Can I Do It? The Potential of
Investing in US Properties

For many real estate investors in Canada, the potential benefits of looking beyond local investments are significant. Many electricians and plumbers, essentially tradespeople, aim to save and buy a condo in Toronto, but it’s worth considering the implications. Saving up 20% for a condo could take the entirety of an apprenticeship, resulting in purchasing a one-bedroom condo with a negative $700 a month cash flow. Realistically, while appreciation has been favorable in the past decade or two, relying on it is no longer viable. Instead of risking a $700 monthly loss, consider exploring more profitable investment options.

Ultimately, the goal should be to buy for cash flow and have the autonomy to manage property, something the US can accommodate depending on the state. Most swing states, and certainly the red states, offer this advantage. Given the high costs and lack of cash flow opportunities in Canada, it might be more beneficial to invest in a more affordable area like Brantford. Now, with the current state of the Canadian economy and waning confidence in its future, many Canadians are buying more US properties.

Canadian vs. American Systems

To provide context, a recent statistic showed that about 100,000 Canadians moved to the US over the last year, the highest in two decades. The type of people making this move are often business people and investors, indicating a loss of industrious and entrepreneurial talent in Canada. This brain drain, where highly educated individuals move to the US for better opportunities, is a long-standing issue in Canada.

When comparing the Canadian and American systems, some challenges in the American system are evident, but it undeniably offers more autonomy over property ownership. For example, spending a lot of money to go cash negative is absurd, especially considering the risks associated with the LTB. As a result, more Canadians are now investing in US properties, considering places like Ohio, Florida, and Texas—warmer locations where they can operate more freely.

Addressing Concerns About Investing in US Properties

While the opportunities are promising, many Canadian investors have valid concerns about entering the US market. Simply put, investing in the US doesn’t mean moving there. Tradespeople, for instance, are well-compensated in Canada due to a shortage of workers willing to do this kind of work. Staying in Canada is sensible for their profession, but it might not be the best idea for parking investment money. However, people often have concerns about investing in US properties from Canada. 

The Reality of Investing in US Properties as a Canadian 

The number one concern is, “I’m a Canadian. Can I even buy US properties?” The answer is yes. Canadians frequently buy US properties, specifically in Florida and Texas. While some may think it’s too complicated, it’s actually quite manageable.

Simplified Financing for Foreign Nationals

Financing is another concern. The DSCR loan (Debt Service Coverage Ratio) is set up for foreign nationals with most lenders, meaning Australians, Canadians, and others can qualify based on the debt service coverage ratio. In fact, it’s significantly easier to get approved in the US than in Canada.

Overcoming the Distance: Managing US Properties from canada

Additionally, another common concern is the desire to physically inspect the property. Many people don’t realize that driving to a place like Cleveland is only four or five hours away, comparable to driving to another property within Canada, such as Sudbury from Toronto. The difference lies in the property costs and investment potential. 

In today’s digital age, managing properties remotely has become increasingly feasible, and many landlords are capitalizing on this convenience. Even if you’re not based in Cleveland, there’s no reason not to consider investing in properties there. With the advent of FaceTime, video chat, and other digital communication tools, you can effectively oversee your properties without being physically present.

Be open minded

On-site discussions reveal that many are often preconditioned to stay within their familiar environment. There is a need for better education about the numerous opportunities available beyond their comfort zones. For instance, taking a drive to Ohio will show that it is a nice blue-collar town with sports, restaurants, and everything needed for a fulfilling life. Investing there could be a wise decision. By broadening perspectives and considering investing in US properties, Canadian real estate investors can find more lucrative opportunities and greater autonomy over their properties. The shift in mindset from local to international investing could lead to better financial outcomes and reduced risk.

However, the difference between the Canadian market versus the US market is a pretty big gap, and venturing into a new market can be daunting. Seeing it firsthand can clarify its potential. 

Identifying Growth Potential in Emerging Markets

When comparing Canadian versus US properties, it becomes evident that some areas, despite being less developed, possess significant growth potential due to their infrastructure and foundational similarities with more developed regions. In many cases, these less developed areas may even present better opportunities, often due to fewer limiting issues.

Property Hustler’s Cleveland Bus Tour

A game-changer for many is the opportunity to visit and explore the market in person. The old adage, “Don’t judge a book by its cover,” rings true in real estate. Specifically, online pictures often fail to capture the true essence of a property. A personal visit allows investors to assess properties, neighborhoods, and their potential firsthand. For example, discovering a duplex for $186,000 in Cleveland is nearly impossible in Canada.

To facilitate this exploration, a partnership has been established with the Asam Group in Cleveland, renowned off-market acquisition specialists who manage construction and US properties in-house. They welcomed the idea of bringing a group of pre-qualified investors to explore properties. This three-and-a-half to four-hour drive from the border served as a networking event, allowing investors to share experiences and build connections.

Main Objectives of the Cleveland Bus Tour

The primary objective of the bus tour is to give investors an authentic feel of the neighborhoods. It is crucial to avoid investing in C-class neighborhoods and focus on A and B-class areas that show promise for future appreciation. The tour encompasses a 12-hour day, including travel, property inspections, and meetings with local professionals. It is an opportunity to understand the market, evaluate properties, and network with like-minded individuals.

Additionally, the tour emphasizes the importance of matching investors with lenders. For those ready to invest, the tour outlines a clear roadmap and immediate action steps. Building relationships with fellow investors during the tour can lead to valuable partnerships and collaborative opportunities.

Hassle-free Experience in Cleveland Ohio

The tour is designed to be efficient, covering everything in one day. Unlike other tours that require a three-day commitment, this one-day tour suits those with families or tight schedules. The tour covers various neighborhoods in Cleveland, from C-class to A-class, and includes multifamily buildings. Meeting with local teams provides immediate context and insights, ensuring that investors are equipped to make informed decisions. Overall, the bus tour is a blend of education, networking, and practical steps towards successful investment in the U.S. real estate market.

Investment Sites in USA: Cleveland

As migration continues to reshape various areas of Cleveland, many areas are experiencing rapid growth. It is essential for potential investors to recognize that Cleveland’s economy is not solely reliant on manufacturing; healthcare has emerged as the leading industry. Notably, the Cleveland Clinic stands out as the number one employer in the region, highlighting the robust healthcare sector and its significance to the local economy.

Cleveland attractions

In addition to healthcare, another often-overlooked industry in Cleveland is tourism and entertainment. The city is home to three major professional sports teams, the iconic Rock and Roll Hall of Fame, and an aquarium that is considered top-notch. This influx of tourism not only contributes to the local economy but also offers additional opportunities for real estate investors.

Driving through downtown Cleveland reveals a city equipped with the infrastructure to accommodate significant growth. The area is ripe for expansion, making it an exciting prospect for investors. Interestingly, Cleveland’s population is quite large but spread over an expansive area. The city itself has a population of around 300,000, which may seem low, but the Greater Cleveland area, encompassing surrounding regions, boasts about 2 million residents. This substantial population ensures a continuous demand for housing.

What to expect when investing in Cleveland

Investing in Cleveland’s real estate market comes with unique considerations. Ensure you’re well-prepared—familiarize yourself with local regulations and practices. When navigating purchase and sale agreements, it’s important to understand that these documents typically include not only the purchase agreement but also disclosures and lead paint considerations. The city places a significant emphasis on lead safety, reflecting a strong commitment to public health and safety in property transactions.

The Importance of Inspections

Inspections in Cleveland are standard practice, and in some municipalities, they are even a mandatory part of the sale process. Unlike the trend in many Canadian markets where buyers might waive inspections to close deals quickly, investors in Cleveland can expect thorough inspections that provide clarity on the property’s condition. This ensures that buyers know exactly what they’re getting into, including necessary repairs and their implications.

Navigating Point-of-Sale Conditions

Additionally, some areas introduce point-of-sale conditions, adding further layers to the transaction process. While there are nuances to navigate, these requirements are generally manageable and should not deter potential investors from entering the market.

Smart Strategies for Selecting US Properties

For those browsing properties on platforms like Zillow, it’s crucial to exercise caution. Listings at rock-bottom prices, such as $45,000, often come with underlying issues that make them less desirable investments. A more prudent strategy is to focus on properties priced above $150,000. This price point tends to offer a comfortable entry into the market and presents a range of options, from fixer-uppers to turnkey properties ready for immediate rental income. 

Ohio Real Estate Laws and Regulations

Understanding the local laws and regulations is crucial for any investor looking to navigate the Ohio real estate market effectively. During a recent visit to a local office, insights were shared about the various laws surrounding landlording in Cleveland and throughout Ohio. It’s important to note that regulations can vary significantly from city to city within the state, so being well-informed about specific local ordinances is essential. 

Choosing the Right Neighborhood for Investment

It is essential to understand the difference in perceptions of neighborhood grades between U.S. and Canadian standards. A U.S. city’s classification of a C-grade neighborhood often aligns more closely with what Canadians might consider a D-grade area, indicating a need to adjust expectations accordingly.  Properties in Euclid and Parma, both of which are situated just outside Cleveland, exhibited a sense of safety and community. These properties, with well-kept lawns and inviting atmospheres, make them appealing options for investment. 

Selecting the right neighborhood is crucial for investment success. Venturing into a C-class neighborhood can lead to prolonged recovery challenges, making due diligence essential. When examining Cleveland’s map, areas from east to west along the lake, such as University Circle and the Cleveland Clinic, are promising. However, it is advisable to exercise caution around downtown Cleveland, particularly for first-time investors.

By understanding these nuances in neighborhood grading and local regulations, investors can make more informed decisions in the Ohio real estate landscape. 

Steps When Investing in Cleveland Ohio

1. Understand the Tenant Screening Process: 

In Cleveland, the tenant screening process differs from Canadian practices. Instead of collecting first and last month’s rent, landlords collect the first month’s rent along with a security deposit. This is an important distinction to keep in mind.

2. Evaluate Renovation Quality: 

When considering properties in Cleveland, it’s crucial to note that the quality of renovations is generally higher compared to other markets. This can significantly impact the overall investment value and tenant satisfaction.

3. Explore Financing Options: 

One of the most striking aspects of investing in the U.S. is the ease of obtaining financing. Investors should start reaching out to lenders, as they are competing for your business. Unlike Canada, where major banks scrutinize every detail of your financial life, lenders in the U.S. often only require confirmation that you have the necessary down payment (typically 20% or 35%) and can cover a debt service coverage ratio of 1.25 to get approved quickly.

Strategies for First-Time Investors

Many individuals believe that real estate investment is only for the wealthy, often thinking, “I can’t enter the market without $200,000 in cash.” However, consider this: do you know someone who has access to those funds? Additionally, do you have the option to refinance your personal property or access a substantial line of credit? There are viable options available.

Here are 6 key strategies to help you start investing in US properties:

1. Research about US Properties

One of the standout advantages of investing in the U.S. is the ease of accessing information. You can conveniently use Google Maps and PropStream, allowing you to easily access ownership information and records for various US properties. Platforms like Zillow and Redfin provide extensive data, including transaction histories and property listings. While similar tools in Canada, like HouseSigma, may generate excitement, such information has been readily available in the U.S. for years. 

This abundance of data empowers you to analyze US properties effectively, compare market trends, and evaluate potential investments with confidence. With these resources at your fingertips, you can efficiently evaluate properties and make informed decisions.

2. Prioritize Financial Literacy

To succeed in real estate, improving your financial literacy is crucial. Presenting yourself as knowledgeable and trustworthy will inspire confidence in potential partners and investors. 

3. Collaborate with Trusted Partners

Partnering with someone who shares your goals can significantly enhance your investing journey. For example, teaming up with a friend who has a solid income and similar aspirations can help pool resources and knowledge. Working with an experienced investor as your mentor can also highly increase your chances of succeeding into making more profit as a new investor. Regular discussions about real estate with people who already know the industry and learning materials can further solidify your investment strategy.

4. Understand Tenant Management

A common pitfall for new investors is selecting the wrong tenant, which can lead to long-term issues. While acquiring a property at a great price is appealing, understanding contracting and renovation processes is equally important. Education is key to making informed decisions, and finding a trustworthy property manager can make a significant difference in your investment experience.

5. Navigate Legal Landscapes

Understanding the local legal environment is critical. In Ontario, landlords face challenges with the Landlord and Tenant Board, which can lead to financial strain if tenants fail to pay rent. In contrast, markets like Ohio offer more straightforward eviction processes. If a tenant doesn’t pay for a month, they can be removed, providing a greater sense of security for investors.

6. Embrace Out-of-State Opportunities

Consider the benefits of investing outside your immediate area. Many investors have successfully ventured into markets like Ohio due to favorable conditions and robust opportunities. By studying the market, you can leverage its advantages and make informed decisions that align with your investment goals.

If you are a tradesperson…

then you already possess a valuable skill set that not only enables you to complete projects but also connects you with a network of professionals who can assist you. Investing in US properties might be a good source of cash flow for you while working in Canada.

If you’re feeling unsure about entering the market…

Don’t hesitate to seek mentorship and guidance from experienced investors! Investing in US properties offers numerous advantages for first-time investors, especially when approaching it with a well-informed strategy.

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