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U.S. financing from Canadian bank offsets purchase

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Canadian real estate investors are often dissuaded from purchasing American properties because of the exchange rate, but a lot of needless headaches can be avoided by receiving U.S. financing from select Canadian banks.

“A $400,000 home in the U.S. will become $532,000CAD, so the U.S. mortgage makes sense to mitigate the impact of the weak Canadian dollar,” said Alain Forget, RBC’s director of business development in the U.S. “At $0.76, a lot of Canadians are backing out of purchases because they’ll still have to change their money at about 33% exchange. A lot of Canadians don’t know they can get U.S. financing from a Canadian bank like RBC, and for investment properties they rent out all year long we can finance 75% of that. But for a second home, if they use the property for six to eight weeks and want to rent seasonally for a few months, we can go with 20% down.”

Canadians are investing increasingly south of the border, spending $10.5 billion last year.

“It averaged $384,000, and that number can buy you a lot of real estate in the U.S.’s Sun Belt states,” continued Forget. “There’s a lot of opportunity in those markets to get three- or four-bedroom homes, or even nice townhomes with three bedrooms and 3,000 square feet in gated communities that have resort lifestyles.”

A home worth $1 million in Canada goes for about $400,000 in much of Florida, but choosing the right kind of home will offset the purchase price, especially during the peak season.

“In Southwest Florida, the west coast of Florida and Central Florida, for $250,000 to $300,000, Canadian investors can rent out their homes for $3,000 to $4,000 a month,” said Forget. “A lot of Canadians are using properties for themselves for up to a couple of months and then renting them out during the peak months of January to April, and they still generate enough U.S. cash flow income to cover their property taxes, HOAs, taxes and insurance. It can even cover financing principal and interest.”

A five-bedroom house in Orlando goes for roughly $450,000 and typically fetches substantial monthly rental income.

RBC has dropped its down payment requirement on investment properties to 20% from 40%—a sign that it regards Florida rental properties as low-risk, high-yield investments.

“The real estate market in Florida varies but you can buy new construction from reputable builders in beautiful gated communities for $200 to $250 per square foot,” said Forget. “It has solid rental potential from an ROI perspective. That’s the beauty of the real estate market in Sun Belt states like Arizona and Florida—you can rent homes out year round or just for a few months.”

Condo hotels are other worthwhile investments. The HOA fee is higher, but those monies are recouped with yield from as little as 65% rental occupancy. Some projects offer up to 10% lease backs, as well.

 

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Victoria real estate agent disciplined for false advertising, encouraging cash deal to avoid taxes

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A Victoria real estate agent is facing $9,000 in fines and a 60-day licence suspension after breaking several professional rules during the sale of her father’s half-million-dollar property, according to a decision by the Real Estate Council of B.C. 

Whitney Garside’s missteps — outlined this week in a disciplinary decision posted on the council’s website — included falsely advertising the property as being almost twice its actual size and advising the buyer they could avoid the property transfer tax if they paid cash directly to the seller.

The property on Burnett Road in Victoria was being sold in 2016 by the real estate agent’s father. That relationship was disclosed and isn’t among the reasons she has been disciplined.

According to the disciplinary consent order, Garside told the buyer — whose name is redacted — that by paying $42,000 cash on the side, the value of the property could be reduced to avoid paying the property transfer tax.

That cash arrangement was not shared with Garside’s brokerage, Re/Max Camosun, a failure that contravened the Real Estate Services Act.

The council also ruled that she “failed to act honestly and with reasonable care and skill” when she advised the buyer the property transfer tax could be avoided by paying cash directly to the seller. 

The council’s discipline committee also found that Garside committed professional misconduct when she failed to recommend the seller and buyer seek independent legal advice, specifically regarding the property transfer tax and the cash agreement.

Another issue the council considered professional misconduct involved the size of the property in question.

The council ruled that Garside published false and misleading advertising and failed to act with reasonable care and skill when the property was advertised as 8,712 square feet, when in fact a portion of the lot belonged to the Ministry of Transportation, and the actual size was just 4,711 square feet.

The discipline committee ordered Garside’s licence be suspended for 60 days, which will be completed Jan. 3, 2021.

She has also been ordered to complete real estate ethics and remedial classes at her own expense.

Garside was also fined $7,500 as a disciplinary penalty and $1,500 in enforcement expenses.

She agreed to waive her right to appeal the council’s discipline committee’s decision in September.

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Frisco apartment community sells to Canadian investor

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A Canada-based investor has purchased a Frisco apartment community as part of a larger Texas deal.

The 330-unit Satori Frisco apartments opened last year on Research Road in Frisco.

BSR Real Estate Investment Trust bought the four-story rental community that was built by Atlanta-based Davis Development.

Satori Frisco was more than 90% leased at the time of sale. The property includes a two-story fitness center, a car care center, a dog park and a resort-style swimming pool.

The Frisco property sold along with Houston’s Vale luxury apartments in a deal valued at $129 million.

“BSR recently exited the smaller Beaumont and Longview, Texas, markets and also sold noncore properties in other markets,” John Bailey, BSR’s chief executive officer, said in a statement. “We are now using our strong liquidity position to invest in Vale and Satori Frisco, modern communities in core growth markets with the amenities our residents desire.”

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House prices on Prince Edward Island continue steady climb

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Residential real estate prices on Prince Edward Island continue to climb at a rate higher than the national average, according to the latest report from a national organization. 

The Canadian Real Estate Association released monthly figures for November 2020 on Tuesday.

They show that the average price for a resale home on P.E.I. is about 21 per cent higher than it was a year earlier. 

Only Quebec had a bigger year-over-year increase, at about 23 per cent. Overall across Canada, prices were up 13.8 per cent year over year in the ninth month of the COVID-19 pandemic.

“For the fifth straight month, year-over-year sales activity was up in almost all Canadian housing markets compared to the same month in 2019,” the report noted.

“Meanwhile, an ongoing shortage of supply of homes available for purchase across most of Ontario, Quebec and the Maritime provinces means sellers there hold the upper hand in sales negotiations.”

That lack of houses coming onto the market compared to the demand means that in those provinces, there is “increased competition among buyers for listings and … fertile ground for price gains.”

There have been anecdotal reports for months that Prince Edward Island’s low rate of COVID-19 infection and looser rules around social activities have been encouraging people to buy homes on the Island. 

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