Foreign real estate investors from all over the world recognize that the U.S. real estate market is one of the strongest and most dependable markets in the world.
The biggest foreign investment in U.S. real estate is coming from Canada. According to World Property Journal, Canada invested $9.7 billion in U.S. property in 2014. This was more than any other country and accounted for 26% of all foreign investment in U.S. real estate. The next biggest investing countries, Norway, China, and Japan, each invested less than half the amount of Canadian investors.
In 2014, Canadian investors bought property all over the United States, but the most popular locations were New York City, Boston, Florida, and Seattle.
Why are Canadian Real Estate Investors Buying U.S. Properties?
The strength of the U.S. dollar, and the comparative strength of the Canadian dollar, has made U.S. real estate attractive to Canadian investors. Furthermore, compared to other markets, U.S. property values are more stable and faster growing, resulting in a greater long-term return with healthy cash flows compared to many other countries.
A few years ago, the U.S. real estate market saw big investments from Canada when prices were at their lowest. Since then, Canadians have continued to invest in U.S. real estate as prices have risen, because of the long-term profitability of U.S. real estate investments.
How Can Canadian Investors Identify Good Investments?
Although the U.S. market is strong overall, real estate investors must discover and judiciously purchase profitable investment properties.
Investors must evaluate prospective properties based on a variety of criteria. Certainly price is part of the evaluation, but low price should not be the only evaluation investors use, as warned in publications like Moneysense.
Many investors, therefore, use a company like Graystone Investment Group. We find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.
Learn more about finding investment properties with our list of Top 10 Physical Characteristics Identifying the Best Cash Flow Properties.
Calculating Expenses and Revenue
Once you find a prospective property in a good location, compute the property’s cap rate. Remember to verify the property’s value using recent comps, project future rents using rental rate history and comps, and take all expenses into consideration.
Learn more about computing the Cap Rate, while also learning the difference between the gross and net cap rates.
Remember that a good investment also depends on your objectives. Define your overall property investment strategy, and stick to your plan.
Learn about 3 property investment rules for every investor, and things you should consider including in your overall property investment strategy.
Track Income and Expenses, Use an Accountant
All real estate investors have income and expenses to track, but investors from outside of the U.S. may have a little more bookkeeping to do.
Accounting for income and expenses can be difficult at times, so we recommend that investors use an account.
As an example, a tenant’s security deposit is not counted as income, except in certain situations. And in other situations, the deposit is counted as an expense. In addition to this, there are criteria as to which year a security deposit is applied in part, or in whole, as income or an expense.
Learn more about Rental Income, Expenses, and Tax Returns.
Can Canadians Get Financing for U.S. Investment Properties?
True conventional lending for U.S. investment properties is not available from U.S. institutions for foreign investors, but we see it opening up in the future.
But, there are other very good financing options. Most Canadians have the availability to get private lending for investment properties, and they can get commercial lending for bulk purchase of 5 properties or more. Furthermore, Canadian investors can possibly obtain funding from Canadian financial institutions with large branch networks in the U.S., such as the Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Montreal.
Canadians and other foreign real estate investors have found that the U.S. is a very profitable place to invest.
Though foreign investors have a few hurdles to overcome, especially if they are financing their investment properties, the higher profits in the U.S. are appealing to these investors.
Perhaps most importantly, using a locally based company like Graystone Investment Group makes the process easier, while typically adding to your bottom line.