The snowbird dilemma

For many Western Canadians, spending several weeks a year at a second home in the U.S. sunbelt is the highlight of a typical winter. Photo: Tim Correa

THE SNOWBIRD’S DILEMMA

Keep, sell or change your business model? We look at the options confronting B.C. owners of sun properties in the U.S.

By Catherine Dunwoody

Around this time last winter many B.C. residents were relaxing in the sunshine, possibly poolside with a nice frosty something-or-other in their hand. That’s the fortunate lifestyle many so-called snowbirds experience at their vacation homes in America’s sunbelt.

A year later, still under global travel restrictions due to the pandemic, it’s a challenge for B.C. owners to spend time in their second homes in places like Arizona and California. At the same time, snowbirds from colder Canadian provinces such as Ontario or Manitoba are flocking to B.C., either to rent long-term or perhaps buy, making our provincial property market in areas like the Okanagan and Vancouver Island more robust than ever.

So what does a snowbird do, with clipped wings? Do you sell your U.S. property and put the proceeds into lifestyle purchases, property or investments in Canada? Or do you keep the U.S. property and patiently ride out the pandemic recovery? We talked to two experts who offer solid advice at this unpredictable time. OPTION 1: SELL AND RE-INVEST

Not being able to spend several weeks annually in your U.S. home is a dealbreaker for some. With land borders still closed between the U.S. and Canada, driving across is not an option and flying for some is still out of the question, health-wise. Listing your property, in what is presently a strong seller’s market, then taking those funds and investing them at home—in a Gulf Island cottage, perhaps, or building that sundeck you keep putting off at your primary residence—might be smart.

David Sung, president of Nicola Wealth, envisions an owner of a $300,000 condo in Scottsdale that can’t currently be used. “They could sell it and invest it in a real estate investment trust; a well-structured pool could generate about six per cent income

per year, meaning $18,000 [annually]. So now instead of having a $300,000 condo that could potentially go up in value, they now have a basket of $300,000 real estate investments that also could go up in value, but generating $18,000 in income... you have $18,000 to go out and rent any place you want.”

OPTION 2: KEEP THE PROPERTY AND WAIT OUT THE RISK

Riding out the pandemic and asking a trusted neighbour who lives in your U.S. community to keep an eye on your place, or hiring a property manager in your absence, may give you the peace of mind to keep your dream vacation home.

Yet an investment property you’re not using ties up a chunk of your assets. Tricia Lehane, a realtor with Arizona Canadian Connection, RE/MAX Excalibur of Greater Phoenix/Scottsdale, has created educational workshops in every major Canadian city for years now, geared to those who are considering buying in America.

She says, “I am also working on a campaign right now for Canadians who own homes there, who are not able to come down, to consider pulling out some of their money to Canada by refinancing it. RBC does it and it’s a very simple process.” That can allow you to access some of the capital tied up in your property now, without selling it, for other investment or recreational pursuits.

OPTION 3: KEEP THE PROPERTY AND RENT IT OUT

“The demand is going to stay strong for seasonal rentals. It’s a very positive way to go for Canadian owners,” says Lehane, referring to the 6,800 B.C. residents who own in Arizona. “With last summer’s fires in California, many people left their homes to rent here in Arizona,” she says of the U.S. domestic rental market. Ensuring you have a good rental agent should help with the anxiety around being a long-distance landlord. Look into local restrictions regarding minimum and maximum rental stays as well.

Sung gives another benefit to generating U.S. rental income. “For our clients who we help manage investments in the U.S., the cash flow generated from these investments is in U.S. dollars and used for the expense of keeping [the property] without the risk of currency conversion.”

So: love it or leave it? Sung weighs in on this very personal decision, saying, “this pandemic creates a great opportunity to reassess your situation. Ask yourself if you are using the property enough? Do your investment dollars work? Is the capital you have in that property best left in that property and owning it, or would you be better taking that capital and redeploying it elsewhere?” Either way, your investment holds promise to help fund a right-sized future for you.

Covid-19 Health Insurance

Are concerns around insurance holding you back from travel or your seasonal home?

Not being insured fully in the U.S. should factor into your decision to visit. Though several Canadian providers have begun issuing travel insurance policies for south of the border, here’s what you need to know.

Experts suggest no less than $200,000 in travel-related health insurance. Some policies have a 21-day limit, while many snowbirds stay south for up to six months. All the major Canadian airlines are offering coverage with new bookings originating from Canada, but read the fine print first: there may be caps on coverage, length of stay and other limits.

Homes in Arizona had a strong rental season in summer 2020, despite the pandemic, due to displaced California residents who rented there. Photo: Tim Correa