Buying property in Nevada

[jamesofthegreatwhitenorth]

Hello forum, I am buying a property in Vegas for the purpose of loaning out to my family and close friends (both American and Canadian family) and plan to spend some time at myself. i am nowhere near retirement and i would only be staying in the US for a month or two at a time over the next 20 or so years. i also have family in the US and visit them on a regular basis. Does anyone have any tips or could anyone anticipate any problems i could have? i will eventually be a snow bird (6 or less mths a year in the US), but for the time being i will be staying and working from my house that i own in Canada for 20+ years, minus my vacations and family visits down south of course.

[Reba]

Shouldn't be too much of a problem, as long as you always have ties to home country, and you're not making a rental income on the property when you loan it out. If you are renting, rather than them using it for free, I think you may have to file taxes for your income in the US.

[jamesofthegreatwhitenorth]

Shouldn't be too much of a problem, as long as you always have ties to home country, and you're not making a rental income on the property when you loan it out. If you are renting, rather than them using it for free, I think you may have to file taxes for your income in the US.

The property will be loaned out and my guests will always be friends or family. no strangers kicking holes in my walls or disrupting my neighbours and no staying more than six months for anyone (my parents are thinking about lengthy stays as they have a spot of heaven on Vancouver island that i would like to stay at). strictly golf pals, work pals and family, they of course would have to pay for the maid service afterwords. If it became a business (where money actually changes hands instead of my intention for non monetary favours back home)i would not have a problem filing with the i.r.s., i'm honest like that. thanks for your help.

[Steven]

If it's just a vacation home and you're not renting it out, it's really easy, just buy it. When you sell it, it will be subject to capital gains tax in the US and Canada, however you claim a foreign tax credit in Canada for the US tax so in essence you only pay the Canadian CGT.

Vacation homes DO NOT have to be declared on Form T1164 (foreign assets), but rental properties do when you file your T1.

However having spent oh, forever, looking for property in the US I don't think Nevada is a particularly good place to buy property. Nevada has no State income tax so counties and towns derive most of their income through property taxes. Property taxes in Arizona are significantly lower than Las Vegas and property taxes in southern California are lower still.

Most of the municipalities in Clark county have rates approaching 3% for property tax, the only significant exception is Boulder City. Arizona is usually around 2% and there are places in southern California (like San Diego) which are around 1%.

Also having spent a long time looking at buying a place in Vegas I think the market there is still overpriced. Utilities are also more expensive due to the lack of water. There are whole neighbourhoods down there which are basically ghost towns.

I thought about Lake Las Vegas, but the developer recently went bankrupt and there are lots of empty houses there. There are townhouses that were going for a million that are now going for $350,000, which sounds like a good deal but I'm not entirely convinced Vegas is going to bounce back like everyone is pretending. Gambling is the first thing to go in this recession.

And it doesn't solve the problem that there isn't enough water in the Colorado River.

I came to the conclusion it's impossible to calculate the risk, or the long-term future of the place, so I gave up on the idea. My gut feeling is that Las Vegas is in for a long slump as happened back in the late 70s.

I would have said try Reno, but they've been having a lot of earthquakes there lately.

I'm beginning to think places like Boise and the coast of Oregon make more sense but they're cold during the winter and Boise is overpriced as well.

[jamesofthegreatwhitenorth]

Well Vegas may not bounce back very soon, but that’s not really my concern as I am mostly there for the weather and outdoor life, I’m not really a gambler. Plus its close (20 hours by car) and it really has alot of stuff to do for all walks of life. My family has worked really hard for many years over some cold winters and really could use the sun time. Especially my mom who had a liver transplant 3 1/2 years ago. I would have to disagree with your assessment of what people will do in the recession, people will always drink, screw and gamble regardless of whether or not they can afford it. Everyone wants to catch the dream. Maybe not as many people as the 90's but still. I also have a hard time believing that the USA would allow the entire south west to dry up; nobody is going to let that happen to Southern California and Southern Nevada.

[Steven]

Yes and that's what people in Las Vegas are saying and I'm certain they are wrong, you only have to look at the reduction in the number of airline flights there and the number of empty hotel rooms. Parts of west Las Vegas look like ghost towns, I went around one development and there was a strip mall that had been built in 2006 and it was totally empty.

As for the water it's hard to say, but the plan they've come up with to tap water from further north via a pipeline has been heavily kyboshed because the Dept. of the Interior has shown it would cause groundwater levels to decline in Utah, so Utah is now adamantly opposed to it.

Like I said, very unpredictable as to what will or will not happen which is important when buying property.

Anyway even if it was going like the clappers the property tax makes it less wise than Arizona or southern California, which I'm sure is one of the big reasons why people from Alberta generally buy there instead.

[jamesofthegreatwhitenorth]

Looking more like we would rent the property out to local people now. The numbers don’t jive with my wife to let the place be there for friends and family. She wants to make money on it or at least pay for itself. So Nevada has no state income tax eh! I have been reading up here on the forum and would have to elect the eci option on the IRS papers as to not get dinged the 30% tax. Do you have to start a US business or can I still keep my Canadian business with foreign assets?

[Steven]

Your rental property is the business. You just make that election on 1040NR. The way I read the new tax treaty all rental income will be classed that way automatically starting this year, but they haven't released the new instructions yet. But effectively it will be treated as business income whether it is or not.

It's never really been practical to do it any other way because if you don't make that election the tenant has to do NRA withholding and report it to the IRS on Form 1042.