I always keep my eyes open for real estate deals; and my recent visit to the Sunshine State was no exception. Not that I had to look very hard - everything I have been reading in the news is true. U.S. property values have reached an unimaginable low. It is a buyers' dream. From what I was told, many properties are being scooped up at huge discounts by Canadian investors, or Canadian Snowbirds looking to soon retire.
And if there's a deal to be had, I want a piece of the action! So I investigated further…
Right now, Canadian investors are experiencing the "perfect storm" in Florida. Bottomed-out housing prices, the strong loonie, and low lending rates are bringing Florida investments properties within the reach of virtually any investor. Can I actually make money here, or is everyone just buying the hype?
The top two things that I need to know are: 1. How do these prices compare to Canadian prices? And 2. Can they be rented to positive cash flow?
First, I compared a property in Florida to similar properties in Toronto, Collingwood and Vancouver. The anchor property in Florida is a 1,362-square-foot, two-bedroom, two-bath unit, backing onto a golf course, listed for $174,000 (U.S.) This property was as nice as any I've seen in Canada, and after doing a little homework; I discovered that the same unit, just a few buildings down the street, sold for $389,490 (U.S.) in 2006! A quick negotiating conversation with the sales staff revealed that they could offer me the unit at $160,000.
Next, I researched rental rates in each city for similar units, to estimate the projected annual rent. It is always important to ensure that the gross rental revenue covers your expenses and services your debt.
The massive list price differential surprised me. Prices between 2004 and 2006 for similar units in Florida and Canada seemed to be floating around the same level, $380,000 to $420,000. However, from 2006 to today, prices have abruptly shot in opposite directions; they have skyrocketed in Canada, and in Florida they went south.
Comparing the Florida property to similar units in Canada, I found that to receive 11/2 or two times the rental income, I would have to spend three times the money! Then I thought, "What would my $160,000 buy me in Toronto?" and found a listing uptown. Finally, I compared what kind of bang for my buck I could get if I were prepared to spend $600,000 in Florida.
Clearly, the anchor property in Florida is the only one that offers good value in terms of rental income vs. purchase price. It's an investment that can cover its financing and carry costs while generating a little cash flow to boot. If you are looking to secure yourself a little piece of paradise south of the border before the U.S. real estate market recovers, I suggest you act fast.
At the time of writing, I have not bought any property in Florida - yet. When I shared my findings with family and friends, a family friend was so inspired that they visited the property I profiled in this article, and purchased it one week later, for $155,000 (U.S.). They close in November, have already received offers to rent, and plan on signing a lease within the next couple of weeks.
Hmm… Now, why didn't I think of that?
Crunching the numbers:
Property 1: $160,000 (U.S.)
Location: Naples, Fla.
Lifestyle: Gated community, 1,200 residents, central clubhouse with social room, conference room, spa, resort pool.
Interior: 1,362 square feet, two bedrooms, two baths, overlooking lake and golf course
Exterior: Four-storey building, new build
Annual condo fees: $8,936
Annual rental income: $12,000-$18,000 (U.S.)
Property 2: $599,999 (Cdn)
Location: Queens Quay, Toronto
Lifestyle: Upscale, well-managed building, close walk to yacht club, airport and entertainment
Interior: 980-square-foot penthouse, two bedrooms, two baths, overlooking lake and park
Exterior: 16-storey building on Lake Ontario
Annual condo fees: $8,118.84 (Cdn)
Potential rental income: $25,000 (Cdn)
Property 3: $575,000 (Cdn)
Location: Roncesvalles, Toronto
Lifestyle: Urban but west of the busy downtown core
Interior: 1,300 square feet, two bedrooms, two baths, rooftop patio
Exterior: Seven-storey building with city views
Annual condo fees: $10,478,64
Potential rental income: $25,000-$28,000
Property 4: $549,000 (Cdn)
Location: Collingwood, Ont.
Lifestyle: Condo community, available room service, workout room, and year-round outdoor pool and hot tub
Interior: 906 square feet, two bedrooms, two baths, overlooking Blue Mountain
Exterior: Four-storey building at the foot of Blue Mountain
Annual condo fees: $10,920 (Cdn)
Potential rental income: $24,000 (Cdn)
Property 5: $659,000 (Cdn)
Lifestyle: Adult living, access to full gym, two saunas, social room, library, workshop, close to ski hill and marina
Interior: 1,025 square feet, two bedrooms, two baths
Exterior: Eight-storey building on waterfront with view of city and ocean, built in 1990
Annual condo fees: $4,506.48 (Cdn)
Potential rental income: $30,000 (Cdn)
Property 6: $164,900 (Cdn)
Lifestyle: Uptown apartment
Interior: One bedroom, one bath
Potential rental income: $18,000 (Cdn)
Property 7: $599,000 (U.S.)
Location: Naples, Fla.
Lifestyle: Gated community, 1,200 residents, central clubhouse with social room, conference room, spa, resort pool
Interior: 2,926 sq. ft., ranch-style bungalow, five bedrooms, three bathrooms, three car garage
Exterior: Half-acre property, 700-square-foot finished patio and entry
Price 2006: $899,000 (U.S.)
Annual condo fees: $10,182.76 (U.S.)
Potential Rental Income: $18,000 to $24,000 (U.S.)
Real estate entrepreneur Scott McGillivray is the host of HGTV's Income Property (hgtv.ca; scottmcgillivray.com).
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