OCTOBER 30, 2007


How to cash in on the US real estate bust

There's never been a better time to snap
up southern property

Buying property in the US: the nuts and bolts

American real estate transactions differ little from the process in Canada. Financing can be arranged using mortgage brokers here in Canada or financial institutions in the US, which, for all of their past recklessness, have been raising rates and are much more conservative when lending money.

Property managers in traditional vacation destinations are not hard to find. Many real estate agencies have in-house management services. Residential property managers have a national association with an internet database that lists members in several, but not all, states. In other areas where these services are scarce, local realtors are helpful allies in finding managers, says Mr Maranger.

Buy low, sell high. It may be clichéd advice, but it's sound — particularly when talking about investing in real estate. Toronto-based real estate broker Paul Maranger says that even as well-heeled foreign real estate investors are 'discovering' Canada, residents considering investing in property should look beyond our border.

Here in Canada, it's still a seller's market. The average rise in housing prices in the country's major markets has gone up 8.7% since the same period last year to $329,113. That's great if you've already invested in the market, but buying into it at this point means trusting past returns will continue into the future, and that someone with more nerve than you will take his or her chances on turning a profit in the same uncertain market.

Today's strong loonie has clout in the US housing market, a market where the burst housing bubble is causing a serious credit crunch. Following years of frenzied buying and skyrocketing prices, defaults on mortgages are now endemic and the big sell-off has begun.

"With the dollar as it is and the varied situation in the United States, there are tremendous buying opportunities in the southern states and particularly in the states that were grossly overheated," says Mr Maranger.

On his list are spots like Florida and Arizona where prices are beginning to come down. "I think people are going to find one heck of a buy in those locales if they are ready to stomach short term volatility," he notes.

"Looking at the astronomical values in Ontario's cottage country it would be an excellent time to look at disposing of that and reinvesting that money in Florida," suggests Mr Maranger. "There are going to be great buys there for somebody who wants a vacation property that provides some supplemental income."

Christiane Goldstein, a realtor in Boca Raton, FL, has seen prices in that area begin to soften as more and more properties go on the market. "On my street there are six houses for sale," she says, "and the street isn't very long." She expects the glut of newly finished but vacant condos in the area will pull prices down even more as developers try to recover what they can of their investments.

Mr Maranger also points to other states that may not have the cachet the traditional getaway destinations do, but may appeal to someone looking for property strictly for investment and rental income.

"There are other areas where industry is moving, like Tennessee and Alabama, where you have a solid base of well-paid blue collar workers who would be ideal tenants," he says.

According to Royal Bank of Canada research published in July the median price of a new home in Alabama — which has been spared the value rollercoaster that other states have ridden and has a relatively strong economy — was $144,000 US this spring. (The median price in the US was $246,500 in 2006, according to the US Census Bureau.)

And, of course, for anyone looking further south to Latin America for vacation or retirement properties, the US dollar is standard for deals there — for now at least.



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