Canadian Guide to US Real Estate Investing: Andrew Kim's Story & Strategies

Introduction

Welcome to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. The show is designed to help Canadians invest better in Canada and the United States. We are the North America-based mortgage financing lender and provide education to both countries.

Discover how you can become a better investor and access the financing you need. Welcome to the Wisdom Lifestyle Money Show.

I'm your host, Scott Dillingham. Today, I have Andrew Kim with us from Share, and I'm really looking forward to chatting with you today, Andrew.

Likewise. Thanks for having me.

The Core Idea

Yeah, it's going to be awesome. We're both kind of in this new world of investing in the States. It's not a new world, it's just a lot of Canadians don't do this. I'm excited to talk about this.

But I guess before we do, if you could share with us a bit about yourself, maybe some trials and tribulations that you've went through to get to where you are now, like why the US, that type of thing. We'll go from there. I'd love to hear your story.

Yeah. So, you know, I've always had this entrepreneurial spirit, but also very cautious at the same time. And I think knowing that I was a bit of a risk taker, I had to have my sort of downside protection. And that's what always got me into real estate at an early age.

So I was a really bad investor in Ontario back in 2010, but then was introduced to the US single family rental markets in 2011 when I moved there for my first technology company. So as an entrepreneur, I focused tech. And then, yeah, I got into the US markets, you know, fast forward 10 years, you know, I didn't really invest much, sold my company, grew my family, was super busy. And then, you know, moved back to Canada.

Deep Dive

And, you know, 2020 comes and I'm wanting to do another startup. And, you know, pandemic hits and realized that my portfolio really hasn't grown ever since I started having kids and having the first startup and realizing, my gosh, like the only person really responsible for growing my real estate portfolio is me. But if I'm super busy, who's going to do it? And that's kind of what brought me to building my current company, which is, you know, how do we actually grow your portfolio?

And so it's an intersection of technology and real estate. And, you know, happy to unpack that further.

That's awesome. And so when you first got started, though, what was it that made you think the States instead of Canada? Yeah, you know, I actually didn't even think about the States because I was in, you know, doing burrs in and around like the greater Toronto area. Well, well outside the greater Toronto area.

We're talking like Ajax, Barry, so, you know, 70 plus kilometers from Toronto. And at the time in 2010, it was like 300K a home, which was still a lot. And then when I went to the States, my current business partner was also sort of advising my startup in terms of how to do cross-border taxes because we're a team of Canadians building a company in the US.

Practical Steps

So she was doing us a favor. And by doing so, we somehow segued into the conversation of real estate. And she was like, well, what do you buy? And kind of shared her my details.

And she was kind of chuckling and kind of embarrassed for me and was like, look, you can buy homes for a third of the price for double the returns. And I was like, that's nuts. But like, look, I don't have time. I'm living in California to show me these homes.

They're like, well, they're in Florida. I'm like, well, I can't do that. And then she showed me the numbers. And, you know, we were, they used cap rates, which is a measure of sort of returns after your operating expenses.

And what I realized is that they all had this weird line that I've never seen before, which was property management. And it was still cash flowing after property management.

Key Takeaways

So that was a game changer. You know, price point returns. And the fact that I can hire a property manager to see it, oversee it, was a game changer and a no brainer for us.

S. market.

S. Nice.

Nice. Yeah, no, it's awesome. I have a lot here too. I mean, but my story, it's not the same as yours, but it's kind of similar.

Resources

Like from the overarching theme of things are better in the States. So like I was born in Maine and actually Lewiston, Maine specifically. And I still have family there. And I would go and visit.

And what I noticed over the years was they dedicated Lewiston. And I'm sure you've heard of this in different areas. But Lewiston is one of those Section 8 hubs, like government funded hubs.

So they have them all over the States. Obviously Section 8 is kind of everywhere, but they have these hubs where they'll literally bus people to and get them to set up there.

So that was happening there. So I was sitting back and I'm just looking at the numbers and I'm looking at the purchase prices. And in Lewiston, it's, it's, there is a lot of single family, but there's a lot of like big houses that are like three or four stories tall that just, they've made each floor kind of be its own unit kind of thing.

Introduction

And so really cool setup. I'm looking at these numbers and you can get something for dirt cheap. And the Section 8 rents is like so high. And I'm like, wow, they don't have this.

And then over the years, just seeing it expand, I'm like, wow, like I really got to get into this. And then obviously here we are doing that, but no, that's, it's really exciting. So I know for Canadians, they, they get sort of this, I want to call it a mental roadblock. I don't know if that's it, but let's just call it that.

And as they start looking towards investing, they get caught up on different things and then they end up getting cold feet, which I find like, you know, if they had somebody holding their hand, they would move forward just like a kid, right? They're scared to make that first step. But when you as a parent guide them, then they're open to it. And I think that's really cool with Cher is you are like their guide and you help them to get established in the States.

So can you talk about that a little bit more and how that helps people who are a little too scared to take that first step? Yeah. So, you know, we're trying to really implement the concept of an asset manager for everyday sort of retail investors. Everyone always assumes like an asset or they think of asset management as like, okay, you put in money in a joint venture or let's call it a private equity firm or REIT or even like a mutual fund, right?

The Core Idea

Somebody is taking that money and behind the scenes, deploying it across different investments. They're making sure that, you know, we're maximizing your returns to get whatever risk return profile you're aiming for. So same concept that we're trying to do, but for your personal portfolio, which is, look, we are acting as you, but with lots of institutional and industry ties. So everything along the way, every single thing you need to think about from entity structure, tax, bookkeeping, all of the actual things to set up and scale your portfolio, we already know and think about all the time, helping our clients can think about these things and help them formulate, you know, a perspective and calculate returns on every single step so that, you know, all they have to do is really focus on their personal professional career.

So literally it starts with understanding sort of their risk reward profile, educating them on the different types of houses, regions, price points, returns, risk reward, all of that before we actually start any work, which is then starting to set up their entities, their bank accounts, and then doing an active search across landlord-friendly and tax-friendly states. And then once they acquire the home, we're doing the renovations and the leasing activity. And once leased, we're your single point of contact. And every single year, we're helping you say, well, what is your market rent rate?

Is it a good time to refinance, rinse, repeat, et cetera. So really trying to put your growth, your portfolio on autopilot.

I love it. I love it.

Deep Dive

And it shows too. Like I've spoken to your clients and they really like the service. Now, a question that I hear all the time whenever there's an event or just even people ask me, what's the difference between an asset manager and a property manager?

Yeah. So the way I always put it is like, look, if you had a portfolio of homes and you had a property manager, in 10 years, just like what happened to me, that portfolio is going to be the same size. They may be running away with your budget, but you know, I love property managers, but their core responsibility is to be an on-call maintenance provider, right? To collect rents and to assist with the leasing.

But they're not responsible for understanding your financing, your tax strategy, your bookkeeping, your actual lending and how are you thinking about lending and your returns, your rates and tracking the growth of your home. Whereas an asset manager is looking over every single thing that contributes to building your portfolio. So that's even down to the pricing you're paying for your accountant or the price you pay to set up your LLC and then helping you maintain all of that and then giving you insights into, hey, look, we can tap into like 60% of your equity right now and pull that cash out and this is how much we think you can get and we can buy another one for you and here's a good lender for you.

So thinking about everything we need to do to grow your portfolio. So if you want to think about it from a hierarchy, you know, so you got your property and your property manager, then you have us, the asset manager where typically would be the investor, but that investor is time starved. Yeah, no, that's, I think that's a good description. I think it becomes clear and, you know, I'm curious on your end, right?

Practical Steps

So what do you think the major, I'll let you know what I think mine is, but what do you think the major roadblock or when Acadian calls you and they want to move forward or American, just anybody who wants to leverage your system, what's the major hurdle that usually stops them that you guys overcome? Yeah, I think it's the, the uncertainty of where to invest, right?

S. is a huge, huge place, right? And so they're like, I'm trying to understand what is a good neighborhood, what is a bad neighborhood. But to be honest, when they look at the homes on the site, we have different profile homes that have sort of different risk reward profiles.

And I think everyone always gravitates to the highest cash flowing homes. But we're like, look, there's a nuance to all of this. And then they kind of get, they're like, I don't know where to go. I hear this state, I hear that state.

So it's mainly like the concept of not being close and remote investing. Makes sense.

Key Takeaways

It makes sense. That's interesting that you say that. I don't see a lot of that because we're not realtors, right?

We do the mortgage financing. So the investors will either reach out to you guys or maybe they've kind of built their own team and they're kind of going off on their own.

So I don't hear that. I find on my end, which you guys solved this problem, which is great, is the entity setup. I find a lot of investors get stuck on, I don't know how to set this up and going to different tax professionals. One person's, you know, reasonable at a couple grand.

The other person wants 10 grand. Why, right?

Resources

Is there a difference? Am I getting something extra for the 10 or is it just, you know, they're charging me more?

Yeah. And you guys like kind of do that as part of your package. I realize there's costs involved, but like it's all there. Can you talk about that a little bit?

Yeah. So it's pretty good. Like we spend on average 60 minutes with a bunch of homework in between. So it's usually two phone calls, two to three phone calls before you get, the referral comes to your inbox.

And usually the three topics are the different types of homes, the regions, the risk reward profile, the financing strategy and options and the returns. So we share a bunch of numbers and sample properties. And then yes, tax and entity structure, you know, what is your annual tax obligation? How does it work between Canada, US?

Introduction

And how do I protect my assets? So we go through all of that together. We share a lot of material that has costed us a lot of money to produce. Just because I think where a lot of Canadian investors get spun, and you mentioned it, you know, they'll go talk to a lawyer, they'll go talk to a tax account or an accountant, or they talk to a US accountant or US lawyer.

And all four of them will say different things because you do need to find a happy middle ground. And I always tell everybody the happy middle ground is where you can get tax alignment, liability protection and asset protection and lender friendliness, right?

So all three need to come into play. So we've given, you know, my business partner, she's a CPA on both sides of the border with over 50, 70 units under her belt at this point. She's quite versed in real estate and tax. So she, you know, along with a lot of consulting dollars, we've come to a conclusion and it works well with our lenders and coincidentally enough, a handful of other four national seasoned investors all kind of landed in a very similar structure and we, you know, we walk our clients through that and we will set it up for them.

Yep. Which I like.

The Core Idea

I really like that. That's awesome. So yeah, that's what I find is the biggest challenge, but I just, again, I really like how you guys kind of do that whole process for the investors.

That's, that's really cool. Now for Canadians, right? Because one of the things that you mentioned was the locations and I realize a lot of things need to be considered when you pick a location, but do you mind sharing? You don't have to necessarily go into the cities, but maybe the states, like what do you find is the most popular states for Canadian to invest?

Yeah. So, you know, I'm going to start off with my pain point. The thing I hate hearing the most and it really drives me nuts is when somebody picks a location and it's like, because it's this many hours of drive time, look, if you live next to the ideal location, fine, that logic makes sense, but that shouldn't be the primary metric of why you're investing in that area. Drive time should not be the metric for success.

You should be best investing in the best area. Now, when I say best, it depends on the profile of homes. So, we have like a profile of A, B, C, D type homes. We will pick different metros to look at for those because you can pick any state and find their equivalent of the A, B, and Cs.

Deep Dive

You know, you want to make sure that the surrounding economics are making sense, meaning like job growth, population growth, economic growth at the various highest level. S. and up the southeast, as well as the Midwest or what they call the rust belt states. But right now, we're not in, we don't push clients to all of them because I think a lot of them still are recovering from some post-pandemic bubbles or the numbers are kind of being slightly affected.

So we're tiptoeing around a handful, but those are the major regions we're in. Nice. Now, we're recording this early December 2024, and we've got a new presidency in January. If you look at the map, right, so I know traditionally the red states, and this is not like the rule, it's more of like a high-level guideline, but traditionally the red states are more landlord-friendly.

And the blue are more tenant-friendly. Again, you know, there's some overlap there where that's not the case, but generally speaking. So, if you look at the map at the states, right, and you look at Democrat versus Republican, and not to get political, but right now, the map is like almost completely red, right?

It's almost completely red. So, do you think that that's going to have any impact on certain areas? Do you think areas are going to open up and be more landlord-friendly? I don't think you'll get more landlord-friendliness from, let's call it the blue states.

Practical Steps

I think they're trying to hold strong on their sort of tenant-friendliness, and if anything, maybe going the opposite direction, right? Going deeper into being tenant-friendly. I do think red states are typically and will continue to be landlord-friendly because, you know, they're, you know, typically, you know, the Republican Party is very capitalistic in nature and, you know, that's, you know, the investor dollars. And also, what you don't see of a lot in Canada or at all in single-family is institutional dollars.

You know, there are large REITs and private equity and hedge funds, big firms that are buying up billions and billions of dollars of single-family homes. They couldn't do that without sort of the legislation necessary to be in control of their investments. So, you know, they're deployed across the same states. So, yeah, we don't see that changing anytime soon.

Okay. That's good. Yeah, I just, I just didn't know, like, you know what I mean?

Because change is coming. Change is coming.

Key Takeaways

So, we'll have to see. Yeah. I mean, if, if, I think if the election went the other way then possibly, but I think the election went the right way for real estate investors. But, you know, I could always, I could sit here for an hour and argue both sides of the coin.

So, I'm interested to see, I'm following a few different policies and a few different, yeah, there's a few different policies that up front don't seem like, hey, look, this is going to negatively impact real estate, but I could see that having a trickle effect down the road. I would say if I had to split it, I would say probably 60-40 in favor of real estate investors.

you know, I think so. Donald Trump, he made an announcement at the start of his campaign and I haven't heard it since, but if he does it, I think it will be great. But currently, the states, like the federal tax rate is 21% for entities, right? And he talked about lowering that to 15%.

And I mean, hopefully he does it. So, I think he does. I think that would be awesome.

Resources

So, you're going to see. But if he does, I'm looking forward to that. I think it's great for investors.

Yeah, yeah, definitely. It's just politics.

You just never know. Yeah, it's definitely good for investors. You know, like I'm curious to see how, you know, the immigration policy works out and all of the, like him being such a nationalist and having, bringing manufacturing jobs here, like in theory should work out well. So, yeah, no, I'm interested to see which way the economy goes.

Yeah, yeah, no, I'm excited to see. Same with Canada too, right? I think Canada needs a refresher and I know we're here talking about the states, but it's just, you know, we both live here in Canada and it's just, yeah, I want to see. But I think it's, I think it's a timely conversation because if you think about it as a Canadian, now that like Trump has won and he's threatening these 25% tariffs, it's like you hear a lot of Canadians like, well, Canada needs a reset.

Introduction

They're, they're all gung-ho. I would say they're all, there is a, there is a sizable portion of the Canadian population that is like going for Trump and I don't think they realize that that has a negative, like potentially strong negative impact on the Canadian economy. So, it's like a double-edged sword here, right? You know, they want him as a front runner, but like it could hurt our economy and could put us in a downward, you know, spin.

Who knows? We'll have to see how we react.

Yeah. Yeah. I mean, that could be taken two different ways, right? Depending how you ride the cycle and how your mindset is, right?

You could take that as this is the perfect time to invest in the States now because of that. Or you can take the other approach for Canada, but again, they don't have the other stuff like the landlord tribunal, all that's not fixed. But I know investors in Canada will look at it like, okay, well now there's a buying opportunity in Canada if the market crashes, right? So, you do see both ends, but still the fact that even if the values reset, the fact that it's very tenant friendly, it does push away some people, sure, depending on the locations and stuff.

The Core Idea

it's really interesting. I don't like to talk politics, but I think this election and just sort of everything that's going on, I think it actually really affects us more than a lot of the previous ones.

Yeah. No, I agree.

I remain politically neutral. I just talk either Canadian dollar or US dollar and the other question is always like, Forex. How much is going in my account?

Yeah. Yeah. I was like, well, they're like, well, what about Forex? I'm like, well, it's so funny because everyone's so concerned before you make your investment into the US, but then the day after they invest in the US, they're like, Canadian dollar sink, US dollar go up, you know, you just all of a sudden switch teams.

Deep Dive

It's interesting. Yeah.

No, it's crazy. That's awesome. So, okay, well, we're coming to the end here. We're going to wrap up the show.

Is there any final tips or thoughts that you would share with somebody who is considering investing into the States to help maybe more? Yeah. And I actually want to touch on this because this seems to be another common barrier, but I always tell Canadians that US single family is actually indeed the most Canadian investment you could possibly do because I think what a lot of people don't realize is that US single family rental SFR is like a bona fide asset class, right? It's not just any single detached unit.

There is this price point, price range, these regions, these economic policies, these legal policies that kind of all wrap it, which the reason why these large institutions are dumping tons of money is because it's super resilient with least amount of sort of fluctuation. So, if you look at major price point fluctuations and everyone's like, oh, well, you know, if I invest in GTA, I'm going to have this crazy appreciation. I'm like, but you're going to be funding this thing out of pocket month over month so you're losing money.

Practical Steps

And it actually is quite price volatile. Like, tell me your house is the same price it was a year and a half to two years ago when we were in the bubble, right? Whereas the US SFR, like the price point we're in, they stay pretty stable. So, you know, rents tick up modestly and appreciation ticks up modestly.

So, it's not like it does this, right? Whereas Canadian real estate often does that and it's highly driven by Ontario and BC. So, if you want steady state, safe and secure, high demand, that's, you know, the US single family and it's the most Canadian asset class in the world, I think.

No, I agree. And I just, just a note of caution for Canadians. I find, and it hasn't like affected the deal or anything, but like I find Canadians maybe because they're used to like properties in GTA, right? That you could buy for X price and in a year it's worth a couple hundred thousand dollars more.

So, they have these same expectations in the States and it's not like that. I think you just nailed it, right? It's a steady, but it's a slow increase. It's not like a crazy massive one.

Key Takeaways

Obviously markets, some markets are hotter than others, but I'd like to share that with the Canadians that, because I hear people say, okay, I'll buy it. I'm going to hold it for one year.

I'll do a prepay one. So then after one year I can refinance it and we're going to have all this equity because it's going to be worth so much more. And I'm like, whoa, hold on.

Yeah. Yes, it's going to be more. Yes, you're going to have mortgage pay down from your tenant. No, it's not going to be as much as you think because some Canadians get really like, so I just think like the mindset, right?

Just getting over like they've got appreciation, right? They've got all those good things, but it's, it's not like a craze.

Resources

We're over here. It's a craze, right? We get into bidding war frenzies and people are overpaying like crazy. Like that's not, that doesn't really happen there, at least to my knowledge in the markets that I've linked in.

Do you see that at all? Yeah.

It's steady state. Like you're going to get growth. It's gradual, but you know, you're going to continue to tick up into the right.

S. S.

Introduction

, right? Those are the, you know, where the price points are north of a million, right? You don't see that price volatility in the rural areas of Canada, right?

S. than there is in Canada.

Yeah, which I like. I would rather have, and I think a lot of Canadians would, especially investing so far away, I'd rather have something that's tried, true, and tested that you know and it's predictable than something that you just hop into and then lose money, right?

So you just want to be careful. Predictable.

The Core Idea

Yes. That's the word. Just to caution Canadians because again, everybody gets hopeful that they're going to make so much money and whatever and I just want to put that message out there that you can, but it's a little more than a year.

So no, that's awesome. So then for anybody listening that wants to follow up with you or touch base with you or your company, what's the best ways for them to reach out to you? Yeah, create a free account, sign up, and then you can book a call with a team and we'll help you strategize, put a plan in place and help you execute it, run numbers, walk you through all of that.

com. Yep, and I'll put the link in the description as well so everybody can click that.

Awesome. So if you're in the car or whatever, can't take notes, we'll put it in there. But awesome, it was great to have you on. I'm glad we could connect and chat.

Deep Dive

Yeah. There's so much going on.

Yeah, it's exciting. Yeah, definitely. I guess I'll see you in probably a week, right? Because we've got an investing event coming up.

Yes, that's right. Yep.

All right. Well, until then.

Practical Steps

Awesome. All right.

Take care. Take care. Thank you so much for tuning into the show today. If you found value, please follow the show and rate it five stars.

It would mean the world to me. And lastly, all the resources that we spoke about are at the bottom of the show notes. Looking forward to seeing you in the next episode.