What’s up investors! On today’s podcast, we’re going to be talking to a Canadian investor that it’s going to answer the question on, how can Canadians or folks outside the United States invest in the United States. Now we’re going to be going into just some investing and entity structuring ideas, and we’re not advocating for any of this type of stuff, but it gives a good insight into what it takes for some other folks that, we have to have some international investors in the group, but they have to go through and, it might also expand your mind to thinking, to get an outside of the United States.
And this is a typical topic for a lot of high net worth investors when their net worth goes over three or four or $5 million. A lot of people might have a lot of distrust in the United States government, or just want to diversify over the United States. Now I personally believe that the United States is the best nation out there because we have the best military. But it might be prudent to get outside of the United States for other reasons like taxes, or maybe just having another passport to be able to get out of town. If you’re in the United States and you love the United States, today’s podcast probably isn’t going to be too much value for today.
But before you go, I just wanted to go over a couple of thoughts or lessons I like to share with you guys before you guys take off to the podcast. Now somebody introduced to me this idea of an incubator group out there, and this is really not in the world of real estate, but in the world of venture capital.
And I’ve spent a couple of years, I spent a lot of my time looking into venture capital because here we have all these investors looking for ways to grow their money, which ultimately just ended up coming back to real estate, mainly for the taxes and the stability.
Especially when you go into stabilized apartments or stabilize properties that it’s already occupied and it’s more of a cash flow model, really. You’re very conservative in your investment and you can really sleep at night or venture capital projects, very, asymmetric type of returns where you might hit it big the 5% of the time. Sure, maybe the overall return when you average all the losers might be a little bit higher than real estate, but personally, that’s just not the way I like to invest. I’d rather hit a high percentage of singles doubles and also get the tax benefits from it, which you don’t get from all these other asset classes.
But somebody brought me to one of these incubator groups and what I’ve learned. And I could be wrong because this is outside of the realm of real estate as there’s a lot of these incubator groups put forth by these influencers, or you can call them mini gurus if you want. But a lot of these guys, they just couldn’t hack it as venture capitalists, actually doing the thing.
And as the same goes, those who can’t teach. So in this world, those who can’t make freaking companies. What they do is they’ll create these incubator programs, where they get a bunch of other mini startups and they give them the resources. They give them some general education, coaching, mentoring, and they create this kind of greatly branded and marketing incubator where they will go out and possibly raise capital from them.
And it gives some legitimacy to the venture capitalists, but really this is all just a fabricated business model for the group creator to extract money from these diamond doesn’t venture capitalists to join their incubator group and also to make possibly big money. All the fact that they have this group and some unsuspecting high net worth ultra high net worth person coming along.
Just thinking that group is legit when it’s just not, it’s just put on by somebody who could do their thing. And they’re pretty good at internet marketing. So just be in the world, that’s out there. I ran into a lot of folks like that. And then the second teaching today is, I think we’re in a very unusual time or in a bull market folks, if you have it realize, and if you think that the market is going to be cooling off anytime, I would disagree. A lot of the stuff I’m reading is, we’re really not going to hit any Rocky times until the year 2026. Now you may disagree with that. You are probably going to miss out on the best bull market run that you ever did see even more than the time, 2012 to 2016, which was known as the age of the apartment.
Now is the good market’s, it’s a bull market. The tide is coming in. And it’s potentially not a good time to be doing more of a duck and cover strategy or what I’ve called a strategy part of the end game strategy. When you have a lot of money, you just want to get a little yield.
One of those strategies in particular is the triple nets, right? When you go into a commercial real estate property and your tenant pays off all the expenses for you, it’s lower risk, lower return. But it may not be the best thing in this type of environment right now with inflation running rampant, a lot of your tenants, which on the marketing cereal box, they tell you triple net deals, you have corporate back, very strong tenants, but that can also have a double-dip because very sophisticated tenants they know what’s happening in inflation and they can just tell you to go screw off when it’s time to they can drop their lease, or they’re a lot more aggressive and a lot more sophisticated in terms of negotiating with you, the landlord in the triple net deal or the triple net arrangement each you have with them.
Think of it like a lot of mom and pop investors got kinda rocked with the pandemic because they weren’t able to fully capitalize on the rent’s going up and they bent over just giving away rent concessions to the tenants, thinking that yeah. It made sense in a pandemic, but the professional landlords, the kind of the way we do, we’re not hugely impacted by rent moratoriums, eviction moratorium, and we know how to play.
Our vendors know how to play the game to extract the whole amount of rent that is due, and that rents are going up over time. And that’s just something that the mom and pop investor that the amateurs just don’t have the ability to do. And that’s just making the comparison, which triple net it’s two.
And you combine that with the fact that like Walgreens, these types of stores are closing. Possibly because of Amazon coming and taking over the pharmacy sector too. And again, I’m just bringing up this concept. You may agree or disagree, but it might be a time to be more aggressive in times of vocal bull market.
And when you should be aggressive and huddle and ducking cover into these more conservative triple net type arrangements that are traditionally lower return, lower risks, and just be cognizant of what other large families are doing. Large families, what they do is they go into those asymmetric risk plays with a certain amount of their net worth while also playing it safe.
Not saying that you have to have the same strategy with your entire portfolio, or another idea would be to be bipolar, which a portfolio potentially being very risk tolerant with a smaller portion going after more asymmetric risk returns and maybe being more conservative with a majority or portion, or maybe even a minority or portfolio if you’re in the beginning, wealth building stages under $5 million net worth. And to go into deals that are more conservative with that portion of your portfolio. Now everybody’s different and this is where I talk to a lot of new investors. We have our onboarding call, which you guys can still do. If you sign up at simplepassivecashflow.com/club, we only do one per person these days for people.
After that, you’ve got to join the family office ohana mastermind, get around other folks, just like yourself doing this and start to build relationships with other high net worth families. If you’ve been around the circuit, dumpster diving in the free Facebook groups, the free online forms, and even worse, the free meetup groups out there with a bunch of house flippers and lower net worth guys. Just join the family office ohana mastermind, right?
You got to get to a point where you pay to play. And that’s what I personally did in 2015, when I had 11 rentals and I saw the light and I got around other high net worth folks. And I realized that was what you do to get your net worth up, to be about a quarter million, half a million dollars.
But when you become an accredited investor, it’s about investing in good deals where you get the tax benefits. You start to learn how to play the game of passive activity losses. You pay less taxes, a little bit infinite banking, and that’s the way that the passive accredited investor invests.
And unless you get it around a community like our family office ohana mastermind, you do not get that. So apply, go to simplepassivecashflow.com/journey and hope to see you out. At a future event, we were doing a meetup in San Francisco and we’re also going to be doing a tour in Houston but you guys can check out all future events at simplepassivecashflow.com/events. All right, here’s the show.
Hey, simple passive cashflow listeners. Today, we are going to be talking about investing from a different country and in this case, Canada. So we’ve got one of our experienced investors here. I’ll do the disclaimer right now. We’re not lawyers, not CPA accountants. We’re just a couple of guys who are real investors and use professional advice from our professional advisors. And this is how we do it. Not saying it’s right or wrong, but hopefully it’ll just give you some ideas as this podcast is just for your entertainment out there.
But thanks for coming, Quentin appreciated it. Oh, no problem Lane. Give people a quick overview of some of your wide range of experience. I think people need to understand that you’re quite a big dog there in Canada.
Thanks man. I hang out with big dogs, so I feel like this small dog with them, but I’ve been investing since 2004. By the end of August, I’ll have $80 million of assets under management. The smallest amount of equity I own in any project is 25% and that’s about 30% of my real estate portfolio is 25% like personally owned by me not shared and the other 75%, I own 50 to a hundred percent of.
So I’ve got a large stake in my portfolio. I have single family homes with up to 40 unit apartment buildings. We’ll have 15 apartment buildings across Southern Ontario. I do invest in the US. And I’ve got some reasons for that. I’m sure we’ll talk more about it. I’ve written five books. I run a real estate investment club in Ontario which is a Durham REI. I was a teacher for a long time and I left teaching to be a full-time investor in 2014. And I haven’t looked back since I flipped like a dozen houses. I’ve done a whole bunch of other strategies and you know what, I really love investing in real estate, not for the fact that it’s investing.
I just like being a transaction engineer. Like I like putting things together. Making deals happen refinancing projects, I love all that sort of stuff. And I understand the asset class. And that’s why when I looked at what I considered diversification, as, moving money outside of the area of where I mostly control, which is Southern Ontario and looking at the U S as a way to expand it.
On this show, I have a loose policy where it’s a no gurus, Quintin fits in that category. We’re going to try and bring some real value, which is, how do we invest from Canada and I was really interested in investing outside of the country at one time. And we’re going to talk a little bit about that, but just, so your main business, you’re an operator in Canada morons more importantly, more than Eastern side of Ontario, maybe describe your portfolio, like just percentage, like what percent in Canada then versus a United States and anywhere else, just give people like a real quick macro view.
I would say that I’ve got to all of my, like I’ve got a, like an $80 million portfolio just in Southern Ontario. And I would say that 75% is in multi-family the other 25% would be in one to four unit properties. In the U S I don’t have very much, I got probably about a million invested in the year.
About maybe 550 K worth in like I’ve got four single families in Tampa or five single families, one one’s a duplex. I actually gotta go back and look, I can’t remember, but then I’ve got to have visited it. I’ve been there. I’ve been to like when I went down, I went, I’ve been down to Tampa a couple of times.
I actually like to visit the places that I invest in. So I was there and I looked at the properties that I purchased at least the first two. And then No, I’ve been doing syndications in the U S. I have invested in an ATM fund down there. I do other things too.
I’m like on the board of directors for a company called rental , which is they basically do bank account checks for tenancies and stuff like that. I’ve got private placements. I’ve invested in different companies too. So I’ve got my, I’ve got funds in different places, but on the real estate side, I would say like about a million down in the US as a hedge.
Like I understand real estate and that’s why I want to continue to invest. And I like the fact that I get to invest in an asset class I understand with other operators down there and what I like is that I’m not depending on the Canadian economy now I’m looking at the US economy and different demographics in different areas as well.
I’m getting paid in US dollars, so I get some currency hedge there, which is useful for me. I think that’s really great for myself and also like everywhere we go, when we go on vacation, we spend US dollars. That’s what we like. I’m going to Costa Rica and spending US dollars.
I go wherever. And so it’s handy to be able to have those US dollars already converted for me. And having the proper structure is really important. Cause you can get slammed. Especially Canadian investing in the U S with double taxation. That’s the worst.
It’s two hands coming into your pocket at the same time, taking your money and pulling it out. And I don’t want to do that. Having the structure is important and taking the time to get it right to avoid doing that. But I’ve, I’ve enjoyed everything I’ve done up to this point and my experiences I’ve had.
Some experiences with property management in the U S like it’s like with the rental properties that I’ve had. And having to deal with that. But I think overall my experience has been really good and I’ve really benefited from real estate over the last, I dunno, two decades.
I’m really happy with doing it and I’m continuing to do it, right?
So I’d like to point out for the folks, like in this lens of diversification, I like Quentin and cut on myself. We’re considered operators, which you guys are not, you guys listing are mostly passive investors. And, I. I think of operating, where we eat our own cooking. We’re going to be heavily into our product through Quentin and it’s going to be up in Ontario for me, that’s going to be apartments that I run. I personally feel like I’m in like 80% of my own stuff. And it seems like the same thing for Quentin, very heavily that side, the analogy I, or the similarity.
I see it like people used to live back in the day where they buy their own company stock that they work for. We all know that’s dumb, but people used to do that pretty religiously until things like Andra started to happen and woke people up. But that’s what we do. So people always ask me like what should I do?
How should I diversify my portfolio? That’s the first question? Are you an operator or are you just a passive investor of your passive investor You’re more likely to diversify a lot. But I personally came to this epiphany where I was like going into a lot of deals by myself, I got a lot of my own equity in there.
I probably want to have this new site idea of having 20% of deals where I’m not the operator and a totally different asset class, not apartments as just being prudent. And I don’t know, maybe for Woody, how did you come with the same thought process too? Is that what kind of led you to come into America?
One of the things that I’ve looked at over the time is Robert Kiyosaki’s, where you have employees, self-employed business owners, and investors. And so for me, I’m trying to focus on that right side in Canada, I’m the business owner in the U S I’m the investor. That’s the way that I see myself and by doing that, I’m able to use my experience in the asset class as a way to get involved in different projects down there.
I’m also learning how to do this stuff, right? Like it’s also part, I enjoy learning all the time, but I’m able to see what the projects are like. And then I can look at different projects and invest in different projects that I want to and yes, I can diversify across different projects, but at the same time, like my concern is that I’m not a big enough player in a particular project in order to affect change in that project. Whereas here I’m an operator. If something needs to change, I’m going to make it happen. That’s my role. I make things happen. I make nos into, yes, right. In a project where I’m a small player, I don’t have the ability to do that.
So when you have an operator, that’s also an investor in a project, it makes it a little bit more comfortable for that person, because then, you have quite a few people that are brought together and then they have a little bit more control, a little bit more control than most.
Like you were explaining before your analogy there, but that, that gives some comfort and it gives you some diversity because then you can be in different like different projects in areas that you like, maybe it’s Arizona, maybe it’s Texas, maybe it’s Alabama wherever it is that gives you still that geographic diversity.
But for me, like I’m getting into being more on the investor side of things, rather than the business owner side of things. Yeah, it’s because you’re used to driving your car and your family around all the time. It’s nice to get into an Uber once in a while. Just relax and play with your phone, enjoy the scenery outside.
But for some people it’s very difficult to turn that off. Yeah. Oh, yeah, my son just started driving. So now I’m in the passenger seat and I’m not, it’s not like being in an Uber. I’m like, you’re conscious of what the heck is happening. The nuances that are going on behind the scenes when a certain message comes out.
But then I don’t know, I do this. I kinda enjoy it. Like a little. Then we’ll talk about this at the end. I’ve been in deals with the passive that haven’t gone as smoothly and things I’ve blown up and I just find it entertaining and being on the other side to just be a passive investor on that. Before we move on, let’s talk about this. Some similarities or differences. With Canada rather than the US, you see both sides of any quick things that come off to the top of your head, just, just for investors out there, just for a general, broad understanding of differences between the two.
The structures, the way that we buy stuff, like the syndication model is very similar. Sometimes it’s structured differently. So like when I’m putting a bunch of people together to buy a building in Ontario if I have less than 10 people, I’m probably just going to use a corporate structure.
We’ll have a corporation and we’ll have shares and Instructure. If. No more than 10 people. I’ll probably do an LP-GP structure, which is pretty much the same as the syndication model than the U S you have. You have the second just a different way that it’s set up, but big picture wise, they’re very similar.
So from the multi-family side it’s quite the same, just some nuances that are different on the residential side, you get, you have this beautiful product in the US it’s called the 30 year mortgage, 30 year term. We don’t have that. Like it’s not there’s no.
The longest that you can get is a 10 year term. And I don’t even think you’d want to have that. So you know, you have this 30 year term, like a super low. It is really awesome. And you’ve got some more, I would say, innovative products on the financing side, particularly in the one to four unit space.
We don’t have those sorts of things, but what we do. Is on the financing side for the multifamily units, we do have the ability to get higher loan to value, which I don’t think I’ve really seen in the U S but we have like CMHC financing that can get us up to 85% to 90% loan to value with the
sub 2% rates. Which is a pretty different outcome you’d have to, you’d probably. You’d know around the multi-family side, whether you have what you have for financing in multi-family buildings. Yeah. So that’s the big piece there. And so that probably means you guys don’t cashflow a lot on a lot of the deals just because the amateurization is wasted.
No one, the amortization can be like, you can get it up to 30, per 30 year AMS for the multi-family side. Typically their 25 year AMS on the multifamily. But if you’re going to CMHC financing, amp Amery will go up too. So it actually works out really well. On the resi side. So one to four units, you’re like, it’s typical to get 30 year amortizations.
And right now Rezi rates are probably around, I would say 2% to, probably, depending on your qualification rate and all of those things. But it’s, I would say it’s around that, cashflow wise, like I would compare Toronto to like Like a New York or somewhere in California and the landlord laws are like in California too.
So it’s pretty nuts when it comes to that. It’s tough. Like you get a lot of appreciation. So my, the way that I’ve been able to do really is I don’t buy anything that doesn’t have cash flow in my market and I make it work. And I, we work to do value add, we do turnover units. We do a lot of different things to make it work and make it cash flow and then refinance and do it again. And pay back the investors funds and continue to own it. And that’s why I liked the syndication model in the U S. Where we were doing exactly the same thing, except I didn’t have to worry about financing.
If I try to get financing as a Canadian in the US it sucks like it, like I’ve I spent almost a year and a half getting financing for those rental properties in Tampa a year and a half. It was brutal. And just at the point where I was about to get financing, it was like, Martin. 2020, and then, COVID but they got rid of all the foreign national lending.
So it was a real pain. So what’s nice for me as a Canadian investing in the US is I get to take advantage of leverage, which I wouldn’t necessarily be able to do if I were to invest directly in the projects myself. Now you would have asset-based lending for multifamily buildings in the US but you still don’t as a foreign national, unless I partnered with somebody else who is a national in the U S I wouldn’t be able to take advantage of it in the same way.
So it’s interesting that I’m able to take advantage of that. Through investing in syndications in the US yeah. And just to a side note, the key principles, the loan guarantors in American syndication, before we go get that Fannie Mae Freddie Mac, I don’t think you can be a foreign national.
I’ve seen it done sometimes if you have a green card, but then I’ve seen it happen sometimes, but it just takes an act of God. And people are like, lenders are just really confused when it does happen. But yeah, that’s up for Americans, but I guess going back to your investing in Ontario, it’s a primary market.
So you focus on things like the more outskirts, the more rural areas of Ontario or. I focus on the 401 corridor, which is from Toronto to Kingston. It’s a major highway corridor there and it’s where a lot of the population in Canada is along that 4 0 1 corridor. I stick to the bigger cities and the bigger locations within there, but on the outskirts. So the suburbs are low. So I’m not in Toronto, but I’m in the outskirts of Toronto, but not in, not rural. So suburban, I would say. So Pickering, Ajax would be Oshawa Kingston and I work hard to buy properties directly from owners. When I buy it.
All the buildings that I bought have never been listed on the MLS system. It’s always, I always worked directly. I have a good reputation. I like people who know me. I do what I say I’m going to do. If I say, I’m going to close, I’m going to close. And my reputation is really important. So that’s how I do a lot of the work that I do in Ontario and I, and I’m what I’m hoping for. Those same relationships through the people that I’m investing in the U S with. So they’re like me in the U S and that’s what I want one to be able to do.
To be able to invest in an asset class that I understand. And be a little bit more hands-off but still, I can read the numbers, I can see what’s going on. I like it, and I have no problem putting people’s feet to the fire if I think something’s a problem. Yeah. And I think what I like about our relationship is, you understand what’s going on and it’s, for some people you need to tell them something like we just had a fire at one property.
And detailed unsophisticated investors, they freak out right where you’re going to ask the right question. All right, what’s the deductible, the cover or the kind of anomalies fine, got it. I’ve had it. I had a total loss on a building. I’ve had to start from scratch.
Took me two years to rebuild. Like I went through the whole process. Actually, what I did was a little bit different from that. I hired an independent adjuster, so that they fought on my behalf. For me against the adjuster of the insurance company in order to get me a little bit more, we do that every time too.
And one time we did it, we got I think three times as much as the first offer. If you’re on a little residential property may not be worth it. Cause I had rental property that I owned outright myself and I just got steamed real. It was just the biggest, it wasn’t big enough.
Nobody would work. And I just got screwed over by the insurance company, but that’s why the bigger stuff it’s better, but let’s get into the question at the top, so a Canadian wants to invest in America in a syndication. How do you structure it? Again, you’re not a lawyer, but how do you do this yourself?
There are a bunch of different ways to do it. And you have to be careful because some of the advice that you see on the internet is old and it doesn’t work anymore. Like some of the things that you hear are like buying it as a Canadian, you hear buying an LLC. If you buy in an LLC as a Canadian, you’re going to be double taxed.
The Canadian government doesn’t see that as an independent entity and you’ll be double taxed on that. And if you earn a dollar and you get taxed 20 cents there and 30 cents here what do you have left? Yeah. Why did you do it in the first place? It’s important that you get a structure that avoids double taxation.
So the way that I do it in the U S is I use a limited partnership where the general partner is an LLC and the general partner owns 0.5% ownership of the LP and 99.5%. Is owned by the limited partner and that can be a corporation and that can be owned by a Canadian corporation, or it could be owned personally.
The idea is that when you are doing your taxes in the US you’re going to try to take as many. Deductions as possible so that you get to a zero tax rate and you’re not bringing anything back. And what’s nice is that they have so many differences, the other difference is depreciation.
Like your depreciation is super awesome. The US I can take the sum of that depreciation upfront because you can segregate it. You can. There’s just so many more benefits. I can get zero every year and I’ve got, and I’ve got like a backup from previous years because I’m able to do that.
But with having that limited partnership And doing my taxes in the U S when I take the, whatever I’ve finally made and bring it back to Canada, it’s usually zero. And then that way I’m not double taxed on that, on the income that I’ve made in the U S there are other ways to do it.
There’s, S-corp, let’s recap the first way. So I think some people, they get confused cause we throw around the terminologies that LP and LP, which is a different thing. It’s a position within a larger deal partner. But there’s no soul, the entity LP lP or the entity and LLC.
So you’re creating a Canadian LP US. So I’m creating a US LP that has so in every US LP, this is the legal structure. There is a GP and an LP within that, right? The limited general partner and eliminated partner within the limited partnership. So the general partner in this case owns another structure that I own.
Which is 0.5%. It’s an LLC, right? So I’ve got my LLC that owns 0.5% of the LP. And then 99.5% of the LP can be owned by me. It’s a limited partnership, or it could be owned by. A corporation can be a U S corporation like an S Corp or whatever you do, whatever you want to do as, I, I can just, for me, it’s just personal.
Then, that’s one option for structuring. So it’s like you have control, you’re the thing that you can. Through is your LP within this energy and you have control over it. I think a lot of people do this in America, where they have a family management company, a holding company where they own a piece of it LP.
They have control over that. So that way it’s like a, it’s like all this kind of like an LP works in a syndication, but you’re doing this all on your side. And so this entity goes into all these other deals. So I just want to. Break that out for folks, because now they’re thinking like, do you make an LP for every deal?
Now this is all of your institution. That’s right. It could be your base structure. And then that’s what goes into investing in like these other projects or owns the property in the U S right in Canada. What you’re talking about would be like a family trust, right? Like it would be like that type of arrangement.
But within a bunch of other structures, but for, in the U S the way that I have it is that I know other people that have done it differently, right there. There’s the right thing. Like I stay out of the gray area. Okay. I’m not into it for, to, to hide my money somewhere or to avoid taxes. I’m okay with paying my fair share of taxes, whatever, but there are other ways to do it that I’ve heard that people do that are Canadians, who are investing in the U S yeah. Yeah. So this is like me personally. I’m not a lawyer. But I’m not a huge fan of series
People use them, but these are like the similar things that other people do. And just, we’re just talking about it here, just to give you guys different ideas, because I think this helps people learn too when you start to get creative with this stuff, but yeah. So how are some of the ways that people get around?
Yeah. So there are, what’s interesting about the U S is that every state has different types of if you form a corporation and in some states there, it gives you additional privacy that you may not get in other states. So that’s one of the things that. It is like the Nevada Corp, right?
So people may want to invest in, or create a corporation in a place where it’s hard to get details on who owns the actual structure. And so if you were to use a Nevada Corp as a Canadian, you move money into there, then you buy whatever assets you want with the Nevada Corp. That’s somebody who’s probably trying to avoid it.
Taxes now we’re not giving anybody advice. I feel like I’m doing something right? No. This helps us understand this. Like what are some of the pros and cons between different states? So correct me if I’m wrong. But I think Wyoming similar, whether you have that anonymity where like you put it in the LLC and you have this anonymity, but to me that enemy’s kind of stupid because any halfway decent lawyer can figure out what it is and subpoena what’s in it.
But in this case, we’re going off the thread that countries are clunking and dumb and they can’t really do that unless they have a reason to uncloak the the entities. So we’re saying, we’re not saying this, but what people do is like they throw into the Nevada thing that kind of cloaks it and then if you can’t see it, you can’t tax it.
But I don’t here in America. You’re supposed to self, self Self do your taxes right in your, in the best way that you can. And what’s right based on your understanding of the taxes. To me. Yeah. This is a little shady, right? This is an up and down to you. Yeah. And that’s why I stay out of that sort of stuff.
I’ve got an ITIN number. I follow the US tax return, as part of what I need to do. And I filed my, take my US taxes, take it to my accountant and make sure that it’s filed in Canada too. So that’s just to be clear, that is not me. I’m not doing that at all. No magician tricks here.
This Pelosi of this. Yeah. I bought that. I think that’s, I’m aggressive, but to hide it behind something, knowing it’s there that’s to me, that’s not. No, and you’re just inviting to, to get into more trouble for something else. Like I, it’s just, you don’t want people to just keep looking at everything that you do just, for something like a, a small portfolio or wherever else you are, you just.
I think that you have to weigh the risks when you do something like that. It just doesn’t make sense to me. And I think there are lots of different ways to structure yourself properly and you just need to find an accountant and a lawyer. Who are familiar with both the US side and the Canadian side at the same time and get their advice.
Cause there are like I’ve heard of structures where there’s a Canadian corporation that owns an S-corp in the US and then the S-corp is what purchases properties. There’s lots of different ways to do it. What year? Trying to avoid double taxation. That’s as a Canadian. That’s what I’m trying to avoid.
I don’t mind paying taxes, but I only want to pay it once. I don’t want to pay taxes, like two countries’ taxes on the same dollar. It doesn’t make sense. Then what’s the point? And that’s all that I’m really trying to do. And then the other piece for me, Hedging against what I’m doing in Canada and the US and then, having that diversity of currency, as something that I find appealing to me. So when I’m diversifying in an asset class, I understand, but not necessarily in a whole bunch of others. Yeah. Yeah. Going back to the whole. The other nefarious type of entity structure, but you see it, the hard thing is like passive investors out there.
You don’t know who to believe, right? Everybody’s shape-shifters out there. And a lot of lawyers who haven’t built up their firms yet, or are young and hungry. What they’ll do is they’ll put their whole business on this kind of aggressive strategy. And they’ll run around and say, Hey, I got this magic trick where we hide all your assets in Nevada and there you don’t pay taxes. If you do, we’ll tell all your friends and yeah. Their professional license and everything, but they’re hanging their hat on something. That’s a trick. And in my opinion not really the right way to do things. So it’s hard for people, right? And this is where I keep coming through.
You can’t just trust licensed professionals. This is where you have to build your network with other capacity investors here, all the different pros and cons of different options, understand it yourself and B become the architect. But then of course go to the right professional, the referral that you deemed the right strategy, and then go and implement it.
Just like taxes, right? There’s guys who like the same thing. There’s all these different strategies out there. Some in my opinion are very nefarious and aren’t right. I think you as investors need to take ownership over that. Yeah, absolutely. Like I, what I do is I’m always looking for peers who are either at the same level of being, but, or just above where I am at and, talk to them about how they do their structures and what they’re doing.
Not necessarily the. Like I’ll ask different professionals about how they would structure it, but, and then I’d go, I’m going to go that extra step and talk to other people that I know who are already doing what I want to do and talk to them about how they’ve got it structured. And not just one person, two or three people that are doing the same sort of thing, to be able to figure this out and then make a decision.
Based on that and what you get from the professional, because in the end, like you’re paying somebody, and when you pay somebody, there’s going to be some bias there, no matter what you do. And they’re going to want your business. So you have to make an educated opinion. And I like mine.
I’m always trying to hang out in a room where I’m not really the smartest person in the room and, I don’t want to sound egotistical or anything, but I think I’m pretty bright and I’ve got some experience, so I need to find like rooms that have those types of people and, I’ve joined different, like coaching, like I’ve I was part of strategic coach and I’m part of the entrepreneurial organization which I really enjoy.
In that group, there are real estate investors from across Canada and I’m able to be in a room with them and like they are, they make me, he looks small and that makes me feel good. Cause I feel like I’m learning all the time. So find that room and they don’t have to be like 20 years in front of you, even if it’s just a year or two in front of you.
That’s probably the best thing, especially if you’re just getting started because. It’s easier for them to want to share with you. If you’re going to ask me questions, I don’t mind talking to you Lane, but if I get a new person who’s starting investing, asking a bunch of questions, I’m going to go say, go talk to your lawyer or go talk to you.
Like, why are you talking to me? Read it, read the basic primer book on this stuff, guys. Like why are you bothering me? So at the same time, though, if you had somebody who just went through the process, they’re going to want to share that knowledge with you. Because they’re like, they’re proud about going through it.
I did great last year, great. Then that’s the person that cheated that you need to find. Groups like yours, like your tribe, right? Like that’s the type of thing that will help people. Get from where they are to the next step, because they’re interacting with other people who have already done it. And that’s what we want to do. And I think this is where you get in the right groups that people pay for. They help out here’s exactly what I’m doing to print it right now. I’m picking his brain on this Canadian thing and we’ll get to my.
Selfless question here at the end. But he helps me out because he knows that the person that he’s helping, if they’re the right person will reciprocate, and not only is it the right thing to do and he enjoys it, this is when you get into these types of worlds, these masterminds, like these are the magical things that happened.
But so here’s my myself, as the question went in it, because you’re a little bit further along the road as I am. And I just kinda liked that I respect your opinion. Not saying I would follow it. But getting these different opinions from people on the same level is important. So it’s a question about diversification.
If I understand it right. You and I are in different situations. You’re in Canada coming to the US. I’m using Canada, maybe one of them for diversification from a real estate standpoint, or maybe a currency standpoint. I don’t know what side of the fence I’m on at this point, but so if I understand what you’re doing, most of your stuff is in Canada.
You take a little small chunk and in us, is this just some place to fund for you? Or is this like a true hedge? Cause you have no intention of really assigning this money back to Canada and you don’t need it. You don’t need the money to survive, put food on the table. So what is like the, is there, it’s just a, something a hobby, give me some insight.
That’s hard. That’s a hard question for me. I would say that for me there’s a couple of different things. It’s again, moving to that investor side rather than the business owner side. You’re right. It’s not a lot of funds for me to be able to. To put it in and invest in different projects.
It’s also, I think I don’t intend to bring the funds back, but I do like the idea of being in the unit. For quite a few months of the year. Particularly as I get older. So I’m thinking that it probably would be good to have all of these things set up. I’m a planner.
So I tend to think 10 years down the road and getting all of these things set up we’ll set up. And my family up in the future, for the things that I intend to do in the U S in the future. There is a, there’s a little bit of that. There’s a lot of just being able to have us dollars for different things that I’d like to do.
And it you’re right. It’s not a lot of my net worth that’s going in there, but it’s it’s it’s enough that I think will be useful for me, for my future goals and plans. So it’s not like you’re not like a prepper kind of mentality then by no means. And you’re not thinking about the Canadian dollars.
No. And I’ve had many people ask about investing with me in Canada and from the US and I’m like, why would you do that? It doesn’t make any sense for me because the state of California is the population of Canada, right? Come on. Instead of coming to Canada, just go to a different state.
You’ve got so many different opportunities in the US instead of going to Florida, going to Arizona or going to Texas, you’ve got a lot more of that. We have some of that in Canada with provinces, but the population is so small. If you were to, if I were to say if someone were to ask me that I would say hedge against it, Asset classes in the U S do like storage or do something else, mobile homes, or do do something else that if you’re comfortable in the real estate space, there are other ways that you can do that in there, but you don’t necessarily have to go out.
And Like there, there’s so many different types of investments out there that you can do that are, I feel like better than putting money in the stock market. If you can do private placements in companies, that’s another way to do it, especially if you understand who they are and what they do. That’s something you could do. But come to Canada. I’m not going to say, I’m not going to tell you to do it. W it would serve me well, but I like to have investors invest in my projects, but I’m. Okay. I think for what I would suggest for Canadians to definitely do, to consider it and to do it and to do it properly and structure it correctly and stay outside of do it.
Don’t do the legal stuff, like just do it right. But don’t worry about what I say, an American co investing in Canada. I don’t think that’s necessary, you can do what you need to do from a diversity perspective in different states. Two, two common mistakes that come to mind that new investors do all the time is, they think that the grass is greener on the other side. They’re in the US, but they think Canada is the untouched proverb, the opportunity. And then the second lead, like shiny object syndrome, a lot of investors get this there, they start to open up into this world of alternative investing and then it becomes like a Las Vegas buffet.
They’re going after the Asian food, the seafood that deserved the Italian food. Which is a multi-family self storage, mobile home park. And then they want to go off to Canada too. I was still able to just focus on one thing. Residential multi-family, I think it’s the start or the basis of it all, but, I think people spread themselves too thin and they don’t earn anything, spend at least a couple of years into one asset class first or that before you branch off to something else.
Because the biggest thing is investing with the right people that aren’t going to steal your money. It doesn’t matter what asset class. For sure. And you have to figure out what your goals are too. So some people, like when I first started, I needed to replace my income. That’s what I needed to do to leave my teaching job.
By 2012, I had enough funds to be able to do that. I didn’t leave my job until 2014. And then I just kept building and building that one type of residential. Real estate where I was getting cash flow from it until I did really well with that. I had really solid cash flow coming from that.
And then I moved away from that into multi-family because multi-family is not as great on the cashflow at the beginning, but it’s great for your net worth. So it was more of a net worth plate. Stabilize the asset, get the property refinance and into longer term financing. Then we started to get cash flow from those assets, but it takes three to five years, at least you can get a home run maybe once in a while, then you can do it in one or two years, but mostly it’s three to five years.
And once you do that, then you start to get the cash flow that comes to that. But people have to first figure out what their goal is, right? Is it cashflow or net worth? Because some people don’t want to quit their jobs. They don’t want to do that. And they don’t, then they need to just focus on, okay.
Let’s not go to the buffet. Let’s find out where the ribs are. Okay. Let’s find the ribs. I’m a meatatarian so I don’t know. Yeah. My cell phone went through it. When I go to a buffet, I love crab legs and bone marrow, that’s all. I’m big on ribs. So that’s where I would go. But you gotta find what that is, and then get enough of that, so that it’s substantial. And then you can worry about the desert and the salad and the, whatever. Yeah. Go have your pizza then, and then your noodles. Just gotta build that up first and then, and you’re right.
The shiny object syndrome is a problem. Like I see so many different people that have been really successful in real estate only to sell it too early. And then get into something else. The analogy that I use as a hockey stick while I’m Canadian, I gotta use a hockey stick. Great. So you got the base of the shaft, you got the base of the stick where you hit the puck and then it goes up the shaft of the stick. What ends up happening is most people. Actually sell their property, probably just a little bit up on the shaft of the stick and they missed the full shaft, right?
Because of whatever reason they got distracted, oh, this is going to be the next big thing. I have to solve this. I got to get into this and they miss all of that. And I think that you got to watch out for that shiny object syndrome. So you can get that big lift that happens, with properties over time.
And that comes with mortgage paydown. It comes with appreciation and it comes with cash flow and value add repositioning those assets. Even if you can take a single family home, And give it to its highest and best use. Maybe get it to the place where that could be like a triplex or fourplex by rezoning, doing whatever you can do.
You can make that thing make you money. There’s no tomorrow, if that’s what you want it to do. So like you got to figure out what your goals are, but don’t. Don’t get distracted and then sell that asset, especially if it’s just some tenant that’s causing you, whatever problem it is, you get too emotionally attached and that’s why you sell it.
You can’t do that. Don’t let somebody else affect the way. The reason why you sell an asset. That’s not a good thing. That means you just got to hire the right people. You’ve got to find out who the, who is. That’s going to help you to manage that asset better and take yourself out of the thinking process, because then you’ll get too, you’re too emotionally involved and then you’ll sell it, right there at the bottom of the shaft rather than at the top. So once I close up here, All right. So you’re a Canadian citizen. You don’t have the protections of the SEC. What if something bad happened in a deal? And then, your general partners you decided to invest with across the country line border, goes haywire. What would you do as a GP?
So I would make sure I have the address of the GPs home. I’d find it in my truck and get my baseball bat and say hello. No, you know what? I think that The thing is that you can do as much due diligence as you can, but it depends on a lot of the things that you can foresee coming, especially if you’re not getting numbers from somebody.
Having experience in this business is really helpful, but there are some things that happen that we have no control over. We’d get A hurricane or, there’s a flood or whatever it is, but the thing is, did that person have the right insurance in place that the people have? And as a LP, you can ask a GP, that sort of stuff, right? That’s what you should be doing. You’ve got to advocate for yourself. And hopefully if you’re with a group of people together who are in an LP, you get the ability to be able to move that GP forward a little bit just by asking the right questions and staying on top of it.
But as a Canadian investing, I have less protection than somebody else, but you got to remember too. It’s just, it’s not just me and not as an LP. I got all these other guys who are SEC protected and you know what they’re going to do. They’re going to complain more than me. Yeah. Like a class action lawsuit, where you’re usually going to have, you’re going to have that one guy out of the LP of 20 guys or even 150 guys, there’s always going to be a leader that emerges. I call it like the lord of the fly. There’s always one guy that’s going to take command of the mutiny and charge things ahead.
Hire the lawyer, just the nature of these people in these deals. They may or may not know what the heck is happening, but there’ll be a leader that usually arises. This is why I enjoy being an LP sometimes. Cause I’ve seen this happen a couple of times where a deal has gone sidewards and. I’m a GP, so I know what’s happening. I’m not, I’m a GP, so I know I’m not a GP, this kind of deal, but I know what the GPs are going through, but I see it from what the LPs are doing. And sometimes it could be overboard and too much and really annoying. And that would really upset me if I was a GP. This is, I think, what happens.
And I think this is why it’s nice to invest in a group like that, that maybe you are the person that I don’t care about. There’s somebody else that probably cares more than you. That’s going to carry the metaphoric baseball bat. That’s great. It’s all metaphorical and that’s what I’ve said.
But yeah, but the other piece there too, is that this really isn’t a significant amount and might not be worth as well. For some people that it may be, but like it’s not really a significant amount. Saying that I wouldn’t be upset if I lost it, but I’m not going to eat tomorrow because of it.
Like it’s not, and that’s traditionally the type of investors I like to work with anyways. Like I’m an ideal investor for myself because I know that I I don’t like to invest with people who are bringing 50 K or 75 K like I’m usually looking for people to bring 200 K or 250 K to any project that I do because I’m dealing with a different person.
I don’t like to see people take money from lines of credit, and invest with me. I’m looking for other types of people. Like my last, the last couple of buildings I had my last building I had 700 K one person. Brought two. And then I’ve got a 16 unit where I have 900 K that one person brought. I would rather deal with those people and be in a partnership with them, a 50-50 partnership and get the deal done rather than have 10 or 20 people with 50K each.
I just find that the people who have 50 K are usually the biggest pains. Take the guy’s 25 grand, cause he needs it more than the other guy. No blast though. The worst is the last 20, 20 grand the person with the last 20 grand I’ve. I turn many people away from investing in my projects because I just, I met a point in my investing career where I would rather not deal with pain in the right.
And this is why I tell people like, if somebody is willing to take 50 grand or less, they’re desperate for cash for their project, because if not, they will just pull it out of their own pocket because most general partners, their net worth is well over $5- $10 million. And they’ll just feel it personally, if I take a guy’s 30 grand. Yeah. It’s a little sketchy. You want to be careful with those types of deals for sure.
Great insights. I. I read between the lines with your little us. You’re not going to be domiciled. I see it. I don’t know if you’ve thought about it this way in your head, but I see it.
I think I see you doing it as an envelope system, people’s budget, and they have like their little play money fund. I feel like you’re using your US money as you’re playing money. So when you go on vacation outside of Canada, you just feel like you can just blow it off. Maybe just don’t tell your wife, I’m neither confirming nor denying what you’re saying. It seems whimsical, but this is what people at the end game do. And I think this is what kind of keeps it fun, just bigger envelopes. And I love learning, right? For me, this is new learning.
The US for me is new learning. It was almost like starting from scratch again, like investing directly in going through the process and, and I enjoy it. So I like to continue to learn. I’m going to keep doing this until I can’t anymore. This has been a fun conversation and I really appreciate it.
Folks, once you guys get Quentin’s book the title is The Action Taker’s Real Estate Investing Planner. Yeah. The Action Taker’s Real Estate Investing Planner, it’s on Amazon. Yeah. And last name D S O U Z A. It’ll probably pop up to the top of Amazon and pick it up. Yeah, thanks for coming on Quentin. No problem and one thing too, is they can reach out to me on Instagram at QMANREI. That’s my Instagram handle and trying to get my followers up on there. So yeah. Cool. There you go. Consolidate your channels, right? I can only focus on one. I’m not really that good at multitasking on multiple social media things.
Thanks everybody for joining us today. We’ll see you guys next time.