Can Canadians Buy US Properties?

In recent years, a growing number of Canadians have been venturing across the border to purchase properties in the United States. This upward trend can be attributed to several key factors that make investing in US real estate attractive for many Canadians. From geographical proximity and affordability to lifestyle preferences and investment opportunities, let's explore the reasons behind this cross-border property buying spree.

There are no citizenship requirements when buying a home in the US. It is open to people from any nation. Canada, Mexico, and China are the origin countries of the largest groups of foreign homebuyers in the US. The US-Mexico-Canada Agreement made cross-border property ownership even more accessible. As a result, based on recent statistics, residential properties purchased by Canadians in the United States from 2021 around 8,800 rose to 11,300 in 2022—a 2,500 increase. This 2023, Canada remains to be the biggest foreign investor in US real estate.

Reasons Why Canadians Are Interested in American Real Estate

Let's delve into the factors that make US real estate an enticing prospect for Canadian investors.

Economic Stability and Opportunity: With a large and diverse economy, the country offers a range of investment opportunities across various sectors. Canadians seeking to diversify their investment portfolios beyond domestic markets are drawn to the US real estate market's stability and potential growth prospects.

Market Size and Diversity:

The vast size and diversity of the US real estate market present Canadians with many options. From residential properties in bustling urban centers to vacation homes in scenic coastal areas, Canadians have a wide range of choices regarding property types and locations.

Affordability and Value:
Lower property prices in some US regions, combined with favourable exchange rates, make investing in US real estate attractive. Canadians can access properties that may be more expensive or unattainable in their home country, thereby maximizing their purchasing power and diversifying their real estate holdings.
Strong Rental Market:
With a large population and diverse rental demand, investing in US properties can provide Canadians with a stable and lucrative rental income stream. Major cities and popular vacation destinations attract both long-term tenants and short-term vacationers, offering potential rental yields that make US real estate an appealing investment option.
Tax Considerations:
The US-Canada Tax Treaty helps to alleviate potential double taxation concerns and provides a framework for tax planning and optimization. Canadian investors can benefit from tax deductions, exemptions, and other incentives, enhancing the overall financial viability of their US real estate investments.
Lifestyle and Personal Use:
Owning a property in the US can offer Canadians the chance to spend extended periods in their preferred vacation destinations or create a second home for themselves and their families.

Legal Considerations to Remember When Purchasing Properties in the US

The legal framework regarding foreign property ownership in the USA is based on a combination of federal, state, and local laws. While there are generally no outright bans on foreign ownership, specific regulations and requirements exist to ensure compliance and protect national interests. Here are the key aspects of the legal framework:

Property Rights and Ownership:
In the United States, property rights are protected by the Fifth Amendment of the Constitution, which prohibits the government from taking private property without just compensation. Foreign investors, including individuals and entities, have the right to acquire and own real estate in the USA, subject to specific regulations and restrictions.
Federal Regulations:
a) FIRPTA: The Foreign Investment in Real Property Tax Act (FIRPTA) is a federal law governing real estate transactions' taxation involving foreign individuals or entities. Under FIRPTA, when a foreign person sells a US property, the buyer must withhold a portion of the sale proceeds and remit it to the Internal Revenue Service (IRS) as a tax payment.

b) CFIUS: The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee that reviews foreign investments in the USA for potential national security concerns. While CFIUS primarily focuses on investments in sensitive industries, it may check certain real estate transactions if they pose national security risks.
State and Local Laws:
State and local laws can impose additional regulations and restrictions on foreign property ownership. These include zoning regulations, land use restrictions, historic preservation rules, and environmental requirements. Researching and understanding the specific laws and regulations in the state and locality where the property is located is essential.
Visa Requirements:
Foreign investors, including Canadians, do not need a specific visa for real estate ownership in the USA. However, if the intention is to reside in the USA for an extended period, Canadians must comply with appropriate visa requirements. For instance, obtaining an investor visa (EB-5) or a non-immigrant visa (e.g., E-2 Treaty Investor Visa) may be necessary.
Financing and Mortgages:
Foreign investors, including Canadians, may face specific challenges when seeking financing for US properties. Lenders may have specific requirements, such as higher down payments or stricter creditworthiness criteria for foreign borrowers. It is important to work with lenders familiar with cross-border transactions or consult with mortgage professionals who can assist in securing financing.
Tax Considerations:
Foreign investors are subject to US tax laws on their real estate income and gains. Income from rental properties is generally subject to US income tax, and capital gains from property sales may be subject to taxation. The US-Canada Tax Treaty helps prevent double taxation and provides guidelines for optimizing tax planning. Engaging the services of tax professionals who specialize in cross-border taxation is advisable.

It is crucial for foreign investors, including Canadians, to consult with legal professionals experienced in cross-border real estate transactions to navigate the legal framework, ensure compliance with regulations, and optimize their investment structure. Legal advice can help mitigate risks, ensure tax efficiency, and facilitate a smooth transaction process while safeguarding the investor's interests.

Key Takeaways

Various factors have driven Canadian interest in American real estate, including economic stability, market size and diversity, affordability, strong rental potential, tax considerations, and lifestyle preferences.

The legal framework regarding foreign property ownership in the USA allows Canadians, like individuals from any nation, to buy and own real estate. However, there are specific regulations and requirements to navigate, such as federal laws like FIRPTA and potential reviews by CFIUS, as well as state and local laws governing property ownership. Visa requirements and financing considerations also come into play for Canadians looking to invest in US real estate.

Consulting with legal professionals specializing in cross-border transactions is crucial to ensure compliance, understanding tax implications, and mitigating risks. By seeking expert guidance, Canadian investors can successfully navigate the legal landscape and make informed decisions to own properties in the USA.

If you are planning to buy a property for sale in the US and you are in Canada, choosing the correct currency exchange provider will assure you that you can maximize the potential of your CAD. RemitBee Currency Exchange services are preferred by many Canadians. RemitBee offers the best currency exchange rates. The exchange fee is free, so you can get the most out of your money. What are you waiting for? Experience the sting-free currency exchange services in Canada now offered by RemitBee. Sign up here.