Remember the 2008-09 housing crash? Subprime mortgages. Homeowners dropping off keys at banks and walking away. Huge corporate bailouts. Good times.
While the housing collapse buried the American housing market for years, the Canadian housing market bounced back relatively quickly. We had a more heavily regulated banking system, stricter rules, and we hadn’t bought into all the 0% down payment 40-50 year mortgages for as long as our southern neighbours did. So by 2012, Canadians had a lot more money in their homes than Americans did, with many of the latter still owing more money on their homes than they were worth.
Canadian purchase a lot of American real estate post 2008-09
So what did Canadians do? Well, we bought American real estate. A lot of it. In 2010 alone, Canadians purchased almost 69,100 American homes worth about $17.1 billion USD. The majority of these purchases were in California, Florida, and Arizona.
Needless to say, Canadians were taking advantage of their increased equity and the continued low American market to purchase a lot of investment property. However, as the American housing market recovered and some Canadians found more opportunity to invest domestically while others were struggling to afford their first home, that foreign investment dwindled. The number remained between 44,000 and 49,000 between 2011 and 2014, but then started to fall off.
Between 2015 and 2020, the annual number of Canadian buyers in the USA was between 18,000 and 34,000. Then we were in the pandemic. In 2021, that number fell to just 8,800 and $4.2 Billion USD. However, 2022 showed that Canadians are willing to come back to the States. Although the 11,300 purchases in 2022 were still well below the norm, the rebound showed that Canadians are ready to return, and in greater numbers than any other country, including China.
International Real Estate Investment Continues to be Lucrative
A major problem with investing in Canadian real estate should be obvious: it is so expensive. In a country where we have a shortage of housing, combined with heavy real estate, rental & tenancy regulation, Canada, and especially the Vancouver region, isn’t the best place to count on for positive cash flow. In fact, many local investors assume a negative cash flow while they count on the high appreciation of the real estate cycle.
However, not all investors want to bank on appreciation. International real estate investing can offer lucrative returns. Additionally, there is always the added perk of owning your own vacation home. In fact, most Canadians who purchase real estate in the United States are doing so primarily for that reason, not investment.
With the advent of short term rental platforms like VRBO and AirBnB, making money off of you investment has become even more profitable – as long as you have the right strategy and management.
A World of Opportunity
Mexico, Turks & Caicos, Costa Rica, Portugal, and many other countries have become attractive locales for Canadian investors. According to Osa Tropical Properties:
A midrange, three-bedroom vacation rental home in Uvita has an average gross annual revenue of $66,100 with an average daily rate of $266 and an occupancy rate of 68%, according to Airdna. Comparatively, a luxury three-bedroom home in Uvita has an average daily rate of $322 has a gross revenue potential of $101,500 with an 86% occupancy rate.
$5,500-8,500 per month INCOME for a home purchased for about the same as a Fraser Valley townhome is definitely attractive for any investor.
Storeys.com ran a great article earlier this year about 6 countries that have a better payoff than Canada, including Costa Rica.
My International Connections & Services
In 2017 I almost purchased a 50% stake in a California brokerage. My plan at the time was to move to the States for 4 years, build up that company and expand along the west coast. However, I decided that this lifestyle wasn’t conducive to raising a young family. In that process, however, I made a lot of amazing connections throughout the State of California, especially in the San Diego & North County area. I also connected with a lot of brokers in the Orange County and Los Angelas area.
I also ended up helping a lot of my clients, including my family members, get connected with real estate in other countries. This sparked a lot of education in the different ways that real estate is conducted around the world and some of the hard facts on the numbers.
While I have not yet attained my Certified International Property Specialist (CIPS) credential through the National Association of REALTORS (NAR) due to the pandemic, I did enjoy a lot of the coursework that was required – I recently sent the organization an email I hope that I can pick up where I left off. I also plan to continue my real estate education through the Coldwell Banker Global Luxury Program in hopes to attain the Luxury Property Specialist (LPS) and Certified Luxury Home Marketing Specialist™ (CLHMS) credentials. Both designations are recognized worldwide and build on top of my already strong international network.
If you are considering to invest in international real estate, please do not hesitate to contact me. Together, we can look at the different options around the world, come up with a strategy, and then connect you with the best professionals and financing options. My buying services are free, paid for by a referral agreement with your international representation.
In future articles, I will be posting features about specific investments and countries.