The Okanagan Valley is an increasingly popular destination for U.S. citizens seeking a second property in Canada. With its picturesque lakes, award-winning wineries, and a lifestyle that seamlessly blends outdoor adventure with urban amenities, the Okanagan offers an irresistible draw for vacation home buyers. But before you take the plunge, it's crucial to understand the financial, legal, and logistical aspects of purchasing a vacation home in this beautiful region.

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Here’s everything you need to know about buying a vacation home in the Okanagan, based on up-to-date information as of January 2025.

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1. Financing Your Okanagan Vacation Home

Purchasing a vacation property in the Okanagan as a U.S. citizen involves navigating the Canadian mortgage landscape. Here’s what you need to keep in mind:

• Down Payment Requirements:
  As of January 2025, most Canadian lenders require a minimum down payment of 35% for non-resident buyers. This is a substantial amount compared to the typical 20% required for Canadian residents. For example, if you're looking at a CAD $750,000 property in Kelowna, you would need to pay a down payment of CAD $262,500.
• Mortgage Rates:
  Mortgage rates in Kelowna for a 5-year fixed term as of January 2025 hover around 4.14%. If you finance CAD $487,500 (after the 35% down payment), your monthly mortgage payments would be approximately CAD $2,600.
• Mortgage Approval Process:
  U.S. buyers will need to provide thorough documentation to secure financing. This includes proof of income, credit checks from both the U.S. and Canada, and proof of assets. Given the complexities of non-resident financing, it’s advisable to work with a Canadian mortgage broker who specializes in cross-border transactions.

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2. Property Management Considerations

Owning a vacation home in the Okanagan often means that you'll need a reliable property management service, especially if you plan to rent it out when you’re not there. Here’s what to expect:

• Property Management Costs:
  Property management services generally cost between 8% to 12% of monthly rent for long-term rentals. For short-term vacation rentals, the management fees can range from 20% to 30% of your rental income. Coldwell Banker Horizon Realty also offers property management services tailored to your needs, whether you're renting out long-term or short-term.
• Maintenance Services:
  When you're away, it’s important to have a trusted team overseeing your property. This includes everything from general maintenance, snow removal in winter, lawn care in summer, to emergency repairs and cleaning between guest stays. A well-maintained property can also help ensure higher rental rates and repeat guests.

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3. Can You Profit from Your Vacation Home?

The potential for generating rental income is one of the main reasons U.S. buyers consider purchasing vacation homes in the Okanagan. However, there are some important things to understand about rental income.

• Short-Term Rentals (Airbnb, VRBO, etc.):
  New short-term rental regulations came into effect on May 1, 2024. These regulations now limit short-term rentals to properties that serve as the owner’s primary residence. As a result, purchasing a second property for the sole purpose of renting it out on platforms like Airbnb or VRBO may not be permitted unless you meet the primary residence criteria. If you plan to rent your vacation home part-time while you are away, this is a strategy you can still pursue.
• Long-Term Rentals:
  For more consistent rental income, long-term rentals can be a reliable option. The average rent for a three-bedroom home in Kelowna is currently around CAD $2,800 per month as of January 2025. For example, a CAD $750,000 property rented long-term could provide a steady income stream and help offset your mortgage and property taxes.
• Short-Term Rental Income Potential:
  Kelowna’s short-term rental market has been thriving, with an average nightly rental rate of CAD $246 in 2024. Based on a 57% occupancy rate, this could translate to a monthly revenue of approximately CAD $13,972 during peak seasons (assuming 30 nights of rental availability). The off-season rates, however, may be closer to CAD $200 per night.

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4. Property Appreciation

Over the past decade, the Okanagan real estate market has demonstrated impressive growth. Here’s what you can expect:

• Price Appreciation:
  Kelowna’s real estate market has appreciated significantly over the past 10 years. The average home price in 2015 was around CAD $430,000, and by 2025, that figure has risen to approximately CAD $813,974—an 89% increase. For 2025, Kelowna’s real estate market is expected to see a projected 3% price increase across all property types, making it a lucrative market for long-term investment.
• Market Trends:
  The demand for vacation properties in Kelowna continues to rise, supported by the area's growing reputation as a lifestyle and tourism destination. The projected increase in sales volume for 2025 is around 4%, indicating continued healthy market activity.

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5. Taxes and Legal Considerations for U.S. Buyers

As a U.S. buyer, it’s important to be aware of Canadian tax laws and the legal considerations involved in buying property in the Okanagan.

• GST on New Properties:
  When purchasing a newly built property in the Okanagan, a 5% GST applies. For example, if you purchase a CAD $750,000 new build, the GST would amount to CAD $37,500. However, a partial rebate may be available if the property is under CAD $450,000.
• Property Taxes:
  Property taxes in Kelowna are approximately 0.5% of the assessed value of the property. For a CAD $750,000 home, expect to pay around CAD $3,750 in annual property taxes.
• Foreign Buyers Property Transfer Tax:
  Unlike other regions in British Columbia, the Foreign Buyers Property Transfer Tax does not apply in the Okanagan as of January 2025. This makes the Okanagan an appealing choice for foreign investors, as other areas such as Metro Vancouver still enforce a 20% foreign buyer tax.
• Capital Gains Tax:
  If you decide to sell your vacation property and it is not your primary residence, you will be subject to capital gains tax in Canada. The taxable portion of the gain is 50%. However, if you also pay taxes on the sale in the U.S., you may be eligible for a foreign tax credit to avoid double taxation.

You can read more about it detail in our recent article Real Estate Taxes for U.S. Citizens Buying in the Okanagan.

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Conclusion

The Okanagan offers U.S. buyers a unique opportunity to invest in a thriving real estate market with strong rental potential and significant property appreciation. While there are a few hurdles to navigate, including higher down payment requirements, property management services, and tax considerations, the Okanagan remains a desirable location for those seeking a second property or a vacation home.

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With steady market growth, a variety of rental options, and a lifestyle that blends nature with urban living, the Okanagan is poised to remain a top choice for U.S. buyers looking to secure their piece of Canada’s paradise. Contact Coldwell Banker Horizon Realty today for assistance in navigating the Okanagan real estate market. Our team is here to help you find the perfect vacation home, and guide you through every step of the process.