While real estate has a long-standing tradition of wealth-building potential, and U.S. real estate is hot right now, it is possible to lose serious cash if you are not careful.
I continuously stress the importance of due diligence. It is key to your survival and success. Even as an U.S. real estate veteran, I still use my quick guide checklists to save myself time, money and possible heartache.
We all need to be informed to protect our investments. When it comes to Canadian-based U.S. real estate, you’re going to want to not only be personally informed but also have actual certified professionals (preferably with U.S. real estate assets or tons of experience) help you out. Sound expensive? It is, but it’s the cost of business.
There are so many possible ways you can gain or lose money in your U.S. real estate ventures – this is leveraging and protecting.
I’m not just talking about buying a place or performing the renovations either (although yes, you need to have a good system for that FOR SURE), I’m also talking about being a landlord. For those of you who are interested in setting up a business as a U.S. real estate investor, one of the major goals is not just flipping houses but also owning to rent.
Passive Cash Flow as a Landlord
I love owning property. I like the idea of owning the asset and benefiting off property value appreciation. Also, when the entire market is on sale (like current U.S. pricing), selling is not usually going to be the smartest cash generating strategy. Which means, you need to understand the roles and responsibilities of the landlord/tenant relationship. Now, while these will vary in different regions, you should have some familiarity with those basics and develop a contract that is legal and suits your own needs.
Things like: who is responsible for insurance? What about utilities? Who will be doing the landscaping, the windows, the property maintenance…all that good stuff should be in your lease. And I guess it is worth reiterating the importance of having your local legal counsel help you out with this process. You really do need to be careful in U.S. real estate particularly, because U.S. social culture is more inclined to litigious confrontations than Canadians might be used to.
The other day, at my Ottawa company office, I slipped and fell on the ice while walking out to my car. It was painful and inconvenient. Turns out, I actually broke my fibula. Now, I’m hopping around on crutches and the real question on my mind is: who is supposed to remove the snow and who is liable for that?
Well, if you ever bought or rented a home, you’ll know that different places will have different set-ups for who is responsible for insurance and snow removal. In this case, I guess if someone had to fall, it was lucky it was me, cause it turns out that my insurance was on the line for liability. Ya, I got the salt down. The lesson I want to share with all of you is – don’t overlook the possible areas of leveraging OR possible expenses involved in your U.S. real estate business or any real estate as a matter of fact. The last thing you want to become is a cautionary tale.
SO – Remember to get your liability insurance because as a landlord, you never know when some dumbass rushing around will slip, fall and break his fibula.