How to Finance U.S. Real Estate as a Canadian Investor

Hello, everybody. Kyle Mazzuchin here, vice president for America Mortgages for the Canadian markets. Thank you very much for joining us today. The point of our presentation today is to bring you value and tools to understand how to finance U.S. real estate as a Canadian investor. At the very end, we'll have a question-and-answer period. We have a wonderful guest, co-founder of America Mortgages, Mr. Robert Chadwick, who will be able to answer any questions as well as myself.

Canadians in the U.S. market: $6.6 billion was spent on real estate, rental, and permanent residence between April 2022 and March 2023 — the second-largest foreign buyer of U.S. real estate. Being so close to the border, why not? And 55% of those purchases are people looking for somewhere warm. You know how cold it can get in Ontario or Winnipeg or Montreal — you're looking at Florida, Arizona and California to get away from the frigid winter.

Some facts from the industry associations: fewer homes were built over the ten years following the U.S. crisis than in any other decade since the sixties. As of the fourth quarter, the U.S. has a housing supply deficit of about 3.8 million units; the National Association of Realtors projects the deficit is closer to 6.8 million homes. So there's real, structural demand.

Why invest in the U.S. versus Canada? A larger, better-diversified economy, global influence, the number-one real estate market, and known for its innovation. Lower taxes than Canada, favorable tax treaties, a stronger currency, and about a 30% difference in the income itself. Meanwhile, we've heard a lot about government intervention in Canadian housing due to affordability challenges.

Here are some examples from around Canada. In British Columbia, a ban on non-resident short-term rentals from May 2024, with fines up to $3,000 a day. In Ontario, short-term rentals are limited, and Airbnb is not allowed in Quebec with a tax on short-term rentals. The federal government has hinted at national regulation affecting platforms like Vrbo and Airbnb, and the CRA is limiting income-tax deductions on short-term rentals.

From January 1, 2024, no tax deductions for short-term rental expenses in restricted areas — again hitting Airbnb and Vrbo. And if you own a trust or a holding company, there's the Underused Housing Tax: a federal 1% tax on vacant or underused homes. If you don't comply, the CRA can levy penalties, starting from a $10,000 fine if you haven't registered. Please talk to your accountant.

Popular places for Canadians to buy: Florida — very popular, warm, with a large Canadian community. Arizona for its dry, mild winters. California, with diverse lifestyles from oceans to mountains. Louisiana with its rich French history. Montana, close to Alberta, for nature lovers. And a state you might not expect — South Carolina — for its charm, hospitality, mild climate and beaches.

The U.S. mortgage overview: no U.S. credit required. No AUM — you don't have to leave money in a U.S. bank; keep your hard-earned money where you are. Foreign income is allowed, and we have loans and programs in all 50 states. As a Canadian you're a foreign national, which means you can purchase up to 75% loan-to-value, or a 25% down payment.

With the proper documentation, we can give you a loan approval in 72 hours and close in 30 to 45 days, signing at a local U.S. embassy or via alternative options to make it painless. Purchase, refinance or equity release. Thirty-year amortization regardless of age, ten-year interest-servicing facilities, and loan programs without income. We're very proud that 97% of the loan applications submitted are approved, and we're truly 24/7 at americamortgages.com.

Here's the process: first, you talk to me; second, we choose a program after our consultation; third, you provide the documents; then I provide the loan approval; we review it with the loan officer; and we order the appraisal to make sure the value matches market value. We communicate with you throughout — then the signing is arranged, the money goes out, it closes, and you receive your keys.

One program I'm passionate about is AM Rental Coverage. No personal income is required — we qualify only on the property's projected rental income. No U.S. credit or residency is required, loan amounts from $150,000 to $3 million, 30-year fixed and interest-only available, and we close in 30 to 45 days. How do you qualify? Not even one-to-one — 0.75 to 1 on rental coverage. So if the total payment (principal, interest, taxes, insurance) is $1,000, you only need $750 of rental income.

The AM Investor+ program uses foreign income, but tax returns aren't required. We qualify based on income letters from your employer or your accountant, using a two-year average. No U.S. credit or residency. Loan amounts $150,000 to $3 million, 30-year fixed and interest-only, and 75% financing for new purchases. If you report $10,000 of income, your mortgage payment, taxes and insurance can't exceed 43% — in this case $4,300. In Canada we'd call it the total debt-servicing ratio; in the U.S. it's DTI.

If you want to use a portfolio, we can use a two-month average. For high-net-worth clients who want to buy a large property but worry about qualifying, you don't have to hand your money to the bank. The high-net-worth program takes the average of, say, a $5 million portfolio divided over the fixed-rate term — over five years, if the payment, tax and insurance don't exceed about $83,333 a month, you qualify. Loans from $3 million up to $100 million.

We also have a student program: if your child is doing their MCAT or heading to a U.S. university, you can qualify based on projected rental income and have your child live in the property — and even put them on title, which helps them start building U.S. credit. Then there's AM Commercial+ for multifamily buildings of five units or more (no personal income, non-recourse, $1M–$100M), and a portfolio program to cross-collateralize four or more properties without providing all your paperwork for each one.

We've got a series of questions from the audience. First: can Canadians sign mortgage documents remotely via DocuSign for a property in New York? Yes, we can — depending on the lender, through notarial or online services. There's a lot of flexibility to sign from home, though it can be easier to visit a local American embassy if you're in a city like Vancouver or Toronto.

Let me expand on that. Canada is unique because it's so close to the U.S. — some people fly over to sign, which is fine. But we have multiple ways to sign: a remote notary (like signing over Zoom) where allowed; or, if your country is part of the Hague, you can sign with an apostille at your local notary, stamped at the high court. Going to the U.S. embassy or consulate is also an option. It's best to speak to your loan officer at the very beginning and set up the structure, because embassy appointments aren't always easy.

As a Canadian, what's the best way to register a property — company or personal? A lot of people use a limited liability corporation (LLC). It gives you tax, asset and personal-liability protections. The borrowers are responsible for the mortgage, just like in Canada, but the ownership of the property is held in an entity — the most common way to structure it, and one of the great things about U.S. real estate investing.

How do I open a cross-border bank account, and would America Mortgages help? Multiple-currency accounts with a service like wise.com that open a U.S. dollar piece qualify, and our loan officers each have a way of assisting. Or, if you're in southern Ontario, you can travel to New York and open an account at a local bank there.

Are there preliminary steps to make approval go smoothly? Our whole business model is a smooth customer journey. The first thing to do — before you look for real estate at all — is get pre-approved. You want to know the payment, the rate and the terms you qualify for. 97% of our applications get approved, and when they don't it's usually the property, not the borrower. Follow what the loan officer sends and respond to emails promptly, and the process will be smooth.

How long does pre-approval take and what does it cost? It costs nothing except a little time. Our documentation is simplified because we do loans for borrowers from Sydney to Shanghai. Once you send the documents, it takes about 72 hours to issue a loan approval, and we give you a letter. When you find a property, you turn that letter in with your offer, and the realtor knows America Mortgages is behind you and your financing is in place.

Who pays for the appraisal, and what is the interest? The appraisal is paid by the borrower — all U.S. appraisals are done by third parties through appraisal management companies that bill you directly. No money is ever sent to us. That's the only out-of-pocket cost initially, and you own that appraisal. The interest rate depends on how you qualify, the loan-to-value, and whether you're a foreign national or U.S. citizen. If you want a lower rate, you comply with the program's requirements; if you're less rate-conscious, you can buy now and refinance later.

What are the fees and rates? We charge a very standard 2% of the loan, paid only at closing. If your loan doesn't fund, you'd only be out the appraisal cost — and you own that. Interest rates for foreign nationals are roughly 1% higher than a U.S. citizen buying an investment property. Right now you're looking at the eights, sometimes the high sevens — still fantastic. (Rates were as quoted on the webinar date; they are not a live quote — always confirm current pricing with a loan officer.)

If I already own four properties in Canada, can I still get financed, and is there a limit? There are no limits on the number of properties foreign nationals can own in the U.S., and no limits on the loan-to-value across your portfolio — in most cases it's 75%. The U.S. is a free-market society for real estate; they're not going to restrict properties or rents appreciating. Some states have rent control — so don't buy there. You have 50 states and hundreds of cities to choose from.

Is there any prepayment penalty? On most investment properties there's a three-to-five-year prepayment penalty. It can be reduced or bought down by paying a fee to the lender. The most important thing is clarity on your plan — if you'll hold for ten years, it doesn't matter; if only a couple of years, you structure it that way. We're here for your journey, not just one transaction.

Can you get a mortgage in a U.S. C-Corp? You can hold the title in a C-Corp if that's what you choose, but the mortgage itself is given to the individual — whoever the borrower is holds the mortgage; how the title is held can be in an entity. Talk to your accountant about the best structure; if you don't have one, we have a CPA we use regularly who specializes in foreign nationals and U.S. expats.

What's the maximum loan-to-value a Canadian can get on a DSCR cash-out refinance for two units or more? If you're looking to cash out, you should be able to get 70%, assuming the rents are sufficient to cover the debt servicing.

Does approval guarantee funds release? The initial letter is a pre-approval — we've put you through underwriting and, based on what you provided, the loan will go through. Like anything, questions can come up on a bank statement or the property, so there's never a guarantee until the loan actually funds. But with a 97% close rate, you have very good assurance. Why get a foreign-national mortgage from someone who sees one in a hundred? This is all we do.

If you have a Canadian credit rating over 800, can you use it to qualify for a better U.S. rate? No. All we want to see is that you manage credit responsibly — whether it's Canadian, UK or Hong Kong credit, we look for defaults, foreclosures or bankruptcies. The score itself, because it varies by country, doesn't impact the rate. The rate is determined by the loan-to-value and how you qualify.

If you have an ITIN, does it get you better rates? It could — not only better rates, it might even get you a higher loan-to-value. That's something to discuss with the loan officers depending on the programs you choose.

This was our first Canadian webinar for American investing — very proud, as the second-largest investment country to the U.S. Reach out to me at [email protected] or on my calendar link, and we also have another Canadian on our team in Alberta to translate American ease to Canadian ease. Thank you all very much for your time.