You've seen the ads:
"Buy in Florida, it's never been a better time!"
"Invest in Florida!"
"Deals abound in Florida."
Successful cross-border real-estate buying requires up-to-date knowledge of continually changing legal, mortgage and property-tax issues. Growing up in Ontario, I always thought about how nice it would be to escape the winter to my Florida getaway, while at the same time thinking that was never going to happen.
But with the Canadian dollar worth two-thirds of the U.S. dollar and Florida home prices over-inflated a $400,000 condo in the States back then cost was $600,000 Cdn. So it was not going to happen for me.
Fast forward to 2007-2008 and the tides have changed. Thanks to an overzealous sub-prime mortgage market and not-so-savvy investors, Florida has been left with an over-abundance of inventory. That condo price that was $400,000 may now be $200,000 and the Canadian dollar is on par with the U.S. dollar. For Canadians that means realizing the dream of a warm winter getaway is now within reach.
Before investing in Florida real estate, due diligence is in order.
"I have had many clients inquire about how they can find out more information on Florida properties, where is the best market and what are the issues for a Canadian buying in the U.S.," says Jared Lehman of Florida-based Farquharson Realty Ltd. He is one of the many realtors in the state looking northward and taking the initiative to research cross-border issues real-estate issues to be able to take advantage of the booming interest from Canadians.
Whether you want to move seasonally or permanently to Florida, there are a few cold hard facts to consider first.
Non-citizens are only allowed to stay in the United States for a maximum of six months, regardless of whether they own property or not.
And it's more than just having a passport. You also have to have documents to prove you still have a primary home back in Canada that you have not abandoned.
It is relatively simple to obtain a mortgage in the U.S. What needs to be determined is whether it is strictly going to be used as a vacation home or an investment property.
For a vacation property in Florida the terms of the loan are a bit more favourable. The definition of a vacation home is that you intend it use it for recreational purposes during a portion of the year and you do not derive any monetary benefits from ownership.
If you are purchasing a vacation home then you will need a minimum of 30 per cent down. In some cases you will be required to demonstrate that you have between three to six months of liquid reserves. Not all lenders require this reserve but many do, so if you have it the better it is for you. In most cases the assets need to be in a Canadian bank and the mortgage lender will request verification directly from your bank.
You will need to show a copy of your Canadian passport and/or driver's license. Some lenders may request only one of these two but be prepared to furnish both if requested.
If you intend to purchase an investment property in Florida then the terms are somewhat more stringent. You will be required to put more than 30 per cent down.
Canadians who earn U.S. rental income must report such income in both countries. If they pay U.S. income tax, however, they can claim a foreign tax credit on their Canadian return to avoid double taxation.
As a final word of advice, it is wise to discuss many of these legal implications of U.S. property ownership, including such issues as the estate tax on any property owned in Florida, with a Canadian attorney.
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Canadian-born Inga Wilson is a realtor in Naples, Fla. She offers more information on purchasing property in Florida at floridahomesonsale.com.
