Canadians, at least the Liberal-leaning ones, don’t seem to have an issue with Florida Governor Ron DeSantis and the conservative politics of the Sunshine State, at least when it comes to buying real estate there. Canadians love to buy property in the U.S., and Florida real estate ranks No. 1.
Check out this National Association of Realtors study. Canada is No. 2 on the list of foreign buyers in the U.S. (behind China), with $9.5 billion in transactions from April 2019 to March 2020.
Related: Thinking about taking the Mexico real estate plunge? Read this first
That is a little surprising. DeSantis is aligned with Donald Trump, and the former U.S. president is the Antichrist among most Liberals, and that includes a majority of Canadians if polls are any indication. DeSantis is one of the projected candidates for a presidential run in 2024, maybe a Vice President candidate if Trumps runs again (Lord help us there). At least many on the Right hope DeSantis runs for president. He’s run afoul with the Liberal press for one. But that also means he’s alright in the eyes of many people on the Right side of the political fence.
So what is it about the attraction between Canadians and Florida real estate then? Is it just the sun and sand? Every year thousands of “snowbirds” flock south to escape the winter. Or does buying Florida real estate make sense for Canadians, many of whom are sitting on a mountain of household savings after 15 months of lockdowns. A CIBC report last November said Canadian households and businesses were holding over $170 billion in excess cash.
Or what about other popular U.S. states where Canadians buy property, like Arizona and California? Or Tennessee, led by cities like Nashville and Knoxville, getting plenty of positive buzz, which Knoxville listing agents can help you with. There are a lot of resources across the U.S. to tap into, if you’re Canadian.
Rental income-generating opportunity?
Do savvy Canadians real estate investors know a good investment opportunity when they see one? Especially those who see a rental income-generating opportunity? Places like Florida is southern vacation real estate investment opportunity without the risk.
I have a friend taking a serious look at Naples, Fla., now (top image). But he isn’t looking to buy there because Naples is nice and he wants to work on his tan. He has commercial real estate in Canada that he is flipping and sees the rental income potential of a home in Naples with a surge in travel coming post-pandemic. With buying vacation real estate in Ontario’s cottage country a challenging scenario, more Canadian investors might be open to this.
Similarities between Florida real estate market and GTA market
The real estate market around places like Toronto is tighter than a snare drum right now. According to the Toronto Regional Real Estate Board, while the real estate market softened a bit compared to the frenzy of March, the factors that have been driving up sales and prices remain in place. The number of sales in May declined 13.6 per cent compared to April. Demand is still there according to TRREB, but inventory remains low. That continues to put pressure on prices. The average selling price across all home types hit $1,108,453 in May, an increase of 28.4 per cent year over year.
Sales of properties over $2 million in the GTA in May slipped compared to March (794 from 982). But sales organizations like Sotheby’s International Realty expect the luxury market to remain bullish, powered in part by a resurgence in luxury condo sales, continued low borrowing rates, an uptick in foreign buyers as pandemic travel restrictions and border closures ease. Sotheby’s also reports there are 2.8 million Canadian expatriates living abroad, many of whom are making real estate enquiries as a path back home.
Canada’s best luxury website: RBC mortgage program for Canadians looking to buy in the U.S.
On top of lending solutions, RBC will help you find the hotter locations to buy now in the U.S. and the Caribbean (Florida leads the league there), insurance and taxes, legal and immigration issues, as well as provide home buying offers and support during the purchasing process. Born in Montreal, Alain has been with RBFG in the U.S. since 2000.
His primary responsibility is to lead a team of sales financial professionals who are managing high value client banking relationships and the cross border segment (U.S. banking for Canadians) from sales strategy to execution across the U.S.
Photo by Nextvoyage from Pexels
Questions for Alain Forget: What real estate opportunities in the U.S. should Canadians be looking at now?
If you look at southern sunbelt locations, affordability is the one of the key points. Diversification is always a good strategy for any kind of portfolio. If wealthy Canadians own property in Canada, with a second home vacation property in the U.S., they can use it and enjoy it, and rent it when they are not there, generating U.S. rental income.
They can get some return on their investment. Especially in sunbelt states with strong seasonal rental opportunity, states like Florida, Texas, California, where there is lots of demand for short term rentals, especially during the winter season.
What are some of the first steps?
We provide home financing for a second home, and you can rent it, via Airbnb or VRBO. That’s still good for us, as long as the buyer uses the home for two months a year, directly for themselves or their family. Then it’s a 20 per cent downpayment, so 80 per cent of the value of the home (can be financed), anywhere in the U.S. If it’s an investment property (not using, just renting), then it’s considered an investment property and requires a higher down payment.
We’ll provide all the direction you need, and take you right through the process. We are an extension of RBC, dedicated just to Canadians. We understand that buying a property far away from home triggers all kinds of issues. There’s understanding the financing issues, tax, legal, everything involving real estate transactions in the U.S. is different. We’re a one-stop shop, a holistic way to bring Canadians from dreaming to doorstep. What takes a week or ten days to finance a property in Canada can take 30-45 days in the U.S., since the rules, regulations, laws and terminology are all different.
It is such a tight competitive real estate market here. It is important for Canadians to understand that before they start looking for property, they need to get mortgage pre-approval. In two or three days you’ll get a pre-approval letter, and now you know your budget. And remember, you have to convert that U.S. dollar price to Canadian dollars. Get ready to be competitive when you find a property. Make an offer quick, and be ready to increase the offer if need be.
Are you getting more enquiries as vaccine rollouts pickup?
Demand is coming, especially for Florida. California is opening up. People have a lot of money saved up. When they announced the release of vaccines, right after holiday season, that’s when we started seeing more Canadians contact us. They were starting to envision life post-pandemic, better days. We saw a big uptick in mortgage requests, pre-approvals, full applications, Canadians looking to buy. Even with travel restrictions, they were buying virtually. Because the market in Canada is very tight, prices going up, with battles for homes and multiple offers.
That wave is starting to get bigger. People see that we are getting closer to border re-openings. They want to be ready. They want to do their homework, in terms of getting pre-approved, getting the financing in place, seeking cross-border legal advice, using our external resources. People are tired of lockdowns.
What does $1 million buy me in Florida now (Forget lives in Weston, in west Florida)?
In terms of trends, it’s similar to what you see in Canada the last six to eight months. Low inventory is a challenge, especially in Sunbelt states. In Texas as well. There was a huge migration domestically in the United States from the Midwest and Northeast. Many Americans just decided to move down south. That’s a big thing we saw in the past six months. In my neighbourhood property went up 15-20 per cent, year over year, with multiple offers usually, homes being sold in days.
For a million dollars, that would get you a downtown, luxury condo, say two bedroom and two bathrooms, 1,200 square feet, in a high rise luxury tower on the beach in Florida. Miami has condos at $1.5 million to $3 million, 45 to 50 storeys high. If you go inland of course you go from $1,000 per square foot to $200-$400 per square foot. You’ll get three-, four-, five-bedroom homes, 2,500 square feet, for $600,000-$700,000, in beautiful neighbourhoods with great amenities, gated and secure.
Photo by Julia Kuzenkov from Pexels
Maybe you have cash lying around, or can use your home equity for a downpayment on a second vacation property. That’s a good real estate investment strategy, diversify with a strong Canadian dollar, low interest rates, doing some leverage, and financing. Because RBC only works with Canadians. We qualify Canadians to get a U.S. mortgage.
Even if they are not in the U.S., we are here to help to Canadian find their dream home in the sun, led by Florida real estate. Other countries will follow. South America, Europe, China, they will re-enter the U.S. market soon as well, so the timing might be right. This is why the stars are aligned for Canadians right now, to pick up another asset.