All Forum Posts by: Matt M.

Quote from @Scott Mac:

Quote from @Matt M.:

Hey Everyone!

We’re a Canadian couple ....

Driving over on your days off might lower your anxiety.

Maybe stay overnight in a motel, get your hair cut there, eat in the restaurants.

Get to know a few cities well, and get to know the neighborhoods there.

Talk to a few realtors and shop in the local grocery stores.

After a few trips, you will know where is not safe, and where is more safe than the not safe.

Also once you cross the border 911 is the call code for help if you need it, but don't expect the Red Coated Mounties in their shiny brown boots. 

Our Patrol Officers sometimes look very militaristic (but not always).

And like the old song says, Michigan seems like a young man's dreams; the islands and bays are for sportsmen (in other words Deer Hunting and Fishing are always a good conversation starter when traveling there).

There is an open hunting season at all times on public and private land from August 1st through March 31st every year.  So hunters could be encountered in the woods on public lands during these months.

Yes! We do look forward to being able to cross the border with ease once again (damn you Covid!). Pretty cool to be able to hop over the bridge and be in a different country, with all its quirks and foibles. And get our fill of Krispy Kremes!

Thanks for the advice, Scott! If there's one key difference I've noticed with Canadian vs US real estate investing, it's that you really have to know your neighbourhood in the US... crossing a street and seeing home values double or triple is extremely weird to us Canadians.

Quote from @Drew Sygit:

Welcome to Michigan!

What financing have you arranged here in the states?

Hey Drew, no financing lined up as of yet... mostly due to Canadian border restrictions that end as of April 1, which makes it costly to cross the border. We have money in the bank and approximately 80-100k USD available through HELOC; we were thinking of starting small by purchasing entirely in cash (including the repairs) for our first BRRRR, though we certainly don't feel the need to limit ourselves to all-cash deals. Any recommendations? I realize it's a bit more complex because we're foreigners... we've been told it's best to deal with Canadian banks that do business in the US.

Quote from @Andrew Moore:

Sounds like you guys are setting yourselves up for success! I am a big proponent of educating yourself, and continuing to learn throughout the process. 

If there is anything I can do to be a resource for you, or if I can be a sounding board for your ideas, don't hesitate to reach out!

Thanks Andrew! At this point, we're in the assembling a team phase. So any recommendations would be appreciated. Realtor, property manager, mortgage broker, wholesaler, lawyer, handyman, contractor, you name it. 

Hey Everyone!

We're a Canadian couple in our thirties looking to buy rental properties in the Port Huron/Metro Detroit area (we live just across the river in Sarnia). We've house-hacked previously and rent out one of our homes in Canada; however, we find the nearby Michigan market to be a lot more BRRRR friendly and would like to purchase at least 10 cash flowing properties there in the next five years.

In the past few months we’ve totally immersed ourselves in real estate investment education: podcasts during our commutes, articles on breaks, discussions at dinner, books during the evenings, and falling asleep to HGTV home reno shows. Seems like all we do is eat, sleep, breathe, and think about real estate.

Only thing stopping us from building an empire (lol) is the anxiety of starting a new strategy, in a new area (and a different country at that), but I’m confident that once we take the plunge, we’ll make it work!

Looking forward to networking, learning, and sharing our experiences.

Matt and Sasha

But why doesn't the market behave like the gas prices market? Gas prices are really quite low. Odd to say, but they're not much higher than what gas stations pay the wholesaler. This is because competition drives prices down. If Joe's Gas sells gas for 4.10/gallon, and Jim's Gas right across the street sells gas for 4/gallon, then Joe is either going to have to lower his gas prices or go out of business because no one is going to buy gas from him. There must be money to be made at 4/gallon, so Joe will still make money at that.

Result is, consumer wins. Competition drives prices down to levels where businesses barely profit. In the case of rentals, competition should drive down rental prices to a point where landlords barely profit. Though they still should earn somewhat of a profit for the risk taken and headache involved; otherwise no one would be a landlord. At the same time, the profit shouldn't be so great that everyone with good finances wants to buy a rental, thus driving up the prices of rental properties and driving down the rents.

Sorry, I should clarify a bit. I know why renters rent. I am a currently a renter.

My situation: I've maxed out all my the money I can save in tax-free/deferred accounts and still have about $2000/month available for savings, so I'm looking into real estate. The bank pre-approved me for 600k.

If I bought two places each for 300k, one with 5% (15k) down and one with 20% (60k) down, I could rent both out for a total of $3600/month, and a mortgage payment of $2500/month. Add in insurance, property tax, and repairs (next to none, as these would be new places), vacancy is actually a non-issue (renters are a dime a dozen), and the cost to me would be about $3000/month, meaning I could have a positive cash flow of $600/month. And I'd actually be very content with that. I'd be happy with no cash flow. For putting 75k down, tenants will have my 600k in houses, which I expect will keep pace with inflation, paid off in 25 years. Heck, I'd even be fine with a bit of a negative cash flow, knowing in the future that my rents will increase with inflation but my mortgage payments won't (at least not as much as inflation).

Why then are investors on this forum demanding such high returns? Obviously, the bigger the better, but we're talking about a competitive marketplace. Investors like me should be driving rent prices down and housing prices up because they're satisfied with lower returns and even no cash flow. I mean, that must be what is happening in my market, seeing as I find rents seem to closely mirror what landlords must be paying in mortgage payments and other expenses. I, for example, rent not because my finances are poor but because my rent is 1200/month on a place that would cost me 250k. I wouldn't save much by owning a similar place, and I haven't wanted to use my savings as down payment, as I've been getting a very good return on my stock portfolio. Now, if I knew my place were worth 100k, I would definitely drop 5k of my savings into buying a similar place, as the mortgage payment then would be about a third of my current rent. But that's not the case, so I'm in no hurry to own (for my own sake; as in, not for investment purposes).

While I'm very satisfied with my stock portfolio returns, I always have to ask myself how I am able to achieve such returns. The stock market is a competitive marketplace. I shouldn't be able to buy low and sell much higher, but I can because I can find undervalued stocks. Undervalued stocks should not exist because other investors should recognize their bargain prices, buy them up, drive up the prices, and no longer are they undervalued. And this should occur instantly, such that stocks are never undervalued for more than a fraction of a second. But I find ways (beyond the scope of this topic). Nevertheless, I always ask myself, why do these opportunities exist. And I can always come up with an answer, and it's usually: "because I'm looking where no big, smart institutional investor bothers to look [small cap stocks - not worth their effort] and where your typical investor is too ignorant, stupid, or fearful to notice the bargain." And that's comforting because I know, as long as that doesn't change, I will very likely continue to profit.

Which is why I don't understand how landlords can charge such high rents relative to the cost of owning. Whenever there is a bargain to be had or profit to be made, investors and businesses should step in, buy up the bargains, offer lower prices in order to gain market share, and effectively make the prices more fair to consumers (in this case, renters). That's capitalism in a nutshell. I know it can be intimidating to buy an investment property, and it can be a real headache, but the returns should negate that. Any business opportunity could be a headache, but the potential returns make it worthwhile. Hence the reason entrepreneurship exists.

I know, I know. Who cares why landlords can make inordinate returns on investment? They do, and that's all that matters. But haven't you seriously considered this? Not just for your own peace of mind? That you'll have reason to believe you'll continue to make a profit in the future? I just can't help but wonder...

edit below

I'm in Canada. Cheapest places in the city I live in go for about 170k, and you couldn't get them for much lower than that (no distressed housing of any sort). Now, what you get for that 170k isn't much (an old townhouse, in a not-so-great part of town). With 20% down, and a 25-year mortgage (max Canadian banks will allow), monthly mortgage at 3.7% = $700. Add on insurance, property taxes, and repairs (bound to be high), and the cost to the landlord should be in the range of $900-1000/month. Meaning, to fulfill the 50% rule, a landlord would have to rent such a place for $1800-2000/month. No way that would ever happen. A renter would expect much better for that kind of money and wouldn't pay much more than 1200/month for such a place.

I think this makes a lot of sense. Why would anyone rent when the cost to own is SO much lower than the cost to rent? And why aren't investors flooding into the market, causing market prices to rise and rental rates to fall?

Think about it. First of all, most businesses would be quite content if they could sell a product that costs them $500 for $1000. That's a pretty good markup, maybe quite typical in retail. But that $500 is for the product alone. That business then has to pay employees, rent, utilities, insurance, etc...

If it costs you $500 a month for mortgage, insurance, property taxes, and repairs, and you can rent out such a place for $1000 a month, then you're doing a lot better than that business. Especially because a good portion of your mortgage cost is principal. That's an exceptional return. And it's significantly less work to manage a rental than to manage a retail business.

When something sounds too good to be true, it usually is. But, obviously, given the success of a lot of you (such that there is a 50% rule); this is a case in which it sounds too good and is true. Haven't you ever wondered why? I'm just curious because I know there's no way you could satisfy the 50% rule in my market. 80% at best. And, you know what, I think that is fair and still a pretty good investment.