Canadians Snap Up U.S. Properties

[Rickson9]

Canadian Dollar COLLAPSES To Four-Year Low

Canada will not reap the benefits of a strengthening U.S. economy or
from improving global growth, according to the International Monetary
Fund (IMF). Yesterday, the IMF maintained its forecast from last October
for the Canadian economy to grow by only 2.2% this year, though it
raised its growth predictions for other major economies.

http://www.forbes.com/sites/deanpopplewell/2014/01/22/canadian-dollar-drops-to-four-year-low/



USD/CAD - Surging Greenback Pushes Above 1.10

The Canadian dollar continues to struggle as USD/CAD has punched across
the key 1.10 level in Wednesday trading. In economic news, the Bank of
Canada held course with interest rate levels, maintaining the benchmark
rate at an even 1.0%. It's another quiet day in the US, with no releases
scheduled until Thursday. Meanwhile, the World Economic Forum has
kicked off in Davos, Switzerland.

http://www.actionforex.com/analysis/daily-forex-fundamentals/usd%10cad---surging-greenback-pushes-above-1.10-as-bank-of-canada-holds-rates-20140122206690/

 

[Rickson9]

^ Anybody have any more insightful opinions on when we will see CAD/USD parity again? Anyone else still expect the USD $ to further deteriorate? Thanks.

 

[Thomas Beyer]

For every $5 in oil price increase Can$ will move up a cent or so ( and vice versa ). So when a barrel of oil is US$150 we will see parity again. This means, in the short term, say next 2-4 years Can $ will decline, maybe to 85 cents, then potentially rise as oil price rises again. Might be 2025 or later. TBD.

 

[Rickson9]

Arizona Still Draws Snowbirds Despite Price Rebound

Increasingly, Canadians are heading to warm-weather destinations in the
United States to buy or rent second homes. Florida attracts 40 per cent
of Canadians, according to a 2013 survey by the National Association of
Realtors, but Arizona ranks second with 24 per cent of snowbirds.



So has the ship sailed for a good deal? `That`s a tough one,` Mr. Kavcic
says. `It is not nearly as compelling as it was three years ago.`



http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/arizona-still-draws-snowbirds-despite-price-rebound/article16686119/

 

[Rickson9]

Why Many U.S. Renters Are Just Saying No To Buying Homes



There was a net loss of 162,000 owners between 2011 and 2012,
according to the 2013 `State of the Nation`s Housing` report from
Harvard University`s Joint Center for Housing Studies.
This is going on despite housing`s impressive recent performance. The
Standard & Poor`s/Case-Shiller 20-city home price index, for
example, jumped 13.6% in the year that ended in October. But professional investors are doing most of the buying, says Gleb
Nechayev, senior managing economist at Boston-based research firm CBRE
Econometric Advisors. Individuals apparently have not reached the same
comfort levels, and it is not clear when they will.



http://business.financialpost.com/2014/02/13/why-many-u-s-renters-are-just-saying-no-to-buying-homes/

 

[3canctheayr]

Rickson-



I've scanned thru much of this thread, but forgive me if you have already answered this; Is there a trigger, or triggers that would cause you to sell?

It appears to me that you have done well & now that the USD has a 10% advantage over the loonie, that has given you an additional 'paper profit' in CAD terms.

Looks to me like you've won on three levels; Your units have significant increases in value, are increasingly cash flowing like crazy and also now have a currency exchange paper profit.

Do you still see lots of upside? Or, is it more about the steady cash returns at this point?



Also, how do you have the ownership stuctured? Are the units owned by you personally, or did you set up a US entity to own them?

Given that you have a few years of experience with Phoenix and probably an increased degree of comfort, would you take out a limited amount of financing on them at some point to redeploy that cash elsewhere? (or extract your original investment?) If your original investment was extracted and repatriated, that would capture the currency exchange profit in CAD terms.......



Cheers

Brian

 

[Rickson9]

[quote user=3canctheayr]I've scanned thru much of this thread, but forgive me if you have already answered this; Is there a trigger, or triggers that would cause you to sell?


That's a good question. The simple answer is that I would sell if I needed the money. However, having said that, I can't foresee 'needing the money'. I can't think of any reason to sell at this moment.



[quote user=3canctheayr]It appears to me that you have done well & now that the USD has a 10% advantage over the loonie, that has given you an additional 'paper profit' in CAD terms. Looks to me like you've won on three levels; Your units have significant increases in value, are increasingly cash flowing like crazy and also now have a currency exchange paper profit.


I hope the USD continues to widen over the CAD. A few individuals who contributed to this thread expected the opposite to occur. One poster inadvertently made this prediction at a top in the CAD and it has steadily collapsed since his post.



[quote user=3canctheayr]Do you still see lots of upside? Or, is it more about the steady cash returns at this point?


The appreciation has been dramatic, so the yields are now low. Going forward, there is little upside in terms of yield or immediate appreciation. I am using the properties as USD generators and a reservoir of USD equity capital should I find myself needing it in the future.



Gross yields on all my US properties have been halved. At the least.



[quote user=3canctheayr]Also, how do you have the ownership stuctured? Are the units owned by you personally, or did you set up a US entity to own them?


I hold the units personally as Community Property with Rights of Survivorship.



[quote user=3canctheayr]Given that you have a few years of experience with Phoenix and probably an increased degree of comfort, would you take out a limited amount of financing on them at some point to redeploy that cash elsewhere? (or extract your original investment?) If your original investment was extracted and repatriated, that would capture the currency exchange profit in CAD terms.......


If there was a worthwhile investment for me, I would consider taking out mortgages on the properties. However, as I've said before, my method of investing is designed throw off more capital than I can deploy and encourage work-free laziness, so I can't foresee getting financing. But never say never.



Even today, my stock investments throw off more capital than I know what to do with, and my US properties are doing the same. The turmoil in the markets in the first month of 2014 gave me the opportunity to invest some of this excess, but I still have much more.



Rent continues to come in monthly and dividends continue to come in quarterly. Money continues to pile up and I am more often at a loss to know what to do with it. I'm doing the best that I can to invest sensibly. Unfortunately for me opportunity doesn't occur as regularly or as often as rent or dividend payments.

 

[Rickson9]

Top 10 U.S. Real Estate Markets For Population Growth

The ranking below is based on five-year projected growth for each city`s population of residents aged 20 to 34. Here are the Top U.S. Markets for Millennial Population Growth:

5. Phoenix






4. Orlando






3. Raleigh/Durham






2. Charlotte






1. Las Vegas


So what`s the big deal about the millennial generation? What relevance
does this loosely defined demographic cohort have to the world of
commercial real estate? It`s simple: millennials are growing up,
becoming an increasingly dominant consumer force. Since more and more
real estate will be rented to, sold to, or otherwise serve members of
the millennial generation, the wants and needs of this generation will
increasingly dictate real estate demand.

http://llenrock.com/blog/top-10-u-s-real-estate-markets-for-population-growth-among-millennials/



Sliding Loonie Signals Growing U.S.

`Right now, [the] most important thing that we`re watching is the growing momentum in the U.S. economy,` Mr. Poloz continued.

`If
that is the reason why the Canadian dollar has come down a little in
the last few months, then we say, `Well, the most important thing there
is the U.S. economy is gathering momentum.` That`s really important to
us. If the strong U.S. dollar is a symptom of that, then that`s a
welcome development. It`s not about what the Canadian dollar is, per
se.`http://http://www.theglobeandmail.c...d-news-for-canada-poloz-says/article17051871/

http://www.theglobeandmail.com/report-on-business/economy/slide-of-loonie-good-news-for-canada-poloz-says/article17051871/

 

[Thomas Beyer]

Owning rental properties indeed makes sense, be they in Canadian or US growth markets. Our Dallas, TX asset went up about 10% in value last year as rents went up about 10%, plus the loonie tanked 10%, so a 20% gross asset value increase in Can $s or 40%+ cash-on-cash (due to roughly 50% LTV mortgage) in Can $s on the Can $ equity invested. Sweet !

 

[Rickson9]

Canadian Snowbirds' Dream Of U.S. Vacation Home Fading Fast


Looking at just Florida, TD says the bottom of the market was reached
in 2011 and there has been a steady increase in what it calls its
Florida House Price Index. The index is up almost 50% over the past
three years.




Much of the increase in Canadians buying in Florida - half a million
Canadians own property in the Sunshine State - occurred over the past
five years because of what TD calls a `60% cheapening` in property
prices.

http://business.financialpost.com/2014/02/24/canadian-snowbirds-dream-of-u-s-vacation-home-fading-fast/



Roubini Advocates More Aggressive Policy To Weaken Loonie

`I would use more aggressive monetary policy to weaken the
currency,` Roubini said at a lunchtime event at the Toronto
Hilton, referring to the Canadian dollar. `That`s what I would
do. More than fiscal stimulus I would say a commitment to keep
rates low for longer, or having an easing bias, something along
those lines.`



`It may not be conventional wisdom right now but I`d say
keeping your currency weaker right now is important,` Roubini
said.

http://www.businessweek.com/news/2014-02-24/roubini-advocates-more-aggressive-policy-to-weaken-canada-dollar

 

[Thomas Beyer]

Indeed, with the biggest Canadian province weak and highly indebted, the only way out ( besides a changes in the provincial party in power) is a weak loonie. As such expect prime rate to stay low, and low longer than in the US. A good time to already be in US real estate, or buy soon. The US will also have a somewhat faster growing economy than Canada over the next few years, but of course macro economics matter less as local markets are so different . There is no US or Canadian real estate market, only local markets.

 

[Jed]

Rickson,



I'm new to US real estate investing. I've been following this thread and I would really like to connect with you and learn about investing in US. Based on all the developments in the past couple years, It sounds like the opportunity to invest in US is gone. Is that a fair comment?

 

[Thomas Beyer]

[quote user=Jed] It sounds like the opportunity to invest in US is gone.
Of course NOT.



There is opportunity everywhere, always ! The US especially is a huge HUGE market with almost 400,000,000 people and growing. You honestly believe there is not one house or building that makes sense to buy ? Not now, not ever ?



Your grandkids should not buy real estate, ever ?



How about North Korea and Ukraine ? Lots of opportunities there over the next few decades !



You do not invest in the US or Canada, btw ! You invest in a specific city, in a specific neighborhood, in a specific asset.

 

[3canctheayr]

There are always opportunities, even in expensive areas like TO and Van. They just require the right eye to see them. I would categorize opportunities in a few ways:



Macro economic oppportunities; such as when a big event such as the 2008-10 crash creates opportunities such as what Rickson was able and willing to to take advantage of in Phoenix.

These can also take the form of lowering interest rates etc.

Localized event opportunities; say a new Factory, or school or? is moving into a town creating opportunities. An example would be when Toyota built a new factory in Woodstock ON. House prices have appreciated quite a bit since then.

Property specific opportunities; such as when a property gets sold lower than it's intrinsic value. I have been able to take advantage of a couple of these. A large scale example of this is US based NRDC's purchase of HBC, which since has also become a real estate play. They've made over a Billion $ on it so far.



There are many other examples and methods of opportunities......

 

[Rickson9]

As others have mentioned above, it's impossible make general statements about "RE opportunities" in the entire "U.S.".



Real estate, 99.999% of the time, is a local endeavour. The massive U.S. RE crash simply made identifying opportunities easier since RE became less "local". For a short period of time it didn't require a local expert to see a deal any more - real estate in the U.S. was a mess almost everywhere. An investor could have picked almost any city and found something. I just happened to decide to pick Phoenix.



I'm still not sure why there were so many naysayers when it was blatantly obvious how good the deals were. I guess they were afraid, and projecting their insecurities. That's what it looked like anyway.



TOP 10 STATES WITH EXPLODING HOME PRICES

As they say in Real Estate 101, it`s all about location. Here are the
top 10 housing markets by state, according to year-over-year price gains
from CoreLogic.

6. Arizona

12-month change: 13.1 percent

Peak Date: June 2006

Percentage Below Peak: 30.8 percent

http://wallstcheatsheet.com/personal-finance/mortgages/top-10-states-with-exploding-home-prices-2.html/?a=viewall

 

[Rickson9]

Cheers to the collapse of the Canadian dollar!



POLOZ: Get Used To Lower Growth

Stephen Poloz, speaking to the Halifax Chamber of Commerce on
Tuesday, said we have `been in recovery since 2009 ` for four years `
yet economic growth still pales compared to the pre-crisis years. The speech was seen as dovish and the Canadian dollar weakened
against the greenback following Poloz`s comments, falling 0.67 of a cent
to 89.8 cents US.

http://business.financialpost.com/2014/03/18/bank-of-canadas-stephen-poloz-warns-canada-and-the-world-should-get-used-to-slower-growth/



Loonie Collapses To Lowest Level Since 2009

The currency fell against the majority of its most-traded peers after
Bank of Canada Governor Stephen Poloz said yesterday he wouldn`t rule
out the possibility of rate cuts if the economy worsens. Fed officials
predicted their target interest rate would be 1% at the end of 2015 and
2.25% a year later, higher than previously forecast, as they upgraded
projections for gains in the labor market.

http://business.financialpost.com/2014/03/19/loonie-falls-to-lowest-level-since-2009-after-fed-revamps-rate-guidance/



Loonie Falls After Fed Drops Rate Guidepost, Trims Bond Buying Further

The central bank also proceeded with its well-telegraphed reductions to
its massive bond-buying stimulus, announcing it would cut its monthly
purchases of U.S. Treasuries and mortgage-backed securities to $55
billion from $65 billion.



Of the Fed`s 16 policymakers, only one believes it will be appropriate
to raise rates this year; 13 expect a first rate hike next year, and 2
others see the first rate hike coming in 2016, according to fresh
forecasts published on Wednesday. But once rate hikes start, Fed
officials see slightly sharper increases than they did in December, with
rates ending 2015 at 1% and ending 2016 at 2.25%, according to the
median of forecasts.

http://business.financialpost.com/2014/03/19/markets-blink-loonie-falls-as-u-s-fed-speeds-up-rate-hike-timeline/



Canadian Dollar Tumbles Below 89 Cents

The loonie, as the dollar coin is known in Canada, sank quickly
yesterday after comments by Bank of Canada Governor Stephen Poloz, who
painted a weak picture of the economy and left the door open to a cut in
interest rates. Today, it sank even further, to 88.8 cents U.S. by mid-afternoon, as
the Federal Reserve`s policy announcement pushed the greenback higher,
while stocks declined. The currency was hovering just below the 89-cent
mark late in the day.

http://www.theglobeandmail.com/report-on-business/top-business-stories/canadian-dollar-tumbles-to-89-cent-range/article17571022/

 

[Rickson9]

Although I have no interest in selling my properties, others may be different. The following are a couple articles that may be of interest to potential sellers of U.S. property.



What Happens When A Canadian Sells U.S. Property



IRS withholding, U.S. capital gain tax rate and how to get back the 10% withholding or avoid it altogether:

http://www.altrolevy.com/all/what-happens-when-a-canadian-sells-u-s-property/



Why the 1031 like-kind exchange is not available to Canadians:

http://www.altrolevy.com/all/what-happens-when-a-canadian-sells-u-s-property-part-2/

 

[Rickson9]

Growing Demand For US Apartments Pushing Up Rents

These are good times for U.S. landlords. For many tenants, not so much. With demand for apartments surging, rents are projected to rise for a
fifth straight year. Even a pickup in apartment construction is unlikely
to provide much relief anytime soon.

http://abcnews.go.com/Health/wireStory/growing-demand-us-apartments-pushing-rents-23179761



As an aside, I'm still looking to buy US property. I've accepted that gross yields will never be 20%+ again and have started looking at properties where gross yields are at 15%.



Why did I change my mind?



First, as the CAD weakens against the USD, the USD denominated cash
flow of these USD properties becomes increasingly attractive to me.
Since I invest in both US RE and US stocks, I can use all the USD that I
can get.



Second, at 20% gross yields, rent starts piling up. I deployed a bunch of USD during the stock market turmoil at the beginning of this year, but things have turned around in the stock market. The USD is collecting faster than I can sensibly deploy it. And it earns basically nothing.



Meanwhile, I can see rental properties that have 15% gross yields (7.5% operating yields). I'm no longer looking in Phoenix, AZ. I am closing on a 1800 sq ft detached home in another state at the moment. It will only take a week to close since I'm doing the transaction in all cash and I'm familiar with the process so it's moving pretty smooth. I'm looking in a number of states simultaneously to increase my odds of finding things.

 

[REQRentals]

Hi,



What State did you buy in ? It would be great to get some comparative returns between the various markets you have looked at.



We just did a video walkthorugh of this Bank Sale Listing in Tampa yesterday.



74K rents for 900 +/- here is a worksheet showing over 7% operating return fairly conservatively. Numbers are estimates subject to our due diligence.



We can do the same income for 45-50K but these have location excellent and there is a lot of development nearby. The value is in the land as vacant lots sell for the same price.



I am getting ready to post it up but saw your post and thought to forward it. It is not our listing we act as buyer's agents on foreclosures.



Cannot close in a week but can get you 10 days for inspections and due diligence during which time you can cancel the contract in your absolute discretion. Standard process in Florida bank sales.



Closing usually about a month which gives us some time to schedule all the work as soon as the deed is registered.

 

[Jed]

Hi REQRentals,



I couldn't access the video. Could you provide the url address please?



Thanks