Cross Border Pro

Canadian Businesses See Opportunity in U.S.A.

At a time when U.S. based businesses are struggling, some Canadian based competitors are seeing opportunity.  The Canadian businesses are able to use the still strong Canadian economy and the Canadian side of their business to fund expansion into the U.S. at a time when their U.S. competitors are struggling. One example is in Washington state.  Washington based Western Recreational Vehicles has closed it's doors.  At the same time Abbotsford, B.C. based Adventurer Manufacturing LP is expanding into Yakima, Washington.  Canadian businesses are able to get a foot-hold in the U.S. market and their hope is to weather the storm in the U.S. while subsidizing the U.S. operations with their Canadian side.  They will then be in a good position in the U.S. market when that economy recovers.

Reverse Flow

Typically we think of Canadians investing and buying investment real estate in the United States.  In a reverse flow of capital First Industrial Realty Trust Inc. has announced that they have formed a joint venture with the California State Teachers' Retirement System.  The new venture has opened offices in Toronto and Calgary to further the investment in industrial real estate in Canada. This is a sign of the continuing strong market in Canada and shows that other countries recognize this stong market.

Buying Presale in Seattle

While we are hearing about the doom and gloom happening in the US right now, many are missing the fact that the Pacific Northwest areas of the US are remaining relatively stable.  Areas like Portland, Oregon and Seattle, Washington are not experiencing the huge market downturn seen in other areas of the US.  Washington and Oregon maintained a more rational market upturn when other areas were booming.  Therefore, they experienced less exposure to sub-prime mortgages.  Washington reportedly has one of the lowest mortgage default rates in the US. Given the strength of the Canadian dollar and the fact that even in these markets there has been some slowing, it might be an opportune time to by in the US.  I have been contacted by phone and email by developers in Portland and the Southwestern US looking to lure Canadian investors to their projects.

A recent article in Western Investor indicated that Washington developers are changing the way they do business and it makes it more attractive to Canadian investors.  This includes allowing assignments of contracts and allowing more investors.  In addition, in Washington when you buy a presale condo it is not a firm contract, it is more like a reservation.  This means that you can walk away from your reservation if the market goes sideways. You give up your non-refundable deposit, but sometimes this can be as low as 5%. This is different from BC where an investor actually creates a firm contract on a presale unit and deposits are at least 10% and sometimes as high as 20%. 

Huge investing Opportunity in the U.S.

Canadians have a huge investing opportunity in the U.S. right now.  Many Canadians think about owning a second home in the U.S. or perhaps an investment property.  It is very possible that there has never been a better time for a Canadian to buy in the States then right now. Many markets that Canadians tend to gravitate towards like the Southwestern U.S. or Florida are really struggling right now and prices have come down significantly on real estate in those areas.  I have heard of price drops of 20% or greater.  Combine slumping prices with a strengthening Canadian dollar and Canadians are in a very good position to invest.  Canadians actually have greater buying power right now in the U.S. then Americans do in their own market. If you figure that the U.S. real estate market will recover at some point and if you believe that the U.S. dollar will at some point return to being stronger than the Canadian dollar, a Canadian could be looking at huge returns on an investment made in the U.S. right now. There have been recent articles talking about builders in the U.S. throwing in pools and leases on luxury cars just to sell some of their inventory.  In some new communities builders have rows of finished houses sitting unsold and you can negotiate very favourable pricing.  So why aren't more Canadians looking to invest in the U.S?  There are some factors like increased hassle at the border.  I think the main factor right now is that the Canadian market is booming and there are so many current opportunities in the Canadian market that most investors just simply don't have the time to look at longer-term opportunistic buying in the U.S.  Another factor is that the commercial market in the U.S. has remained relatively strong so those opportunistic buys are not in larger investment properties.  But, for a Canadian looking for a vacation home or maybe a couple of rental houses there are huge opportunities right now.

Importing Car to Canada

When we moved to Canada we imported our cars with us from the U.S. My brother-in-law was so intrigued by this that I later helped him import a used car to Canada from the U.S. At this time the savings was a few thousand dollars on a $15,000 car.  Now with the strength of the Canadian dollar the price difference has become ridiculous. I was looking (just for fun) at an Audi S4.  The list price in Canada is $71,000cdn.  The list price in the U.S. is $49,000usd.  A $22,000 price difference!!  Now if you factor in the exchange rate that price difference is getting close to $25,000.  The exchange rate almost makes it possible to buy the car at par and have the exchange rate pay your taxes.  It is amazing though that as much as I have looked at importing a car to Canada the hassle and time involved really makes me think twice.  I know that some manufacturers will cancel a warranty if the car is exported from the U.S.  And some manufacturers are offering incentives like no charge maintenance for four years that most likely would not transfer.  Still it is hard to ignore the price difference.  Many in Canada are really starting to question the Canadian pricing and why it does not come down.  One problem in the car business is all the leases in place with residual values in the contract. What happens if you have leased a car for four years and want to buy it for the residual value at the end of the lease and the car manufacturer has decreased prices by 10% on new models of the car you have.  Good luck negotiating that one.  Has anyone else had experience importing cars to Canada?

Doing Business in The USA

The Doing Business in the USA seminar will be held on Thursday,November 8 at the Best Western Abercorn Inn, 9260 Bridgeport Road, Richmond, BC from 8:30am to 4:30pm. Cost for the seminar is $195 pre-registered or $225 at the door ($145 each for 2 or more, and $25 further discount for registration before November 2). For more information contact Carol Jackson at 1-800-799-8848 or visit www.ucantrade.com

This seminar deals with key issues of doing business across the border and is ideal for any company considering doing crossborder business, employees of existing crossborder businesses, or those that advise crossborder businesses.

Bill Introduced That Would Require SSN For Real Estate Purchase

A Bill introduced by Rep. John Doolittle to Congress would require that mortgage providers obtain a Social Security Number (SSN)  from purchasers of a primary residence in the U.S before providing a residential mortgage.  The mortgage industry has developed programs that allow non-resident and immigrant purchasers to use a Individual Tax Identification Number (ITIN) instead of a SSN to purchase a home. This bill is obviously aimed at illegal immigrants.  While I will not comment on the protectionist action I will comment on the potential unintended effects of this Bill.  Areas of the South in the U.S. including Florida, Arizona, and California have large populations of Canadian home owners.  These "snowbirds" spend significant time in the U.S. and for some, they do not own a home in Canada.  Some rent and some live with relatives when they return to Canada.  These Canadians need to ensure that they are not spending more than the allowed time in the U.S. as visitors and effectively becoming "illegal immigrants."  However, assuming that they are following the rules, this Bill would require that they prove the home purchase in the U.S. is not their primary residence.  Much depends on how stringent the rules are related to this proposed Bill.  If to onerous it could significantly decrease the number of Canadians purchasing vacation properties in the U.S.  This is definitely one to watch.

Cross Border Title Insurance and Escrow

Real estate investors in North America can purchase real estate with confidence knowing that title to the property they buy is generally clear and insured.  In the U.S. there is title insurance provided by private insurers.  In Canada title is guaranteed by the provincial governments through a land registry system.  As North American real estate investors move into international developments the need for title insurance becomes even more apparent.  Resort development in Mexico, South America, and the Caribbean by both U.S. and Canadian developers is picking up.  As a result third party insurers and escrow closing agents such as LandAmerica are seeing increased demand for their international services.  When purchasing in foreign countries investors need the confidence that the property they are buying has a clean title and that the closing is handled effeciently and according to the laws of the local market. U.S. based title insurers are also seeing an increase in demand for their services from foreign developers/investors that develop in countries foreign to them.

Canadian Developers in the United States

The Canadian real estate market has been booming for several years now in most market areas of Canada. Many large developers in Canada also are active developers and investors in the States.  Komenda Capital located in Vancouver, BC has several land development deals in Washington State and the Southwestern U.S. along with their development projects in British Columbia.  One of their larger U.S. projects is the Centre Point Condominiums located in Bellingham, Washington.  This is a 132 unit multi-phase project.

Mosaic Homes located in Vancouver, BC is a multifamily developer with several past multifamily projects thoughout the Greater Vancouver area.  They are currently developing a 97 unit townhouse project called KEW in the Clayton area of Surrey.  Mosaic also maintains a Seattle office and they have two multifamily projects currently under development in the Seattle area.

Pinnacle International is a high rise developer located in Vancouver, BC.  They have build over 4,000 residential and hotel units. They have developed and currently manage over 1,000,000 square feet of industrial, office, and retail space.  They develop high rises in Vancouver and also develop and have an office in Toronto.  Pinnacle has an office in San Diego and currently has at least one high rise project in San Diego under developement.

WestStone Properties is a multifamily developer located in Abbotsford, BC.  They have developed several multifamily developments across the lower mainland of British Columbia.  They are currenlty leading the way into the Walley area of Surrey, BC, which has historically been a run-down area with crime and drug problems.  They, and other developers, are attempting to turn this area around and several pre-sale projects have sold out in a day or two.  WestStone is also an active developer in the Southwestern U.S., specifically Phoenix.  They are reportedly the 3rd largest multifamily builder in Phoenix.

Deecorp Ventures is primarily a real estate investment firm investing in landmark buildings and potential redevelopment / value-added commercial buildings. Deecorp owns or has redeveloped several landmark commercial buildings in downtown Vancouver, BC.  Deecorp is also an active investor in Texas, Colorado, California, and Arizona. Deecorp appears to specialize in working with foreign investors and specifically investing in landmark commercial buildings.

Tariffs drive imports into U.S. storage

A recent article in Business in Vancouver discussed the benefits of Canadian companies importing their U.S. bound products directly to the U.S. rather than first to their Canadian facility and then into the U.S. market. According to the article, Canada usually charges an 8% tariff on goods imported from China, while the U.S. does not charge tariffs on goods from China. So if a Canadian company is selling goods from China into the U.S. market they can avoid this additional cost by importing directly into the States.  They accomplish this by warehousing their goods just across the border in the U.S. One company set up specifically for this purpose is International Market Access run by Jim Pettinger.  From his 20,000sqft warehouse in Bellingham, Washington Mr. Pettinger services 130 companies based in British Columbia, Canada. International Market Access provides a knowledgeable service to Canadian companies looking to do business in the U.S.

Other options include leasing a small storage/warehouse space or for larger operations building or leasing a warehouse facility staffed with their own employees.  There are various pick-and-pack providers near the border that can also service the needs of Canadian companies.