Canadian's Guide to US Real Estate Investing

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 back to the Wisdom Lifestyle Money Show.

I'm your host, Scott Dillingham. Today, I have an awesome guest I'm super excited to have on with us, Glenn Sutherland. So Glenn is an expert helping Canadians. And even if you're not from Canada, you can still tap into his program and learn how to invest and purchase properties in the States.

So I'm really, really excited to have you on because this is an avenue that we're venturing down with the lending. So welcome, Glenn.

The Core Idea

Thanks for having me. I'm excited.

It's going to be fun. I'm excited.

Yeah, yeah, no, for sure, for sure. So I'm curious, though, what inspired you, right?

Because you're a Canadian. So what inspired you to want to invest in the States? Well, you being a lender probably know some of this stuff. I actually know you know really well know this stuff.

Deep Dive

But I used to do traditional lending with the Canadian banks and, you know, use the big five or big six, depending on how people look at it. But I used to use those banks. And one of the big things is I got maxed out. They started saying, you know, I think at the time I had four or five, maybe six Canadian properties.

I can't remember exactly. But they were saying, you're done. You're going to have to go to secondary lending. You're going to have to go somewhere else to find lending.

You're basically cut off. Actually, you know what? They didn't pitch to go to secondary lending.

They just said, you're done. You're not going to be using any more investing. They weren't going to give me any more even creative strategies. That was one of the big things.

Practical Steps

The other thing was that I was, when I was investing in Canada, was the landlord, the property manager, the contractor, the everything. Because I was a property manager, and honestly, it's not my strong suit. That's why I hire other people to do this, because I trust way too much. I understand that I'm hiring contractors to do it my way, but I trust too much to do property management.

When someone says they're going to give me rent, I assume they're going to give me rent. I ended up at the landlord tenant board way too much. Ontario landlord tenant board, because I live in Ontario. The other thing is, doing the contracting myself, I'm not a contractor, but I'm fairly handy.

I can do trim, put cabinets together, do a lot of stuff. I would take weeks off of... I used to have a nine-to-five job. Take weeks off of work to go work.

If you have your properties 10 hours, 12 hours away, 20 hours away in a car, you're just not going to have that option to go fix this. You're not going to be running over there in the evening.

Key Takeaways

It freed my life up. No, that's awesome.

That's awesome. You're right.

You're right. I do know those points. I just wanted to hear it from your perspective.

You're right. It's just... It's a different world over there. The things that you can do.

Resources

It's crazy. So, for your first purchase over there, what did you buy?

What did you go after? Well, this is actually a really common question I get. And I'll tell you what I bought. But I honestly wouldn't recommend going down this path.

It was for somebody who... I wasn't hiring a coach.

Wasn't getting advice. Wasn't listening to podcasts.

Introduction

Wasn't... There wasn't a cost-border podcast back when I started, back in 2016.

So, I was kind of winging it. But what I started off with is I bought some turnkey properties in the United States. Started off as a property in Alabama.

Was my very first one. S.

financing. And...

The Core Idea

Because everything was new. But I figured I'd go as far as I could go and I'd figure it out. And then when I bought property two and three, I put all three properties into three mortgages all the time and I refinanced. Basically, the first one into three properties all in one transaction.

Into three properties. And met somebody who could help me with that.

Yeah. So, I don't know. You want to go in specifics about what kind of property it was?

Well, no. You don't have to.

Deep Dive

I just... The fact that... You wouldn't do it that way again. I'm curious what way that you would recommend a Canadian invest over there to get going.

Yeah. So, the problem with what I did was... The same problem everyone has when they do a lot of rental properties or any kind of rental properties, even in Canada or the United States.

As if... Say you have...

I don't know. Everyone has a finite amount of money. And if you go put that money into a property and you buy it at market value, how do you grow? How do you continue to buy your second property?

Practical Steps

Where does that come from? Was the problem. And so, you know, at the time, I basically used my line of credit up because the exchange rate was a lot different.

S. property. And I was like, how do I expand? And that was where I kind of got myself stuck.

So, in this even current market right now, there is advantages to even like, you know, the 2022 market where everything was flying off the shelf. Right now, people are more open to seller financing. People are more open to, you know, inheriting mortgages. They're more open to a lot of strategies because the market is moving a lot slower.

So, it takes them a lot longer to sell some of these properties. If these properties aren't in 100% shape, you know, tip-top shape, needs some renovation, needs something, then they're going to even more be open to these sort of strategies. But basically, if I was going to buy now, you need to find an exit strategy to the property. It can't be just, I'm going to buy this and hold it forever.

Key Takeaways

Like, forever is not a good strategy. So, you know, how are you going to refinance this property in a future time? And if you're going to refinance it, why would it work to refinance? Are you going to add value to it?

Are you going to buy it at a discount? Like, you need to be doing something, not just buying turnkey properties. I wouldn't, I would honestly wouldn't advise that because if you're banking on appreciation as your exit, it's not the market for that.

Yeah. No, and I agree. And you said something there too. You didn't say the word, but you're talking about it is leverage, right?

As well. Because if you don't have the correct leverage, how can you grow your portfolio, right?

Resources

If you're buying everything cash. So that's definitely one of the things that I encourage investors to do, right?

Is compare leverage, right? If you can get leverage in Canada, great. Compare it to the States, see what that looks like. But if you're going to buy cash, right, it will limit your growth for sure.

Yeah. And then like, no, I love that.

Thanks for sharing. S. and what your interest rates in Canada are, because you might have a lease to get your feet in the door to get started. It might be the cheapest money might be your line of credit or your home equity line of credit.

Introduction

S. S.

lending, right? So I think it's about having that conversation first to make, to understand which is going to work the best. And if you can find somebody like Scott that works on both sides, they can be a one-stop shop instead of contacting several people. And one kind of, you know, American lender doesn't understand a Canadian lender is sort of, you know, if you're forwarding emails back and forth to each of them.

Yeah. S. broker and they're like, no, sorry, we don't have foreign national lending. And it's like, there's so many letters out there.

But so, so being in this, I haven't been in this world as long as you have. I mean, I've, I've was born in the States, moved to Canada when I was four. I always wondered what I was going to do with my status.

The Core Idea

Right. And, and then it hit me the one day to open up the lending, but you've been doing this for many years and, and now, right. I believe you are a coach and you have your own programs to help you.

Canadians. And I think that's really important because what I see when I speak to Canadians is like, how do I do this?

Where do I start? What's next? What type of entity, all that stuff. And I know you go over all of that.

So I'd love for you to talk a little bit about your programs and what you do to help investors. Cause I know there's so many that would move forward if they had a clear path to do so.

Deep Dive

Yeah. So we, we can cover everything, right. The idea is that if you take the program, you should be able to replicate what I do. There's, I'm not the kind of person that's hiding it or I don't, I'm not selling up for a second course, you know, to, to charge you more money a second time.

So like off the start, we're going to be like, you know, starting with the basics, understanding the differences between Canada and the U S. Honestly, answering the biggest question is the market, like where to invest in the United States. Cause they're literally 10 times the size of Canada. They have so many cities, so many states with all different regulation, trying to figure that all out and negotiate or navigating that.

You know, setting up your corporate structure. And we actually have like some special discounts with some attorneys to set this up so that they'll actually be a much cheaper price, like a literally 50% of what the regular attorney price is just because of the volume, you know, setting up your corporate structure, understanding all the laws, the FAPI, the like, what, what, what, how can revenue looks at this? How the IRS looks at this? Understanding all the different advantages of the U S for instance, and I'm not talking like, you know, just, you know, the evictions and all that stuff that committing the state.

I'm talking like the advantages. Oh man, I lost my train, but like you could, Oh, all the different structures.

Practical Steps

So I'm sorry. Um, strategies.

Yeah. So like you can do subjecting, subject to in the United States, which like is not as easily done in Canada, which is inheriting a mortgage or splitting a mortgage from the lien holder and the debt on it. Um, and just, and, and, you know, let them keep the, uh, the debt and you take the ownership, which isn't really a strategy that happens in Canada, understanding how to do that paperwork to do that, how to set up a contract for deed, a lease option, how to buy from the bank, how to do short sales, how to do foreclosures, how to do tax deeds.

Like there's just a lot of stuff. And a lot of people are going to say, well, I don't really need to do that. And so you don't have to do all that stuff. It's just all there, but you'll find, if you understand and know all of these things, something will trigger you.

Like you'll, you'll be talking to someone and they'll be, they'll, they'll say something that you'll go, wait. And it might be, cause you're like, I don't want to talk to make phone calls. I don't make phone calls, but you're like, you're talking to a property manager and they can make a connection. You're like, they might say something like, you know, I don't need the money right now.

Key Takeaways

Right. And you're like, light bulb.

Wait a sec. What are all the different ways we could do this? How could we structure this so that I could get very little money down?

How could I make this? So that is a great win-win for both of us. And I think that a lot of it is just to be able to understand all of the differences, all the, that are going to happen between Canada and us and understand how to implement them. And even just being in the coaching program, we have questions when you're, you're doing a deal analysis.

Some of the biggest questions are what I usually am on the phone or on a zoom call with my students is, is that they're just like, Hey, this is the deal. Can you check to make sure these comps are good? Because I don't want to make a mistake or, they just have questions that you just need somebody to make fewer mistakes, just to ask those questions.

Resources

Right. Or like, I just got my E2 visa and social security number. You don't need that to invest, but you like, if you have questions or want to know how to do it, like just to have someone to bounce those questions off of is, is really important. Cause you know, mistakes can be very expensive.

If they're done wrong, you could lead to double tax. If your corporate structures aren't done in compliance for a can of revenue, there's a lot of different things that you're kind of juggling. And just to shortcut the whole thing is I would have bought it myself. And that's why I keep price low because I want it to be affordable for, you know, what I would have paid at that time, whenever I wasn't making the kind of money I make.

And you're right. You, you bring up so many good points about all the different ways to save money. And like, one of the biggest ones, it's the easiest thing.

And you know it, right? When I tell you, you'll know it, but like Canadians, when they go to buy over there, they're like, okay, I'm going to offer a lower price.

Introduction

Okay. And that's great. And a lot of times you can get a lower price, but it's actually more effective. And I know, you know, this is to get a seller credit, right?

Get the seller credit, use that to even buy down your interest rates. If you're borrowing for lending or use it for your closing costs, right? Like you can do all these different things. Cause in Canada, you can't get the credits.

I mean, you can, but what happens is the lenders lower the purchase price by the equivalent of the credit, right? But over there, that doesn't happen.

The lenders will finance that. So just with that seller credit and buying down your rates, I can see thousands and thousands of dollars. Like it's so much better than lowering the purchase price.

The Core Idea

Obviously do both, right? Get the lower purchase price and the credit if you can. but little things like that, right? Which I know you go over in the course.

So that's awesome. Oh yeah. I have a whole calculator for the buy down rates that you just mentioned. Like the, the idea with a buy down, right?

Is you could pay a little bit more on fees up front, but get a lower interest rate. Right. And what I like to do is you need to figure out what the break even point on that is. Like how many years do I have to hold this property to pay for those extra fees I'm putting to get the savings.

Right. And every, it's just a chart, right? Everything makes a break even point. And you're like, it has to make sense.

Deep Dive

If I'm, you're like, Hey, I'm doing a two year project, but my break even point is three and a quarter years. You're like, well, let's just pay the higher interest.

So it's about making smarter decisions. No, it's, it's, it's really, really cool too.

Right. And then obviously cashflow, do I need to buy on the rate to lower the cashflow and, or increase the cashflow. But a lot of Canadians, they don't understand what they do over there. So like in Canada, let's say you go to RBC, just kind of pick them.

Your mortgage is going to be with RBC forever. Right. So you, you have to, but in the States, what they do is really, when you get your mortgage, they actually sell the debt. You know, and it might be a couple months later, because sometimes they'll group a bunch of mortgages together and sell it.

Practical Steps

But that's why they're really willing to accept you paying them the fees up front and getting that lower rate. Cause in their mind, they're like, I don't care.

I'm selling the debt. So if I can make extra money now, why not?

Right. So I will say that for every Canadian, when you get your mortgage statement every year, it might reflect a different company every year, but, um, the terms that you get and everything that you get are locked in.

Okay. So the debt, even though it's being sold, it's not going to alter anything, uh, for you. So, but since you brought up RBC, so let's say, sorry, I'll, I'll go one thing to add, cause I know that's, it'll be a faux pas if you bring this up, but one thing that Canadians may not understand, cause a lot of them, they have that comfortable that they're comfortable with this Canadian banks or other Canadian banks, the, you know, the BMOs, the other ones, they're all down there as well.

Key Takeaways

But you, if you're going to go down that path, rather than, you know, talking to a broker like Scott here, um, you're going to have to personally qualify with those banks. And you really should understand what kind of liability you're, you're taking on compared to not personally qualifying, putting this in a corporation, um, because of the different taxes and how your taxes are going to be changed by paying it personally. Um, when you sell the property, if you sell it, it could be subject to FERPTA, you could be subject to double taxation, um, depending how this is set up.

So, well, it's one of those things that, you know, if Scott brought it up, you're like, Oh, it sounds like I'm just preaching my own thing, but it is true. And it is something you should understand the risks you're taking and even the personal liability that someone could sue you. Um, if you, this property screws up in the U S that if it's personally liable, they could be coming after your assets in Canada. Whereas if it isn't corporately liable, it would be broken by the corporate.

No, it's a great point. And I didn't want to bring that up.

Yeah. And that's, that's a great point.

Resources

And you're right. I didn't bring that up just to like, I didn't want to stir the pot.

Well, you are right. The, the Canadian banks that lend over there, it's very restrictive.

It's personal name. It's based on your debt ratios instead of the property.

They also have limits. Like one of the banks will only let you have three properties. And if you own over here, then you're done over there. Like if you've got three here, then you can't even buy over there.

Introduction

So it's, it's very restrictive. And a lot of clients think that that is their go-to, but you're right. You nailed it with the liability. The U S is very sue heavy.

It is compared to Canada. Right. So to own things in your personal name is such a big risk compared to putting a property in an entity and having that isolated from yourself.

So you're right. It's a, it's a massive thing. Now, for those that are listening that want to take the next step, but maybe haven't, or they've been hesitating, how do they find you? Like how do they join your course?

How do they get access to you? Yeah. Well, there's a million different ways.

The Core Idea

I'm on everything. If you just type my name in, it'll show up. But, uh, I do a podcast, uh, probably the easiest way to get a feel of, you know, how I do things, but a Canadian investing in the USA or U S I don't remember which way it is on iTunes and Spotify, but you can find me there at links. com slash Canadian investing in the USA.

Uh, you know, if you want to get on a one-on-one call, just, uh, reach out, send me a text, send me an email. My information is on my website. That's my actual cell phone number.

That'll actually go to me. Um, and like, I, I'm here to like, I've been through it. I've done a lot of mistakes.

I've learned a lot. I've refined it every single time. And I don't want you to do the same thing.

Deep Dive

Let's, let's skip some steps. No, that's, that's awesome.

And you know what? I just want to throw this out there too. There's a lot of people that live in their mom's basement that offer investing advice in trying to sell coaching programs. And I can honestly tell you that I know for a fact that Glenn is an investor in the States.

I know that he is. And I want you to know that he's not somebody, again, that lives in their mom's basement that has this overpriced course. And, and, and they've not taken action on anything that they're trying to teach.

Right? So I think that is a really big, especially in today's market where you hear of people going bankrupt and that coach went under and this one went under or that one lied.

Practical Steps

That one's being sued. Right? The great thing with Glenn is he is an investor. You can look me up as well.

I'm an investor, multi-property owner, and we're giving you the advice from experience. So that really speaks a volume when you guys are researching or deciding to purchase products.

So awesome. Well, thanks so much, Glenn. I really appreciate you coming on and I'm looking forward to seeing you grow.

I appreciate it. Well, I'm already growing quite a bit. I'm actually thinking of like de-growing.

Key Takeaways

Yeah. Getting it down to a reasonable amount of properties because right now it's a lot. Anyway, no, I appreciate you coming, having me on the show. This was a lot of fun.

And I love talking real estate. Thank you so much for tuning into the show today. If you found value, please follow the show and read 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 on the next episode.