Did you know that in 2017, Canadians purchased $5.3 BILLION dollars in real estate, just in Florida? In general, there were 3 main ways Canadians were able to invest so much in Florida in just 1 year.
1. All Cash
Canada is a wealthy country. Many investors simply had the available funds to purchase property without the use of financing. Though many that used “All Cash” in the past, did eventually make use of financing later to expand their portfolio, diversify, and increase their returns. The strong Canadian dollar also helped with this in years past, though with US dollar strengthening since the recession it has made the currency exchange less palatable.
2. Financed homes in Canada to purchase homes in the US “all cash”
Canada has seen a huge run up in values that has lasted for well over a decade. Many Canadians are sitting on quite a bit of equity in their Canadian property or outright have their homes fully paid off. Financing is much quicker and easier in Canada and have lower interest rates available than what you can find here in the states. This usually makes this strategy the best option for many and has been used by the majority of those we have worked in the past several years.
Additionally, the CRA may allow the deduction of the mortgage interest you pay on the loan in Canada against the rental income you earn here*. Making borrowed money less expensive and more attractive to use.
*Always consult your tax adviser to confirm this applies to your specific situation.
3. Used a U.S. based mortgage to purchase
US mortgages can be good and bad. Check out “Benefits and Risks of Using a US Mortgage as a Canadian Investor”, but in general the advantages are that a US mortgage acts as a good hedge against currency fluctuations as well as allows you to diversify or break into the market if you have less funds available.
When compared to financing in Canada though, obtaining the mortgage is much more difficult, taking at least 30-45 days from application to approval and requires providing in-depth financial documentation, higher down payments and higher rates on investment property. Lastly, you are much more likely to be able to win a great deal being able to bring an “all cash” offer to a seller vs. one that is subject to financing.
This is why we have found out clients prefer to use a U.S. based mortgage after they have already purchased a US home and it has already appreciated some. They are then able to take out additional US dollars to either purchase additional homes or to lock in currency gains without the need to sell or pay capital gains.
This covers the “How” Canadians buy Florida real estate. To read “Why” Florida and specifically central Florida Orlando Real Estate is a great place, check out “Why Orlando Florida to Invest” (Coming Soon) and profiles of specific areas and neighborhoods around Orlando on our blog.