US Real Estate Market Outlook for Canadian Investors
Real estate market in the United States has long been a popular destination for Canadian investors looking to diversify their portfolios and take advantage of the strong returns. However, as with any investment, it's important to have a clear understanding of the market conditions and trends before diving in.
Currently, the US real estate market is still showing signs of strength, with home prices and rental rates on the rise in many areas. It is true that for the past few years low mortgage rates have made it more affordable for buyers to enter the market, however, as interest rates are currently on the rise, many investors are not able to manage their assets and need to sell. This presents a great opportunity for investors, especially in this buyer’s market. As a buyer, right now, you have leverage and you can use it to extend your due diligence period, negotiate better prices and deal structure.
One of the biggest benefits of investing in multifamily properties is the stable income they provide. Unlike single-family homes, which can sit vacant for extended periods of time, apartments are typically occupied by tenants on long-term leases. This provides a reliable stream of rental income, which can help offset the costs of owning and maintaining the property. With the US population size being over 300 million people (which is almost 10X larger than Canada), your multifamily property has potential to have more tenant applications and lower vacancy, of course, it will depend on its’ location, rental rates and management. That’s why you’d want to work with an experienced team to find and underwrite the deals and manage the properties.
Even though there are uncertainties in the economic outlook, multifamily properties are less susceptible to economic fluctuations than other real estate assets. This is because people always need a place to live, and renting an apartment is often a more affordable option than buying a home. As a result, multifamily properties tend to be less affected by market fluctuations, making them a more stable investment option.
One of the big advantages of investing in multifamily properties in the US is the tax benefits that are not available in Canada. In the US, rental income is subject to federal income tax, but there are a number of deductions and credits available to property owners. Additionally, property owners may be able to take advantage of depreciation deductions, which allow them to offset some of the income generated by the property.
Finally, multifamily properties in Canada are reaching relatively high prices per unit and assets with stable and attractive cash flow are becoming hard to find. Coupled with limited tax benefits, less favourable landlord laws in many provinces, and relatively high management and repair costs, the US multifamily real estate market looks attractive to many Canadians. In many areas around the US multifamily properties are larger and can be acquired at a lower cost per unit, which is a great option for Canadians looking to diversify their investment portfolios. With stable income, tax benefits, and potential for appreciation, multifamily properties offer a solid return on investment.
Another thing to consider is the exchange rate. As the Canadian dollar fluctuates against the US dollar, it can impact the affordability of US real estate for Canadian investors. The exchange rate can also affect the returns on investments in US real estate, as any gains or losses will need to be converted back to Canadian dollars.
In conclusion, the US real estate market offers a wide range of opportunities for Canadian investors. However, it's important to conduct thorough research, consider the local market conditions, be aware of the potential exchange rate risks and work with an experienced team to ensure you are making correct decisions. If you are looking to get into multifamily real estate or expand your current portfolio, I am happy to answer any questions. Book a call with me here or send me a message at nick@nserealestate.com .
