Removing the Fear of Buying in the US for Canadians-Part 2

February 12th, 2011 | Buying Property in the U.S. |

Removing the Fear of Buying in the US for Canadians

Managing tenants from Canada

No one likes tenant problems. Even in your Canadian properties, tenant problems are a time consuming hassle. If you are managing your own Canadian properties, my humble opinion would be to hire a competent company to do that for you. As in any business, time is money. I know from experience that with my first rental properties many years ago, I was too cheap to pay a management company and as a result, wasted tons of time both filling the units and keeping the tenants happy. I finally gave my head a shake and realized the time I was wasting dealing with my tenants could be better spent finding other deals. When I thought about the hourly wage I created for myself, I realized it was alot cheaper to hire property management.

There are many excellent property management companies in the U.S. that have proper screening, tenant managing, collections and eviction processes that are very reasonably priced.

Real estate investing is a team sport. We highly recommend having a team for success in place as you would in Canada. Including property management, your team should  include a lawyer who knows the best corporate structure for a Canadian; an accountant that understands taxation on both sides of the border; an insurance person that knows investor situations such as property renovations and rental properties; a contractor you can trust to do work on time and budget; lenders that will finance your properties; an escrow agent who appreciates you are doing business from another country; a banker who can assist in your account set up and money transfers; a mentor who can both educate and find you a stream of great deals.

We had to painstakingly create a success team which took many months, many meetings and a number of deals to finally decide on the team members. We now share this team with our students and save them tons of time and money.

What about financing?

We get asked alot about this. The banks have gone from being incredibly lenient with their lending criteria during the boom to being extremely stringent with their lending policies. That doesn’t mean it’s impossible to get financing in the U.S., it just means you have know what the banks are currently comfortable with.

Obviously cash purchases are your best bet. Even if you pull the cash from a HELOC or other credit line, it is the cheapest money you will be able to use and the best kind of leverage; using the bank’s money at 3 -4% to get 15 – 30% returns is pretty good use of tax free use of cash.

The process to acquire a mortgage in the U.S. is very similar to in Canada. If you can qualify for a similar mortgage amount in Canada, chances are you will qualify for a U.S. mortgage.  In most cases you can expect to put 25-35% down and receive a rate of 4-12% which will still provide handsome double digit returns and allow for further portfolio growth.  The banks will require a personal covenant for the loan however we suggest moving the property into your corporate structure shortly after closing. A number of states have no property transfer tax so this process is very inexpensive.

Appreciation

We are buying nice properties at anywhere from 40-70% below the cost of construction. Since the crash in 2007/2008, Phoenix for example, like a number of U.S cities has seen little to no construction however, migration continues to be significant year over year and will continue to increase as baby boomers retire to warmer climates. By the end of 2012 or early 2013 there will be significant need for new homes as the entire foreclosure home inventory will have been sold. This means in order to begin construction, which currently costs $100-$125 per square foot for an average home, property values which average $50 per square foot today, will have to come up to meet new home values. With supply shrinking and demand increasing, prices will naturally go up.

Closing thoughts

There could not be a better time to get involved as a Canadian investor. With good deals becoming increasingly harder to find in major Canadian cities that are experiencing a real estate cycle at its top, we highly recommend investigating a real estate cycle that is at its historic bottom. Not since the Great Depression has the U.S. experienced a recession with interest rates so low. Never before have investors been able to purchase properties at prices that are the same value as they were 10-12 years ago.

This is an opportunity that may never come around again in our lifetimes, and it is forecast to be over in 12-18 months as all the foreclosures are processed through the system and sold to investors like you and me. The process may seem daunting, but we make it easy for investors to get over the same hurdles we experienced. Don’t miss out on your opportunity to “buy low-sell high!”

If you would like more information on how to get involved in buying US real estate,
email me at info@propertyprohets.ca.

#propertyprophs
#realestateapprentice
#canadianrealestate.

Removing the Fear of Buying in the U.S. for Canadians

Managing tenants from Canada

No one likes tenant problems. Even in your Canadian properties, tenant problems are a time consuming hassle. If you are managing your own Canadian properties, my humble opinion would be to hire a competent company to do that for you. As in any business, time is money. I know from experience that with my first rental properties many years ago, I was too cheap to pay a management company and as a result, wasted tons of time both filling the units and keeping the tenants happy. I finally gave my head a shake and realized the time I was wasting dealing with my tenants could be better spent finding other deals. When I thought about the hourly wage I created for myself, I realized it was alot cheaper to hire property management.

There are many excellent property management companies in the U.S. that have proper screening, tenant managing, collections and eviction processes that are very reasonably priced.

Real estate investing is a team sport. We highly recommend having a team for success in place as you would in Canada. Including property management, your team shouldinclude a lawyer who knows the best corporate structure for a Canadian; an accountant that understands taxation on both sides of the border; an insurance person that knows investor situations such as property renovations and rental properties; a contractor you can trust to do work on time and budget; lenders that will finance your properties; an escrow agent who appreciates you are doing business from another country; a banker who can assist in your account set up and money transfers; a mentor who can both educate and find you a stream of great deals.

We had to painstakingly create a success team which took many months, many meetings and a number of deals to finally decide on the team members. We now share this team with our students and save them tons of time and money.

What about financing?

We get asked alot about this. The banks have gone from being incredibly lenient with their lending criteria during the boom to being extremely stringent with their lending policies. That doesn’t mean it’s impossible to get financing in the U.S., it just means you have know what the banks are currently comfortable with.

Obviously cash purchases are your best bet. Even if you pull the cash from a HELOC or other credit line, it is the cheapest money you will be able to use and the best kind of leverage; using the bank’s money at 3 -4% to get 15 – 30% returns is pretty good use of tax free use of cash.

The process to acquire a mortgage in the U.S. is very similar to in Canada. If you can qualify for a similar mortgage amount in Canada, chances are you will qualify for a U.S. mortgage.In most cases you can expect to put 25-35% down and receive a rate of 4-12% which will still provide handsome double digit returns and allow for further portfolio growth.The banks will require a personal covenant for the loan however we suggest moving the property into your corporate structure shortly after closing. A number of states have no property transfer tax so this process is very inexpensive.

Appreciation

We are buying nice properties at anywhere from 40-70% below the cost of construction. Since the crash in 2007/2008, Phoenix for example, like a number of U.S cities has seen little to no construction however, migration continues to be significant year over year and will continue to increase as baby boomers retire to warmer climates. By the end of 2012 or early 2013 there will be significant need for new homes as the entire foreclosure home inventory will have been sold. This means in order to begin construction, which currently costs $100-$125 per square foot for an average home, property values which average $50 per square foot today, will have to come up to meet new home values. With supply shrinking and demand increasing, prices will naturally go up.

Closing thoughts

There could not be a better time to get involved as a Canadian investor. With good deals becoming increasingly harder to find in major Canadian cities that are experiencing a real estate cycle at its top, we highly recommend investigating a real estate cycle that is at its historic bottom. Not since the Great Depression has the U.S. experienced a recession with interest rates so low. Never before have investors been able to purchase properties at prices that are the same value as they were 10-12 years ago.

This is an opportunity that may never come around again in our lifetimes, and it is forecast to be over in 12-18 months as all the foreclosures are processed through the system and sold to investors like you and me. The process may seem daunting, but we make it easy for investors to get over the same hurdles we experienced. Don’t miss out on your opportunity to “buy low-sell high!”