Canadian investing in US rental properties

[Curtis Woloshyn]

Real estate in Canada is crazy expensive! I was looking to buy rental properties in my own country, but the amount of monthly rent generated vs the price to buy rental properties,, the numbers just weren't adding up. I have a good friend who lives down in the usa who has now made a full time living buying properties for below market value, fixing them up a bit, and renting them. We've decided to try and work out an agreement between us to buy some properties together. We've met with the bank and an accountant, and heading to the lawyer on Monday. I'll lay this out as briefly as possible. I would like any advice/opinions on how we're going to proceed. If anyone has a better idea on how I should proceed with investing in rental properties, please share your ideas.

We're going in 50/50. I'm the money investor.  My partner brings to the table his expertise and does the work ( finding the best deals, purchasing the property, overseeing reno's, lease agreements with renters, collecting rent, paying the insurance, property tax etc), he does all the baby sitting associated with the rental property.

I'm act as "the bank". When my partner finds the right property to purchase, I loan the money back to our partnership, as basically a mortgage. An example scenario we ran with the bank president was if we purchase a rental house for $40,000. I would loan the $40,000  over 10 years @ 4%.  The rent would cover paying back monthly principal & interest to me, plus insurance and property tax. The little bit left over would be put towards future renos etc. If we need more money, which we will, for reno's, I would issue another loan to the partnership to pay for these.

From this partnership, my partner is benefiting by building equity in a property that he didn't have to spend a dime on,, but he does all the work associated with it. Once the property is paid off, the monthly net income split between us will be a nice little income. Someday when we decide to sell the property and split the money 50/50, that's when my partner will really benefit.

On my end, I have this money that I've worked hard and saved up all these years. It's doing hardly anything for me sitting in my bank account, earning almost nothing in interest. So I'm benefiting from being " the bank", earning 4% on my money, plus half the monthly net rental income, which will be a bit of money in the future after the house is paid off, and half the money from the house someday when we sell it.

Is there a better way to do this investment??? We have a bunch of things to figure out with the lawyer. I want to cover my butt. I won't be here to see what's happening with the property. My biggest risk is the trust I'm putting into my partner to do everything as according. I'm not sure how to have everything written up in our partner agreement so I can cover all areas. I'm excited and  nervous! Any opinions or ideas on what I've described?