Cross Border Pro

Recreation Money is Flying South

According to a Leger Marketing survey done for the Bank of Montreal 31% of Albertans and 28% of British Columbians said they are interested in buying real estate in the United States. 

Distressed U.S. Real Estate Lures Canadians

Canadian real estate investors have been lured to the U.S. distressed residential market for several years.  Now larger Canadian investors like RioCan REIT and Second City Capital Partners are being lured to the U.S. looking for distressed commercial real estate deals.

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/distressed-us-real-estate-lures-canadians/article1861647/

 

Canadian Investors Make News

I have noticed a recent trend of Canadian investors making the news in U.S. publications.  I had previously posted that in some U.S. markets Canadians are currently making up the majority of buyers.  Further evidence of this was recently published in National Real Estate Investor. In the article "Apartment Investment Sours in Phoenix, Florida Markets" it stated that a recent trend in the Phoenix market is the arrival of Canadian buyers to purchase 20 or so condo units unsold from projects of about 200 units. It noted that discounts of 30% to 40% are achieved on some of these bulk sales.

Oh, Thank You Very Much, Canada

A recent article in the National Association of Realtors magazine Realtor had the above title.  The article was discussing how in some markets in the US the only buyers were Canadians buying investment properties and second homes. The article quoted Mike Kent, a Realtor in the resort community of Birch Bay Washington near the Canadian border who said nearly 40% of his sales in late 2007 were to Canadians.  Additionally the article says 11% of all international buyers in the US are Canadians. 

On the commercial side a recent article in the Bellingham Business Journal quoted Ken Reinschmidt with Saratoga Commercial Real Estate who stated that 40% of the industrial market in the Bellingham area was made up of Canadian companies.

Clearly, many markets in the US are being supported by Canadian buyers in this down economy.  This is not only occuring near the border, but also in resort areas of Arizona and Florida.  Ozzie Jurock, a real estate investor in Vancouver BC recently stated that he has purchased 100 condos in Arizona in the last two months.

Purchasing Development Property Located Outside BC

If you live in British Columbia or for that matter anywhere in Canada I am sure you have noticed more and more advertising of properties for sale in the United States in local Canadian newspapers and real estate guides. I have seen whole multiple page inserts for development projects in Palm Springs and a lot of advertising for Las Vegas also.  Recently, the Superintendent of Real Estate in BC came out with a statement regarding purchasing in these projects.  The Real Estate Development Marketing Act continues to govern the marketing in BC of development properties located anywhere in the world.  Under the Act, local and foreign developments must meet similar requirements in order to be marketable in BC.  The developer must file a disclosure statement with the Superintendent of Real Estate before marketing begins. Deposits must be held in BC by a lawyer or notory unless deposit insurance or an exemption has been obtained.  If you go to the Superintendent's website you can see these exemptions.  They basically disclose where the project is located and how the deposits will be held and under what circumstances they will be released. 

So if you are considering buying a property in the U.S. based from marketing you saw in BC, call the Superintendent of Real Estate and ask about the developer.  There is a good chance they are registered with the Superintendent.  If they are, then you as the buyer have some additional protection in your purchase of foreign property.

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.

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.

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.