All Forum Posts by: John Lusk

I didn't hire a local property manager as I wanted to manage the property myself in Year 1 before sacrificing any pm costs. I do have my sister-in-law serving as a defacto manager, so that's helpful.  Managing the property from Seattle is no different than managing a property in a different state, or province. It's never that easy.  It was a huge pain trying to rent it from afar, namely due to not being able to meet potential tenants face-to-face.  And finding the right service providers is a total crap-shoot unless you already know folks or have insights on the good providers. Two things were immensely helpful initially, and have been incredibly helpful since renting in July. 1) By complete dumb-look, I ran across a handyman who's been absolutely spectacular.  2) My real estate agent has be unbelievable, and proactively, helpful in terms of offering advice, making intros, etc.

@Xuan-Thy (XT) Bui All based on assumptions of course, but on a 35% down payment, my estimates have me coming in at a 10.4% COC return at a 7.2% cap rate. My 'bad case' scenario gives me 8% COC. All that being said, I'm using a LOC against my investment portfolio to finance a portion of the 35% downpayment (I'm fortunate to have access to very favorable rates via my bank), which brings my COC up to 14%. So, if my assumptions hold up, I feel this is a pretty good deal. When I take into consideration the diversification opportunity (money outside of the US for me) and the exchange rate (1.3:1 today), it could be a phenomenal opportunity. Emphasize 'could' as I'm really not planning on playing the currency exchange rate game. Just makes the numbers look much sweeter if the CAD and US move a bit more towards parity.

Keep in mind that the 35% is only required for non-residents. 

@Robert Gunther Thanks for the note! We discovered this bylaw when doing our due diligence. We actually went to the city to see how many complaints were received last year to get a sense of the risk. There was 1. In East Hill. The city isn't doing much to promote this bylaw as most realtors/investors don't seem to know that it exists (or are choosing to just ignore). Regardless, it's a risk and I would suggest that anybody thinking about suiting base their conservative model on renting as a SFH rather than a suited home.

All that being said, 90% of the suited homes we looked at in Vernon, were illegal, non conforming suites...so maybe the city is turning a blind-eye given how low the vacancy rate is.  

Just following up on this post. We ended up going with a SFH in Vernon (just North of Kelowna) as the Kelowna market was a bit too competitive at our price point. At a vacancy rate of 1.4%, and the potential to rent out a 'suited' basement (essentially our SFH purchase acts kind of like a duplex but with more of a mother-in-law look and feel), the COC return is very attractive. Downside is definitely the 35% downpayment requirement for non-residents, but with some creative financing on our end, we're still able to get to a strong COC.

@Joel Sherlock we actually ended up going with Chris Mueller from Vantage West based on a recommendation from @Edison Reis on this thread.  We've been very satisfied with our experience.

Thanks to everyone for all of the feedback and recommendations. We're still working through a number of small challenges but looking to close and take possession by 6/15.

Thanks for all the great feedback/insights.  Based on my limited research I had assumed that capital gains taxes would be relatively steep. The process of even getting to the point of actually realizing a gain, as a foreign investor, is a bit of work as well.  First step is to find the right folks who can help guide us through this process. @Edison Reis very much appreciate the connections. Adding you now.

My wife's family lives in Kelowna (she's from Vancouver Island) and we travel from Seattle to Kelowna 4-5 times each year to visit. For a number of reasons, we feel like it's a good time to invest in the Kelowna real estate market (i.e. single family, condo, townhouse, etc.)

Can anybody recommend a real estate agent in the Kelowna area who has experience with foreign investors, ideally American investors?  And does anybody know of a real estate tax/accountant individual in the Seattle area who has experience in cross-border transactions?

Any insights/recommendations are greatly appreciated.

John

All,

Many thanks for the great feedback.  It's definitely a great problem to have, but one that's nonetheless wrought with long-term implications.  Based on the feedback I've received thus far, I'm inclined to do the following:

• Inquire about Cash-Out refi's, what rates I can get for a 30 year fixed, how long it will take to close, etc.
• Pull out the amount of equity that I've put into the place up to this point. While I'm certain that more is available, I'm hesitant to over-leverage when I'm not exactly sure where the money is going.
• Ideally use that cash for another investment property (or two).  Seattle is a tough market right now, so if I can't find anything that meets my goals and criteria, I'll use the cash to pay out a higher interest loan that I'm currently carrying.
• I do like the idea of at least looking at HELOC rates. My inclination tells me that I can get better rates from other existing assets (i.e. cash-our refis, LOC against existing accounts, etc.) but the thought of being able to move very quickly on any deal is very intriguing.

Again, many thanks for all the feedback. I'll continue to keep an eye out for other words of wisdom!

John

First post on BE so hoping this 'test' provide some interesting answers.

I have a property in Austin, TX (78704) that's generating 8% CAC returns.  I've had the property for 9 years and it's appreciated 75% since 2006.  The market is 'bubble hot' in that zip code at the moment, with 0 inventory and multiple competing offers for every listing.  I can tweak a few things and get my CAC to 10% in the next couple of months (refi, rent increase). 

Should I hold on to this property or take advantage of this ridiculously hot market, sell, and take my gains (of which I would do everything I could to minimize the tax hit)?

After going through a number of BP podcasts and posts, I figure I have 4 options:

• Hold for the long term.  Continue enjoying nice returns, principal accumulation, debt reduction and accept that I'min a great market that's not likely to go drastically South anytime soon.
• Sell and Reinvest:  Realize quadrupling your initial equity investment is damn good, take advantage of this market and invest in a bigger property, ideally through a 1031 (note: I don't have anything lined up yet so pulling off a 1031, especially in my current market of Seattle, might be tough).
• Hold, Cash-Out Refi: Refi the property at a lower rate and take out some cash to us for future real estate investments that my wife and I plan to make in the next 3-6 months.
• Hold, obtain a HELOC: See if I can get a HELOC lined up so that we can access funds when needed...although I have no idea how interest rates here would compare to the cash-our Refi

1. I know that I'm hitting on some general, differing philosophies of RE investing, but curious to know if folks out there have some opinions?

John