All Forum Posts by: Natasha Rooney

I am going to to try to hop on a call with you. I was actually working in the investor real estate space for 3 years before I took the jump and did it myself. Now I am on property #9 (that took 5 years).

Follow Nathan Gesner's advice. Break it down step by step and you will feel confident to move to the next decision.

Do you want to Flip or Hold?

If you are holding, do you want to do Long term, Mid term, or Short term rentals?

What is your comfort level on construction - cosmetic, mid-level or gut to the walls?

I also agree with him that your Property Manager is the most important person on your team. (And I am a realtor saying that). They are the one that is going to protect your investment long term.

Hello, I was just reading your response to this post as I am in the exact same boat! Trying to narrow down a market/markets that we'd like to invest in. Would love to speak with you as well if you're open to that!

1 Vote

Quote from @Account Closed:

Quote from @Natasha Rooney:

Quote from @Account Closed:

Hey Natasha!

In general if you are what is called a resident alien, you are going to be taxed on your world wide income.

You want to be sure your classified for what is called a non resident alien. Basically means you live in Canada, but you invest in the USA. A non-resident alien for tax purposes is a person who is not a U.S. citizen and who does not meet either the “green card” or the “substantial presence” test as described in IRS Publication 519, U.S. Tax Guide for Aliens.

Non-resident aliens are taxed only on their income from sources within the U.S. and on certain income connected with the conduct of a trade or business in the U.S, leaving your CA income alone! I work with a lot of foreign folks who invest in multiple countries or live abroad. If you have any more questions feel free to reach out!

Thanks so much for the reply! So registering as an 'alien resident' is definitely something that we will be doing. From your experience, do you know which legal structure is the best for Canadians investing in the US? LLC? C-corp? direct investor? etc?

Thank you!

Depends on your deal! We want to have legal protection WHEN its applicable. For stock investments for instance, just invest directly. For partnerships, consider being a limited partner when you can. If your own real estate directly, a simple LLC will be more then enough to get started

Thanks for the reply!!

This may be a dumb question but what do you suggest: LLC vs LP when investing alone (or with one other person, my spouse)?

1 Vote

Calgary, Alberta

Quote from @Account Closed:

Thank you!

0 Votes

Calgary, Alberta

Quote from @Danny Gonzalez:

Hey Natasha,

That's awesome that you want to invest in the states! I'm not a CPA but I have worked with a lot of out of the country investors over the years. Here's an overview as well as my understanding of the tax implications.

I'll start with the US Tax implications:

As a foreign investor, you’ll be subject to U.S. federal income tax on the income generated by your U.S. real estate investments. This includes rental income, which is typically taxed at a flat rate of 30% unless you elect to treat the income as "effectively connected" to a U.S. trade or business, which allows for graduated tax rates and deductions. You'll be able to write off the expenses and interest, but there is a tax on the profit from the real estate.

State Taxes: Some states also impose state income taxes on rental income and capital gains from the sale of property. The rate varies depending on the state in which the property is located so I can't give you specifics without having more information.

Capital Gains Tax: When you sell a U.S. property, you may be subject to U.S. capital gains tax on any profit. The rate typically ranges from 15% to 20% for long-term capital gains, with an additional 3.8% Net Investment Income Tax (NIIT) potentially applying.

OK, lets chat about the Canadian side. To my understanding:

Worldwide Income: As a Canadian resident, you are required to report and pay taxes on your worldwide income, including income earned from U.S. real estate. This means rental income, dividends, and capital gains from U.S. investments must be reported on your Canadian tax return.

Foreign Tax Credit: The good news is that Canada has a tax treaty with the U.S. to prevent double taxation. You can generally claim a foreign tax credit on your Canadian tax return for the U.S. taxes paid, reducing your Canadian tax liability by the amount of tax paid in the U.S.

Capital Gains: Canada taxes capital gains at a rate of 50% of the gain. You will need to report this on your Canadian tax return, but you can offset it with the foreign tax credit for any U.S. taxes paid.

A few other points to mention, a lot of the specifics here also depend on your legal structure e.g. LLC, sole member, direct investor, etc. There are a lot of attorneys/tax professionals that are familiar with Canadians investing in the states, so reach out to them and they'll be able to walk you through the process. If I can help with anything else, don't hesitate to reach out.

TL;DR: You will likely need to pay taxes in both the U.S. and Canada, but the Canada-U.S. tax treaty provides mechanisms to avoid double taxation.

Much success!

DG

Thank you very much! This is all very helpful information and some things that I will definitely be looking into! I'll let you know if I have any specific questions :)

1 Vote

Calgary, Alberta

Quote from @Chad U.:

Quote from @Natasha Rooney:

Quote from @Chad U.:

This is indeed a widely debated topic amongst many tax professionals and investors alike, and an entire novel could be written on the best method to use. There are many other things to consider besides income taxes including but not limited to: estate taxes, probate, liability protection, incapacity issues, witholding taxes on gross rental income/witholding taxes on sale of foreign property (known as Foreign Investment in Real Property Tax Act (FIRPTA)) and the list goes on. The fact of the matter is that no one's situation is really the same, so each person's ideal setup differs.

As to why LLC's don't work for Canadians, as explained in the articles, is that LLC's are double taxed when the income is brought back to Canada. The reason being is Canada Revenue Agency considers it a foreign corporation (not a flow through entity), and therefore a mismatch in foreign tax credits resulting in some cases of 70%+ taxation!

The most common approach to purchasing US real estate as a Canadian is by utilizing an US LLP or LLLP, with the investor as a 99% Limited Partner, and having another entity (such as Can Corp or US LLC) as the General Partner at 1% to limit liability exposure. Use of these entities in this manner allows for matching foreign tax credits, and when the money is brought back to Canada, you essentially pay income taxes at your personal rate. This structure is not cheap to setup initially, and the annual admin costs are substantial, however gives peace of mind that it offers the ultimate liability protection and most efficient tax structure.

The best advice is consulting a cross border tax specialist who also have a good understanding of US real estate laws and taxation. I can give some recommendations if needed.

Hello! I know this post was made about 10 years ago... would you still happen to have contacts for cross border tax specialists who understand US real estate laws and taxation? Thanks!

10 years, wow time flies.

Reach out to @Elliott Milek, he may have some suggestions

Thank you!! :)

0 Votes

Quote from @Linda Labbe:

we are also Canadians investing in the us. We invest in toledo and Detroit were we have found the returns to be great. More then willing to share what we have learnt and why these cities with anyone who wants to chat

Hello! I am just getting started with my US investing goals. As a fellow Canadian, I'd love to chat! Its a bit scary jumping into a new market and learning what to do and what not to do as a Canadian investor. I'll send you a message to connect!

0 Votes

Toronto, Ontario

Quote from @Gloria N Gear:

Hi Alejandro, I just had a new client (investor) from Toronto drive the short 8 hour drive to Indianapolis this weekend to do some research of the area with me. I would be happy to connect the two of you and talk with you about my experiences with my other Canadian investors.

Hello! I am also a new Canadian investor looking to get into the US market. I'd love to connect and talk about your experiences with your Canadian investors :) Thanks!

0 Votes

Toronto, Ontario

Quote from @Ty M.:

Hello looking to break into the US market in 2024. I have 1 unit in Toronto Canada and want to look for opportunities across the border. If any one has experience with this it would help (Mainly the lending process) Toronto is a vibrant city with lots of renters but it’s also expensive and renters have more rights than landlords.

Hello! I'd be interested to connect with you. I am looking to get into the US market in 2024 as well. I'd love to hear about your experience if you've started. Thanks!

0 Votes

Toronto, Ontario

Quote from @Michal Liviatan Carpenter:

I am a US lender based in Toronto.

Feel free to reach out with any question. Good luck!

Hello! I'd love to connect, I sent you a message :)

0 Votes

Toronto, Ontario

Hello everyone!

I am a Canadian living in Calgary, AB, hoping to purchase my first real estate investment south of the border in the US this year!

Looking to connect with any fellow Canadians who have already been investing in the US to get some more detailed information.

I have already learned a lot from this site and am looking forward to being part of this community!

Thanks!

0 Votes

Calgary, Alberta

All Forum Posts by: Natasha Rooney

Natasha Rooney has started 11 posts and replied 43 times.

Post: In desperate need of guidance

Post: Tax Implications for CANADIAN investing in US real estate

Post: Tax Implications for CANADIAN investing in US real estate

Post: Learning about investing! Canadian trying to invest in US real estate

Post: Tax Considerations for Canadians

Post: Canadians investing in US - Toronto

Post: Canadians investing in US - Toronto

Post: Investing in US markets

Post: Investing in US markets

Post: Hello! New Investor from Canada