More and more Canadians are looking to purchase property in the United States, here are a few key items to consider when buying

From a financing perspective, it’s pretty straight forward especially if you are buying in your personal name. They will use you income, credit score, and qualify you just the same. They move extremely slow though, so be prepared 

You can expect to put down 30%, get a slightly higher interest rate but still great options like a 30 year fixed term or entire properties on Home Equity Lines of Credit (Heloc). I have done both options with American banks. 

Opening an American bank account is very straight forward, they will want photo ID and your SIN number, you do not need an American address. You will need an address if you would like a credit card. 

If you put the property in an LLC or American corp you can expect to be double taxed, if you put in your personal name or Canadian corp you will not be double taxed. Any tax you pay to the states, you will get credit for from the CRA. 

Americans use title companies to close transactions, they are very quick and efficient. This is why is not uncommon to have a 2 week close. Typically the seller picks the title company and the buyer uses that same company to transfer the deed. 

When offering on a property, you have to disclose if it’s cash purchase or if it will be financed. A lot of times your offer is conditional on getting that financing up to closing, this is why there is so much value is being a ‘cash buyer’ in the states. 

Comps are tougher to run because sold prices are not posted until the property has actually closed, instead of just firmed up like in Canada. So there can be a 3-4 week lag in data

In summary, it’s not as scary or challenging as one might think! Keep in mind, I use a realtor, mortgage broker, insurance agent, accountant for my purchases as you should. This thread is for educational/awareness purposes only. 

November 2022 Market thoughts

First, I will say I understand we have a supply issue, I understand immigration targets for Canada but….in my humble opinion 

Nothing can fight the RE math. Do you know what is stronger than demand? Affordability! Current prices don’t work with today’s mortgage rates. Period. This is also why we have seen prices drop 20-30% off February highs when supply has not changed! Its just simply demand destruction. 

In the residential market I think people are either:

A) In a adjustable rate mortgage and already feeling the pain of increased payments, cost of living going up. They are stuck trying to navigate this and in a lot of cases hanging on for dear life. 

B) People in a variable rate mortgages, the bank of Canada has said 50% of people have reached their trigger rates or are paying 100% of their payment in interest, I have also heard banks are now allowing unpaid interest to be added to the principle amount….boy thats a slippery slope

C) In a fixed rate and going to feel the pain on renewal in the next 2-3 years when their payments jump 200-300%. Will banks allow for longer amortizations on renewals? Could be

In the commercial market, sellers and buyers have a large disconnect. Sellers want 4 cap prices in a 6% interest rate environment, again the math just doesn’t work 

That doesn’t mean real estate transactions wont happen, people will still need to sell, still need to buy but the truth is, sales are already down 49% y/y from October 2021 to October 2022. So buyers being strapped or sellers having no where to go because of supply issues is real. I expect more of the same in 2023

15 Examples of Buyers Breaching their Real Estate Contracts

As the market has turned in the spring of 2022 unfortunately there were many breached contracts, and as we discussed with a well known and respected real estate litigation lawyer, the number of current cases is unprecedented. These unfortunate cases already have or will go to trial within the next couple of years, here we are listing 15 examples of the cases from the past to illustrate what happens when the buyer breaches the agreement of purchase and sale.

Different cases: resale, preconstruction, deposits delivered or not, selling for less and selling for more, some buyers couldn’t close others just changed their mind, mostly higher end properties but not all. 

What they all have in common is that the party breaching the contract loses, and the awards can be life altering.

For each case we are providing a link to the actual ruling.

Tabrizi v. Majesty Development Group Inc

Purchase Price: $1,960,000.

Date Purchased: March 2017.

Deposit Amount: $150,000.

Damages Awarded: $659,570.

Pollard v. Perry

Purchase Price: $1,050,000.

Date Purchased: June 2021.

Deposit Amount: $50,000.

Damages Awarded: $140,886.

Deposit was not delivered.

Masoomi v. Chen

Purchase Price: $1,500,000.

Date Purchased: February 2017.

Deposit Amount: $50,000.

Damages Awarded: $174,284.

Giancola v. Dobrydnev

Purchase Price: $1,167,000.

Date Purchased: March 2017.

Deposit Amount: $50,000.

Damages Awarded: $306,130.

Kermati v Ko

Purchase Price: $1,410,000.

Date Purchased: November 2019.

Deposit Amount: $100,000.

Damages Awarded: Amount of the deposit.

The seller sold the property for $115,000 more than the original sale price within couple of weeks after the contract was breached and was awarded the deposit of $100,000.

Tribute (Grandview) Limited v. Rafindram

Purchase Price: $1,038,990 plus upgrades of $101,112.

Date Purchased: September 2016.

Deposit Amount: $99,166

Damages Awarded: $381,971 plus $22,000 legal fees.

Prowse et al. v. Noroozi

Purchase Price: $2,450,000.

Date Purchased: March 2017.

Deposit Amount: $150,000

Damages Awarded: $806,380.

Rosehaven Homes et al. v Aluko et al.

Purchase Price: $1,523,162.

Date Purchased: April 2017.

Deposit Amount: $136,723.

Damages Awarded: $331,922 plus interest.

The property sold for $2,328,800 in February 2022, $805,638 more than the price as per breached contract.

Greco v. Padovani

Purchase Price: $3,200,000.

Date Purchased: June 2017.

Deposit Amount: $400,000.

Damages Awarded: $1,227,756.

Pomata Investment v. Yang

Purchase Price: $2,214,813.

Date Purchased: September 2016.

Deposit Amount: $150,000.

Damages Awarded: $616,601.

Country Wide Homes v. Cui

Purchase Price: $4,100,258.

Date Purchased: March 2017.

Deposit Amount: $334,100.

Damages Awarded: $957,607 plus interest.

Mouralian v. Grouleau

Purchase Price: $1,499,000.

Date Purchased: May 2021.

Deposit Amount: $70,000.

Damages Awarded: Forfeited deposit of $70,000 plus $12,000 costs.

The property sold shortly after the contract was breached for $1,677,022, $178,022 than the original price per APS.

Artista Homes (Kleinburg) Inc. v. Griu

Purchase Price: $1,728,109.

Date Purchased: February 2017.

Deposit Amount: $134,738.

Damages Awarded: $612,847.

Bang v. Sebastian

Purchase Price: $995,000.

Date Purchased: May 2017.

Deposit Amount: $35,000.

Damages Awarded: $122,221 plus interest.

Park Avenue Homes Corp. v. Malik

Purchase Price: $788,900.

Date Purchased: February 2017.

Deposit Amount: $60,000.

Damages Awarded: $158,936.

If you enter into a real estate contract, please ensure you have the ability to fulfill it.

So you are locked into a variable or adjustable  rate mortgage , now what?

First of all, I am going to say that there is a lot of people hurting right now who are too embarrassed to talk about it. 

There isn’t anybody I know who thought we would see interest rates go from .25% to 4% in less than a year. Scotia bank was the only bank I know who predicted 8 rate increases which would have got us to 2.25% 

The bank of Canada governor, Tiff Macklem, telling people in October of 2020 not to worry, interest rates will stay low for a long time. 

I don’t know a single mortgage broker who was telling people, myself included, to take a fixed rate mortgage.

So please, don’t feel bad, or embarrassed for taking a variable or adjustable rate mortgage. 

So now what, what are your options besides cancelling your Disney plus memberships. 

Keep in mind I am not a mortgage broker and everybody situation will be different. From my prospective at this point, it does not make sense to switch to a 5 year fixed rate, but looking into locking into a 2 year or 3 year fixed might be a good option to help give you some stability. 

If you don’t lock in, you are essentially riding the variable wave. There are still talks of increased rate hikes coming but hoping we see the rates come back down sooner rather than later. 

Next would be to tighten up expenses, while Cynthia Freeland took a lot of heat for saying Canadians should cancel their Disney plus memberships to save expenses, her message isn’t wrong. Cancelling services that are luxurys can help you get back to a comfortable monthly carry. 

Selling liabilities is never a bad move, if you have toys like cars, motorcycles, boats especially if they have monthly payments… unfortunately, they may have to go. I don’t like selling assets like stocks or real estate but it may come to that point depending on your situation. 

Your last option if you do not want to lower or can’t lower expenses is to increase your income. 

Some tough choices are going to have to happen, I know nobody is talking about this because we are proud Canadians, but you are not alone, this will be a tough couple of years. Yes years. Please adjust and prepare accordingly. 

I am always a phone call, text, or email away if you want to confidentially strategize. I promise you I wont just ask for your listings. 

How to start investing in Real Estate

I was young, broke, and barely enough money to afford a down payment. My wife and I purchased a small bungalow in Oshawa with 5% down and we living in that house for 3-4 years and we were lucky that the housing market had increased significantly so we were able to use some of that equity to put a legal basement suite into our home. We got our first renter who payed 1400 dollars a month covering a good portion of our mortgage. We then moved into our next home, again putting 5% down and plan on doing something similar.

If I were buying my first home, I would look to do something similar. We couldn’t afford to do the renovation right away so we waiting until it was a feasible option.

My point is, you don’t need to build an empire overnight! Investing is slow calculated discussions that over time, pay dividing…literally!