# Invest rental property in USA



## frugalmini (Feb 19, 2011)

Hi, All

I want invest in a rental property in the USA. But I'm not sure how to start. 

Is it something like you get a realtor and a property management company, look for a property, make offer, after accepted get mortgage, and deal. Is there anything that I should pay extra attention to? Have any of you done this before? Do you hold it personal or under a company? What's the legal and accounting process of doing these?

Thanks a lot.


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## Quotealex (Aug 1, 2010)

Wouldn't it be easier for you to just buy a few U.S. REITs?


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## Berubeland (Sep 6, 2009)

Answer the following ten questions. 

Why do you want to be a landlord? 

Do you have any special skills or knowledge that could help give you an edge in the property rental business? 

What kind of property appeals to you? (Although this is just a guideline you should have an affinity for the kind of property you invest in) 

Is there a specific area in the United States you would prefer to visit or are familiar with? 

Is the money you are investing extra money? It's probably better if it's not your grocery money. 

Are you a good judge of character? 

Are you aware that investing in a foreign country has it's own set of risks? The USA is particularly disarming because it is similar but oh so different at the same time. Every state is different and has very different laws governing tenancies and real estate. 

Are you able to tell the difference between a good real estate investment and a bad one? 

Are you able to get financing in the US? 

How committed to this idea are you? Every business has ups and downs.


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## Just a Guy (Mar 27, 2012)

Well, it's not as easy as investing in Canada. You should get a realtor who's familiar with canadian investors. 

Each state has different rules. Some, like Florida, have higher property tax rates for non-residents (like 3x the normal rates). 

There are legal issues, so you need a lawyer who knows Canadian investors. 

There are financing issues (Canadian banks don't usually loan on American properties and American banks don't usually lend to non-residents).

There are management issues, such as non-residents are not allowed to renovate properties (so, legally, you aren't even allowed to paint the place yourself, and have to hire locals). Can you trust the property management company to put your one or two units in front of a local customer who has multiple doors?

There are tax issues, so you have to file income tax in both countries, and the US wants a withholding amount up front.

Finally, there is the problem of not knowing the areas...are you buying swampland? Gangland? Abandoned areas? Etc. what is the local economy like?

It's not easy, looks intimidating, but it is possible and can be profitable.

Oh, I also forgot, you also need things like title insurance, because they have different scams down there...and there may be location specific things to consider like termites which you may not think of being Canadian...


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## marina628 (Dec 14, 2010)

I would advise you start reading online as much as you can before you even think of it.As for financing most i know borrow against their Canadian homes and pay cash for US Properties.You need money sorted before an agent will even write a deal.
TD will give loans to Canadians on US properties but they base it on your equity in your Canadian home ,You must have a TD mortgage in Canada for them to work with you.
As for property taxes I can only tell you what I learned myself about Florida they charge 5% more more per year to non residents so every year you and your neighbor can have identical homes and lots but you will pay extra 5% just because you are non resident.
We went down 6 months ago to look at homes and realized we had much more to learn and figure out.My advise stay away from condos and make sure you get to see any HOA docs before you buy.Reading the local newspapers helped us find the big names to stay away from and the agents will tell you what you want to hear in most cases.
Title insurance is a must and get your own lawyer ,don't use one the agent recommends etc.Lots of fraud still going on and we decided not to purchase right now .
As for taxes if you buy for investment this will affect your ability to finance as we found banks only willing to do vacation homes/second home financing .If you do rent they have 30% taxes off top of the rent then managers will take their cut ,I was told by one management company in Florida they are required by law to deduct the 30% income taxes from rent and remit to the government then you have to file your taxes .


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## Ihatetaxes (May 5, 2010)

We were seriously looking at detached houses with pools to buy in Naples Florida and also the Fort Myers area. Initially the idea was to rent it out using VRBO, kijiji and through family, friends and work. The big drawbacks are being absentee landlords and having to trust a property management company, the fact that costs quickly add up (taxes, insurance, HOA fees, maintenance, repair, pool service, etc.). Then we have been considering buying a slightly less expensive house and not renting it out at all to avoid all the hassles and having to file a US tax return. Tons of great places for around $250k in Fort Myers and North Port.

For right now we have decided we already have a large enough percentage of our net worth in real estate, great houses are available to rent by the week or month for very reasonable prices whenever we do want to spend time down there, and the biggest deciding factor is that buying a house in Florida will just be more worry and stress that we don't need, especially with questionable fiscal return on investment.


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## kcowan (Jul 1, 2010)

marina628 said:


> ...If you do rent they have 30% taxes off top of the rent then managers will take their cut ,I was told by one management company in Florida they are required by law to deduct the 30% income taxes from rent and remit to the government then you have to file your taxes .


You can get it reduced to 15% by filing a form and having an ITIN or SSN. This is basically a promise to file with the IRS. The CRA also wants to know about any property over $100k.


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## frugalmini (Feb 19, 2011)

Thank you all for the help, sorry for the late reply. I, for some reason, thought I posted my question in a different subforum, and couldn't find it until now.


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## frugalmini (Feb 19, 2011)

Quotealex said:


> Wouldn't it be easier for you to just buy a few U.S. REITs?


Thank you, Quotealex. 

That is an option, I'll look into it. Actually, I have bought some XRE, which is doing good, especially love it's monthly dividend. But It's all canadian. Is there some options you like for US REIT?


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## frugalmini (Feb 19, 2011)

> Why do you want to be a landlord?


I'm don't mind to be a landlord, and I'm more interested in generating some passive income. And invest in a rental property is one of the options. 



> Do you have any special skills or knowledge that could help give you an edge in the property rental business?


I don't have much, currently in the property rehab business. 



> What kind of property appeals to you? (Although this is just a guideline you should have an affinity for the kind of property you invest in)


Single family home in nice location and have steady work force in the area.



> Is there a specific area in the United States you would prefer to visit or are familiar with?


No, still doing research on it....



> Is the money you are investing extra money? It's probably better if it's not your grocery money.


It's extra money...



> Are you a good judge of character?


Average.



> Are you aware that investing in a foreign country has it's own set of risks? The USA is particularly disarming because it is similar but oh so different at the same time. Every state is different and has very different laws governing tenancies and real estate.


I'm aware everything comes with a risk and I open to learn.



> Are you able to tell the difference between a good real estate investment and a bad one?


I can in the neighbourhood I'm currently familiar with. 



> Are you able to get financing in the US?


Not sure. I have a very good credit score personally, but I'm more interested in start a company there to handle the business/finance. So I'm not sure about it. 



> How committed to this idea are you? Every business has ups and downs.


I can only answer this question after I done my research.


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## frugalmini (Feb 19, 2011)

Just a Guy said:


> ...


Thank you for your suggestions. I will for sure look into the area you mentioned in your post in my research. So they are: tax rules, legal issues, financing issues and property management.


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