All Forum Posts by: Gord Stevenson

We have a vacation rental condo at the Princesa Resort on Sandy Beach in Puerto Penasco (Aka Rocky Point).  We have owned it for a little over 3 years.  The number of visitors to the area was always good but has been steadily increasing over that period.

Occupancy is very high from March 1 to July 31,and then starts to decline.  Traditionally the winter months...October through February have been slow, but even that period has been increasing.  Weekends in October and November seem to be doing well based on some local events, such as a big bike rally in mid November.  December is still slow...maybe 20-25% occupancy.  January and February are now getting interest from retired people and snowbirds that want to visit in the less busy/noisy times.  We have had bookings for maybe 10 days worth in each of Jan and Feb.   This year we started getting inquiries for month long stays in that period although so far most of those have wanted ridiculously low rates.  And as I mentioned above, the place just goes crazy starting March 1 due to Spring Break and almost every day will be booked.

Condo prices have been rising quickly over the last few years and condos that go on the market seem to sell quickly now.  Partially just because it has been “discovered” resulting in more visits...and partly because they are working on a “Home Port” cruise ship port.  Construction has been going on for more than 3 years in fits and starts, but there has been some recent recommitment noises from the government which has increased confidence that it may actually get finished and cruise ships may actually visit.  If that happens then activity and prices could really jump.

The major attraction is that Puerto Penasco is only about 3.5 hours (1 hour on the Mexico side) from Phoenix or Tucson and it is the closest ocean beach...closer than San Diego.   So it is close enough for a weekend getaway for a pretty large population.  Having said that we still see maybe 25% of our guests coming from farther away....even Canada.  The highway down from Phoenix through Lukeville and Sonoyta is good, and well travelled.

The only real drawback is that while there is an airport there waiting for good sized commercial planes, there is not yet a reliable commercial schedule.  Periodically a small regional airline will start flying there but so far it hasn’t stuck.  Eventually I think it will though.  Once there is a regular commercial flight, that will make it much more convenient for visitors from elsewhere.

I live in Calgary but like others have found purchase prices here too high with respect to rent potential.  We invested in the US and are happy with that decision.  

My son has invested in Calgary but to do so with positive cash flow he partnered with a friend and purchased a house that had been converted to a fourplex.  Two units upstairs and two downstairs.  That cash flows but not with a big margin. 

You may want to check out this thread:

https://www.biggerpockets.com/forums/52/topics/383631-method-for-tracking-income-expenses

I described my tracking spreadsheet, and there were some other interesting posts as well.

Yes, a Canadian who earn rental income or real estate capital gains in the US will need an ITIN, and will need to file US tax returns.  1040NR returns.  Generally, if they pay tax in the US they can claim that tax back on Foreign Tax Credit forms on their Canadian tax returns in order to avoid double taxation.  Personal tax situation can affect how well that works.  I.e. the devil is in the details.

I live in Calgary and totally agree with @Brianne H. excellent posts above.  While we love Calgary and Canada in general, the capital costs of owning property in Calgary make it very difficult to cash flow if buying today.  In most cases it is cheaper to rent than own here.  We live in Calgary, but invest in property rentals elsewhere.  In our case we have found success in investing in the US.  We need to use property managers, but even with that cost both cash flow and opportunity for equity gains have been better.

I periodically update a document that lists all of my assets, key contact information, and enough instructions to handle the important items until the properties can be sold.  I also maintain (every month) complete and accurate accounting records...one spreadsheet per entity...so heirs will have no doubt regarding revenue receipts and expenses paid...or cost basis for capital gains.

I also find it helpful to maintain all user IDs and passwords in a password manager.  I use LastPass.  That way there is one place to look and the list is always up to date.  You can also store “secure notes” such as bank account information there.  

LastPass now even has a feature that allows takeover of your userids and passwords by a designated person.  At least I remember reading about it last year.  That reminds me...I had planned to figure out the details and implement it.  If I remember right the designated person triggers the request to take over the account, and you are notified of the request and have x hours to deny the request if you are still able to respond.  I thought that was quite good.  I am not saying LastLass is the best.  There are competitors.  I researched it and made the selection maybe 5 years ago.  I could not live without it now.  Maybe I shouldn’t publicly admit that...I can sense the rate increase coming.  :-)

I installed a Ring Doorbell camera (the high def model) at a vacation rental and absolutely love it.  Quality is good, and I really like that it seems to buffer a few seconds so that when motion is detected the recording captures it right from the individual walking into the frame, or even a second or so earlier.  

By contrast I am less happy with the Arlo (the older..not Pro) cameras we installed at home.  For those the recording lags and the person may have already passed the field of view before the recording starts.  A friend has, and is happy with, the Arlo Pros though.

The RIng does require both a good wifi signal and a strong electrical pulse from the doorbell transformer though.  We had to install a better wifi router ($80 off Craigslist) and a new doorbell transformer ($30).  Absolutely worth it though.  We can see new guests arriving, when the cleaners come and go, and what enters or leaves the condo.  It clears up a lot of mysteries.  

Why was there a damaged towel and bed sheet including what looked like grease stains?  Maybe something to do with the 4 high end touring bicycles that came in/out of the condo carried by spandex-wearing guests.  Why is that guest bringing what appears to be a bedroom window screen into the third floor condo, and why is the bedroom screen now featuring a small cut?  Hummm.  

@Roy N.  I hear you Roy.  As I said, “unless your financial situation is such that a more complex (and more expensive to maintain) structure is warranted.”  Maintaining corporations in both sides of the border would be like that for me anyway.  

I file my own US and Canadian taxes, and do not engage an accountant, so my administration costs are low if you don’t count my own pain and anguish.  :-). Setting up LLPs were under $100 a pop and I have five.  Using corporations they would probably be $500-$1000 each to set up and if I then needed an accountant...maybe a couple of thousand per year?  Plus the added cost of setting up and maintaining a corporation in Canada.    

The other concern I had with corporations when I first researched it was that they had both a higher income taxpayers rate, and a higher capital gains rate than LLC/LLP (partnerships) for US taxes. That may or may not still be true.

I don't have stats but my guess is that the vast majority of LLCs and LLPs are set up as partnerships for taxation purposes in the US and those will attract double taxation according to the new Canadian tax authority viewpoint....unless you own the LLC/LLP in a Canadian corporation. If a fellow reader has sufficient scale or other financial complexities, to warrant the cost of a CPA and/or already has a Canadian corporation in place to own the US investments then I agree...different situation...use the CPA and whatever he or she suggests. I also agree that depending on your own level of skill it may be advisable to get a professional opinion.

Can we agree that the situation with the CRA position has changed and that serious due diligence should be exercised before using one as a Tax resident of Canada?

@Ali Boone @Roy N. @Jessey Kwong LLP's used to be advised for Canadians, but not now. Please search on my posts for a longer answer. The net of it is that LLPs are similar to LLCs but "in the old days"didn't attract double taxation for Canadians. The CRA has changed their position and now they are treating LLPs the same as LLCs. There is a grandfather clause for LLPs created before April 2017 but any new ones are problematic. You can use an LP but that doesn't provide the same level of liability isolation. For most Canadians it probably makes sense to hold US properties in your own name and buy extra liability insurance. Unless your financial situation is such that some more complex (and costly to maintain) structure is warranted.

@Jessey Kwong I live in Calgary and have several properties in the US.  If you want to chat, send me a Collegue Request.  Cheers.