Fly snowbird fly, but there are some things to know before you settle


Looking to invest in a vacation home outside Canada? Before planting roots abroad, experts advise doing some extra exploration

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MONEY MILESTONES: In an ongoing series, the Financial Post explores personal finance questions tied to life’s big milestones, from getting married to retirement.

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For those nearing retirement age, choosing a more permanent vacation property to avoid Canada’s dipping temperatures every winter can seem very appealing.

Nearly one million Canadians spend their winters in the United States each year, according to the latest statistics from the Canadian Snowbird Association, with half of them living in Florida.

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No surprise then that sales of condos and townhouses in South Florida in October 2021 rose nearly 25 per cent compared to the year prior, but the average home sale price of US$345,000 to $406,500 is a bargain by big city standards on this side of the border. Even those snowbirds who sold off their Florida properties during all the COVID-19 uncertainty are expected to reinvest as economies settle.

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“For many people, the pandemic became a little bit like a fire drill for retirement because they realized they could work from anywhere … so this idea of expanding your horizons and being in warmer climates is certainly more attractive after COVID,” said Darren Coleman, senior vice-president, Private Client Group, and portfolio manager at Raymond James Ltd., a cross-border financial services provider.

For many people, the pandemic became a little bit like a fire drill for retirement because they realized they could work from anywhere

Darren Coleman

But he advises all clients investigating property purchases abroad to first spend some serious time in their target destination to experience it like a resident rather than just a tourist.

Coleman said readily accessible services such as Airbnb and Vrbo make it easy to live in many destinations for a month or two, or more.

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“That can be very helpful to realize if you have enough proximity to a grocery store, dry cleaners and health-care services,” he said. “We recommend people go and test a few real estate markets so they can see where they can build friendships and experience the lifestyle they really want.”

Tourists as they bike along the beach in Miami, Florida.
Tourists as they bike along the beach in Miami, Florida. Photo by DANIEL SLIM/AFP via Getty Images files

Keep in mind that living outside typical tourist areas may require having a good grasp of the local language, depending on the country.

Once you’ve determined the right location, look at the entire purchase price, including real estate and legal fees, property taxes, homeowner association and maintenance fees, as well as future income tax implications.

“Many times, we just go online and look at the price tag, but that’s not the full story,” Coleman said. “And if you’re going to earn income from this property, that is going to create some tax reporting obligations, too.”

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Many times, we just go online and look at the price tag, but that’s not the full story

Darren Coleman

If considering a condo, he also advises checking the financial health of the condominium corporation.

“One of the things we saw after the financial crisis when properties became inexpensive was that we had to advise clients to go in and see the (financial) books,” he said. “If they’ve run out of money because people aren’t paying, they’re going to hit you with that bill.”

While still a ways from retirement, Elke Rubach, financial adviser and founder/president of Rubach Wealth in Toronto, was seriously contemplating buying a vacation property in Tulum, Mexico, this year because of its warm climate, beautiful beaches and low cost of living. Mexico is home to more North American expat retirees than any other country in the world.

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She found a property at the right price, with a built-in maintenance service and an option for rental income, but still decided against purchasing.

The world economy is not stable, inflation is out of control (and while) real estate is arguably a safe bet, it’s not looking great for tourism

Elke Rubach

“The world economy is not stable, inflation is out of control (and while) real estate is arguably a safe bet, it’s not looking great for tourism,” she said. “I will revisit next year as there is no shortage of new projects.”

For any out-of-country property purchase, Rubach said it’s essential to run cash-flow models using different assumptions, such as foreign-exchange fluctuations, rising interest rates and inflation.

“Always run the best- and worst-case scenarios and ask questions such as: How stable is the currency? How reliable is the legal system? And do you have the network in place if something goes wrong?” she said. “Then if you do buy, make sure it’s in your will and you have a succession plan.”

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If the numbers work, the next hurdle may be securing financing, Coleman said. It might be theoretically possible to get financing in a foreign destination, but he said banking systems oftentimes aren’t integrated across countries so accessing credit bureau reports can be difficult.

“We recommend having your Canadian financing used first in securing the property,” he said, adding that could entail using, for example, the line of credit on your home to make the foreign purchase. “You really have to get your ducks in a row to make sure it’s done correctly.”

Regardless of where you buy, Rubach said purchasers of foreign properties should seek out local counsel and realtors to work with, even if they have Canadian representation already, to ensure no details fall through the cracks.

“Make sure they are reputable, tried, true and tested,” she said. “Going for the cheapest may end up costing a ton later.”

Finding a financial expert and legal counsel well-versed in both markets is the ideal scenario, Coleman said. “Or at least ensure they are talking to each other as you don’t want any decisions made in isolation.”

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