Investing in US Real Estate as a Canadian: The Pros and Cons

With an average house price over $700,000 north of the 49th parallel it's no wonder that more and more Canadians are looking south to invest in real estate.

For starters, the average house price in the US is less than 1/2 of the Canadian equivalent while rents are quite comparable. Smaller monthly mortgage payments combined with comparable rents makes it much easier to find cash flow positive properties throughout many US markets whereas in Canada real estate investors are forced to buy in small, remote markets in search of positive cash flow.

Secondly, with a population that is 10X that of Canada (several individual states rival all of Canada in terms of population) there is a tremendous amount of opportunity. In Canada, a market like Calgary is considered a primary market. In the US a market with a 1,000,000 people would be considered a secondary market at best.

Finally investing in US property is also made easier by landlord-friendly laws (in certain states) that help investors manage their tenant risk and make the most of their properties profit potential.

That said, investing inherently carries with it an element of risk; one such risk for a Canadian investing in the US is double taxation. If you're quick to rush to invest without ensuring you've set yourself up for success you might find yourself answering both to the IRS and CRA back home. Make sure you work with a qualified cross-boarder accountant to ensure that you've crossed your t's and dotted your i's.

Also given that you won't be living near the property it's absolutely imperative that you've hired a reliable property management company in town to handle the day to day affairs. Check references, compare fees and ensure you're comfortable with the level and frequency of their reporting.

One of the biggest differences when investing in the US is how quickly neighborhoods change. On one side of the road houses could be $200,000 and on the other side similar houses sell for $100,000. It's important to understand WHY because that divide could represent something material like a ZIP CODE or a school zone district change. Unlike most cities across Canada, going one or two streets over in (any town) US can make a world of a difference.

Ultimately investing in the US as a Canadian can be quite lucrative over the long term. In some markets you can buy entire apartment buildings for less than people pay for houses in Toronto or Vancouver.

I encourage anyone interested in investing in the US as a Canadian to proceed with caution, ask lots of questions and consider investing with someone who has been through the process.

Marcin Drozdz

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