With its close proximity and similar cultures, investing in US real estate has always been popular for canadians looking to diversify their portfolio or generate rental income. However, there are important factors to consider regarding taxation, financing, legal issues, and more when investing across borders. This article will provide an overview of how canadians typically invest in US real estate and key things to keep in mind before taking the plunge.
Understanding tax implications for canadians investing in US real estate
One major consideration is the tax implications of owning US property as a canadian. While the US-Canada tax treaty prevents double taxation, canadians still need to pay US taxes on rental income and capital gains from US properties. There are also IRS filing requirements. Consulting cross-border tax experts is crucial to ensure full compliance and optimize your tax planning.
Getting US mortgages as a canadian real estate investor
Canadians usually cannot get standard US mortgages, so financing requires more creativity. Options include using a US-based LLC, cross-collateralized loans with Canadian assets, private financing, or hard money lenders at higher rates. Portfolio lenders that understand cross-border issues may provide better rates for canadians with multiple US properties.
Understanding legal and ownership structures for US real estate
There are pros and cons to various ownership structures when purchasing US real estate as a canadian. Using a corporation or LLC provides liability protection but triggers more tax filings. Personal ownership is simpler but riskier. Many choose to hold US rentals in a Canadian-owned LLC or partnership for the best tax treatment.
Choosing the right US market to invest in
Canadians traditionally focused on west coast cities like Phoenix and Las Vegas, but markets across the US can be attractive. Conduct in-depth market research and run the numbers to identify appreciating markets with strong rental demand. Consider traveling to the area as well before committing to a purchase.
While investing in US real estate can be a smart move for canadians, it involves heightened legal and tax considerations. Getting proper cross-border advice and financing, understanding ownership structures, and choosing the right market is key to success.