Canadian resident- How to buy a home in USA?

[emmacatherine50]

Again, Steve, thank you. You may not know everything about trusts, but you know a lot more than me.

I did read your post about property taxes in Vegas (and somewhere on here someone said California there are no extra taxes -- was that you?) so we're leaning towards S. Cal. There is simply too much to choose from though, wherever you look. Who would think one would've had that problem?

[Steven]

I was generalising when I said that, it appears to me that property taxes in southern Nevada are close to 3% on average, in Arizona they seem to be around 2% and in southern California (notably San Diego) they are just over 1%.

Obviously it depends on the specific municipality though, in Boulder City which is near the Hoover Dam the property tax rate is just under 2.5%.

The catch is that the reason for the difference is because of the State income tax. If you ever actually moved permanently to Arizona or California you would actually pay more tax than in Nevada because the income tax rate is higher.

If it's just a vacation home though obviously you'll never pay State income tax.

Florida is another State where you have to be careful. They just raised the homestead exemption to $50,000, so if you live there permanently (and by "permanently" they've clamped down on that and it means an LPR or a US citizen), then a house valued at $100,000 is only taxed on $50,000 of the value.

However if it's a vacation home you get taxed on $100,000, plus there is a 3% cap on increases in property tax for people who have a homestead exemption, but not for people who have vacation homes.

I have to say I think there are areas that aren't going to recover from this housing slump and buying there would be a serious error. Some of the bedroom communities near Phoenix and San Francisco I think are basically just going to be ghost towns. I've looked at some of the new developments that were thrown up around San Diego and Las Vegas and the quality of construction is total crap, they were built by overzealous developers selling to overzealous investors. I went round one development in Henderson and they'd actually covered up a hole in the floor with carpet.

What happened was they were halfway through the development, buyers dried up, so they basically finished them as cheaply as possible.

I'd stick with stuff that was built at least four or five years ago that isn't surrounded by foreclosures.

[emmacatherine50]

Again, thanks for the good advice. You should be a consultant!

We were in Las Vegas last year and saw how many units (condos, TH, SFH) were for sale, but didn't go through any developments. Simply the sheer number of units for sale gave us the idea to buy. Good advice on cheaply-built developments though. Covering up a hole in the floor with a carpet.

But you're blowning our idea of S. California as we were going to (possibly) use it as a rental property. We're undecided - buy a single family house and rent it out, or buy a condo for our personal use (or both). We should look further into income tax rates in S. California.

No worries there though on newer homes, we typically go for older homes anyways (1950s-1980s). With the whole "leaky condo" issues here, we are wary of new construction in general, we don't even look at new anymore. And we would look in established neighbourhoods. Good advice, again, on properties not surrounded by foreclosures.

Do you own property south of the border?

[Steven]

I used to, sold it awhile back but as with most people in Canada I wouldn't mind somewhere warmer to go during the winter.

My feeling on Nevada is the property market there is still a way from the bottom. I still see condo apartments at prices that seem way too high to me.

If you rent it out obviously you have to pay US income taxes as it explains in that CRA publication, so yes State income taxes make it even more of a pain.

Established neighbourhoods is definitely the best plan, some of the stuff I've seen in California and Nevada I have no clue how they're ever going to shift it all. I stood in a strip mall that was completely deserted which must have had dozens of houses near it that were all unsold or foreclosed on in Nevada - who the hell would want to live there? I don't care how cheap it is, who would want to be the first person to move in?

Everyone tells me Boise is really nice, bit cold during the winter though but not as bad as here. It's easy to look at property prices in CA, NV, AZ from a few years ago and think you might make money but I'm not so sure, if you buy in an established area where the market never tanked it may not seem like a bargain but I think it's a better long-term bet. If property prices have dropped 60% or something stupid like that though I think that area is going to take a long time to come back, if it ever does.

[iiq2000]

Steve,

I've read your responses and seems like you have a lot of information on buying properties in US.

I'm Canadian resident and if a buy property in US, what is my tax obligation in Canada? If I pay applicable taxes in US, do I still need to pay any taxes in Canada?
What if I buy property in Dubai (has tax treaty with Canada) and keep Canadian residency? Can you tell me a website to find this information?

Thanks,

Imran

[Steven]

Doesn't matter where you buy property, if you live in Canada it will always be subject to Canadian capital gains tax when you sell it. If there is a tax on the sale where you sell it, you can claim a foreign tax credit in Canada. However as Canada has a higher CGT than the US you end up effectively paying the Canadian rate, which is 50% of the income tax rate.

Have a read of the CRA capital gains tax guide for more information.

If you rent it out you will also have to pay income tax there on the income from it, and claim a foreign tax credit in Canada for the income tax. Once again as the Canadian rate will usually be higher, you will end up effectively paying the prevailing income tax rate on it.

Foreign real estate is also subject to departure tax, i.e. if you buy it, then emigrate from Canada, the property will be subject to departure tax.

[brunborg]

There is a lot of useful information for ppl who want to buy a property in US.
Maybe this topic needs to be sticky, to stay on the 1st page.

[investor]

We are Canadians, searching for financing our purchase of investment properties in New York. Due to the credit crunch, we have been informed by bankers in NY State that they are not permitted to finance foreign investors. Also, Canadian bankers (e.g. RBC) will not be financing properties in USA due to the current financial crisis. We are exploring other alternatives for financing these rental properties in NY State. Can someone please provide us names of financial institutions that lend to Canadians investing in the USA with excellent credit scores?