All Forum Posts by: Frederic Babeux

As a fellow Canadian who has invested in the US, I'd say your first hurdle will be to find a lender that will lend to you cross border.

You can try the big Canadian banks with US branches but from my experience they only seem to lend for vacation properties in certain states (Florida should be easy peasy for such a property with the amount of snowbirds out there).

I haven't found any lenders who would finance an investment property held by a Canadian that lives in Canada (they will lend to you if you're a Canadian living in the US).

Also not all insurance companies will want to cover your investment property as a Canadian without any residence in the states. Oddly enough though, I was able to get coverage with liberty mutual when I had my duplex in NY state.

And then, as it has been mentioned before, another important thing you'll need is someone you can trust that will be your boots on the ground.

And to top it all off, you'll need an accountant that deals with cross border tax for your investment property. The tax implications are huge when you sell your building (they withhold 10% or so of the selling price at closing to make your you pay the IRS).

For all these reasons, I decided to exit my US investments as I found it was too hard to scale with no lending partners.

If you manage to find a lender, let me know because price wise the US is much more interesting than Canada.

Best of luck!

@Ronald Rohde

I'm talking about buying in the US, was just comparing to Canada as I'm a bit more familiar with how lenders work etc.

In an ideal world, I'd get seller financing for the down payment portion and then turn around to get a conventional loan for the rest of the PP. At least here in Canada, seller financing counts as ''equity'' for lenders as long as it is deferred (balloon payment or other deal). That would allow the seller to get say 75% of their selling price right away, allowing me to scoop some assets with low / zero down. 

For a full seller financing deal, you are right that there has to be some incentive for them to do it (tax incentive maybe? not sure how that works in the US.) At the same time, I'm not going after the best properties, we're talking the ones that have been on the market for a while. Vacant buildings I think you have much higher chances of getting seller financing because the asset is not performing.

@Ronald Rohde I agree, zero percent chance someone takes that deal on CVS or MCD's. Just trying to find some ideas to get some assets without having to save up for the next few yrs / raise capital.

So I was browsing Crexi today and saw quite a few national tenant nnn buildings that were listed for 5-6-7+ months and was wondering what is the usual days on market for those kind of deals?

Tenants included CVS, McDonald's and Beacon Roofing Supply.

My main question is this: am I wasting everyone's time thinking I can get seller financing on the lower credit quality tenants such as Beacon Roofing Supply?

I understand there's no way/very little chance it would work on a investment grade tenant due to them being seen as more stable investments. Also those deals wouldn't work financially anyways due to lower cash flow / lower cap rates.

In talking sub 2m deals btw.

Sooooo, am I nuts?

Thank you in advance!

Why not just try and sell it and get into something a bit bigger with a loan from the start? Seems a good way to scale faster?

Generally when interest rates rise, cap rates also increase. The spread between treasuries and the CVS might also widen or stay the same.

In any case, I'd take the CVS due to leverage, potential appreciation as well as different taxation rates.

Landlords in Quebec have to disclose the previous rent and you can be forced to give it to them.

It is very difficult to raise rents year over year in Québec, there is a formula provided by the housing tribunal that you have to use in order to justify your rent increase. You're lucky if the increase matches inflation.

That is one of the main reasons I do not want to buy locally, the law is really in favor of the tenants.

But to get back to your question, the payback period depends on your plans for the property. If you want to sell, the amount you can offer is much higher due to the fact that a higher NOI will increase the property value by a lot.

For example, if you manage to increase the rent by 500$/mo (that's a realistic thing here in Quebec due to the fact that we still have some leases @ 700$/mo when the market supports 1200-1500/mo. Now let's say that you get 6k in NOI at a 3.5% cap rate in Montreal, that is an extra 170k in value!! I'd have no problem offering 25k+ if I wanted to sell.

If you want to keep holding, it's also similar because your NOI will drive your refinancing...

Hope that clarifies it for you!

Have you looked into providing internet for your tenants? That is one way to increase the NOI.

for example, let's say you make 30$/unit in profit on the internet per month, on a 6 unit that's 180$/mo, 2160$/yr, divide that by your cap rate and that is the value you added. At a 6 cap that is 36k in value. The more units the better it gets.

Good luck!

Here's an idea, why not partner with someone on that deal? Get the 32k down payment from them and either pay interest on it (you mention 650$ in cash flow, should be sufficient to pay them a fair rate) or give them equity.

Otherwise, have the sellers provide seller financing for the down payment portion, offer them a slightly higher price with that option.

Another idea would be to sell the belongings (you mention they left them there and gave you that price because they didn't want to deal with them). That would allow you to raise some cash towards the down payment.

You have a lot of options in front of you, after all, you're getting the property at 75% of fair market value, this should be an easy deal to get a partner on board.

Good luck!

I've invested in the US from Canada, hardest part is probably financing.

I have not used financing in the US because the property I bought was too cheap to get a mortgage on.

I know some Canadian lenders have US subsidiaries but when I reached out to them on a bigger deal I never got any answers.

Also, if investing remotely, you need reliable/trustworthy people to manage your properties otherwise you're in for a looooong ride.

I'd be curious to see what the above poster has to offer for foreigners and what the restrictions are.

Best of luck!