How to bargain shop for U.S. real estate
The American real estate crisis has attracted many Canadians to head south of the border to snap up homes at cheap prices.
For the last couple of years, Canadians have been increasingly snapping up property in the U.S. like bargain shoppers, seeking investments or recreational getaways.
Canadians are so actively buying property in the U.S., that a recent report released by the American National Association of Realtors (NAR) shows that for the last two years, they are the number one international buyers of American real estate — by a wide margin.
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Canadians outpace other foreign buyers on the list, including China, Mexico, Britain and India. In fact, Canadians represent 24 per cent of foreign sales in the U.S. this year, according to NAR stats. Last year, Canadians represented 23 per cent of those sales. China, which is the second biggest purchaser, only represents 11 per cent of sales in the U.S. for the last two years. In other words, Canadians are becoming a familiar shopper to U.S. realtors in particular states.
The American real estate crisis of the last four years has enabled the Canadian foothold down south, where properties can still be snapped up for cheap, even as the U.S. real estate market starts to slightly recover.
Toronto musician and co-owner of music coaching service League of Rock, Topher Stott, is flying to Austin, Texas this month to view several condos that he's interested in purchasing.
"I've seen the steady decline of prices there," says Stott. "When I was in Austin a couple of condos came up for reasonable prices, and I thought, "Hah!' So we found a couple of condos were right in the middle of Austin, and they were $125,000 and a couple of others were priced at $80,000. I'm just assessing the health of the buildings right now."
Stott, his wife and baby will use the property as an occasional secondary residence, since he often works in Austin. They'll also rent the property out when they're not using it, which makes it a useful investment. He says he knows of some friends who purchased condos in Florida for around $20,000.
"There are a lot of people buying properties that they thought at one point or another would never be available to them in the U.S.," says Don Lawby, Century 21 Canada president. "Properties in places like Phoenix and Scottsdale, Arizona areas, Palm Springs, Palm Desert, Florida.
They never thought before, 'I can do this.' But they look and see a depressed market. They think, 'I can't get a return on my investment in Canada that will be the same as what I'm going to get in the U.S., when the economy recovers.
"I think that optimism plays a huge part of it, that the American economy will eventually turn. And if they have got a quality product at a reasonable price it is going to escalate in value."
Stott still isn't clear on what hoops he'll have to go through to become a landowner in the U.S. However, Vancouver couple Rodney Hynes and Thomas Hunt has learned through months of research what lay ahead when they made their recent purchase of a three-unit brownstone in Brooklyn's up-and-coming Bedford Stuyvesant neighbourhood. The couple had almost paid off their Vancouver home, so they "mortgaged their house to the max," to purchase the brownstone, clear title. Because they were offering a cash deal for the $725,000 U.S. property, they had a huge advantage. They made the offer last month, which was accepted.
"A lot of people wouldn't do what we're doing because it takes a lot of work," says Hunt. "I mean, so much work. An enormous amount of work."
They had thought of purchasing closer to their Vancouver home, which would have also been a sound investment decision, but their hearts just weren't in it, says Hynes.
"I was thinking, we could buy in New Westminster or Chilliwack, but I just didn't feel connected to those places. We've been going to New York since the early 90s at least once or twice a year. I feel connected to that place."
Lawby says Canadians are often wealthy enough, or have enough equity in their own homes, not to need a mortgage for their U.S. property.
"They are either putting a mortgage on a home, taking money out of the stock market because it's not overly performing, or they are getting a line of credit, because it is much harder to borrow in the U.S.
"They are listening to economists in Canada and the Bank of Canada talk about interest rates staying low," he says.
Toronto realtor Paul Indrigo regularly attends conferences in places like Florida to keep up with the U.S. market. He also maintains a long list of U.S. realtor contacts to help his own clients.
"The ones I see which are more thought out are definitely looking at Orlando, Tampa, Miami. Those are people who I think who have been thinking about it for a few years. Now they are at stage where the decision is almost made for them in terms of improved pricing. They were going to buy there anyway at $150,000 so why not buy at $70,000? These are the reports I get from them."
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