principal residence, the entire gain is tax free.

If it's not your principal residence, then you pay capital gains tax, which is on 50% of the gain. So if you buy for 200,000. Sell for 300,000. Your gain is 100,000. You pay tax on 50%. So your taxible income from it is 50,000. So if your tax rate is 25%, on the entire 100,000 gain, you pay 12,500 in taxes.
The government doesn't keep 50% of the gain. You just get taxed on 50% of the gain.
 

hakrjak

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We can't write off our mortgage interest here. But when we sell a home that is our principal residence, the entire gain is tax free.

If it's not your principal residence, then you pay capital gains tax, which is on 50% of the gain. So if you buy for 200,000. Sell for 300,000. Your gain is 100,000. You pay tax on 50%. So your taxible income from it is 50,000. So if your tax rate is 25%, on the entire 100,000 gain, you pay 12,500 in taxes.
The government doesn't keep 50% of the gain. You just get taxed on 50% of the gain.

Wow, thanks for clarification on that! A rare case where Canadian taxes are more favorable than even the US. Very good to know.
 

Superwoman

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Perusing the forums and saw this thread. I am American/live in the US and own a 4-plex in Tofino, BC. Getting ready to list it, and will probably buy something else in Nanaimo/Victoria. Thought I would through this out there if anyone still has questions.
 
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EvanOkanagan

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With the US dollar buying you $1.30 Canadian right now, I have been thinking a lot about buying a piece of Canadian real estate to diversify my portfolio, and as a hedge against the US dollar falling again in the future. My wife and I have been vacationing a lot in BC, and enjoy the scenery + that 30% discount on everything, thanks to a strong dollar. Even if we don't turn a profit, I wouldn't mind just having a second home, or condo as a get-away.

Are there any Americans here who have done this, and do you have any tips to share?


What I think I know so far:
  • American's can own Canadian real estate without any special taxes, penalties, licenses, etc
  • If you rent your Canadian real estate, you must file a Canadian tax return (And possibly claim a foreign tax credit on your IRS tax forms)
  • If you're using Canadian real estate as a second/vacation home, you can write off mortgage interest on your IRS tax return.
  • When selling your real estate, if there is a capital gain, it looks like the Canadian government keeps 50% of the gain?
  • Certain major cities in Canada such as Vancouver seem to be in a real estate "Bubble" right now, so picking a city carefully is important.
Cheers,

-Hakrjak

Have you heard of Kelowna, BC? Huge tourist town, wine country and next to beautiful lakes + golfing, vacancy rate is 1.5%, rents are high and homes are nowhere near Vancouver pricing. I'm a Realtor and own 3 properties here (7 units total) and all cashflow quite nicely.

AerialAug2006-001.jpg
 
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Superwoman

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Yes, I have heard of it. We have family on the island so if we buy something else, will stay there. Thanks though!


Sent from my iPhone using Tapatalk
 

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