All Forum Posts by: Michael Japuncic

@Matt Willis @Nicholas Aiola and @Roy N. both brought up great points. Talk to a cross- border accountant and lawyer BEFORE buying any properties or setting up any companies. A couple hundred bucks upfront can save you thousands down the road.

I can't give legal or tax advice, just speaking from experience and from spending many hours with cross-border accountants and lawyers. 95% of the time for us Canadians, buying properties in a LLC is the wrong way to go. You will be probably be double taxed, paying tax to the IRS and then to CRA when you bring your money back into Canada. When you buy in your own name or a partnership, then you receive a CRA tax credit for the tax that you pay to the IRS.

There are a many different routes you can take, but Limited Partnerships have treated me well.

Good luck and PM me if you need any referrals.

@James Ma you're absolutely right! Anything bought 3 years ago is up hundreds of thousands of dollars. The stress test, interest rates and foreign buyers tax all slowed down the market but will never make it *pop*. If anyone thinks that a bubble will burst here and it'll bring back the days of $500,000 or even $1,000,000 single family houses then they are delusional. 

Some markets like ours cannot be explained or properly predicted by analysts. In-migration is the key to property values increasing and that will never stop here because we have:

1. In-migration from Canada. Vancouver will always have the most mild temperature in Canada. Remember that the rest of Canada is completely frozen and covered in snow 70% of the time. I dare you to tell me someone who likes going outside at -20 below!
2. In-migration from Asia. Geographically we will always be the gateway to Asia. This applies to people as well as merchandise.
3. In-migration from around the world. We are an extremely multicultural city and everyone wants to bring their families to live with them (myself included)
4. People follow jobs and BC has the second highest GDP growth in Canada.
5. Canada is one of the best countries and Vancouver is always close to the top of the most liveable cities in the world. When the rest of the world looks at Canada, Vancouver stands out as the most beautiful and best choice to live. 

@Courtney M. I also live in a very expensive market so I mainly invest out of state/province/country where the numbers make more sense. Personally, I like my properties being a flight away. When they are within driving distance I would always find myself wasting time painting, doing minor repairs, self managing trades, screening tenants, driving by to see if the grass had been cut and about a million other reasons that took me away from BUYING MORE PROPERTIES! 

Research the heck out of the market you choose (like Detroit), stick to B or C+ neighbourhoods and have multiple people look at your deal before moving forward. There will be lots of people here on BP that will be able to help you with referrals to set up your local real estate investment team in that city. A turn-key provider with a good track record might be a good idea.

I agree with and do it the same as @JD Martin.

I don't post my cell number on the ads, all contact is through email which has worked great in my area. If I can trust them to live in one of my houses, then I can trust them with my cell. Then I make sure that all of the tenants have my number which is to my benefit because if there is a water leak or some other type of emergency I want to know ASAP!

@Dean Letfus This has been a great thread and really hits close to home. @Doug Pretorius I admittedly was the young, uneducated "I live in Vancouver and the prices here are too high to cash flow" beginner investor. Buying a whole house for $35,000 in Memphis that cash flowed $400/month seemed like a dream come true! Fast forward 9 years and I sold the house for $2000 less than what I paid for it. I would have made 10x the ROI buying a negative cash flow property close to home that had mortgage pay down and appreciation in the deal. I wouldn't change the path that I took because of the lessons that I learned along the way. *Disclaimer* Do not take the same path, just to learn the lessons! Stick with Bigger Pockets to learn.

The lessons that apply most to these cheap properties are:

1. Appreciation is icing on your investment cake but IT MATTERS! Stay away from flat or declining neighbourhoods. 

2. Capital expenditures hurt a lot more in lower priced houses. An AC unit, roof or drywall costs the same regardless of the house value. Frickin squirrels cost me thousands on that property and trust me "squirrel repair" was NOT a line on the pro-forma!

3. Don't ever rely on just one person for your information on a property/neighbourhood (as Dean said), verify everything with a second source. With such little money to be made in these small deals, there will be people who will try to screw you (especially if you're from out of town). Lying about neighbourhood quality, rent amount, cost of repairs, repairs charged but not actually being done etc.

Well said @Roy N.

Typically a LLC is the best choice for an American, but NOT for Canadians investing in the US.

Hi Angela,

I have been investing in the US for almost 10 years so feel free to message me, I'm happy to help.

Hi Bobby,

I'm a Canadian and have been doing this same thing for years (setting up partnerships with Canadians to buy US property). I'm not an attorney or accountant so you both should talk to cross-border ones to make sure you each do what is best for your specific situation. 

LP is what I use and is most likely going to be your best bet. The general partner being either a C corp or LLC and then you both listed as limited partners. This is because when a Canadian owns US real estate in his/her own name or a partnership then when they pay the IRS, they receive a tax credit towards their Canadian taxes. BUT if the real estate is owned in any type of company (LLC, C or S corp) then that same tax credit does NOT apply. They will end up being double taxed by having to pay taxes to the IRS and then again to CRA.

Hopefully you and your partner can learn from my expensive mistake! lol

I'd be happy to help you with any cross border referrals. Good luck!

Some of the pitfalls that I have encountered with owning condos is the fact that strata/HOA can REALLY screw around with your otherwise great plan. They can easily ban or put a limit on rentals in the building with just one vote at a monthly meeting. The other issue would be large capital expenditures that there is not enough of a reserve for such as re-piping, a new roof, boiler, painting, leaky windows etc. When there isn't enough of money to pay for those, then guess who does... YOU (9 times in this case) and the other owners. I have been hit with a bill of $5500 to repipe a DIFFERENT building in the same complex as one of my rentals, OUCH! Imagine that 9 times over! I would go with an actual multifamily that you can control every aspect of and don't have to answer to a HOA or strata.

@Matthew Jarvis I'm in!