Cracking the Code: Why the U.S. Real Estate Market is More Lucrative than the Canadian Market with SHARE


Investing in U.S. real estate has become a topic of increasing interest, especially given the challenging conditions in the Canadian real estate market. For Canadian investors seeking more lucrative opportunities, this exploration is both timely and essential.

Challenges in the Canadian Real Estate Market

The Canadian real estate market is currently fraught with challenges. Overpriced properties and landlord-unfriendly laws have made it difficult for investors to achieve desirable returns. Many landlords struggle to collect rent, with some tenants occupying properties for years without paying. Additionally, low cap rates and poor cash-on-cash returns create an unattractive environment for real estate investors. The Canadian market’s significant contribution to the national GDP incentivizes maintaining inflated prices, making a major correction unlikely in the near future. As a result, investors are left in a precarious position, searching for better opportunities abroad.

Exploring U.S. Real Estate

Given these domestic challenges, many investors are turning to the U.S. real estate market. Andrew Kim from SHARE, an investing platform designed to help Canadians explore and invest in U.S. real estate, provides valuable insights. SHARE offers end-to-end services, from identifying profitable markets to managing investments, making it easier for Canadians to navigate the U.S. market.

Introducing Andrew Kim and SHARE

Andrew Kim is a technology entrepreneur with extensive experience in building and selling technology ventures. He began investing in real estate in 2010 in Ontario, Canada, before transitioning to the U.S. market in 2011. His passion for technology and real estate led to the creation of SHARE, a digital asset management platform offering a REIT-like experience with direct property ownership. Unlike traditional REITs, where asset managers retain a significant portion of the upside, SHARE ensures that investors keep all the profits. The platform focuses on the single-family rental (SFR) market, guiding investors through market selection, financing strategies, and long-term portfolio management.

Why the U.S. Real Estate Market?

Andrew’s journey into U.S. real estate began with a realization: the economics were far more favorable than in Canada. In 2010, he invested in Ontario properties far outside the Greater Toronto Area, where even foreclosed homes cost around $350,000. In contrast, he discovered properties in St. Petersburg, Florida, priced at $100,000 with cap rates of 9-10%, including property management fees. These properties offered substantially higher returns compared to the low single-digit cap rates of his Canadian investments, which did not account for property management costs.

The attractiveness of the U.S. market is further underscored by significant institutional investment in single-family rentals, signaling a strong, investable asset class. Many Canadians might not realize the potential of the U.S. market, but the data speaks for itself.

Institutional Investment in Single Family Rentals (SFR)

The presence of large institutional investors in the U.S. single-family rental market provides a level of reassurance. Major Canadian pension funds are indirectly involved in U.S. SFR investments, showcasing the trust and stability perceived in this market.

Price Disparities and Market Dynamics

The significant price differences between Canadian and U.S. real estate markets are striking. For instance, a property in the Greater Toronto Area (GTA) might cost $600,000 to $700,000, whereas a similar property a few hours away in the U.S. might be around $250,000. This disparity is influenced by several factors:

  • Number of Major Metros: The U.S. has a higher number of large metropolitan areas, leading to a more diverse job market and population distribution. Canada, on the other hand, sees a concentration of population and jobs in a few cities like Toronto, Montreal, and Vancouver.
  • Population Size: The U.S. population is significantly larger than Canada’s, which affects real estate dynamics. The population spread across many cities in the U.S. contrasts with Canada’s concentrated urban centers.
  • Job Market Diversity: U.S. cities often have diverse economies encompassing logistics, technology, health, and manufacturing, which attract a varied workforce. In Canada, cities like Alberta are heavily reliant on industries like oil and gas, making them more susceptible to economic cycles.

Investment and Affordability

In the U.S., cities like Atlanta offer more affordable housing compared to Canadian cities, and even within the U.S., prices can vary significantly outside major metros. This affordability and the corresponding rental demand make certain U.S. markets attractive for investors.

Institutional Presence and Market Stability

The institutional presence in the U.S. SFR market brings about an ecosystem of services, including property management, which is lacking in Canada. This institutional involvement ensures higher quality management and service, reducing the risks associated with managing properties remotely.

2008 Financial Crisis and Market Resilience

A significant reassurance for investors wary of market volatility is the resilience shown by the U.S. SFR market during the 2008 financial crisis. Unlike many sectors that suffered, the SFR market maintained its stability and attracted institutional investors due to its reliable cash flow potential during economic downturns. This resilience underscores the SFR market’s capability to weather financial storms, offering a safer investment harbor.

Mortgage Structures and Cash Flow

The U.S. mortgage system provides another layer of stability with its 30-year fixed-rate mortgages. This contrasts sharply with Canada’s shorter-term, often variable-rate mortgages, offering U.S. investors more predictable long-term cash flow and easier management of their investments. For Canadian investors, this means entering a market where financing structures support sustained profitability and reduced financial stress over time.

Homeownership Culture and Out-of-State Investments

In the U.S., there has been a cultural shift towards renting and investing out-of-state, driven by high property prices in many local markets. This flexibility is less common in Canada, where investors are more accustomed to local or provincial real estate investments. However, embracing this shift can open up a broader range of opportunities, allowing Canadian investors to capitalize on more affordable and high-potential markets across the U.S.

Identifying Attractive Markets and SHARE’s Role

Regions such as the Sunbelt, Texas, Georgia, and parts of the Midwest have become hotspots for SFR investments due to their diverse job opportunities and affordable housing. These areas offer promising returns and are particularly attractive to investors seeking stable and growing markets. SHARE assists Canadian investors in navigating the U.S. market, providing support and infrastructure to make out-of-state investments more feasible and attractive.

Key Takeaways for Canadian Investors

  • Institutional Trust: Investments from Canadian pension funds in the U.S. SFR market signify strong stability.
  • Market Resilience: The SFR market’s performance post-2008 showcases its resilience and attractiveness.
  • Mortgage Stability: The U.S. offers 30-year fixed-rate mortgages, ensuring consistent cash flow.
  • Cultural Shift: Adapting to the U.S. trend of out-of-state investing can unlock new opportunities.
  • Investment Guidance: SHARE assists in navigating the U.S. market, identifying promising areas, and managing investments.

By understanding these dynamics, Canadian investors can confidently explore the U.S. SFR market, leveraging its stability, affordability, and robust support infrastructure. Whether you’re new to international real estate or looking to diversify your portfolio, the U.S. SFR market presents a compelling opportunity worth considering. Let SHARE be your trusted partner in this journey, ensuring your investments are well-informed and strategically positioned for success.