Best and easiest route for Canadians to get financing in the U.S. For rental property

7 Replies

As mentioned in my previous posts my father who lives in Canada is looking to buy a few cash flow investment properties in the U.S. What would be the best and easiest way for him to get financing?

Worth checking out the major Canadian banks "cross border banking" or similar products.

From what I have seen, RBC, TD, and BMO all offer these programs. The great part about them is that:

- You get competitive interest rates.

- They'll use your Canadian source income and Canadian credit history in the loan underwriting.

- Compared to US lenders who (probably? but I don't know for sure; other members may chime in with their experiences) don't recognize Canadian income or credit history and so, will lend on the asset value only (e.g. similar to hard money) - higher interest rates, less flexibility than conventional loans.

Example from RBC's FAQ on this product:

5. What types of properties does RBC Bank finance?

We finance primary and secondary homes and certain investment properties (for existing RBC Royal Bank clients). However, we do not offer commercial financing or financing for multi-unit complexes greater than four units. We also do not finance vacant land (lot loans), manufactured homes (mobile homes), working farms, or condotels (condos that rent rooms on short-term leases or are located in hotels).

Cdn banks like RBC and TD have US branches only in the east coast ....for west coast purchased you will have to find a US lender...I know one particular lender located in Arizona who have a specific program designed for CDNs looking to purchase property in US.

HomeOwners Financial I believe is their name...

@Thomas Lorini

RBC's FAQ states:

2. In what U.S. states does RBC Bank offer mortgages?

We offer real estate financing in all 50 states.

For someone physically located in the US it may be a challenge if the bank wants to see them in person.

OP stated family member is physically located in Canada, which means they'll go to the Canadian branch for all paperwork.

Canadian bank (US subsidiary) will finance on the West Coast (e.g. I have talked to them about California property before I moved here) if it meets their underwriting criteria.

(For what it's worth, I'm a TD Canada Trust / TD Bank customer w/ cross border banking. My US home branch is somewhere in Maine, I've never set foot in it - TD Canada just picked one at random for me, and only required my physical presence in the Canadian one to do all the ID verification, etc. to get banking setup. Whilst I never did a mortgage with them, I can't imagine it'd be much different RE doc signing / process wise).

@Account Closed

Entirely possible that many US lenders will loan as well (per Thomas' note there's an AZ lender that will) - best is to check out all available, and then see what fits your criteria.

The problem that I've seen with these programs when I looked into them a while back (although they change all the time so do your own due diligence) is usually they will only loan in your personal name. You can't own the property in an entity, even if wholly owned by you. That's a real problem from an asset protection and liability standpoint. The other problem with some of the programs is the low (ie 50%) LTV.

Let us know what your current research uncovers. Thanks 

Depends on what kind of properties he wants to buy. I know of some private financing options available for Canadians buying in the US but they only loan on certain types of properties. 

Does he have any markets in particular in mind? Is he wanting to put work into the properties or keep them more hands-off?

I just spoke to RBC. As mentioned above, the RBC US Cross border mortgage requires the property and mortgage under your personal name. It's a huge liability and tax issue for Canadian investors. It may be only suitable for snowbirds purchasing a vacation home, but not for investors. Also, they don't loan to commercial properties at all, only residential, only under your personal name. Does anyone know other options available to Canadian investors who are investing under a US business? Of course, the US business is either owned by a Canadian business or a Canadian individual.