As many of you may know both Linda and I own properties in Florida. Linda’s property in Ft Lauderdale is mainly personal use and mine are in the Ft Myers area and are rented out. In buying in Florida we have garnered a lot of experience in owning property in the USA. There are many pluses and minuses to owning property and we do get many questions on different aspects of owning foreign property. We have also come to realize that many people are interested in owning a vacation home in the southern US but have a bit of trepidation when it comes to pulling the trigger on the purchase…so we thought we would try and share a little bit of what we have learned along the way.
Before buying in a specific location we strongly suggest you go there for an extended period of time. Get a feel for the area. Would you be comfortable with an extended stay? Talk to as many people as you can in your desired community and other communities. Linda originally bought in Ft Myers and was happy but has since relocated her vacation home to Ft Lauderdale where she absolutely loves it.
Is ownership for you? Being a long-distance owner does have pitfalls. Think of all the issues your home has in Canada. Renting a vacation home from someone else gives you a fair bit of flexibility not just financially but also in where you stay. For example, you could go to Florida one year and Costa Rica the next.
When you purchase a property in the USA, it is a good idea to get a US tax id (ITIN) for the eventual sale of the property. Even if you plan to pass the property on it will be a deemed disposition upon your passing. If/when you do sell it you will have to file a US tax return (alone or jointly if co-owned with spouse) which is where/when your tax id will come in handy. You will not receive your full value on sale of property as the buyer is forced to remit withholding tax to the government if the owner of the property is non-resident.
Non-residents of Florida pay much higher property taxes than residents of Florida. Insurance is much higher due to hurricanes. Insurance does not cover flood damage even if caused by a hurricane and fire insurance is usually separate from home insurance. There are Home Owners Association (condo fees) on property that is part of a condominium or a complex as well. All of these add to the cost of ownership which should weigh into your buy vs rent decision. Owning does give you the flexibility in travelling to your vacation home whenever you desire though.
The good news for those of you looking to finance your purchase is that both TD and RBC have large US operations and now lend in USD to Canadians who qualify. I actually own several townhomes with a friend who lives in the US. I have to file annual returns with the US as well as claim the income here in Canada. Owning property in Florida does require us to get down there from time to time…I don’t mind so much in the winter though.
There are lot of decisions to be made if you are looking at purchasing a vacation home in the US or elsewhere. It can be a very rewarding experience and possibly a good way to create wealth as well.