# Financing a US Property Purchase this month



## Hampton N/S (Apr 3, 2009)

Hello everyone from Atlantic Canada,
I am purchasing a vacation home/investment property in Florida,  with closing set for April 23rd. I have been researching financing alternatives available and would appreciate any feedback, advice and comments you may be able to provide.
With closing costs the price will be around $200,000 US. 
with an exchange rate of 1.30 that brings it to $255,000 Canadian.
I can finance it with my Canadian HELOC at prime (2.5%) and I have a 10 yr fixed rate pre-approved at 5.25% for the next 4 months, then if I don't want to lock in I will apply for another preapproval for 4 months etc.
I was interested in trying to reduce the impact of the US exchange on the purchase and applied for a US Mortgage in Florida - awaiting rates but likely 5.5 or more on a 5 yr . I also enquired about a US HELOC - I was offerred P+1.5 over the phone but was told there is a 4% floor. An option may be to finance a portion in CDA and portion US. 
There will be a BOC rate announcement next on Apr 21st. Many speculate rates will be cut a bit further. Who knows what will happen to the exchange rates - there are so many variables involved. And our economy is so tightly linked to the US that as they suffer further in the recession - even though we may not suffer as much - we will be on the same trend.
So, what do you think?
And thanks in advance for taking the time to read my "story".


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## FrugalTrader (Oct 13, 2008)

Hampton, I have a quick question. I've heard about the two tiered property tax system in Florida so that foreigners pay a higher rate than local residents. If you don't mind me asking, how much property tax will you be facing?


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## Hampton N/S (Apr 3, 2009)

Hello Frugal Trader, I have followed your Journey for awhile - thanks for that service.
From what I have learned over the last month - Florida local govt's collect property taxes, (state gets none) and they have as part of the US "Save our Homes" initiatives have provided for Exemptions to local residents. The most common is the Homestead exemption - if it is your personal residence you deduct $50,000 (2008) from the assessed value of your home before applying the local govt's millage rate. There are other exemptions available to residents as well. In addition, the govt has committed to limiting any increase in the assessed value of the homes - that qualify as Homesteads- to 3% per year max, or CPI increase - whichever is lower. 
For non- homestead properties - us snowbirds - there are no exemptions, and the max rate of assessment increases is 10% annually. 
The millage rate is the same for residents and non-residents but the assessed value will be different. 
But they have the sun!!


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## canabiz (Apr 4, 2009)

Hampton, congrats on your purchase! I am intrigued as to what you plan to do with the property. Are you planning to rent it out while you are here in Canada and move in while you are down south ?

Any income tax ramifications from both CRA and IRS perspective ?


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## FrugalTrader (Oct 13, 2008)

Hampton N/S said:


> Hello Frugal Trader, I have followed your Journey for awhile - thanks for that service.
> From what I have learned over the last month - Florida local govt's collect property taxes, (state gets none) and they have as part of the US "Save our Homes" initiatives have provided for Exemptions to local residents. The most common is the Homestead exemption - if it is your personal residence you deduct $50,000 (2008) from the assessed value of your home before applying the local govt's millage rate. There are other exemptions available to residents as well. In addition, the govt has committed to limiting any increase in the assessed value of the homes - that qualify as Homesteads- to 3% per year max, or CPI increase - whichever is lower.
> For non- homestead properties - us snowbirds - there are no exemptions, and the max rate of assessment increases is 10% annually.
> The millage rate is the same for residents and non-residents but the assessed value will be different.
> But they have the sun!!


Thanks for the info Hampton! What is their average property tax for non-homestead properties? About 1% of the assessed property value?

The reason I'm asking is because I find the idea of owning a property in Florida alluring. How did you go about your property search?


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## Hampton N/S (Apr 3, 2009)

Hello Canabiz,
we are only 49 and our youngest won't go to University for 5 more years so we plan to work FT till then, then move to PT before retirement. so over the next 5 yrs we will use it for vacations March, Dec over Christmas, and a summer visit - so probably only about 6 weeks for us, but we will let other family use it as well. we will rent it out through a Property mgmt co that has been doing it for the past owners, and they have a good rep. The peak months of course are Dec-April - otherwise probably no rents. Later we will spend months there.
I have checked CRA and IRS website info and talked with tax acct. re rental income - we pay US taxes with IRS and then include the income in Cdn income but claim a tax credit for the US tax paid. Of course, we are expected to operate a business/rental with an expectation of profit. i've been told we might be okay with 2 or 3 yrs of small losses but then need to show the property can earn income. Once that can't be the case we'll have to stop treating it as a rental property - I am a conservative tax filer.
Right now the properties are well price, interest rates are great, but also many properties are available for rent - so it won't be as easy as in the past.
I've been told though as long as we can show it is available for rent - advertised, managed etc - we have a case that it is a business. 
That's the plan, let's see how it works.


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## Hampton N/S (Apr 3, 2009)

Good morning FT,
This is my second try, I timed out last time with too long a reply I guess.
For my property the rate is 12.558 per thousand dollars of assessed value Plus there was an additional levy of $361 for fire, garbage and stormwater. 
The rate depends on the county or city you are in. 
You can find most rates at the County Property Appraiser office website.
Previous owners paid $1625 for 2008 (based on assessed value of only 86616). Our bill will be about $2600. due to increase in assessment and no exemptions.

Re Property search - we used MLS then narrowed down communities. We have been goign to Florida for over 20 years for a few weeks. We like the Gulf coast. And we chose Venice Florida. we have a distant relative who is a real estate agent there, so when we went down we spent two mornings and an after noon looking at about a dozen properties and neighbourhoods.
If you want her contact info let me know - great having someone you can instantly trust.
Give it a thought. Nothing like owning property, in my opinion.


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## lazy cdn (Apr 3, 2009)

with the USD trading at a premium to the CAD, is it really worth buying in the states, even with historically low prices?


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## Hampton N/S (Apr 3, 2009)

Good morning Lazy Cdn,
With the snow flying here in Atl. Cda and my flight booked to Florida in 2 weeks - I am reminded of my goals and objectives for the purchase.
Certainly, I have been anxiously watching the exchange rate with the US dollar - it will add a substantial amt to our cost. You are totally correct that this cost can not be overlooked- and we have included it in our calculations of our investment. Also, we set the limit of our purchase based on a 30% exchange hit.
BUT what we want is the sun in the winter, good rental opportunity when we are not using it, and a good investment to resell in 10-15 yrs. Florida offers those to us - with a price of course.


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