When she talks about her numerous Canadian clients, Palm Springs realtor Sheri Dettman of Sheri Dettman & Associates in La Quinta says: “People tell us they just want to be warm. Year-round golf, tennis, swimming and our unique indoor-outdoor living is high on most Canadians’ lists.”
Indeed, no matter how much Vancouverites like to brag about living in a “lotus land” paradise that is the envy of all Canadians east of Hope, the fact is that southwestern B.C. can’t really compare to the “sunbelt states” of Arizona, Nevada and California when it comes to pleasant winter weather.
Indeed, Canadian “snowbird” communities are spread far and wide across the southern states, including Florida and the Texas gulf coast.
Las Vegas, Phoenix and Palm Desert all share the craggy beauty that typifies the high desert. Often, the only lush, verdant vegetation is found on the fairways of the dozens of golf courses that dot the landscapes of these three cities.
Most western Canadians are focused on the Sun Belt for good reason. For decades, these states witnessed some of the fastest growth in the Lower 48. The region went on a tear that was the envy of North America, and not merely because you did not have to shovel snow for four months.
From 2000-09, the population of Coachella Valley — (Palm Springs and environs) shot up by more than 100,000, Las Vegas increased by a half-million, while Phoenix/Valley of the Sun grew by more than one million people. Housing prices ballooned accordingly until the end of the decade, when they dropped precipitously due to the mortgage meltdown and financial crisis. That’s when the Canadians started opening their wallets.
To carry the climate metaphor further, Dettman also talks of a “perfect storm” of conditions that has pushed up Canadian investment.
“Canadians have been coming to the desert for decades. That said, the recent combination of drastically reduced home prices in the U.S., a strong Canadian dollar against the U.S. dollar, and low interest rate financing options has just about doubled the number of Canucks buying here over the last three to five years.”
Indeed, investing in real estate raises a whole new set of issues. It’s one thing to cross border shop for cheap clothing or dairy products, and quite another to write up a serious offer on a vacation home or investment property. Realistically, before you start out, you must ask yourself: “Am I going to live here or am I investing here as part of my personal wealth strategy?”
Alas, for many people, it will likely be a combination of both factors. Thinking prices have hit rock bottom (and “market timing” in real estate is at least as fraught with uncertainty as timing is in the stock market), a typical Canadian buyer might think: “Prices won’t go lower, I love to play golf, and I could definitely see this house as being part of my retirement strategy. “In the meantime, I’ll rent it out and pay down the mortgage.”
And even if you decide to retire, you can only live in your American home for a total of 180 days and out of province medical insurance can be quite costly.
There are subtle but significant differences between the two countries. Ah, the mortgage. How are you going to get that in the first place?
Luckily for most Canadians, there are both American realtors and bankers willing to help you navigate the various mazes, and your personal wealth and high credit score are paramount.
One advantage American financial institutions offer is a fixed-rate, 30-year mortgage for borrowers with an excellent credit rating. This long-term rate certainty can facilitate future financial planning.
Similar to Canada, Canadians may also purchase properties with an eye to fixing them up, renting them out and eventually selling at a profit. However, Canadians, (or any other homeowners) cannot make home improvements on their own investment property; repairs and renovations must be carried out by a third party.
By far the greatest challenge, though, lies with estate tax planning, which not only factors in your American investment, but the value of your worldwide — including Canadian — holdings. This can be a complex issue that may necessitate formation of a U.S.-based trust or a limited liability partnership (LLP) to avoid a large tax hit. The good news is that property taxes are generally lower, there are no realtor’s fees upon purchase, and, of course, there is no GST.
At the height of the foreclosure boom, many Canadians were investing in revenue property, which (as in Canada) demands a very different set of criteria for purchasing.
Type of neighbourhood, vacancy rates, future zoning, cap rates, management fees, municipal and state taxes, and many more — all of these will factor in to your investment decision and should be discussed with a team of professionals well versed in foreign ownership wherever you are buying.
Dettman concludes: “Canadians are generally a conservative lot. Canadians normally purchase for personal and family use. They are investing in a lifestyle for their family and friends, rather than just a home. Most of our Canadian buyers want to be able to enjoy good amenities and prefer newer developments with newer homes.
“Golf, tennis, fitness and social activities are offered within most development. This is about much more than real estate, it’s about finding just the right community for each person’s lifestyle and then negotiating the best price and terms possible.”