How to buy U.S. real estate

It’s true the loonie hasn’t been this low since George Bush was president—and U.S. real estate prices fell by as much as 75%. But you can still find good deals, provided you know the lay of the land. These five tips show you how.

1. Hunt for value

To find undervalued properties, examine housing reports compiled by the National Association of Realtors as well as statistical reports from Trulia, the robust U.S. version of MLS. Also, look for urban areas where builders are starting to ramp up production, which pushes resale prices down temporarily. For instance, a surge in new-builds lowered prices in Fayetteville, NC., by 4% in 2014.

2. Think local

Sure, you can poke around on Zillow.com and find a two-bedroom Florida condo for US$45,000, but you risk being mugged walking up to the front door. Work with a local realtor who knows the area and can also alert you to make-or-break investment trends. For instance, synthetic stucco is now considered kryptonite because of mold and moisture issues.

3. Do your math early

Lined up some properties? Now it’s time to firm up the financials. Getting a U.S. mortgage isn’t easy. As a Canadian, you’re lumped in with B-lenders, and U.S. mortgage applications take at least 30 days to process—unlike Canada where five is standard. So consider getting a Home Equity Line of Credit against your primary residence that can be applied to the purchase of your U.S. property. Just don’t forget to factor in the loonie’s drop in value.

4. Expect extra expenses

Just like any other property purchase, you’ll need cash for closing costs—and this means greenbacks not loonies. Budget for two home inspections in warmer climates—a standard home inspection as well as termite inspection, between $200 and $800 each. In addition to legal fees and title insurance, you may need to pay a one-time fee of $100 to $300 to register your rental with the county. It’s a small cost but it can save you thousands in penalties.

5. Hire a tax expert

Once you own U.S. property you have to report any income earned on it, and file taxes in both the U.S. and Canada. To keep it easy, hire a cross-border tax specialist to walk you through allowed deductions and to show you how to obtain an ITTN number required for U.S. tax identification.If you go the DIY route, be aware that without meticulous records you could be subjected to a 30% holdback by the IRS on your annual rental income.