Buying U.S. Real Estate

Richard Dolan (Toronto) is the CEO and Senior Analyst of the U.S. Property Shop, a U.S. real estate capital advisory and research company based in Toronto.?Dolan has co-designed two certification programs, Certified Wealth Management & Marketing and Selling Wealth Management Services, which are offered at the Schulich School of Business, York University. Don R. Campbell (Vancouver) is a Founding Partner of the Real Estate Investment Network(tm).?He is a leader in providing Canada's most current real estate investment education programs and economic research materials, and is the author of the best-selling Real Estate Investing in Canada 2.0 and co-author of 97 Tips for Canadian Real Estate Investors; Real Estate Joint Ventures; and Secrets of the Canadian Real Estate Cycle. David Franklin (Toronto) is counsel to The US Property Shop and an expert on Canadian and US real estate.

• Foreword xiiiIntroduction 1Part I: the Decision to Invest 7Insight 1: The Economics Behind the US Market 9What Trends Are Driving This Opportunity? 9No Income, No Assets, No Worries! 10How Big Is the Foreclosure Market? 11The US Economic Recovery 12New-Home Construction 13The Rental Explosion 13Prime Property Will Be in Hot Demand 16Insight 2: Finding the Treasure with the Property Goldmine Scorecard 18An Important Tool for Real Estate Investors 18Property Goldmine Scorecard 19Insight 3: Let Quality Research Drive the System 21Getting Quality Information from the Internet and Other Sources 21Insight 4: Dig for Specific Information and Ignore Generalities 26The Market Today and Tomorrow 26Insight 5: Jobs, Infrastructure, and Gentrification 29Signs of Potential Economic Growth 29Business-Friendly Policies Are Vital 30Trains, Planes, Automobiles: Infrastructure Matters 31Gentrification and Renewal 33Insight 6: A Closer Look at Three States 36Florida 36Arizona 40Texas 42Part II: the Distressed Property Market 45Insight 7: Learn to Identify a Distressed Property 47What Causes Distress 47Volume Sellers South of the Border 48Resist the Temptation to Think You’re Different 49What’s Behind the Discount? 50So, There’s Money to Be Made 51Insight 8: Understand the Fundamentals of the US Foreclosure Process 52Foreclosure Defined 52Insight 9: Commit to the Number One Rule, Then Get Your Options Straight 55Three Ways to Buy 55What to Remember about Foreclosures 59Insight 10: More on Due Diligence 61Five Market Fundamentals 62An Extra Word on Vacancy Rates 64More Market Facts 65Insight 11: Avoid the Snake-Oil Salesman 66There’s No Such Thing as ‘Leading’ or ‘Only’ Experts 66Lender Scams 70Housing Rip-Offs 70Insight 12: Recognize That a Bad Area in the United States Is Very Different from a Bad Area Elsewhere 75Define Your Bad Area 75Be Realistic 76Know What You Need to Know 77Weigh Risks and Returns 77Insight 13: Look for the Stability of a Good Neighborhood and Follow First-Time Homebuyers 80The Benefits of Market Stability 80What’s Your Investment Plan? 81A Final Word of Caution 82Insight 14: Choose Your Exit Strategy Before You Make the Deal 84Identify Your Exit Strategy 85Wholesale and Fix-and-Flip Options 87Pick Your Partners Carefully 89Choose an Exit Strategy That Makes Money 90Insight 15: Know Your Financing Options and Obstacles 91Portfolio Loans 93Private Money 93Leverage Your Canadian Successes 94Insight 16: Understand the Real Estate Cycle 96What Is the Real Estate Cycle? 97Boom, Slump, and Recovery 100Recognizing Cycle Shifts 101Insight 17: Find the People Who Can Help You Find Foreclosures 105The Not-So-Secret Way to Find Great Real Estate Deals 106Understand What an Agent Can Do for Your Business 106Getting an REO Agent’s Attention 107Beyond the REO 109Check Out the Wholesaler Market 109Deal Flow 111A Recipe for Success 111Insight 18: Benefit from the Five Profit Centers of Real Estate 113Natural Appreciation 114Forced Appreciation 114Positive Cash Flow 115Mortgage Reduction and Leverage 116Tax Deductions 117Insight 19: What a Full-Service Real Estate Investment Group Offers 118What Full-Service Real Estate Groups Do 118Good Full-Service Real Estate Groups 119Bad Full-Service Real Estate Groups 121Insight 20: Analyze Your Deal 123Understand the Property’s True Potential 123Cash-Flow Statement 124And the Final Number Is 129Checklist for Entering US Real Estate Markets 130Ask Yourself the Tough Questions 132Part III: Renovations and Management 135Insight 21: Work Smartly with Contractors and Subcontractors 137Five Common-Sense Rules 138Insight 22: Weigh Reno Must-Haves with Nice-to-Haves 143The Kitchen: Put the Three E’s to Work 143The Bathroom 146Insight 23: Dial Up the Intellect (Dial Down the Emotions) 148Emotion versus Passion 148How Much to Spend 149Exit Strategy 150Look and Ask Around 151Insight 24: Do the Big Four Renos on a Rental Property—Now 152Make Sustainability a Fundamental Priority 153The Big Four 153Insight 25: Get Everything in Writing 157The Six Golden Rules of the Written Contract 158How to Handle Contract Changes 160Keep It Simple 160Insight 26: Curb Appeal: You’ve Got Seven Seconds to Impress Me 161An Exterior Makeover 162How Much Should You Spend? 164Insight 27: Run If You Spot Any of the Top Three Reno Red Flags 165Make Sure Your Project Is Efficient 166Keep the Project Focused on What’s Effective 166Stick to Economical Options 166The Top Three Reno Red Flags 167Insight 28: Hire the Right Property Manager 172Zero In on Excellence: Seven Questions to Ask Potential Property Managers 173Insight 29: Make Money by Delegating to Your Property Manager 177Put Your Money to Work 178Professional Property Management Pays for Itself 179Insight 30: Set the Rules Up Front with Your Property Manager 180Get Your Communications Plan in Place 180Stick to Business 181Use Technology Wisely 182Insight 31: Be Smart about Rent Collection 184From Delinquent to Delivered 185It’s All about the Business 186Part IV: Cross-border Tax Planning 189Insight 32: Understanding US Tax Laws 191Filing a US Tax Return 191General Guidelines 192Insight 33: Taking Title to Your US Property Investments 197Limited Liability Corporations 197Corporations 197What Options Do Canadian Investors Have? 198US Estate Tax 200Gift Tax 201Insight 34: Deal with Depreciation 202Depreciation Recapture 202Insight 35: Limit Your US Taxation if You’re a Canadian Snowbird 205Residence Rules 205Renting Out Your Property 206Selling Your Property 206Gain: Filing Requirements 207Foreign Tax Credit 208Estate Taxes 208Review US Estate Tax Plans 211Part V: Legal Planning 213Insight 36: The Three Pillars of Real Estate Asset Protection 215The Three Pillars of Asset Protection 216Learn What Asset Protection Is and Isn’t 216Perform Due Diligence 217Insight 37: Develop an Asset Protection Plan and Be Prepared to Avoid Lawsuits 219Case 1: The Vexatious Litigant 220Case 2: The Cyclist 220Case 3: The Toppling Toddler 220Case 4: The Weekend Getaway 221Stay Out of Court by Being Prepared 221Insight 38: Counter Threats to Your Wealth with Foresight 222The Top Threats to Your Wealth 224Insight 39: Draw Up a Blueprint for Your Estate Plan 226Probate 226Adopt a Plan 227Insight 40: Steer Clear of Asset Protection Fakes, Scams, and Planning Errors 233Land Trusts 233Limited Liability Companies 235Understand Your Strategy: Probate versus Credit Protection 235Offshore Trusts and IBCs 236Homestead Exemption 236Transferring Assets to Family Members 237Part VI: Cross-border Banking and Financing 239Insight 41: Understand Cross-Border Issues 241Overcome Your Citizenship Issues 241Insight 42: Familiarize Yourself with US Mortgage Financing 245Loan Application 245Investor Loans 247Insight 43: Buy US Real Estate Property with Other People’s Money 248Begin with People You Know 250Keep Your Advisors Informed 251Part VII: Insurance and Investments 253Insight 44: Insure Your Investment 255Find an Agent Who Can Shop Around 255Areas of Coverage 256Replacement Cost Value and Actual Cash Value 258Making a Claim 259Location, Location, Location! 260Insight 45: Carry Insurance Beyond the Property Line: Medical, Auto, and Third-Party Liability 262Medical Insurance 262Automobile Insurance 264Third-Party Liability Insurance 265Appendix: Considerations for Buying a Second Home 266Index 269About the Authors 274