“It’s more involved and more complicated,” says Shawn Bedard, a Canadian investor with properties in Atlanta and Memphis.
“It’s very easy to set it up incorrectly. If you talk to a U.S. attorney, he’ll give you the wrong advice, and if you talk to a Canadian attorney, he’ll give you the wrong advice. You really need [to consult] a cross-border specialist.”
There is a long laundry list of things to know about the tax implications of investing in the U.S. But one of the things that no one talks about is appealing the tax value.
“In Columbus, if you paid less for a property than what the tax value was, you can appeal the tax value and get the taxes down, and that can increase your return,” Jones-Cox says. “But there’s only a three-month period in which you can do that.”
Bedard says one thing that surprised him was the amount of time it took to get funds. “Financing in the U.S. takes a lot longer to get, particularly as a Canadian; usually a month or so, depending on how skilled you are,” he adds.
“It’s still a traditional mortgage, but you have to go through a U.S. bank because a Canadian bank won’t secure a U.S. property.”
Outside of the doom and gloom of tax considerations, investing in the U.S. can be very lucrative.
“Realistically, someone who learns and researches the market, who made their own purchases, can easily get a true 12 per cent cash-on-cash return – and that’s [including] everything: maintenance, vacancy, etc.,” Jones-Cox says.
“Some of the locals who are buying inexpensive properties and are rehabbing them are getting much better returns than that. It’s not uncommon to get $200 per month in positive cash flow after being all in at $30,000.”
Bedard adds that the U.S. market as a whole, while not as great as it was two years ago, is still a great market. “Particularly when you compare it against similar markets in Canada,” he says. “Your rent-to-purchase ratio is still better in the U.S. than it is in Canada.”
This article was originally published in the October/November 2014 issue of CREW.
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