Canadians investing in the US!?

15 Replies

Hey there everyone!

My name is Zach, and I'm a newb to BP. My brother and I are Canadians (dual citizens actually, but born and raised in Canada), currently own two rental condos in Florida (without a mortgage on them), and are looking to sell them and use the money as a downpayment to buy a multifamily unit in Texas. We just started looking around at different financing options, but it seems like there are massive limits for Canadians trying to get a US mortgage. So I suppose I have a couple questions for whoever happens to see this post and knows a thing or two about Canadians investing in US real estate!

- Are there lenders that give mortgages for Canadians looking to buy commercial property in the US?

- What are generally the best options for creating a corporate structure for a Canadian investing in Texas?

- What is other general advise for someone in my position?

Hope to hear back from someone!

Zach

Hi Zach,

There are some options.

What kind of money down and loan size are we talking??

If it's a small loan you would benefit more from TD bank or RBC bank that are from Canada but lend in certain states here where they have branches to Canadians at favorable terms.

The local banks for foreigners have some foreign national programs but they want more than the traditional 25% down which after exchange rates for money and the international tax treaty offset kills cash on cash returns. The local banks have the regulators on them and really want a relationship with a local investor here in the states. Some of my other foreign clients I have called over 100 banks for them to see what was available. It's very limited for foreigners but there are some loans.

If you go larger in deal size for commercial I have CMBS lenders for clients that will lend at regular down payment 25% and rates to foreigners. Certain countries that have no tax returns or are known for money laundering and terrorist activity they will not touch but Canada is not one of them they mention. The minimum loan size is generally 2 million and up so 500k down at 25% and they want to see another 200k liquid for reserves after down payment. You will need about another 50k or so for due diligence and closing costs and lender legal with a 1% origination fee.

Hope it helps.

  

@Zachary Derksen  filing a corporation in Texas is not overly difficult, even for foreign investors. You will want to research which county you plan to locate your business in, because each counties procedures are different. You will also need to register your corporation with the Secretary of State in Texas. You will also need to file your franchise tax papers with the State comptroller after you filed your paperwork with the SOS. Depending on the county you are working in, you may need to file your assumed name certificate with the county clerk first, to verify name availability. 

Recommended order to file is as follows with approximate costs.

1) County clerk assumed name cert. ($20-$250 depending on county)

2) Secretary of State file business organization docs. ($250-thousands)

3) State comptroller you would file your franchise tax documents. ($0 initially, but taxes quarterly)

The projected costs are based on foreign entities, and type of company will determine actual costs.

If you are unsure what forms to file, locate a Texas Business Attorney to help you file, or a really good Real Estate Attorney with foreign investment experience. Best of luck, and welcome to Texas.

Richard: Thanks for that information, that advise provides a solid starting point!

Joel: Thanks for the response! Our loan will definitely be a smaller one. We only have roughly 100k to use as a down payment, and are obviously hoping to leverage that as much as possible. We aren't by any means seasoned investors, so this information helps! I should mention that I have my duel citizenship, so I am an American citizen. I have a US credit card, social security #, and have established American credit. Would this make a difference?

Hello Zachary. I am on the west coast in the Naples/Fort Myers area. We have a LOT of Canadian buyers in this area. Where did you purchase in Florida?

Hi @Zachary Derksen  

Welcome to BP, you've come to the right place for great RE info.  

First off, you should consult with a cross border legal and tax specialist to determine the most appropriate entity structure to use to hold the property. The most common I'm seeing for Canadians to hold US property is via an LLP, however since you are a dual citizen may or may not be the best option.

As for obtaining a mortgage, you can try BMO or RBC but they will only lend on properties up to 4 units, require 40-50% down and need a prior banking relationship with them.  TD Bank doesn't lend in Texas.  Being as you are a dual citizen with a credit rating, should make it easier to get a mortgage. Commercial loans are a good option for 5+ units, but the min loan size is typically $500K with 30% down meaning you'd have to pony up $200K+ at closing.  

You could also reach out to mortgage brokers who specialize in procuring loans for Canadians. I have a few that I work with, PM me if you'd like their contact info.  

Chad

Hi, Is there any Canadians here getting 25% or more cash on cash returns on their  US properties with or without financing?

I am moving into markets outside Toronto where I still can get 20% cash on cash, even 30% in rare instances, so I am curious about how it works out for you by investing in US

Thank you

Filipe

Hi Filipe,

Where are you finding those high returns outside of Toronto?  Only area I could maybe see is the Windsor area.  

you are kinda right, at over 20% only windsor and places like Timmins will do, 

but 20% is still possible in Hamilton and I am sure other towns. You just have to pick the right property.

In US you may find those returns around the corner, but here you just need to wait a few months.  It's fine for me, I buy one per year.

put 2 offers on 2 properties in the last 7 days, missed one by one day -another buyer sent offer first- and got the second one, both allow for 20%.

looking for the next one.

Originally posted by @Filipe Matos:

you are kinda right, at over 20% only windsor and places like Timmins will do, 

but 20% is still possible in Hamilton and I am sure other towns. You just have to pick the right property.

In US you may find those returns around the corner, but here you just need to wait a few months.  It's fine for me, I buy one per year.

 I thought driving to Chicago was bad.. Timmins is way further unless you catch a flight from Porter.. 

I think you can find deals in Cambridge and London that can yield close to 20%. I see some Multi Family in Windsor that is about a 12 cap that can get you close to 20% cash on cash with 20% down and 2.7% variable..

Nice to see Canadians on BP

Hi Zach,

Here is a fantastic article which regarding the Tax planning perspective when buying US property if you are Canadian, check it out, it really helps when doing these cross border type of transactions.

http://www.canadianrealestatemagazine.ca/infocus/cross-border-tax-planning/ 

@Chad Urbshott , I'm also researching on financing options for Canadian to invest in US property, do you mind to share mortgage brokers who specialize in the procuring loans for Canadians? Thank you!

@Karen Ng

Look up Express Capital Mortgage out of Arizona and ask for Eric or Bryan.  Tell them Chad sent you.  

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HI all am Canadian and now invest successfully in the states it has been in interesting time getting from where I was to where I am today... am more then willing to share ... would not change a single step taken but there are lots that I sure would not do a 2d time...financing can be a challenge but all challenges can be overcome...looking forward to chatting with you

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