Out of Country (Canada) Investor - Manage Flip In States- How does it work?

17 Replies

Hello BP Community,

I have a Investor/Family Member Located in Canada that would like to Buy homes here in the states because he can get more for the money. He would like me to mange the flips as well as find the deals etc.

- My question is does the investor have to be a residence of the U.S. in order to purchase?

- Does he give power to sign documents (like closings)?

Any advice please share.

Thank you,

Forest

here in new york, there are many canadians that own real estate. i personally have done work for many canadian people, and in fact, have sold one house to a canadian couple that own several units here in the western new york area. yes, they can legally buy and sell right here  in the states. 

No problems at all, he can buy and sell without residence. 

Now managing rehabs is another game alltogether    In general, you want to see what the contractors are doing.  You can gain a good deal of control over you contractors with good independant contractor agreements, but you need to either inspect thier work or have someone that you trust inspect it.  If you dont, you could be taken advantage of. 

If I were your friend I would target areas in the US that he could easily visit. 

To your success

Josh

Medium t shirt logoJosh Caldwell, Pittsburgh REIA | [email protected] | http://pittsburghreia.com

Thanks Mark, Was there any extra special forms needed?

Borrower do not have to be residents of the states, it would be considered a Foreign National Loan. Closing doc can be mailed out to borrowers to sign for closing but it depends on the investor, some may grant a POA other may not.

I would have him start a LLC with you as the manager of the LLC. That way he can put money in the LLC and you can buy houses for him in it.

I am not an accountant but I am doing the exact same thing as a Canadian investor and my cross-border accountant has told me that LLC's are toxic for Canadians from a tax perspective. Canada does not recognize LLC's the same way that the IRS does. I would recommend he finds a good cross-border accountant before setting up any kind of ownership entity.

As for managing rehabs. I have a partner in the US that I trust a lot and he does the due diligence that I cannot do from Canada and he oversees the contractors to make sure they are staying on target. It is a great relationship. 

Forest if you are planning on being his "boots on the ground" partner then I think he can do well investing in the US. It's all about teams. 

Cal Ewing, Karma Property Wholesalers | [email protected] | 8327803042 | http://www.karmapropertywholesalers.com

Originally posted by @Forest Williams :

- My question is does the investor have to be a residence of the U.S. in order to purchase?

- Does he give power to sign documents (like closings)?

Short answer: The investor does not have to be a residence to invest. He can provide Power of Attorney (POA) to you, a lawyer,.... to sign documents.

Originally posted by @Cal Ewing :

I am not an accountant but I am doing the exact same thing as a Canadian investor and my cross-border accountant has told me that LLC's are toxic for Canadians from a tax perspective. Canada does not recognize LLC's the same way that the IRS does. I would recommend he finds a good cross-border accountant before setting up any kind of ownership entity.

 Cal: They can be "toxic", but need not be depending on how things are set-up on both sides of the line.   I concur, consulting both an accountant and attorney with cross-border experience in real estate should be the first step for any Canadian planning to invest in U.S.A. real estate.

Medium greenapartmenthires 1024x1024Roy N., Louer Louer Ltd. | 1.506.471.4126

Most documents can now be signed online or scanned emails/faxed.  The only things that really require in-person signings are for bank related stuff like opening a bank account/mortgages/refinance.  Again would double down on the recommendation of getting proper cross border consultation for finding the right business entity to use and operate with.  

Thanks  @Forest Williams  for posting this. And thanks to everyone who responded. As an Australian looking to invest, and source properties in the USA. So while not from Canada, the thing in common is being out of Your country, This thread was of value. 

@Bayard P

No, the banks (BMO & TD) don't require in-person as they will mail the signature card to you. I have a personal experience with this. We bought a property in 2012 and have yet to physically see the property. We opened a U.S. bank account immediately. Rent is directly deposited into our U.S. bank account opened over the phone/online. Most banks we contacted for financing actually mailed the credit and mortgage documents over to us in Canada. No residency or LLC required to purchase.

Thank you to everyone this good to know.

Originally posted by @Forest Williams :

Thanks Mark, Was there any extra special forms needed?

 no, there were not special forms needed. the canadian couple did not, of course have american social security numbers, but they were able to use canadian i. d. in place of that without issue. they purchased the house i sold them and others that they currently own in much the same manner as an american citizen does. i would have to agree with josh, it would be best for your friend to invest in an area of the U S that he can travel to easily. here in buffalo and the western new york area, the couple from canada that i speak of live in toronto which is about 90 miles away. pretty much an easy trip. of course you have to go thru customs on a regular basis which can trigger intrest from them because of the frequent trips, but once they get to know you and the issues that are a part of the reason for the frequent trips, its not a problem. 

Even though you're family, don't forget to spell everything out in a contract or partnership agreement. I'm Canadian but have completed a number of flips in the US while living in Canada. I'll echo what others have said - make sure your investor (and you?) structure your entity correctly so they don't get charged extra tax (common if the entity is an LLC). A lot of Canadian investors opt for a limited liability limited partnership (LLLP) which might be a good option if you're going to be a partner. It's critical to get advice from specialized cross-border tax accountants (not your local CPA!!) as well as an attorney that specializes in entity formation for foreigners.

Bank accounts can be set up remotely and contracts can be signed remotely as well.  Working in Illinois (where all real estate closes are handled by attorneys anyway) I just give power of attorney to my attorney - for executing the contract only.  :)

Partnering with "boots on the ground" is a great way to do business.  It's worked for me multiple times and sounds like a good opportunity for you and your investor.  Just make sure the numbers work and you have an agreement that covers all contingencies in case it doesn't all "go to plan".

Good luck and let us know how it all turns out.

Medium logo 01Larry Smet, Boomerang Capital Group | 1‑800‑266‑6345 | http://www.boomerangcapitalgroup.com

Originally posted by @Larry Smet :

Even though you're family, don't forget to spell everything out in a contract or partnership agreement. I'm Canadian but have completed a number of flips in the US while living in Canada. I'll echo what others have said - make sure your investor (and you?) structure your entity correctly so they don't get charged extra tax (common if the entity is an LLC). A lot of Canadian investors opt for a limited liability limited partnership (LLLP) which might be a good option if you're going to be a partner. It's critical to get advice from specialized cross-border tax accountants (not your local CPA!!) as well as an attorney that specializes in entity formation for foreigners.

Bank accounts can be set up remotely and contracts can be signed remotely as well.  Working in Illinois (where all real estate closes are handled by attorneys anyway) I just give power of attorney to my attorney - for executing the contract only.  :)

Partnering with "boots on the ground" is a great way to do business.  It's worked for me multiple times and sounds like a good opportunity for you and your investor.  Just make sure the numbers work and you have an agreement that covers all contingencies in case it doesn't all "go to plan".

Good luck and let us know how it all turns out.

 Well said Larry.. LLLP is the way to go as long as that state recognizes it.. In GA I believe it does.. Even if the state doesn't recognize it there is a way around it which I already did in 2 other states.

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