Canadian resident- How to buy a home in USA?

[emmacatherine50]

Hi Everyone
This is just CURRENT info (as of June, 2009) that may help someone out. My husband and I were just in San Diego and Las Vegas putting offers on properties.

Firstly, we got a mortgage with BANK OF AMERICA but it's running out NOW. So don't expect to get an American mortgage even with good credit. It is the last "A-paper" (basically, regular bank) lender that will give "non-resident/alien" mortgages (according to our mortgage lender). And they have had meetings about stopping this - and stopping this SOON. That said, we are qualified for one right now (for a second/vacation home) but still have to put 35% down and we have good/perfect credit. And they won't OK for that much... even with 35% down. But right now is the last chance for a typical/market rate loan. At least in California, to the best of our knowledge.

That said, you can still get a "hard-money" lender to back a loan at 8-11% interest and 50 to 60% down payment (which to me seems like a loan shark). All around, seems dodgy.

Secondly, we have an offer in Las Vegas as prices are ridiculously cheap. We have an offer on a 3-bedroom, 1250sq.ft. condo that's a foreclosure (at $49,900) but there are multiple offers on everything if it's in a nice area. They go QUICKLY. There are many, many, many places for sale so really know your areas as most of it's dodgy.

That's about it for now. I used this website as a starting point (thanks again, Steve) last fall and we're just going from there. My husband is convinced that prices still have a ways to go down, but for $50,000 we couldn't resist making an offer. Fingers crossed.

[Steven]

Secondly, we have an offer in Las Vegas as prices are ridiculously cheap.

Like I said further back, there's a reason they're ridiculously cheap. I gave up on Las Vegas, it's just a minefield with property there because most of the neighbourhoods are really new and you have no idea what's going to end up happening to them. And the property taxes are much higher than in Arizona.

So although driving down Hwy 89 is going to suck big time I think if I buy another property down there it's going to be somewhere in Arizona.

[emmacatherine50]

Steve you're totally right - you have to be prepared to lose your money (I sure wouldn't get a mortgage there -- not that we even could ). Another huge consideration is the "HOA" (Home Owner's Association) - basically our equivalent of a strata - could be broke now or anytime in the future because if people can't pay their mortgage, they aren't paying their HOA dues!

[puckitguy]

Would it be advised to register a limited company in USA and buy your house through the company? Then lawsuits ..ie from tenant would be limited? Has anyone done this ? Looking for info on this.
I am thinking of buying a house in the Phoenix area of Surprise. If anyone can assist me that would be great.

[Steven]

Like I said further back in this thread, my personal opinion based on all the problems my relatives have had that buying a single property in a foreign country and renting it out is more hassle than it's worth. You won't make money just having a property manager looking after it, add in the hassle of a corporation to limit your liability and you're just constantly looking at more $$$.

Bear in mind you have to pay US income taxes on the rental income, so then you'd be in the situation of paying US and State corporation taxes on the rental income (unless you pay it all out as salary, which you presumably would) and you've got to pay out the income to yourself as well somehow, which means a US payroll. Or you could use a Canadian corporation to limit the liability but it still has to file a US tax return (1120-F).

So basically on a single property, I'd say you're better off just sucking it up rather than messing about with corporations. Or buy more properties to make it worthwhile.

The more common scenario is to use a trust to own the property, the advantage there is your heirs avoid having to do probate in a foreign country, but there is tax paperwork involved with a trust as well, plus the tax on trust transfers is 75% of the income tax rate, whereas capital gains tax is only 50% of the income tax rate. Generally speaking given the paperwork and the additional tax, it only makes sense to use a trust if your heirs live in Victoria and the property is in Florida for example, as it's a hassle to do probate from that distance. Depends on how much the estate is worth as well. If it's only a cheap property, then the tax is going to be minimal but the cost of going to a foreign probate court might be high, so then a trust might make sense. I think another reason why people use trusts has something to do with US estate tax, but given that it's all but been abolished there's no point anymore.

This CRA publication: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html explains how to handle US income taxes on rental property although it's a bit out-of-date, because now you have to declare it as income effectively connected with a US trade or business, but why you wouldn't have done it that way before given the extra paperwork I've never been clear on.

[kevin24792]

I have propertys in the U.S (florida). I am trying to get fiance for another. My uasuall lender tells me 50% down and min mortgage of 250,000. looking for lender with 15% to 20% only looking for $80,000.

[aavenger]

Hey
I am a little different,I am a dual citizen I reside in canada but wish to purchase a retirement home in florida...I know about the homesteader law but am unsure if I would qualify and how to apply.I have a us passport and SS card..I have not resised other than vacations for 40 years......I am wondering if the citizenship would make a us mortage any easier for me??

[Steven]

Well yes it does, because you can simply take up residency in the State like any other American and apply for a mortgage like anyone else would. Plus you immediately qualify for the homestead exemption, a Canadian visitor would not. Your only problem is likely to be access to your credit history.