Canadians can invest in US real estate without actually investing in the U.S.

[Marc Ramsay]

.. by being private or hard money lenders.

Are you a Canadian and want to invest in the U.S. real estate market but haven't done so yet because because of all the cross-border taxation issues, or the need to work out the best entity structure to set up?

One option is to become a private or hard money lender to another Canadian investor who is already investing in U.S. real estate and is looking for short term loans for wholesaling or flips.

Let's take a rehab and flip property as an example. As a hard money lender, you lend the Canadian investor the money he/she needs to purchase and rehab a property, and in exchange you or your Canadian company/partnership/etc register a 1st position mortgage against the property for the amount of the loan plus interest and fees. The investor buys, rehabs, then sells the property at a profit, and out of the funds from the sale, the title company pays you first as the 1st position mortgage holder registered against the property, and the investor gets the remainder of the profits.

Now here's the best part. As the Canadian originator of the loan, you get paid out by the title company, and you pay no tax in the USA for the interest and loan fees you charged, You only have to claim your profits on your Canadian tax return. You have just made a profit on a U.S. real estate deal without lifting a finger except to write the check, and you didn't have to worry about any of the entity structure issues or filing a U.S tax return. Congrats! You're brilliant!

As a hard money lender, you can negotiate a fairly high interest rate plus fees (usually called points). As an example, a recent loan I arranged for another investor was 12% annual interest plus 5 points on a $100,000 loan. The 5 points equals 5% and that is on top of the loan interest, so the private/hard money lender made $5000 on the loan before collecting any interest.

So what's the catch you say? You still have to know who you're dealing with by doing your due diligence on the investor and the property they want to borrow your money on. If the investor fails to complete the rehab, or can't sell the property, you will need to foreclose on the property and assume ownership to recover your investment, or portion thereof. One reason you will want to finance a fellow Canadian investor is so you can have them sign a personal guarantee for the loan and you can chase them personally through the Canadian courts to recoup any losses you have incurred. Like any type of investment, there are always risks involved.

If you are a Canadian and are interested in this method of investing then drop me an email and we can talk. marc @ majuraproperties dot com