Bottom fishing in U.S. Real Estate

Prices in America's top twenty cities dropped for the 22nd month in a row in May.  In parts of Florida, prices are down 35-40% from their 2005 highs.

For Canadians who want to bottom pick properties in the U.S., there's financing available in much of the sunbelt if you have a 30% downpayment.  You'll have to prove income but there is no credit check.

We're hearing of variable rates near 4.8% for 30-year terms, with no prepayment penalties.  Closing costs range widely depending on the state, but can be anywhere from $1500 to $3000 or more. Plus you can expect up to 2-3% in broker and lender fees.

Other details may apply as well (like minimum loan amounts). Moreover, don't forget that currency risk and tax-related issues can arise with cross-border home shopping.  If you're interested in buying down there, find a good mortgage planner to explain the whole financing process in detail.

Comments

[Ryan]

I have also heard that in places like Florida, they have the ability to set the tax rate for foreigners to as much as 4x the rate of a U.S. citizen. If this is true I would be steering clear. Also, there are many places that will not let you rent out your place if it is foreign owned. I think Arizona is a more friendly place to invest for foreigners. Lower taxes and few restrictions on renting out.

[Richard Moxley]

Does anyone know names and contact information of mortgage companies who will give mortgages to Canadains that are looking to buy in the states?

[Larry Yatkowsky]

@Ryan and Richard

I've asked a couple of trusted folks from Florida and Arizona to pop into this blog and help with your questions.

Watch for Ines from Miami and Jay from Phoenix. Two of the best.

Melanie and Rob excuse my presumption on your blog. Let me know if you are ok with this.

[Ines]

Thanks Larry for the heads up on this post.

We've been doing a lot of deals with Canadians here in Miami but most of the deals have been cash.

For financing, I can tell you that you are right about the 30% down but the interest rate is an adjustable in the 6's (not in the 4's) - we have a couple of lenders that specialize in foreign national loans.

As for the tax question - no such thing in Florida as higher taxes for foreigners that would be sacrilege!! (especially since our economy depends on foreign national business). You can homestead your primary residence and that prevents property taxes from rising above 3% per year, otherwise....no cap and no protection (but that applies to second home owners and citizens as well).

I have never heard of a condo that doesn't let rentals if it is foreign owned - but you need to check out the by-laws of each condo to make sure you can rent and what limitations you may have (like one 2 rentals per year or a minimum of 3 month rental)

Miami Beach for example is going through a major ordeal right now about not being able to rent your property at all for less than 6 months.

Sorry for the book - but more than willing to help and answer questions. We love our Canadian customers.

[Canadian Mortgage]

Hi Larry: More the merrier!

Hi Ryan: You are right in that Florida property taxes are generally higher for non-homesteaders (e.g. Canadians that don't live there).

Hi Richard: Best bet is to contact a broker down in the U.S.

Hi Ines: Thanks very much for the info, and welcome. I'll preface this with saying that we don't handle U.S. mortgages but get frequent updates from our U.S. colleagues. The 4.8% adjustable rate is the latest quote we've got for a 30-year mortgage in Florida for qualified applicants. If you're interested in more info I'm happy to put you in touch with one of our sources.

As for property taxes, my understanding is that the homestead rules make property tax cheaper for most FL residents than non-residents. I also heard that they capped the taxes now for non-residents. Maybe someone else can confirm.

Cheers,
Rob

[Ines]

Rob,
I'm always looking for people that can handle foreign national loans here in the US - so would love to hear who you work with.

Our ultimate goal is to provide better service to our clients, so always open to expand our resources.

The tax issue has been very controversial, there is no cap in place now and although there have been changes (I've written about them on my blog), those have not been thorough enough and don't really address the needs of second home owners, foreign nationals, investors or commercial property owners.

[Canadian Mortgage]

Hi Ines,

Feel free to give me a call and I can give you more information on those rates.

On the tax issue, according to the Florida Department of Revenue, all nonhomestead residential property is to be reassessed annually beginning in 2009, but the change resulting from the reassessment may not exceed 10%. So a cap is enacted, but 10% is still a lot.

[ines]

Sorry it took me so long to get back here. There is a 10% cap for non-homesteaded property in Florida - but historically, taxes have never increased that much, so the reform IMHO is a bit bogus.
Here's the rest of the approved reform: http://www.miamism.com/florida-property-tax-reform