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BY Michael Light / On January 22, 2016

 
As the majority of my clients are international, I have several long-time clients from Canada, 2 of which have recently contacted me to sell their condos in Miami. When I asked them each for their reasons, they both gave me the same answer,the exchange rate.”

Moreover, both of these clients purchased condos between 2010-2012, a period of time at which the Canadian Dollar (“CAD” or “CAN$“) was approximately even with the U.S. Dollar (“USD” or “$“). For many years, Canadians were purchasing Miami real estate to take advantage of this nearly even rate. If they were going to spend CAN$500,000 to purchase in Canada, why not purchase in Miami for the same amount in USD and have a great winter retreat from the cold. However, in late 2014, the exchange rate began to shift as the USD strengthened.

This week, the exchange rate is approximately $1.00 to CAN$1.45. This means that the same $500,000 “even swap” I mentioned above would cost you CAN$725,000 today!

Let’s look at a hypothetical example of a Canadian condo owner in Downtown Miami. She purchased a 1-bedroom condo at Marina Blue in January 2013 for $300,000. Upon exchange at the time, this purchase cost her CAN$297,000. The unit has since been rented with no vacancies for the past 3 years with a return of 4% per year (3.5% – 4% return is average in Miami). After getting a modest return on her money, she decides to list it for sale at $415,000 today. At full asking price, the gross profit would be $115,000, plus the 4% return for 3 years, totaling approximately $151,000. That’s a 50% return on her original $300,000…looks like a great investment.

Now, let’s look further at the numbers once it is converted back to CAD. A $415,000 closed sales price becomes a whopping CAN$602,000! That is a gross profit of CAN$305,000 above the CAN$297,000 she spent to purchase the property. That is over a 100% return on her investment…now that 50% return above doesn’t look as good, does it.

Purchase:
January 2013 – $300,000 | CAN$297,000

Sale (At full asking price):
January 2016 – $415,000 | CAN$602,000 

USD to CAD 5 Year Exchange Rate
USD to CAD 5 Year Exchange Rate

Make Sense?!

I know this is a very simplistic way to look at the numbers, but I am trying to prove a point. When buying or selling, there is much more that comes into play than just price. Miami has the highest level of foreign buyers in the entire country. When working with buyers or sellers, I, as a licensed real estate broker, have to understand the complexities of more than just sales price. Buy low, sell high doesn’t always make sense unless you couple that with the right exchange rate on both purchase and sale.

On Wednesday of this week, the CAD, commonly referred to as the “loonie,” fell to its cheapest value since April 2003. Real estate investors from Canada must look at this as a prime opportunity to sell in the States. Between Miami seeing its highest real estate values since the market downturn and the loonie at its lowest value, this is a prime “sweet spot” for Canadian investors to cash out with enormous gains.

If you, or someone you know, are interested in selling your condo in Miami or Miami Beach, please contact your Miami condo specialist, Michael Light. You may reach me directly at my office at (305) 350-9842, on my cell phone at (786) 566-1700 or via email at michael@miamiluxuryhomes.com.
 

Disclaimer: The information contained herein is for informative purposes only and should not be relied upon. Please also note that currency exchange rates fluctuate on a daily basis, and although I am a licensed and experienced real estate broker, I am neither a certified accountant nor a licensed tax attorney.
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