Canadian Buyers, Sellers, Investors
International Property Buyer FAQs
Buying in South Florida can be stressful to anyone. Every person’s situation is unique and you need a Realtor who understands your unique needs as a Foreign Investor. Time is of the essence in the existing market and buying at the ideal time can translate into potentially thousands of dollars in savings. Let the Marshall Minotto Network help you through this process. Here are some common questions we get from our friends from the North!
Q: Do Canadians pay more in property taxes then other residents? A: No, All Foreign Nationals pay the same tax as Florida residents pay.
Q: are there restrictions for Foreign National buyers purchasing in Florida? A: No There is no restrictions and you are treated the same.
Q: Is there a sales tax due when buying a property? A: No. There are some Florida state “documentary stamps” – essentially filing fees – due at closing but they are nominal. The fees do vary if you are paying cash for the purchase or if you are financing. Closing costs are the same for Canadians as they are for anyone buying Florida property.
Q: If I am only at my South Florida home seasonally, say 4 to 6 months out of the year, who takes care of my home or condo while I’m away. A: For some, the idea of owning a property far away from home is new and a bit daunting. But rest assured, it’s business as usual in South Florida and there are several options for keeping your property safe and secure while you’re away. Neighbors, management companies, and Realtors will help you.
Q: Should I get a condo over buying a single family home because condos are low-maintenance?
A: Not necessarily. Condos villas or townhouses are low-maintenance (exterior, grounds, community pool, etc.). Yet many who prefer single family homes (say on a Fort Lauderdale waterfront canal) find that hiring services to maintain the pool and lawn is easy and reasonably priced. Again, friendly neighbors are a good resource to help you, as well as professional home watch and/or property management services.
Q: Who pays for the Realtors real estate services?
A: The seller pays the sales commission. The seller is hiring the services of real estate professionals to find a willing and able buyer for the property. We represent you and work to find you the best property, best location, and best value.
Q: I see the terms “sold AS-IS” in many of the listings. Are these distressed properties that I should stay away from?
A: Generally speaking the AS-IS stipulation in the listing data is not a concern and does not indicate that the home is bad repair or in need of work. What it means is that the seller will accept only the AS-IS contract, a standard Florida FAR/BAR approved contract – Florida Association of Realtors the Florida legal BAR (as are all the contracts we used). Most of the contracts we write are AS-IS even on brand new homes or condos.
Our Canadian buyers have told us that buying real estate in their hometowns is similar and the AS-IS terms are common there also. In fact, most of our Canadian buyers say the purchase process here is much simpler, and much faster.
The As-is contact stipulates that the buyer has the right to inspect the property and can cancel the purchase contract for any reason. The other contract (non, as-is, or “standard” contract) stipulates a pre-negotiated amount that the seller will pay for any repairs needed for defects discovered during the inspection. Typically that is 1.5% of the purchase price. So when the listing says being sold “as is” it means the seller is saying up-front that they are not going to agree in advance to a repair allowance. So for example, let’s say the inspector says the pool pump should be replaced. In an as-is contract, the buyer can decide whether or not that is an issue worthy of cancelling the purchase contract or the buyer can decide that they still want the home and proceed with the purchase (and replace the pool pump at his/her own expense). At the end of the day, everything is negotiable. But the key difference between the two contracts is that there is no pre-arranged repair allowance in an AS-IS purchase.
Q: Is home property insurance difficult to get as Canadians?
A: For most Canadians buying property in Miami-Dade, Broward, Palm Beach Counties, obtaining homeowners insurance is straight forward. If you are considering buying a single family home directly on the Ocean (Hollywood Beach, Lauderdale By The Sea) it might be a bit more difficult, but to date all of our clients have had no problems getting coverage.
Property insurance (wind/fire and flood) varies greatly given the size of the home, its age, construction type, elevation, location and so on. Here is one example for illustration:
The Home: 1997 construction, 2200 sq. ft under air, sailboat access canal, replacement value $400,000 (cost to rebuild the home on its present site).
The Annual Insurance Expense: $2200 wind and fire, $600 flood. Flood insurance is a separate policy (federally regulated) from the Hazard (wind/fire) policy.
Buying a condo
If the property is your permanent residence, you're considered a U.S. resident, and, consequently, all your income is subject to the country's tax laws.
However, if your principal residence is in Canada and the condo is your secondary residence, you remain a Canadian resident. You have to be vigilant about the length of your stay to avoid being deemed a U.S. resident, for tax purposes.
You will be deemed a resident if you stay in the country 183 days or more, according to the following formula:
- at least 31 days during the calendar year AND
- for a period of 183 days or more calculated by adding:
- all the days of your stay during the current year
- 1/3 of the days during the preceding year
- 1/6 of the days during the second preceding year
In other words, the total amount of time you've spent in the U.S. over the past 2 years is taken into consideration. For example, if you spend more than 123 days in the U.S. over 3 consecutive years, you'll reach a total of 183 days.
Renting your condo
If you rent your condo, your tenant must withhold and remit 30% of the gross rental amount to the IRS (Internal Revenue Service) within a month of paying the rent.
However, if you decide to apply the tax to your own net income, you have to inform your tenant of your intention and fill out the form that exempts him or her of the obligation to withhold the tax.
Net rental income is also taxable in Canada and in your province of residence. Paying taxes in the U.S. entitles you to a foreign tax credit on your Canadian and provincial income tax return.
Selling your condo
As a Canadian resident, you're subject to a withholding tax of 15% of the gross sale price which the U.S lawyer or title agent has to pay to U.S. authorities. (The profession of notary doesn't exist in Florida.)
However, no withholding is required if the following 2 conditions are met:
The transaction mount is less than $300,000. Meaning if you sell your condo for $274,000 and you only paid $40,000, you are exempted from the FIRFTA withholding.
The buyer formally declares that the property will be his or her principal residence.
Whether or not a tax applies, you have to file a federal U.S. tax return to declare your capital gains, which are subject to the minimum 20% tax rate on the total earnings (not half, like in Canada).
Taxes deducted at source at the time of sale will be used, if applicable, to reduce the income tax applicable on the capital gains. No taxes are owed to the state of Florida, which is not the case in all U.S. states.
Capital gains declaration (Canada and Quebec)
As a Canadian resident, you have to declare your capital gains, half of which are taxable. You will be entitled, in both your Canadian and provincial income taxes, to a foreign tax credit equal to the income tax due in the U.S.
Though the property is outside of Canada, you can designate it as your principal residence, thereby avoiding the payment of Canadian taxes at the sale.
Note : You can designate only one principal residence per couple. If you own 2 properties, say one in Canada and one in Florida, take the time to determine which one will provide the greatest tax savings.
For personalized advice and information, it is strongly recommended that you consult a tax specialist or a financial planner who is very familiar with U.S. legislature.