Welcome to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. Today, I'm gonna be going over the pros and cons of investing in The US market as a Canadian investor. So we get, I'm gonna say, we're probably getting more phone calls for US investing than Canadian investing right now, which is unique because I've been lending in Canada for the past fifteen years. And the fact that more are wanting US, it it just it's unique.
Scott Dillingham:Not to say that there's not demand in Canada. There is. But I'm just saying we are getting more. But when I have these calls with people or my team has the calls, there's, you know, a lot of questions like, what are some pros and cons? You know, can you let us know?
Scott Dillingham:So I'm gonna be, you know, as honest and straightforward as possible and outline all the pros and all the cons. So and I'm even gonna do it in reverse, and I'm gonna start with the negatives. So let's talk negatives. So whether we'll start off with with Trump. Right?
Scott Dillingham:Whether you like him or not, he's the president. And some people love him, and some people hate him. So he is a big real estate investor. He's pro real estate investing, which I think is fantastic. He also has some crazy policies and things that he does and says.
Scott Dillingham:Right? So so that is that could be seen as a con. I guess depending on how you think of Trump, maybe that's a pro. Right? It it it all depends.
Scott Dillingham:But I think if you put politics aside and forget who runs the country and look at the state that you want to invest in and make sure that that state has the proper fundamentals. Right? Like, positive growth, population increase, you know, new employers wanting to open up there. Right? Like, if you look at fundamentals like that, and then on top, you layer in landlord friendly rules because there are some states that are experiencing growth, but they're not very landlord friendly.
Scott Dillingham:So, you know, maybe avoid those ones, but that's how I would decode this. When you go high level to say, I don't want to invest in The States because I don't like the guy who runs the country, It's also saying I don't wanna grow my positive cash flow and my net worth in a very effective and fast manner. Do you know what I mean? And so it's it's one of those things where sometimes we have to put aside, you know, the the things and just look at look at the whole thing. So that's why I I say look at the states because then when you're looking at an individual area, right, you're looking at different stuff.
Scott Dillingham:Right? Now you're looking at who the governor is, how they run it. Like, it it's all different. Right? And and it kind of separates Trump from the equation because you're basing it on that market's fundamentals.
Scott Dillingham:And that's how an investor should do it. Right? Think of Canada. A lot of people liked Trudeau, and a lot of people didn't. And I hear more people say that they didn't.
Scott Dillingham:Right? But it doesn't matter. We were still investing, and we were still doing things during that time. We weren't just saying, oh, I don't like them. I'm not doing it.
Scott Dillingham:Do you know what I mean? So I don't know if that helps, but, you know, put that aside. So that's that's one con. Another con is I think long term, it could hurt the Canadian economy if everybody moves their money over there. Now the thing is is the Canadian government needs to do and improve a lot of different things before it makes sense for investors to come here.
Scott Dillingham:Right? And I know they kinda started to do some things, like they axed that capital gains tax that was gonna come out. Right? Like, that targets investors. Ontario specifically, bill 60 opened up a lot of policies and made it more landlord friendly.
Scott Dillingham:It's still heavily based on tenants. There's other provinces where it's more landlord friendly than tenant friendly, so that could be part of it too, right, shifting your location. But if if money leaves and and, honestly, you could Google it. Like, don't take what I'm saying here, but there's billions of dollars that are are leaving Canada to invest in The States. And I don't think it's permanent, and I don't think people would say, hey.
Scott Dillingham:It would never come back, but Canada has to be more competitive with the taxation, with the the landlord rules. Also, when you look at certain markets, right, it's it's it's hard to justify because you can buy a single family home in certain areas, and not to say that that's what I would invest in, but, like, $500, easy, even more, right, in many markets. And in The States, you could get that for a fifth of the price for the same house. Do you know what I mean? So it it's and, again, certain markets, but it it's a big difference.
Scott Dillingham:So for somebody who's tight on funds but wants to invest, like, makes sense. So, I mean, I think the con is that it could hurt the Canadian economy. But at the same time, we didn't make Canada set the rules that they set. And with money leaving and, you know, the politicians seeing that happen, right, maybe that helps put the writing on the wall saying, hey. Things aren't good here.
Scott Dillingham:Let's make it a little bit better, and, you know, that money can come back. And we do see it too. We do see US people buying here because it's you know, they're they've got that US dollar that's that's worth more, but it's more on a personal basis they're buying here. So, I mean, we we do see money coming here, but but yeah. So, I mean, I think I think that's it, and I wouldn't wanna hurt the country that I live in.
Scott Dillingham:But at the same point, like, I have a family to feed. My clients have families to feed. Like, there's, you know, there's there's things that you have to consider here. So I do think that that could be a con, if I'm if I'm being honest. Another con is that it's it's a brand new country, so there's there's a lot to learn.
Scott Dillingham:And I don't think there's a lot in the sense that it's it's overwhelming, but you will need to learn, you know, the country's policies, how they operate. You also need to work on setting up a team, especially if you're long distance right, for you to be able to manage these properties. You know, you're gonna need you're gonna need people there, boots on the ground. So that takes a little bit of time to set up. Once it's set up and it's a good team, right, it'll be a well oiled machine, everything's good to go.
Scott Dillingham:But in that beginning, it's it's harder where if you're investing in your own backyard, right, you know what's what, you know the good areas, you know the good contractors, like, can like, it's just easier to make your team. So I do consider that a con. Another con is is taxation. Now in the states, they have an estate tax, so you would be subject to that. Now I'm not a tax person at all, but I speak to them, and I am an investor.
Scott Dillingham:So I know from my own experience, you know, some of these things. But, of course, speak to your own tax adviser, but the states does have an estate tax. But I just spoke to a gentleman earlier this week, and we're just waiting for him to get approval through his head office to come on. But they have a product, like an insurance product or an investment product that upon death, right, it gets paid out and it helps cover that estate tax, and it's it's really cool. So we're gonna have him on to go over that, but, you know, the taxation complication of it increases.
Scott Dillingham:Right? Because now you're not doing just Canadian. You're also doing US. Now you have to find someone who understands both sides of the border because you can't just go to your Canadian person because they might file things that are not proper the way that The US would wanna see them filed. Right?
Scott Dillingham:So you have to have somebody that understands both so the taxation is fluid between the two countries, and it all works out in your favor with the least amount of tax owing. Right? So that's something that can be a negative. Another negative, but I I don't think it's a huge negative because it's counterbalanced, but, you know, your down payments, Everything that you do, right, we have to convert the Canadian to US. Don't mind you.
Scott Dillingham:Their house prices are so much cheaper. So even still, it's still less money than investing in Canada, but, you know, you have to keep that conversion in into account. But on the flip side, you will be getting US income that when you bring back to Canada has that as of today. Right? 40% surplus on it.
Scott Dillingham:So you gotta keep that in mind too. I'm trying to think if there's any other major cons that I can think of. Not really. Of course, there's always gonna be, little things, But I think that covers the majors. Okay?
Scott Dillingham:So now we'll talk about the pros. Right? Why people are doing it? Why so many investors have discovered it's it's worth it? So I could I did kinda touch on it earlier, but the purchase prices are so much cheaper.
Scott Dillingham:So the real estate that you can get is fantastic for the price. Okay? So that is a major, major thing. So if you're maxed out in Canada or you just don't have the income to qualify in Canada, you can do something in The States. In The States so this would kinda be a separate pro, but I'm building it in here.
Scott Dillingham:It's really easy to qualify for. You don't need a personal income. You don't need a personal credit score. They're literally analyzing the strength of the property based on what it can rent for, and it can cover if it covers the expenses in the mortgage that you're applying for, you're approved. It's really easy.
Scott Dillingham:So, you know, that's that's part of part of this pro, right, is you get the lower purchase prices and and easier approvals, which is fantastic. Another pro is the states, and I did touch on this right when I started the cons, but there's many states that are landlord friendly. In fact, there's even some where it is a felony, and you can go to prison if you do not pay your rent, which is unheard of here. Right? Like, that's just unfathomable, but it's it's there, and people have went to jail for this.
Scott Dillingham:So, obviously, if you're buying in these states, you you don't have that risk level of somebody not paying the rent. Right? Because they know it's a felony. So it's just going to be better. Another thing is so for the pros, I'm gonna stack a couple of them together, but another thing is is no rent control.
Scott Dillingham:Right? So right now, I'm I'm grouping all of these under the landlord benefits. So there's no rent control in many of the states. So mainly the red states. Right?
Scott Dillingham:The the blue states are more tenant friendly overall. Not saying every state, but the the red states are more landlord friendly overall. Again, and that's not everyone, so this is why you wanna research your market. But if you don't have rent control and say expenses go up let me just make up an example. Let's say you have a property in Florida and the area flooded.
Scott Dillingham:Well, now everyone's insurance in that area is going up. Right? Or even nonexistent, to be honest. But in a lot of cases, you know, it just goes up. Some cases, they they won't insure.
Scott Dillingham:Like, some insurers have pulled out of certain markets in Florida. So be careful of that. But so if the insurance goes up, right, and you don't have rent control, you can pass it off to the tenant. Right? You can say, hey, guys.
Scott Dillingham:Sorry. We have this extra expense. We need to increase your rent $500 a month to to cover it or whatever. That might be very drastic, but it gives you that power to to do that. Now, obviously, if you get greedy and you raise it too much, your tenant's gonna leave.
Scott Dillingham:So you wanna be reasonable, but you have that capacity where when we look back in Canada and we look at all the rates and everything that we had after COVID, the rates went way high. But in in those markets with rent control, you couldn't do anything about it. You had to eat that cost. So you had to subsidize people's housings. And to be honest, one of my properties, that's actually what we're doing right now.
Scott Dillingham:The the mortgage, it was variable. It went up so high, but the rent, already gave them a discount when they moved in. My property manager said, hey, Scott. These guys are fantastic. They're gonna do repairs.
Scott Dillingham:They're gonna do landscaping. They're gonna take care of everything for you, but they just can't pay the asking. So I actually took 400 below market value at that time. Now it's actually, like, 1,500 below market value. But then the mortgage went up and, like, I am subsidizing their housing.
Scott Dillingham:Now because I have, you know, multiple properties, it doesn't impact the whole thing, but it's it's it is bad. So I'm looking at different things, you know what I mean, of of what I can do, whether it is selling and redeploying the capital or when the loan comes up for renewal, you know, really shopping that around and getting the best terms. And, you know, we talk about how to improve people's cash flows and all that good stuff, and that's a prime example. But the one thing for me is I really don't wanna, like, put them on the streets. I know that they don't have the money.
Scott Dillingham:And if I'm not letting them have this property, then where are they gonna go? So there's a little bit of humanity attached to my investing strategy. But, anyways, in Canada, I have no control. If I wanted to raise the rent, I can't. Do you know what I mean?
Scott Dillingham:But in The States, you can. So I think that's a huge, huge positive. The other thing, and I kinda touched on it, but or maybe I didn't in this episode, but it's fully unlimited. You can buy unlimited properties as long as you have the down payment. And these properties are fully open after five years.
Scott Dillingham:So that's the difference between the Canadian mortgages and US mortgages is Canadian mortgages, you pick a term. So when your term is done, then you can renew, then you can refinance or whatever. But in The States, it's just a thirty year loan for the whole thing. So they're open after five years. So what a lot of investors are doing is they're buying, right, and then they're refinancing after five years penalty free.
Scott Dillingham:So if the rates are lower, they get it, and they keep redeploying capital and just keep keep buying. So it's it's a really cool thing because, again, there there's no there's no caps. So I think that is absolutely fantastic. I know part of the cons I touched on this, but the fact that you're getting paid in US dollars is fantastic as well. Because when you bring that back, that's a 40% surplus.
Scott Dillingham:So you're already getting positive cash flow because the real estate is so cheap, and then you factor in a 40 bonus because of the the US dollar to Canadian dollar. It's fantastic. And some people don't even bring it back. Right? Some people keep it there.
Scott Dillingham:So if they travel or whatever, they've got funds there and like so it's up to you what you wanna do, but, you know, that's that's a great thing. And then there are, like, some markets that are blowing it out of the water. Like, there is you can look it up, but, like, Texas's GDP, so just one state, is more than all of Canada. And there's a couple states like that where it's like it equals that. So you look at all of our economic activity, Canada wide, and it's being hit in individual states.
Scott Dillingham:So their market is just so much bigger, so much bigger. In Canada, if you wanna buy in a certain town, right, it's tough because there's bidding wars and things like that. But in The States, it's not so much like that. I will say the good properties get sold really quickly, but you have time. When you put in offers, we're seeing people write in thirty days for financing as a condition, and it's being accepted by the sellers.
Scott Dillingham:Like, that's common over there. Here, it's like you gotta go on cash if you want an you know, the best chance. But if you can't, right, a week is is what you're gonna get. It's they don't allow these long commercial. You see the long, financing condition periods, but not a residential, but but you do there.
Scott Dillingham:So it gives you time. You we can really shop around for you, get you the best deal. So I wanted to, like like I said, I wanted to share with you all of the concerns that my clients come to us with, pros and cons that we could go over. And, of course, there's more. This is not I do these quick episodes.
Scott Dillingham:I try to keep them under twenty minutes. Right? There's more cons, but there's offsets to it. Right? Like, for an example, everybody sues everybody in The States.
Scott Dillingham:Right? But that's why they have proper entity structures over there to protect yourself. There's insurance against that as well. So there's things that you can do to offset it. But I I think for me, the biggest thing is you can cash flow.
Scott Dillingham:It's set up. And I know a lot of people say, oh, capitalism sucks. And, you know, whether you agree or disagree, it doesn't matter. That's not what this is about. But the thing is is they are very capitalistic over there.
Scott Dillingham:They're very much set up for those that wanna grow and make money and build portfolios. They're set up for that. Where Canada, I feel, really used to be set up that way, but now it it feels like I I don't wanna say the wrong words here, but it feels like we are set up or things are being structured so that growth that we want to achieve is not becoming available to us. Even at the banks, like when I started, I worked at a bank, and they would do unlimited rental properties, and that was pretty common. There was quite a few lenders that didn't have caps.
Scott Dillingham:Right? And then this bank went down to 10 properties, and then they went down to five. So, I mean, why? Do you know what I mean? Like, why limit people?
Scott Dillingham:And then the banks have such a monopoly on the capital, right, that comes in. Like, look at Rocket Mortgage Canada. Right? They they came in. They tried to set up to be their own lender, but rumor has it, and I again, look online, find do your research, but what I've heard, because I'm in Windsor, their headquarters was in Windsor.
Scott Dillingham:So, like, I I hear things and I know people that have worked there, was just that the banks were so aggressive and so tight on trying to let another lender into their market that they bought up as much bonds and everything that they could. So Rocket couldn't get the liquidity that they needed to become their old lender. Do you know what I mean? So it's such it's it's not as competitive as a market because there's not as many competitors. And when you have very few competitors and then the banks come up with rules where you can only have five properties, it really limits and holds back an investor's potential growth, where in The States, it's not like that.
Scott Dillingham:So that's what I meant by sort of it's set up for more of a a capitalism standpoint because they want you to grow. Right? Where in Canada, it kinda feels like they don't. And that is my opinion. Maybe you don't feel that way, but it just it seems that way when when the governments come out with different policies that are against investing and investment in Canada.
Scott Dillingham:And then, yeah, it's just I don't know. It is what it is. So I'm gonna leave that there. You guys have heard sort of the top pros and cons and discussions that we have with investors. I gave you the behind the scenes, unfiltered of exactly what people come to us with.
Scott Dillingham:Hopefully, this information was insightful, and it can help you to decide whether you want to invest in The States or maybe it solidifies your reasons why you don't want to, and that's perfectly fine too. Like, that's why we're in multiple countries. We just wanna have those options for an investor. We're not necessarily pushing one over the other. It's wherever you want to invest, we're gonna come up with a plan and and do whatever.
Scott Dillingham:We never if a client says, hey. I wanna buy multifamily in Canada, we'll never be like, oh, you should do it over here instead. Like, we never but we wanna have those options for you, and that's what this is all about is for you to have those options, make those decisions for your family, right, so you can create the legacy that you want for them and yourself, and then go from there. But if you like this episode, please like it. Please follow the show.
Scott Dillingham:Share with a friend. All that good stuff. It means a lot. Thanks so much.