Off market, Accepted offer in Kansas City for a three bedroom, 1.5 bath, 1,200 sq feet for $183,000. Estimated monthly rent? $1500, 5.9% cap rate.  Potential for civil unrest including rent strikes in Canada and Legal and Accounting structures for Canadians owning US rental properties with Carmen da Silva, CPA in both Canada and USA. All this and more on this week’s Truth About Real Estate Investing for Canadians!

Greetings my fellow Canadian investors! My name is Erwin Szeto, host of this humble podcast since 2016, home of over 300 episodes where we speak to Canadian investors about what repeatable successes they have, where they made mistakes, what drives them so we may all learn from their experiences to improve our own investment portfolios.

This past week has been a wild one. My US entities have been created, I’ll applied for my employer identification number (EIN) so I report taxes to the IRS. I have funds after selling a few houses from our investment portfolio and have been eagerly awaiting to buy a house in the US then Thursday I get an email from Dmitri, CIO of SHARE, an off market deal from a wholesaler came available, we have a conditional sale, and I’ve ordered a home inspection. 

The deal? Kansas City, MO, Detached house 3 bedroom, 1.5 bath, single garage, 1,200 square feet for a whopping $183,000 including renovation. Projected rent: $1,500 per month plus utilities. Cap rate for those who know commercial real estate, 5.9% in a single family house.  In my experience, 5.9% cap rates are extremely hard to come by without significant development and renovations as you’ve heard many of my past guests of this show discuss by full time investors vs. I’m remote, passive investing. I’m happy to stay in my boring lane and happy for those who enjoy the excitement of active, exciting real estate.

Some quick interesting facts about Kansas City? 46% of the households are renters in KC, the Ford F150, the most popular pick up truck in America is manufactured in KC employing 7,500, and Panasonic is building a new electric vehicle battery manufacturing plant just west of KC, a $4 billion investment projecting 4,000 employees. Needless to say, I’m liking the economic fundamentals. (https://www.rentcafe.com/average-rent-market-trends/us/mo/kansas-city/#:~:text=occupied%20Households%3A%2054%25-,End%20of%20interactive%20chart.,54%25%20are%20owner%2Doccupied.)

As mentioned I’ve ordered a home inspection and the property manager will be quoting about $25,000 worth of renovations to optimize my rent return. 

When the email came in, I was literally finalizing my presentation I was about to give in front of 120 Dominion Lending Centres (DLC) mortgage agents and brokers.  My mortgage broker, Scott Dillingham who can get me both US and Canadian mortgages invited me to speak as he was announcing the availability of US mortgages to all of Dominion Lending Centres’ 2,800 mortgage professionals.

The feedback was overwhelmingly positive as this was a trade show and SHARE had a booth I was attending. It didn’t hurt that the two Chief Economists who spoke at the same conference has many positive things to say about the US economy.

Pardon the geek speak but my two favourite economists were speaking at the same event: Dr. Sherry Cooper and Benjamin Tal, both I’ve been following for over a decade as they’re sharing and very insightful.

Benjamin Tal, Deputy Chief Economist for CIBC mentioned how the housing crisis we are in is quite bad and if left to continue we could see some civil unrest of anti-immigration and renter strikes.  I’d argue we’re seeing both already.  Ben also mentioned we are in a recession in terms of real GDP per capita as in inflation adjusted per person.  When this happens, expect quality of life to decline which we are seeing now with health care and education suffering.

All this while the US economy is chugging along, Jerome Powell, Chairman of the US Federal Reserve has revised downwards the number of rate cuts in 2024 from three to one. Most economists are predicting four rate cuts for Canada in 2024.

Both Ben Tal and Dr. Sherry Cooper predict the Bank of Canada’s overnight rate to fall to 200 bps to 3% by end of 2025 and a steady increase in prices for detached real estate.  Condos not so much: buyers market for next year, year and a half.

For this reason, I don’t feel so bad for still holding several local properties in our portfolio. I fully anticipate appreciation to be there, just not cash flowing and worsening with inflation running so high. 

I also don’t know why immigrants continue to come here hence I asked Dr. Sherry Cooper, Chief Economist for Dominion Lending Centres. She had shared earlier that the federal government is still forecasting 500,000 new immigrants per year in each of the next few years.  I asked Dr Sherry if there is still demand and she said yes, there is plenty of demand for immigrants to come to Canada… while owning a home has never been so unaffordable in Canada. 

At the same time Canadians leaving Canada for the USA is at an all time high. A 70% increase from a decade ago. Exactly 126,340 in 2022. I have a feeling that number will continue to trend upwards.

Source: https://www.cbc.ca/news/politics/canadians-moving-to-the-us-hits-10-year-high-1.7218479

Personally, I’ve never been so busy fielding calls from Canadians to invest in real estate but they’re asking about SHARE and investing in the USA, not locally.  If you too would like more information on investing in the USA, I’ve written a free guide to USA Investing for Canadians. You can download it from www.truthaboutrealestateinvesting.ca/ once you have the report, you can check out current and past deals available for direct investment on the SHARE website and you can pick up my report on the best places to invest in the USA in 2024.

Navigating Legal Structures and Taxes: A How To for Canadians Investing in the US with Carmen Da Silva, Tax Specialist, CPA in both USA&CAN, CFO of SHARE

On to this week’s show!

We have a special guest today who we squeezed in before her return home to Tampa Bay, FLA to warm weather, pickleball year round, fruit trees in her backyard. The reasons are obvious why Canadians love Florida. Carmen is a Canadian living in Florida, she’s Chartered Professional Accountant Tax Specialist in both Canada and the USA. She owns 70 income properties in the USA, her 24 year old son even owns three rental houses in the States too! Carmen got into investing after selling her business, then in the 2008 real estate crash and bought a portfolio of single family homes in Florida to generate cash flow and replace part of her income.

Carmen is a passive investor as SHARE’s property management team takes care of everything so she gets to enjoy early retirement income.

As Carmen is a practicing Accountant who prepares tax returns for Canadian clients, she introduced clients to invest in US based single family rentals including Andrew Kim, CEO of SHARE and together could see how involved the process from legal setup to ongoing property management but the returns are life changing hence they knew they had to create SHARE, a technology based real estate solution for anyone to become a US landlord without all the hard work.

I’ve invited Carmen Da Silva, CPA in both Canada and US to return to the show to focus on the most common questions Canadians have about investing in the US.  The answer is different for everyone and Carmen takes the time to explain why.

Friendly disclaimer, I Erwin Szeto am not an Accountant, Carmen Da Silva is an Accountant but not your personal Accountant so you still need to seek your own professional, expert advice for your specific situation.  Our conversation is for educational purposes, tax let alone cross border tax is a complicated subject.

With that said please enjoy the show!

To Listen:

HELP US OUT!

UPCOMING EVENTS

BEFORE YOU GO…

Before you go, if you’re interested in what kind of properties I am looking at in the landlord friendly states of the USA please go to iwin.sharesfr.com for what I consider the best investment for most Canadians, most of the time.

I’ve been investing in Ontario since 2005 and while it’s been a great, great run. I started out buying properties in the 100,000s and now it’s $800,000 to $1,000,000.  How much higher can it go? I don’t know

To me, the remaining potential for appreciation does not match the risk hence I’m advising my clients to look to where one can find rental properties that are affordable range of $150,000 to $350,000 US$, with rents that range from $1,400 to 2,600/month plus utilities.   As many Canadians recognize, these numbers will be positive cash flow and are night and day compared to anything locally. Plus the landlord has all of the rights, no rent control, and income is US dollars which are better than Canadian dollars.

If you don’t believe me, US dollars are better than Canadian dollars, go ask 100 non-Canadians which currency they prefer to be paid in.

So to regain control of your retirement planning.  Go to iwin.sharesfr.com and check out what great cash flow properties are available in the USA.  

The best part is, my US investments will be much more passive compared to by local investments as I’m hiring an asset manager called SHARE to hand hold me through the entire process.  As their client and shareholder, Share will source me quality income properties, help me with legal structure and taxes, they manage the property manager and insurance provider while passing down to me preferred rates so I save both time and money.  

Share will even tell me when to strategically refinance or sell.  SHARE can even support investors all over the country for proper diversification hence my plan is to own in Tennessee, Georgia, and Texas.  Share is like my joint venture partner but I only have to pay them fees while I keep 100% ownership and control.

If your goal in investing is to increase cash flow, I don’t know of a better strategy for most Canadians most of the time.  One last time that’s iwin.sharesfr.com to see what boring, cash flowing real estate investing can look like on your path towards financial peace.

This is how I’m going to make real estate investing great again for my family and hope you choose the same.  Till next time!

Sponsored by:

This episode is brought to you by me! We don’t have sponsors for this show. I only share with you services owned by my wife Cherry and me.  Real estate investing is a staple in my life and allowed me to build wealth and, more importantly, achieve financial peace about the future, knowing our retirement is taken care of and my kids will be able to afford a home when they grow up.  If you, too, are interested in my systematic strategy to implement the #1 investment strategy, the same one pretty much all my guests are doing themselves, then go visit www.infinitywealth.ca/events and register for our next event.

Till next time, just do it because I believe in you.

Erwin

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Disclaimer:

As a committed advocate for transparent and responsible real estate investment, I want to openly share my involvement with SHARE SFR (Single Family Rental) as an Advisor. I hold an equity position in this company and receive a referral commission for clients I introduce to their services. My endorsement of their business model – focusing on direct ownership of positive cash flow income properties – is consistent with my own personal investing since 2005, is based not only on a professional assessment but also on my personal experience and belief in their approach. Please note that while I stand behind my recommendations, it is crucial for each individual to conduct their own due diligence and consider their unique circumstances before making any investment decisions. As always, my priority is to provide you with honest, insightful, and practical real estate investment education.