Investing in Kelowna

22 Replies

My wife's family lives in Kelowna (she's from Vancouver Island) and we travel from Seattle to Kelowna 4-5 times each year to visit. For a number of reasons, we feel like it's a good time to invest in the Kelowna real estate market (i.e. single family, condo, townhouse, etc.)

Can anybody recommend a real estate agent in the Kelowna area who has experience with foreign investors, ideally American investors?  And does anybody know of a real estate tax/accountant individual in the Seattle area who has experience in cross-border transactions?

Any insights/recommendations are greatly appreciated.

John

While I can't recommend anyone local, you'll definitely want to take the time to find some good professionals in this regard. We are currently dealing with a couple doing some transactions who are one part Canadian and one part American and there are all manner of complications.

@John Lusk , I find more luck finding qualified tax professional in Canada side than US.  Unfortunately, I don't know anyone locally in Kelowna.  It definitely is attractive investing in Canada due to exchange rate, but be sure you understand tax consequences since taxation on the gain can be heavy for non-resident, as well as, no option like 1031 Exchange in US.  I used to live in Vancouver and now I live in California, and I am moving my investments with me to US primarily for tax friendly reason (and maybe easier to find deals too).  Best of Luck!

@John Lusk , we live in Kelowna and recently bought an investment property through Vantage West Realty. They are specialized in investment properties but can also help with residential units. 

I worked with Chris Muller. 

As far as an accountant or firm we use Grant Thorton, contact Tyler Neils 

We can't list phone number numbers in here  but if you add me I can give it to you

Let me know if you need more assistance

Edison

Thanks for all the great feedback/insights.  Based on my limited research I had assumed that capital gains taxes would be relatively steep. The process of even getting to the point of actually realizing a gain, as a foreign investor, is a bit of work as well.  First step is to find the right folks who can help guide us through this process. @Edison Reis very much appreciate the connections. Adding you now.

Originally posted by @Myo Thein :

@John Lusk , I find more luck finding qualified tax professional in Canada side than US.  Unfortunately, I don't know anyone locally in Kelowna.  It definitely is attractive investing in Canada due to exchange rate, but be sure you understand tax consequences since taxation on the gain can be heavy for non-resident, as well as, no option like 1031 Exchange in US.  I used to live in Vancouver and now I live in California, and I am moving my investments with me to US primarily for tax friendly reason (and maybe easier to find deals too).  Best of Luck!

Hi Myo,

It is true that Canada does not have anything like the 1031 Exchange.  However, U.S. Citizens that invest in foreign real estate can still structure a 1031 Exchange and defer any U.S. income tax consequences upon the sale/exchange of the property.  The investor would still pay any Canadian taxes that might be due, but the U.S. taxes could be deferred through the 1031 Exchange as long as they meet the 1031 Exchange requirements and sell foreign rental/investment property and reinvest in foreign rental/investment property.  We administer exchanges of international property all the time. 

Bill, that's very true.  But after paying a hefty Canadian tax (29% + additional 45% surtax for non-resident on the tax owing -- so roughly 35%), I think you might as well claim foreign tax to Uncle Sam (worse case less than 30% for long term gain) at the same time.  I personally see no value in paying Canadian tax than claiming 1031 exchange in US.  Maybe I might be missing something.  But again, I am by no mean tax professional.  Speaking from my own experience as selling my Vancouver property while I am non-residence of Canada.

@John Lusk The market in Kelowna is doing very well at the moment, I have worked with a number of tax accountants in Arizona for our investments there. I would assume they would be able to help you going the other way. I have not worked with anyone in Seattle. 

Regarding agents in Kelowna I have been licensed with ReMax for years and prior to that was a founding Partner of Vantage West realty. We have a great team in the Okangan and would be happy to help you out or just answer some questions.

We also have some great currency brokers if you end up buying in Kelowna.

@Bill Exeter Great comments! I sure wish we had a 1031 program in Canada.

Just following up on this post. We ended up going with a SFH in Vernon (just North of Kelowna) as the Kelowna market was a bit too competitive at our price point. At a vacancy rate of 1.4%, and the potential to rent out a 'suited' basement (essentially our SFH purchase acts kind of like a duplex but with more of a mother-in-law look and feel), the COC return is very attractive. Downside is definitely the 35% downpayment requirement for non-residents, but with some creative financing on our end, we're still able to get to a strong COC.

@Joel Sherlock we actually ended up going with Chris Mueller from Vantage West based on a recommendation from @Edison Reis  on this thread.  We've been very satisfied with our experience.

Thanks to everyone for all of the feedback and recommendations. We're still working through a number of small challenges but looking to close and take possession by 6/15.

@John Lusk ! Wow excellent news ! Vernon is indeed an attractive area where the prices aren't as crazy as Kelowna. I am glad Chris managed to help you appropriately. (I hate when a refer someone and they drop the ball)

All the best of luck and please keep in touch ! 

@John Lusk there are no legal basement suites in Vernon, unless the owner occupied one of them.  So you can get away with it until you are reported but it is a risk and the city may shut you down.

I suspect if you are buying in a lower end area of the city you can probably get away with it for a long time as the neighbors probably don't care as much.

If you try and operate an illegal suite in the 'fancy' parts of town like East Hill I suspect the neighbors will be calling the city very quick to complain.

@Robert Gunther Thanks for the note! We discovered this bylaw when doing our due diligence. We actually went to the city to see how many complaints were received last year to get a sense of the risk. There was 1. In East Hill. The city isn't doing much to promote this bylaw as most realtors/investors don't seem to know that it exists (or are choosing to just ignore). Regardless, it's a risk and I would suggest that anybody thinking about suiting base their conservative model on renting as a SFH rather than a suited home.

All that being said, 90% of the suited homes we looked at in Vernon, were illegal, non conforming suites...so maybe the city is turning a blind-eye given how low the vacancy rate is.  

@John Lusk I think in 2014 there was something like 12 legal suites in the entire city.  Since at least one of the units must be owner occupied I guess it does not happen legally often.

There are hundreds and hundreds of illegal ones.  If you look at the property listings a great many of them have existing suites.

In 2014 the council was considering lifting the owner occupied rule but it does not seem to have gone anywhere.  

So they are thinking about it, and with no vacancy anywhere hopefully they relax the rules.  

I believe it is a BC law that a duplex can never have a legal suite, so if they do make it legal at some point the duplex properties with basement units will still not be legal. You mentioned SFH, so hopefully someday they become legal.

congrats @John Lusk on your Vernon purchase! Kelowna/Okanagan market has been an interesting area for me...do you mind sharing the numbers (or rough approx) on your recent purchase? Would like to know how the CoC and cap rate % ended up being with the 35% down payment requirement. Thanks!

@Xuan-Thy (XT) Bui All based on assumptions of course, but on a 35% down payment, my estimates have me coming in at a 10.4% COC return at a 7.2% cap rate. My 'bad case' scenario gives me 8% COC. All that being said, I'm using a LOC against my investment portfolio to finance a portion of the 35% downpayment (I'm fortunate to have access to very favorable rates via my bank), which brings my COC up to 14%. So, if my assumptions hold up, I feel this is a pretty good deal. When I take into consideration the diversification opportunity (money outside of the US for me) and the exchange rate (1.3:1 today), it could be a phenomenal opportunity. Emphasize 'could' as I'm really not planning on playing the currency exchange rate game. Just makes the numbers look much sweeter if the CAD and US move a bit more towards parity.

Keep in mind that the 35% is only required for non-residents. 

@Robert Gunther @Pawan J. @John Lusk Edison Reis

Hello all, I'm from lower mainland, BC and new to BP. Got to know about this few weeks ago and joined right away. I have to say that this is the best platform to learn and educate about RE. I have been studying the Kelowna and Kamloops market and wanted to get some insight from locals about their view on the growth and rental market on SFH with a basement suite. John Lusk congratulations on your investment in Vernon. How is your experience so far managing it from out of country. Have you hired someone local to manage your property.

I didn't hire a local property manager as I wanted to manage the property myself in Year 1 before sacrificing any pm costs. I do have my sister-in-law serving as a defacto manager, so that's helpful.  Managing the property from Seattle is no different than managing a property in a different state, or province. It's never that easy.  It was a huge pain trying to rent it from afar, namely due to not being able to meet potential tenants face-to-face.  And finding the right service providers is a total crap-shoot unless you already know folks or have insights on the good providers. Two things were immensely helpful initially, and have been incredibly helpful since renting in July. 1) By complete dumb-look, I ran across a handyman who's been absolutely spectacular.  2) My real estate agent has be unbelievable, and proactively, helpful in terms of offering advice, making intros, etc.

Posted prematurely.... Kamloops has good, high cash flow, and vibrant construction industry rushing to fill housing demand. We've had 10%+ appreciation for the past 2 years which will likely continue, although we were a "flat market" prior to that since prices doubled in 2006.

Recent news article shows us at 1.5% vacancy.

The university(TRU) is huge and growing fast, double UBC-O in Kelowna.

Hospital to have another $200M expansion in 2020, possible 3rd mine AJAX construction/opening at same time as Kinder Morgan pipeline construction means we'll have a much tighter rental market for the couple of years that takes. 2000 employees taking up short term housing.

Just saw an article that right now someone is renting a walk in closet for $300/mo.

Currently we have a 10,000 job deficit, with 30,000 projected in near future according to a labour study just released.

#1 according to western invest magazine. http://www.westerninvestor.com/news/british-columbia/kamloops-coquitlam-head-list-of-top-towns-for-property-investors-1.2443954

Join the Real Estate Network Training Society Facebook group for updated info on Kamloops, better than me posting thousands of pages of economic data here...

Cheers!

@sam

Hi Sam, I am moving into Kelowna this month from Calgary. Do you have any insight into the market, in this Covid19 world? I am in the Construction industry, REI minded, looking to connect/JV with other investors who could use my skill set to keep capital output low and returns higher.

Would love any advice from you seasoned professionals. 

thanks in advance.