Canadian's buying cash-flowing properties in the US - help a beginner!

Vancouver, bc · Member since 2014 · 19 posts · 11 votes

Hi,

I own 4 two-bdr units in Vancouver BC. Our market here is purely appreciation/principal pay down strategies for investors. Now I want to invest for cash-flow so my wife doesn't have to work anymore, I am looking in the US because CAP rates in BC are quite low.

There is so much information on this site that I don't know where to start looking for people who are Canadian and have done what I want to do. I really want to find the discussions the real risk factors, and the issues like legal, tax implications, etc.

Is it a good investment to buy a $40k house in Kansas City with a 15% CAP rate? Sounds crazy to everyone here I talk to. They think I'm insane.

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Hattie Dizmond

Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes

11y

I think the real lesson learned here is, as Bob pointed out, learn the market...learn to do the analysis...and, then DO IT. Don't ever take someone else's analysis or opinion of a property & investment and simply jump. There are people here on BP who advertise "wholesale" properties right here in DFW with fictionalized ARV's and understated rehab costs. When I challenge them on what they are offering as a smoking hot "deal", they can't even counter the issues I have with their valuations. Why? Because they don't understand the market. I don't know much of anything about KC, but I know DFW. The DFWA MSA, which is entirely covered by the North Texas MLS, is over 9,200 sq miles. It can't even be addressed as a "market". If you want to even start understanding it, you have to pick a definable "sub-market" and learn that first. My partner and I build our sub-markets around school districts, which is the driving desirability factor in DFW. Within the sub-markets we have targeted, we have identified specific "micro-markets" that further define and drive RE sales. You have 2 real options, if you don't want to either end up with properties in a war zone or with properties that will never cash flow...do your homework or go with a reputable turnkey provider.

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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
11y
I'd suggest starting with "Canadians US" in the search box. You will find topics like http://www.biggerpockets.com/forums/51/topics/1611... and you may or may not get any answers.
I know that Canadians invest in US markets on the east coast. I see them all the time when looking at Myrtle Beach, SC property. I'm sure that is true in cities in Florida as well. As for risk factors and tax implications, I think that depends on the details of what you are trying to do. I would think the Canadian equivalent of a CPA (Certified Public Accountant) could give you the details on the tax implications.
It's kind of funny. I am looking at places in Canada east of Toronto and feel the same way as you. I don't know enough US citizens to talk about these areas... and it feels... well, foreign!
If you know any Canadians who want to sell 2BR+ oceanfront property in the Carolinas, please let me know! If they want to sell 50%... I'd be open to buying 50% and manage as part of the deal. Or go 50/50 on something at Myrtle Beach or close proximity ....
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
11y
Originally posted by @Harry White:

Is it a good investment to buy a $40k house in Kansas City with a 15% CAP rate? Sounds crazy to everyone here I talk to. They think I'm insane.
Harry, at 15% cap rate (Gawd, how would someone figger a cap rate on a $40,000 SFR?) then you would be looking at a $6,000 NOI ! Why would ANYONE sell a reliable $6,000 a year "income" for only $40,000? Better question, why would the market (you) only pay $40,000 TOTAL for $6,000 yearly? There is some insanity there.
1 Reply
Account Closed
Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
11y
why's it crazy to buy a house for 40k and make 15% per year? However you figure the cap rate? If it's for real, what's the problem? Sounds reasonable to me if everything is considered in how the rate is obtained. Obviously I am not grasping something. Thanks.
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Ndy Onyido
Toronto, Ontario · Member since 2014 · 615 posts · 172 votes
11y
Welcome to BP, @Harry White
I personally do not use CAP Rate metric for SFH. There are other REI metrics that I find more applicable in practice that CAP rate, unless you are taking about commercial REI.
I am a Canadian and just bought my first US investment in Kansas City, but I do not invest in Class D neighborhoods. What neighborhood is your 40k property and 15% CAP? It may probably be in Class C- at most.
I think I am happy with my KC investment.
You can PM for more details.
Follow @Chris Martin suggested postings in BP with respect to Canadians investing in US. You will have tons of resources and materials to learn from on this site.
I consider BP the go-to site for REI resources.
Thanks
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Account Closed
Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
11y
my question was as far as my personal experience go. I have purchased 40k houses and make 12-15% 'cap' or ROI, as far as I figure it anyway. The neighborhoods would probably be considered 'C-'. I have done well so far.
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Ndy Onyido
Toronto, Ontario · Member since 2014 · 615 posts · 172 votes
11y
@Account Closed is in Canada. Class C- and Ds, according to one of the BP members, has high 'Headache Value'. My recommendation of out of staters is true turnkey projects where the investor is truly hands-free and not involved in daily property management and intricacies involved in Class C- and D properties.
Just my opinion.....
Thanks again.
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Account Closed
Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
11y
Sure, you do need someone local you can trust. That is for certain, and that person must understand the market very well.
Fortunately, I do not need to manage any of my distressed properties. I would not invest in them if I did. Thanks for you comments Ndy :)
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Account Closed
Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
11y
Yes, the headache factor is high in them - if you rent them, as I used to. Since I went owner finance a few years ago, my life is simple.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Harry White
Hey just down the 1 5 from you in Portland.... I wrote a little e book for foriegners on the do's and don'ts of buying mid west or low end rentals.. I would be happy to share it with you.
There are hundreds of Turnkey operators in the US that sell ready to go investment SFR's and 20 to 40 markets to consider.. shop and compare.
However in my humble opinion buy the best you can... lower price does not necessarily make it a great deal... There is a happy median try to find it.
Podcast Guest on Show #222
JLH Capital Partners51 Review
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Pawan J.
Developer · Vancouver, British Columbia · Member since 2014 · 122 posts · 26 votes
11y
I am also interested in buying cash flow properties in the states and looking to learn what states are landlord friendly and of turnkey sellers in those states. U hear Texas but where in Texas? Is there something online that tells you what areas are a,b,c,d etc? Vancouver is not a place for cash flow rentals which is why we buy, renovate and sell and profit share with investors as there is money in it still.
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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
11y
there is no place online that gives you that type of data as it is all very subjective and everyone has different e per owners. Dallas and Houston are popular for places in Texas. Memphis is also an investor friendly ace for investors. Make sure to do your due diligence. Good luck
Curt Davis - KAIZEN Realty538 Reviews
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Harry White
OP
Vancouver, bc · Member since 2014 · 19 posts · 11 votes
11y
Hi, thanks for everyone's responses.

Yes your ebook would be great, how can i obtain a copy?

Originally posted by @Jay Hinrichs:

@Harry White
Hey just down the 1 5 from you in Portland.... I wrote a little e book for foriegners on the do's and don'ts of buying mid west or low end rentals.. I would be happy to share it with you.
There are hundreds of Turnkey operators in the US that sell ready to go investment SFR's and 20 to 40 markets to consider.. shop and compare.
However in my humble opinion buy the best you can... lower price does not necessarily make it a great deal... There is a happy median try to find it.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Harry White
send me a pm and I will forward to you post haste
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
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Fred Heller
Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
11y
Hi Harry,
The general rule of thumb for all investments is the higher the return, the higher the risk.
I have history in KC and am very familiar with the market. If you contact me through PM I'll be glad to share what I know about the area at which you are looking.
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Babatunde Fakunle
Medical Practitioner, Real Estate Investor · Stoney Creek, Ontario · Member since 2014 · 5 posts · 1 vote
11y
If is too good to be true, it probably is
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Rich Urban
Wholesaler · Miami Beach, FL · Member since 2011 · 22 posts · 8 votes
11y

@bob bowling - Damn, you must pay retail on all of your deals :) That actually sounds like a typical deal for me. We purchased our duplex with a net operating income of $29,000 for only $100k. By your logic, that would have been a bad idea? We flip houses here in South FL where monthly rentals is about $900/month and sell them for about $30,000 all day long.
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Chad U.
Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
11y
@Rich Urban
Where in South FL are you selling properties for $30K? The only thing at that price point I see is in Liberty City, where I wouldn't drive through in broad daylight in an armored tank .
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Rich Urban
Wholesaler · Miami Beach, FL · Member since 2011 · 22 posts · 8 votes
11y
Originally posted by @Chad U.:

@Rich Urban
Where in South FL are you selling properties for $30K? The only thing at that price point I see is in Liberty City, where I wouldn't drive through in broad daylight in an armored tank .

I was referring to North Miami, Port Saint Lucie, some more rural areas in Palm Beach County. I've bought and sold in Liberty City as well at that price range. If you wouldn't drive through there in daylight with a tank, then you must be only looking for the really pretty properties. I've never had a problem in that neighborhood even at night. I will say, that I try to stay out of the overtown area though.
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Chad U.
Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
11y
@Rich Urban Port St. Lucie makes sense, but I'd like to see what you have available in North Miami for $30K. There aren't many properties under the $80K price point (ARV) in and around Miami that make good rentals for the average investor.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
11y
Originally posted by @Rich Urban:

@bob bowling - Damn, you must pay retail on all of your deals :) That actually sounds like a typical deal for me. We purchased our duplex with a net operating income of $29,000 for only $100k. By your logic, that would have been a bad idea? We flip houses here in South FL where monthly rentals is about $900/month and sell them for about $30,000 all day long.
Rich, where did I say this was a bad deal? Attention to detail is very important in REI. Better to learn that at the start of your investing.
What I keep pointing out to you newbies is that there is a real estate MARKET. You should understand that market. $29,000 NOI for ONLY $100,000?!?! Sounds TOO good to be true. Even Chad is calling you out on this and he likes 15% crap rate properties.
So if someone is selling me $29000 NOI for only $100,000 I'd be looking for where he's reinvesting into a better deal than that so I'm not a chump wholesale investor. Smiley face.
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Account Closed
Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
11y
As far as where to invest in TX, the Big 4 all have their proponents. Austin gets all the press but entry costs are steep there. Dallas and Houston probably are cheaper and good too, not the expert on those towns. My city of San Antonio is always the sleeper that many forget about :). But we are starting to get attention - lots of CA cash is coming in here, driving up prices......60k for a 3/1! Outrageous :). It used to be 40k :)
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Hattie Dizmond
Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
11y
I think the real lesson learned here is, as Bob pointed out, learn the market...learn to do the analysis...and, then DO IT. Don't ever take someone else's analysis or opinion of a property & investment and simply jump. There are people here on BP who advertise "wholesale" properties right here in DFW with fictionalized ARV's and understated rehab costs. When I challenge them on what they are offering as a smoking hot "deal", they can't even counter the issues I have with their valuations. Why? Because they don't understand the market. I don't know much of anything about KC, but I know DFW. The DFWA MSA, which is entirely covered by the North Texas MLS, is over 9,200 sq miles. It can't even be addressed as a "market". If you want to even start understanding it, you have to pick a definable "sub-market" and learn that first. My partner and I build our sub-markets around school districts, which is the driving desirability factor in DFW. Within the sub-markets we have targeted, we have identified specific "micro-markets" that further define and drive RE sales. You have 2 real options, if you don't want to either end up with properties in a war zone or with properties that will never cash flow...do your homework or go with a reputable turnkey provider.
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William Robison
Real Estate Consultant · Kansas City, MO · Member since 2013 · 388 posts · 200 votes
11y
@Hattie Dizmond
Kudos to these comments. Understanding your sub-markets and micro-markets is critical. I see quite a few unscrupulous companies trying to take advantage of even sub-markets. Find a partner that is willing to work with you over the long term that understands these micro-markets.
I was asked just today for a map of market areas. Its subjective as previously mentioned, but there is a lot to be said for a good boots on the ground team. Even if I wanted to develop a market map, it wouldnt be possible without it being a HUGE map to show the differences in these sub-markets. I too start with the school district, then break down the markets from that starting point. DFW and KC are quite similar in those respects.
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Raymond B.
FL · Member since 2009 · 2k+ posts · 357 votes
11y
@Rich Urban,
To Make the @ work do the following:
Hold down the shift key and type the following: @?
Look below this Window, and you will see a list of list of names of people who have posted in this thread.
Click on the name of the person that you want notified via an email that you responded to them.
If you are a Colleague with anyone that has not posted in this thread, and you want them to see your post, hold down the shift key, and type the @ and the first 4 letters of the first or last name.
Look below this Window, and click on your Colleague's name.
They will be notified via an email about your post in this thread.
Raymond
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Hattie Dizmond
Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
11y
@William Robison Nailed it. A good boots on the ground team is imperative. I provide those services for several out-of-market investors here in the DFW area. (No, this isn't a plug!) But, here's some of the qualities you should look for in a local contact...
1. They are willing to spend time simply talking to you and getting to know you and your particular approach, goals and strategies.
2. They should be completely transparent in ALL they do. If they present a property and you don't understand the valuation or comps, etc., they should be willing to show you all of the data they used to derive those numbers....and, there had better be data!
3. They should approach the search much the way a seasoned agent handles clients looking for a primary residence. At first, what they show you may miss the mark. However, every showing that misses the mark should help them better define what your parameters are. They should never be annoyed that you pass on a deal.
4. If they are wholesalers and you are working directly with them, they should be willing to give you a reasonable - not less than 24-hours, not more than 48 - of exclusive right to evaluate a property. You should not be competing against their "list".
5. They should be honest, straightforward and humble.
6. You must be able to trust them.
There are a lot of folks who will give you a laundry list of what to look for, but if you find someone who you can check these boxes on, I would stop looking and try that relationship on for size.
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