All Forum Posts by: Paul Sverdlin

LLC is a US concept. There is no such thing in Canada. Moreover, if a Canadian owns an LLC in US then it will be deemed a Corporation by CRA.

An accountant who recommended keeping those properties in your own name likely saved you a bit money by eliminating the need to file corporate taxes, keeping a corporate bank account, etc, which can easily cost $2000+ per year. That's not even considering that a greedier accountant may have set up a passive corporation to hold houses, an active corporation to bill management fees from the passive corp to make "active business income" and then a holding company on top of them to keep cash & distribute it out. That would cost you considerably more to operate.

In case you want to separate business from personal affairs for legal purposes (which is an approach usually taken by lawyers), that's a different story. Hold Co, Active Co and a central company to own them is likely a starter kit you'd be directed to. Work with a lawyer and an accountant to figure out what is best for you.... and be ready to pay top dollar for top advice.

Happy to partner up when it makes sense. I had not personally partnered with a contractor before, mostly involved financing partners into my deals, but JV is a great option to build wealth when the deal is clearly good.

Google is your friend. There is no shortage of hard money lenders. They are just expensive as compared to regular financing options. 

Hard money is EXPENSIVE. While in general the deal should be done so long as it makes sense, whatever the rate. However in practice I had not found a deal that would be worth the trouble of involving a hard money lender. Hence I know a few, but can’t really recommend any. Good luck!

Welcome to real estate investing and to bigger pockets in particular!

The first step is to check whether you can get a mortgage at all being a student. Based on your income level and savings that can be used towards downpayment the banks will give you a ballpark estimate of the total mortgage you'd qualify for. If you don't qualify (being a student its not clear whether you have a job or a business), then the next step is to find someone to partner up on a deal. In case you do qualify - you'll know what that amount is and that will set the limit on what you can realistically purchase. Armed with that info you could start exploring strategies that fit that price range. House hacking would be my go-to approach.

Tenants will help pay for the property, but in Ontario, and especially in Toronto where prices are some of the highest in the world, cashflowing from day 1 is problematic. Househacking is a great option, just lower those expectations a bit and count on contributing at least some cash every month to a property if you live in it. At these interest rates even if you don't live in it, the tenants will hardly provide positive cashflow either. Its a tough market these days for cashflow opportunities. Look into triplexes, rent by room, explore short-term rentals... there are ways of getting "there".

If you explore in the US just go to RBC or TD. They are quite willing to lend for a "cottage" or a "second home" in US. That should be stated as your intent on the application. What you actually do with that property after the loan is granted is of little concern to the bank. While rates are higher than in Canada, at least you will be able to secure financing for that very first deal.

I heard that Alberta is more cyclical and oil-dependent? That when the oil price goes down, companies reduce drilling and many people leave the province and rents plumet. If I invest in Alberta, I will have to do it remotedly so that I can keep my job – in which case it might be better to invest remotedly in USA?

Love your advice on landlord friendly states – I’ve seen some scary enviction troubles on YouTube. I am going to research remote investing and setting up local teams (cleaners + handyman etc) more both for Canadian provinces and US, so I’ll look into Florida numbers closer.

Would you know, are there any additional taxes for foreign investors purchasing US properties that local residents do not pay?

Feel free to DM me and we can connect directly.
From what I hear Alberta is less and less dependent on oil, it is clearly diversifying, but I am no expert in that area. Just heard from multiple sources that compared to Ontario there are better deals to be had there.

Think through tenant-landlord laws carefully. In ON you can't raise rent beyond government set limits (which are capped at max 2.5% per year even when inflation is 9%). We can't remove tenants if we want to sell the house since they live in it; making it nearly impossible to show a nice looking renovated home to prospective buyers. Since raising rents is hard - tenants tend to stay longer, meaning that you may end up renting your unit for $1000 below market and won't even be able to sell it if the tenant refuses to show the unit to prospective buyers. Any kind of issues with non-payment of rent will take 8-12 months to resolve through our Landlord Tenant Board and you'd have to carry the house, pay for legal advise, etc while the tenant will employ a free lawyer from Legal Aid. There is no "security deposit" which can be applied towards damages and suing the tenant for damages is pointless as they have no money usually. Etc-etc-etc. In AB or in US the laws are much more landlord friendly. There is no "security deposit" which can be applied towards damages and suing the tenant for damages is pointless as they have no money usually. Etc-etc-etc.
 

There are no additional taxes in the US for Canadians that I am aware of, however you will need a legal structure, a bank account, you need an ITIN from IRS, you need to file taxes in Canada and US (and pay accountants extra due to complexity). Luckily US tax will be considered when you pay Canadian taxes to avoid double taxation, yet there are some cases when that's an issue to be carefully researched. Most of those points are one-and-done hindrances though, you can set up the system once and let it serve you for decades. 

Welcome to RE investing Lubica.

As an investor in Ontario and Ohio I can totally relate to your frustration. It is not that the books or US focused podcasts are incorrect. Its just that they seem to be behind the interest rate increase wave. It was easy to find a cashflowing property when rates were 1.5%. Now at 5-6% the same task is nearly impossible. 

When reading your post I recalled Robert Kiyosaki's books. Not sure which one covers it, but he mentioned that him and his wife waited 4 years at some point to buy their real estate. That time went into market research, negotiation, saving up some cash, etc. There is no need to jump into the market when cashflow is negative! Personally I've been on sidelines for 2 years already, constantly assessing deals and not buying anything yet. There will be an estate sale, a foreclosure, a duplex (or better a triplex) that will make the cut and we'll pick it up. As Warren Buffett famously said: imagine you have a card with only 20 holes to punch. You'd be very careful about what to buy if you could only make 20 buy decisions in your lifetime. Speaking of Buffett - he's been sitting on piles of cash for 12 years before making a couple of purchases in the last few years.

To be a bit more action biased I'd look at Alberta where prices are still low-ish; at houses without any condo fees where you could carve out 3 units to rent instead of just one; perhaps STR-MTR in cottage country where you could negotiate a good deal. Those seem to be the only options on the table now in southern Ontario. As for US - Florida short-term rentals are clearly cashflowing if you'd be willing to invest in US. Nothing is keeping you in Canada from investing perspective. I've gone to US a long time ago and its been amazing. Just pick a landlord-friendly state and see how different an eviction process works as compared to our %^&& LTB up here.

Quote from @Eric S.:

Just had a baby and totally forgot to get back to everyone's reply.

 Congratulations! Excited for you! A growing family is one of the greatest motivators for an investor.

To your point about refi: welcome to the real world where podcast hosts don't seem to always live in. If you've reached a limit on financing, that's an issue that may not be easily overcome, although there are certainly some options available:

1. Use JV partner. I went this route. Find someone who'd be willing to take out the mortgage and contribute part of the downpayment. You do all the work, they bring financing, and at the end you split profits 50-50 (or whichever way seems fair). Matt Piche aka Fruitful investor has a whole youtube channel on how this is done.

2. Bring in more expensive lenders. If the deal is good then someone will lend you money for it at a higher interest rate. Private money is always available... just costs a lot more. Perhaps carry a higher rate until you stabilize your cashflow and refinance at cheaper rates later? Sometimes lenders will settle on interest-only loan, which will be costly but easier to manage from a cashflow perspective.

3. Adjust your strategy to flips from brrr. Why stay stuck with 1-2 properties that you can finance if you could make good profits flipping houses (that's a big if and there are lots of transaction costs and tax considerations here).

4. Vendor financing. Sometimes seller will lend you money if you buy the property at the price that they wanted to get. There are courses online on how to do this. A rare find in my experience, but they do exist. 

Hope this helps and I am sure there are a dozen other ways to handle financing restrictions that other members of this forum can share with you. 

Best of luck and congrats again on the baby!