All Forum Posts by: Gord Stevenson

Hi @Nikhil Gupta. We used Canadian debt, obtained by leveraging the HELOC on our own Canadian home, for our US purchases. My reasoning was (1) lower interest rate, (2) already in place, just write a cheque, and (3) from the seller's perspective it is a cash offer and therefore more desirable than one that might be a few thousands higher but dependent on financing. The downside is that as I understand it, you can only write off interest on debt against the related income if the debt is registered against that property. So we can't deduct the interest for US tax purposes. But we can deduct it in Canada.

Because of this approach we didn't have the issue of trying to get a US mortgage on a property held by an LP, LLP, etc….although I have heard that can be a challenge.

I have also heard that buying the property under your own name to get the financing, and then flipping it to an LP/LLP/LLC is technically not allowed and can trigger a clause in the financing terms to require immediate repayment, just like a sale. But I really don't know. It's just what I read. You would have to check with the financing organization.

these are just my thoughts.  I have no tax or accounting credentials.  Cheers!

When my wife and I (Canadian Citizens and Residents) purchased a few properties in the US, we held them in LLPs to avoid the double taxation problem.  Later, the CRA decided that LLPs act like LLCs and going forward would be treated as such.  The older ones were grandfathered.  

Going forward, my thought is that the property could be owned by an LLC (for liability protection) and the LLC could be owned by an LP. The LLC would be a "disregarded entity" from a US tax perspective. The 1065 would be filed at the LP level, resulting in K1's for each partner. Canada, presumably, would see the LP as a standard "Partnership", and the Foreign Tax Credit for US tax paid should work according to the Tax Treaty.

I am no tax accountant.  What do you all think?  Would this work?  It seems reasonably easy to set up.

Thanks @Jaysen Medhurst.  Makes sense.  I will try to find out more about how the wiring works here.  Cheers!

@Justin Tahilramani The condos are in 5 story buildings with no natural gas (in the resort at all)...and the only propane is to the pool heaters.  The water pipes enter the condo in the master bathroom...so that's where the heater would have to go...not near an exterior wall.  Electric would be the only potential option.

@Jaysen Medhurst Good point about only needing to bump it up from whatever the incoming temperature is.  Let's say the breaker in the condo can handle the load.  If it can't, that is obviously the condo owner's problem.  But is there any potential for the load to still affect other condo owners in their units?  E.g. The condo in question is A201...and maybe the electrical "line" serves A101, A201, A301, A401, A501.  Could you foresee a possibility that the load doesn't trip the breaker in A201, but both A201 and A401 are doing this...and now there is a problem in one of the other units (A101 for example)?  I am trying to differentiate between impacts to the owner who installed the heater and potential impacts to others.   Thoughts?

Hi everyone, I am looking for electrical advice. I am on the HOA board for a resort in Mexico that was built in 2000. There is a small electrical service in each condo, that I would guess has less than 100 Amps. Wiring is original, and to Mexico standards, not US standards. I.e. not the best.

A couple of condo owners have decided that they are not happy with the temperature or reliability of the "hot" water supply and are looking at installing electric tankless water heaters in their condos.  There is no gas service, so it would have to be electric.

One owner is considering an EcoSmart 18.  The web site says it's for condos/apartments; it is listed at 1800 watts.  The specs say 75 A draw; 2 x 40A breakers; and 2 x 8 AG wires.  

What do you think?  To be determined, but let's assume there is enough space in the electrical service box for the 2 x 40A breakers.  How safe is this from an electrical perspective?  Is there a risk of fire?  Is there a risk of affecting other condos' electrical supply?

Thanks!

I second the earlier recommendation to check the use of LLCs by Canadians. The conventional wisdom is that LLCs will open you to double taxation. Assuming the LLC is set up as a partnership for taxation (likely) then the IRS considers the revenue as personal income...while the CRA considers it Corporate income. Foreign tax credits cannot be applied in Canada to recover foreign personal tax paid against corporate tax due in Canada.

I have a vacation rental that I manage as well as a few long term rental homes. For the STR, all the same questions around investment, expenses, tax planning etc apply. But for the STR there are a number of additional questions around operating model. It is important to get those nailed before you start having renters show up and you have to scramble. Some examples:

How will you market and attract renters?  I use VRBO and AirBnB.

If you have multiple channels, how will you maintain an availability calendar and keep the channels current?  I have calendars on both VRBO and AirBnB and have them synching.  

How will you collect and receive revenue?  I use VRBO and AirBnB’s systems (not mandatory)  I leave the credit card management, collection of money etc to them, and have them deposit the money directly to my bank account.  I also configured both to only pay me when the renter checks in so that I don’t have to worry about managing refunds if someone cancels.

So...then how do you handle it for the small number of times someone contacts you directly to rent, or decides to stay an extra day after they are there...those transactions that aren't captured by the channels? I maintain a spreadsheet based system that tracks revenue coming from the channels, and those additional transactions. And also expenses: property tax, utilities, maintenance, yada. I have an earlier post on this site where I described the accounting spreadsheet. I built it for the LTR properties, and expanded it for the STR. I like it. It works for me. It to be frank the STR stresses it a little. If I had multiple STRs I would probably have to go to a more professional accounting system.

How do you communicate with the renters?  Only through the channels?  Or directly?  If directly, how do you capture and track email addresses, phone numbers etc?  I have a tab in my accounting spreadsheet.  And then over time I am not dependent on the channels for my customer list.  I also maintain an information document that answers all frequently asked questions and I proactively send it to every renter to avoid a lot of email traffic answering the same questions.

How do you maintain and communicate schedules to cleaning staff, and apartment or resort security if applicable?  Monthly I cut/paste the schedule into an email and send it to both, and correct it if it changes.

How do you manage arrivals?  Key management?  I dislike keys.  I use a wifi connected door lock and I send it personal door codes for each renter that activates and deactivates according to their arrival and departure dates.

Maintenance contacts?  Sounds like in your case you are close enough to handle that.

Cleaning contract.  What is the scope of cleaning?  What will the6 provide?  What will you provide?  If you are providing supplies, how will the inventory be managed?  I get the cleaners to provide all supplies...which means a more expensive cleaning bill...but reduces other costs and hassle.

What inventory do you need?  Dishes, utensils, bed/bath linens, soaps, garbage bags, etc.  Wi-Fi (the SSID and code goes in the info document).  Furnishings.

Are you going to take security deposits and manage refunds?  Or use damage insurance?  Or take some risk?  For me, a $200 damage deposit is not worth managing...so I don’t collect one.  That is a risk but my theory is that I may get a couple of extra rental stays per year because I don’t insist on one...and that would more than pay for one or two small damage issues.  And a damage deposit won’t handle the possibility of a major trashing anyway.

I am sure there are a lot more.  Those just came to mind off the top.  Basically do a walk through of every step from the moment a potential renter searches for a property to the time they depart, and think about how it will work.  That will provide the question list.

Good luck!  It’s all doable.

I agree with the other posters recommending all revenue and expenses related to the property be managed through a dedicated bank account...and specifically not co-mingled with personal finances.

This is a good thread to read:  https://www.biggerpockets.com/forums/52/topics/383631-method-for-tracking-income-expenses?page=1

I posted my method of tracking income/expenses, and rolling it all up to income tax form income and expense categories.  Others contributed their ideas too.

 I would be very worried about investing in real estate in Toronto right now.  Who knows what will happen but the prices are still very high and governments seem to be implementing tax policies that are providing further headwinds.

Given a desire to focus on real estate, maybe a REIT would be an easy way to invest in real estate without risking it on Toronto. Just a thought.