Buying below the border

If you are like me, you love a great deal. Who doesn't? Many of us will drive across town to save a few cents on a grocery item or wait in a long line up to fill up when gas is forecast to go up two or three cents per litre.

Canadian real estate investors are no different - continuously searching for good deals, which can sometimes be difficult to find.

Many are looking to the south: currently the greatest real estate sales since the Great Depression are happening in areas of the U.S. where deals can be had, not just well below their peak prices but, more importantly, well below the price of construction.

As Canadian real estate investors, we should be taking full advantage of this unique moment in time.

According to Daryl Hemingway of Albert and York Investment House, located in Toronto and Phoenix, it's a once in a lifetime window. "Cash on cash returns of 20 per cent or better and prices 30 to 70 per cent below cost of construction is typical of what our Canadian investors are experiencing."

However, while many real estate investors realize the U.S. represents a big opportunity, they may not be aware of the steps required to get involved, specifically as Canadians. I have been asked a lot about this recently and three common questions arise: "where to buy, what to buy and how to buy?" Let's briefly address these questions.

Where to buy

Our first concern as a Canadian is to understand that the subprime mess that caused the initial wave of foreclosures is over. Those properties have gone through the system, gone to foreclosure and have been purchased.

We are now dealing with the adjustable rate mortgage (ARM) catastrophe where banks gave two- or three-year teaser rates, followed by a rate increase of two or three times, making the payment unaffordable for the owner.

Why did the owner engage in such a thing? It's because property values were going up and the client was encouraged to refinance before the end of the teaser rate term.

This was also good for the banks as they get all their fees at the beginning of a mortgage.

To learn more about how you can find opportunities south of the border, download a copy of our December 2010 issue.

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