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Not sure where you stand when it comes to where to park your investment dollars moving forward in 2024 and beyond? 

With the most recent 2024 Canadian Federal Budget released recently with even more punitive tax implications for investors, it seems that many Canadian investors are talking about looking South of the border to begin investing in real estate or even growth stocks and equities in the US. 

As an investor, navigating the shifting sands of taxation and market conditions plays a much greater role on the value of your near-term and long-term investment portfolio and ultimately your net worth. Once a Canadian investor decides that they will routinely invest for their future, deciding where to invest – the US or Canada – against the backdrop of rising capital gains taxes, economic headwinds, and overall risk versus reward can drastically change the outcome of your real net worth. 

Stick with us as we dig into the complexities of diversification, emphasizing that it’s not merely about geography but about aligning investments with individual circumstances and longer term goals. From minimizing income tax implications to maximizing your return on investment, this episode provides insights to empower you to make informed decisions in an ever-evolving, complex Canadian financial landscape.

What you’ll learn:

• Gain clarity on how to diversify your investments while navigating potential tax implications and currency risk across both sides of the US and Canadian investment markets.
• Learn strategies for finding real estate deals with a margin of safety, in Canada or the US, to preserve your capital and safeguard your investments.
• Understand the benefits of diversifying real estate investments across different provinces in Canada or states in the US, with a focus on flexible financing and long-term growth potential.
• How you can take advantage of “risk-on” assets such as real estate while also creating a completely “risk-off”  buffer against market downturns in Canada or the US.

Stick around as we unpack the pros and cons surrounding whether we should be investing in the Canadian economy or whether packing up your stacks of cash and sending them down to the US is the best move regardless of whether you’re looking at single family homes, multifamily real estate, private placements in the US, or even just publicly traded US equities.

Resources:

• Budget 2024: Fairness for Every Canadian
• Capital gains inclusion rate proposal should be delayed, if not scrapped altogether [Article]
• Rule #1 – Phil Town [Book]
• Dig into our Ultimate Investment Book List
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX. 
• Looking for a new mortgage, renewal, refinance, or HELOC? Reach out to Jon to share some options.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting corporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

By hopping on a discovery call with Kyle, he will review your specific personal and corporate financial situation in order to determine if there are some quick wins available for you to minimize taxes personally or corporately, provide ideas for how you can increase your personal cash flow, and ensure that the net worth of your estate continues to grow in tandem.

Watch Now!

Detailed Episode Summary 

Discussing US vs Canada Investment Strategies

In this episode, Kyle and Jon discuss the potential benefits and risks of investing in the United States versus Canada, in response to the increasing capital gains tax in Canada. They argue that while diversification is generally a good strategy, it doesn’t necessarily mean moving all investments to another country. They highlight the need to consider individual situations, including tax implications, debt-equity ratios, and cash flow, before making any decisions. They also emphasize the importance of staying informed and doing thorough research before making any investment decisions.

Real Estate Investing Strategies and Margin of Safety

Jon and Kyle discussed strategies for their real estate investing journey. They highlighted the importance of finding good deals with a margin of safety, a key principle they learned from their experience in stock market investing. Jon emphasized that their approach is not specifically focused on the US market, but rather on seeking out opportunities that offer a margin of safety, regardless of location. They also touched on the uniqueness of current real estate and lender opportunities in the US that allow them to create a margin of safety.

Diversifying Real Estate Investments in US

Kyle and Jon discuss diversifying their real estate investments to the US, specifically looking at properties in Florida, Texas, and Arizona. They prioritize finding deals with flexible financing options like seller financing or assuming existing mortgages to minimize upfront capital. Their goal is properties in desirable areas that can transition to short-term rentals for personal use later in life. They emphasize understanding the seller’s motivations to structure win-win deals that meet both parties’ needs.

Discussing Currency Risks and Diversification in Investments

Jon and Kyle discussed the potential risks and benefits of investing in real estate and other ventures in the United States and Canada. Kyle emphasized the importance of considering currency risks, noting the current high value of the Canadian dollar and the potential for it to decrease in the future. He also highlighted the advantage of having a significant portion of their income in US dollars, which offers some protection against currency fluctuations. Furthermore, Kyle suggested the consideration of diversifying one’s portfolio across various sectors and geographies, encouraging questioning of whether an 80% Canadian or US equity portfolio would be more beneficial.

Transcript:

00:00:00:11 – 00:00:29:19

Kyle Pearce

Not sure where you stand when it comes to where to park your investment dollars moving forward in 2024 and beyond. With the most recent 2024 Canadian federal budget released recently with even more punitive tax implications for investors. It seems that many Canadians are talking about looking south of the border to begin investing in real estate or even in U.S. growth stocks and equities on the U.S. side of the border.

00:00:29:22 – 00:01:03:11

Kyle Pearce

As an investor, navigating the shifting sands of taxation and market conditions plays a much greater role on the value of your near-term and long term investment portfolio and ultimately your net worth. Once a Canadian investor decides that they will routinely invest for their future, deciding where to invest, the U.S. or Canada, against the backdrop of rising capital gains taxes, economic headwinds and the overall risk versus reward can drastically change the outcome of your real net worth.

00:01:03:13 – 00:01:45:13

Kyle Pearce

Stick around as we dig into the complexities of diversification, emphasizing that it’s not merely about geography, but also about aligning investments with individual circumstances and longer term goals. From minimizing income tax implications to maximizing your return on investment, This episode provides insights to empower you to make more informed decisions in an ever evolving, complex Canadian financial landscape. Here we go.

00:01:45:15 – 00:02:21:12

Kyle Pearce

Welcome to the Canadian Wealth Secrets Podcast with Kyle Pierce and John or we are recovering high school mathematics teachers and education consultants whose entrepreneurial spirit has led us to begin multiple businesses in real estate investing, digital courses and coaching and consulting after the bell rang at dismissal time. Fast forward a decade later where we’ve grown our portfolio and our time freedom to the point where we can now help entrepreneurs, business owners and investors to grow their wealth into a legacy that lasts a generation.

00:02:21:14 – 00:02:53:06

Kyle Pearce

Through hidden investment and tax secrets your financial advisors won’t believe are true. All right, let’s dig in. Well, well, well. They’re Canadian wealth seekers. We are digging in here today, and we’re actually going to be talking a little bit about heading south in this episode. And yes, it is. Some are kind of odd, right? Kind of odd. There’s a couple reasons why we thought this might be an interesting episode and we’ve mentioned it on a few earlier episodes.

00:02:53:10 – 00:03:21:07

Kyle Pearce

We’ve been hearing this buzz of like, especially in the real estate community, real estate investment community in particular in Ontario. So with as many people know, we have some pretty tenant friendly rules when it comes to leases and renting properties here in Ontario where you and I, John, are from, we are in the Windsor-essex area of Ontario and we have properties here in Windsor, Essex.

00:03:21:07 – 00:03:50:11

Kyle Pearce

So we have an Ontario portfolio, but we also have some little spattering elsewhere. And more recently, we’ve actually started looking south ourselves, except on this particular episode, we actually want to take a bit of a high level holistic view as to why looking elsewhere could make sense for investors, whether it’s real estate, whether it’s equities, whether it’s any type of investment.

00:03:50:16 – 00:04:10:08

Kyle Pearce

And we actually want to do a little bit of a comparison to kind of talk about the pros and the cons, the benefits and the risks that might be associated with doing so. And just to give people a sense as to where they might want to go, because the problem is we as humans, we tend to follow the herd, right?

00:04:10:09 – 00:04:38:21

Kyle Pearce

So when you hear a lot of people are there’s even some out there, friends of ours, colleagues of ours that are selling their portfolios in Ontario, and they’re taking it all down south, or at least that’s sort of the message that a lot of us are hearing. And today we want to just take sort of a balanced approach here, give you some perspectives and help you to think through your own situation, to try to figure out what the heck is going on and should I be hopping on that train or on that bandwagon?

00:04:38:23 – 00:04:47:24

Kyle Pearce

Or is there a different way? Maybe it’s perfect for me. Maybe it’s a horrible idea for me. That’s going to be the goal here in this particular episode.

00:04:48:01 – 00:05:19:04

Jon Orr

Yeah, and I think there’s lots of us wondering, too, about this kind of like, let’s let’s, let’s pack up and why would we want to invest in Canada right now? We’ve had multiple people reach out to us after the 2024 budget coming out and saying we are adjusting the capital gains tax for individuals on any gains over $250,000, where all of a sudden moving up from 50% to 66.7 or two thirds of that, and we’ve had people reach out to us to say, why would I now want to invest anything in Canada?

00:05:19:04 – 00:05:38:12

Jon Orr

Should we just move everything to a different country? Should we move to the states? Is this the time? And so you’re going to be hearing or maybe you’re listening to other podcast, maybe you’re listening to other people on on any social media and they’re saying the same thing. It’s like we’re moving south where we have to like, we can’t keep investing here because we’re going to lose On the tax situation.

00:05:38:12 – 00:06:11:15

Jon Orr

And I think it seems natural to kind of go with should we go that route and kind of figure out whether buying in the states or buying in another country makes sense right now. But I’m going to tell you right now the reason think we are doing this episode, not because specifically of the capital gains tax, but there are other reasons that have made it more maybe more attractive to look elsewhere in Canada and kind of like explore a little bit and figure out what is the right move for you and what we want to do here today is to help you kind of decide, is it should I just abandon ship and move everything

00:06:11:15 – 00:06:30:24

Jon Orr

to the south or are there some gains on staying here versus going there? What I should think about in terms of in general, my portfolio, whether it’s the real estate investment or any other sort of asset class? Because Kyle, I think the wonder is like if I go to the States and buy there, I get to like walk away from the capital gains tax.

00:06:30:24 – 00:06:37:06

Jon Orr

It’s like, I don’t have to worry about that anymore. Is that and you’re like, Are you sure you really know what you’re talking about? Yeah.

00:06:37:08 – 00:06:58:01

Kyle Pearce

Yeah, exactly. Exactly. I’ve had I have a lot of these calls with many folks, some from the community here, others through other sources that we’re hopping on calls we’re doing. A lot of times it’s corporate wealth management sort of discussions. And the question often comes and one in particular, one calling. I think, John, you know who I’m talking about when I say this.

00:06:58:01 – 00:07:18:18

Kyle Pearce

This person’s out there and quite vocal on social media about how they want to just like leave Canada. And, you know, they’ve got quite a few assets and we’ve chatted about this at length and whether it’s the Bahamas or whether it’s to Turks and Caicos or wherever you’re going to go. The problem is, is that if you already have assets here in Canada, we’ve designed this.

00:07:18:18 – 00:07:43:05

Kyle Pearce

I say we like, you know, like I did it, but we’ve designed this as a country, or at least the leaders of our country, so that it makes it hard for you to do it. It makes it hard for you to leave. Now, if you’re the person who wants to leave and they want to get to like a 0% sort of income tax sort of environment like the Bahamas are, some of these other places, you are going to get kicked in the butt on the way out the door.

00:07:43:06 – 00:07:58:08

Kyle Pearce

Now, mind you, if you’re listening to this podcast, I doubt this is you friends, but if you’re listening to this podcast, you have no assets, you have nothing to sell, you have nothing to like. You know, you can cross the border and they ask you like, are you traveling with more than $10,000? You’re like, No, I don’t have that on me.

00:07:58:08 – 00:08:21:11

Kyle Pearce

And I’m leaving and I’m never coming back. It’s easy to leave, right? I mean, you’ve got a lot of documentation to do. You have all of that stuff. But the reality is, the more assets you have now, the more of a difficult time you’ll have trying to say fully leave. And if you go to the U.S. and start investing but you’re still a permanent residence in Canada, you’re still going to have the tax rules in Canada to live within.

00:08:21:11 – 00:08:48:08

Kyle Pearce

So for those who are like thinking like, oh my gosh, capital gains taxes, it’s increasing here in Canada. Like, unless you’re willing to hit the full eject button before June 25th this year to take advantage of the 50% inclusion, you are probably going to be taking massive losses and you’re going to have to essentially move all of those assets out and then actually not be a permanent residence here like a taxpaying citizen here.

00:08:48:08 – 00:09:08:13

Kyle Pearce

Right. So we have to think here when we’re planning and when we’re thinking about our own situation. A lot of times we talk about it all the time. We’re all in or we’re all out, right? We’re digital people, right? We were one zero were on, we’re off. And this is one of those cases where, sure, I don’t like the fact that capital gains tax is increasing.

00:09:08:15 – 00:09:27:15

Kyle Pearce

What it does is it actually makes the need for more tax planning. Right. That’s something that a lot of people don’t pay any attention to. Right. Perfect example is everyone that has these big, massive RRSPs and they say that’s going to be the last bucket that they plan to touch when they leave their working years. That’s not a good idea.

00:09:27:15 – 00:09:51:07

Kyle Pearce

That’s a bad tax planning strategy. Right? Because a lot of that’s probably going to get taxed down the road all at once. Well, the same is true here. Now, that doesn’t mean it’s not a good idea to diversify, but what we’re trying to highlight here is the why, right? Like, are we going to just run with everybody and go and put money into the U.S. because of X, Y or Z?

00:09:51:07 – 00:10:09:24

Kyle Pearce

Or is there actually a fundamental logic behind the work that you’re going to do? Because for us, John, like if we hit the eject button now and we were to sell everything we have here and then try to reinvest it all in the U.S., we are taking a big tax penalty to do so. Not only that, right, Sure.

00:10:09:24 – 00:10:38:21

Kyle Pearce

Maybe we might save some money on this 50% or two thirds inclusion rate initially. The challenges is that as we earn capital gains in the U.S., there’s going to be tax associated with that as well. So the real question is, is it worth diversifying? I think our general answer is potentially for you, like diversification is always good. But the reality is, is it’s not necessarily taking everything and completely moving it because let’s be honest, that is not what diversification is.

00:10:38:22 – 00:10:44:24

Kyle Pearce

That’s not the definition. That’s called going all in in a different place and hoping you were correct.

00:10:45:01 – 00:11:10:12

Jon Orr

Right? Yeah. So if let’s say moving asset choice to the states is going to like all of a sudden relieve me of this tax implication that I would surely have to pay down the line. Like then let’s get into the weeds on our decision making because we started this podcast by saying we have scattering of investments across different markets and we have some investments in the states.

00:11:10:12 – 00:11:25:13

Jon Orr

And even though people are saying, Let’s go do this, and we’re saying, well, hold off, why make it sure it makes sense for you. Fill the audience, fill the listener in right now, Kyle and go like, why does it make sense for us to explore that market right now?

00:11:25:15 – 00:11:47:19

Kyle Pearce

For sure. And I also want to touch on why it doesn’t make sense for us to say hit the eject button here. And the reality is, is that depending on your situation, this answer can be very different. So for us, we aren’t in a cash flow negative situation here right now. We are we’ve talked about it before. We don’t overleverage properties in general.

00:11:47:23 – 00:12:08:12

Kyle Pearce

We tend to have some debt equity in there and that’s like a safety issue for us. So that in uncertain times, like now, a lot of people consider this to be an uncertain time with higher interest rates and, you know, things that most people are not used to seeing. Right. Because it’s been such a long run since that 2008 sort of little blip.

00:12:08:14 – 00:12:33:23

Kyle Pearce

And ultimately, at the end of the day, it’s like we don’t have a need to hit the eject. But now I want to pretend, John, that we had portfolios in Toronto and we were really or Vancouver and we were focusing essentially all of our plan around appreciation, right? And it was working for a while, but we are doing it either cash flow neutral button for a lot of people, it could be cash flow negative, right?

00:12:33:23 – 00:13:02:23

Kyle Pearce

And let’s say they’re in a position there and they saw some of that growth. For those who saw growth, they’re probably like, I’m still okay. But for those who bought in with the anticipation that appreciation was going to lift them and then they saw the blip in the market, they’re now thinking to themselves, Can I sustain that? So for that person, they may not have or let’s be honest, maybe they shouldn’t have made the investment in the first place, but is it time for them to maybe dust themselves off and take the chips elsewhere?

00:13:02:23 – 00:13:27:15

Kyle Pearce

Maybe. Right. So this is the hardest part about this sort of discussion. But for us, when we look to the states, we have a few different things going on. Now. Let’s be honest. Windsor-essex not exactly Canada’s bright spot. We’re going to put it out there. We love the area. We love living here. But I mean, Windsor is not necessarily the first place people are looking in Ontario when they think about investment and growth.

00:13:27:21 – 00:13:47:15

Kyle Pearce

However, over the next little while, we actually do have a bit of a bright spot. Some people are starting to look. Here we have the Gordie Howe Bridge being constructed right now. We have the battery plant, the EV battery plant happening, you know, lots of money coming in which obviously assuming that that plant is finished and does employ people.

00:13:47:15 – 00:14:14:18

Kyle Pearce

I always worry because we this happened in 2008 when Chrysler built a plant over on Central. I don’t know if you remember that, John, and they were done building the building and then they halted it and then Chrysler ripped it down. They actually like literally ripped the building down. Now, it’s not as big as the battery plant. And the government stepped up to allow that to not happen in this particular case, which is still worrisome for me as to why the government needed to do that.

00:14:14:18 – 00:14:39:19

Kyle Pearce

So that said, Windsor looks fairly good in comparison. But for you and I, John, we have well, first of all, I started my real estate investing journey in the U.S. so I was very familiar with Florida and Arizona, and we’ve now sort of shifted towards that as sort of a diversification play. But we also have some other pieces to the puzzle here.

00:14:39:21 – 00:14:46:17

Kyle Pearce

So tell me about it, John. Like when you think about the perspective, what are you liking about the U.S. right now as opposed to maybe local here?

00:14:46:23 – 00:15:12:22

Jon Orr

So I don’t think it’s like a U.S. specific situation. And I know that you’ve got I think there is some U.S. specifics, but I think the bigger picture is that we are in our hunt to figure out what assets to purchase with our capital. We’re continually thinking about trying to create a margin of safety and thinking about what is a good deal because we like to keep our powder dry.

00:15:13:02 – 00:15:32:13

Jon Orr

And there are some specifics in the United States that kind of allow us to kind of continually look for that margin of safety. But I think that’s really the if you kind of zoom out, we’re always in search of an assets that can give us that margin because it allows us to kind of like keep our powder dry so that we’re like, we’ve got this over here.

00:15:32:19 – 00:15:53:02

Jon Orr

Our strategy isn’t to just go and go. I want to invest in the state. So let me just grab that property. Let me grab that property or grab that property. I think what we want to stress here is that our strategy is always about trying to figure out where’s the good deal, Can we make sure that that’s got a margin of safety attached to it and then we will move our capital into that?

00:15:53:02 – 00:16:17:13

Jon Orr

So it’s not specifically a U.S. thing. It’s all about figuring out where can I find that deal and where can I find that margin of safety. Now, when it comes to the U.S. right now, there are some unique situations specifically around real estate and buying real estate and say lender opportunities that allow us to create that margin of safety currently.

00:16:17:13 – 00:16:45:20

Jon Orr

And that’s kind of like where this is been a strategy that we’re now going down or we have been going down this kind of route. And Kyle is going to share some of those specifics with you. But I think that’s really the big picture is like when you think about when you’re investing, one of the first things we learned when we were first investing in the stock market on things like buying individual companies, buying individual stocks or buying individual equities and going fill towns, rule of number one was like, you buy it on sale.

00:16:45:21 – 00:17:06:18

Jon Orr

It’s like, let’s wait. If this company hits all of these great metrics and it’s a company that you know about, a company that you want to own and you can own for a long time, then when you keep an eye on it and when all of a sudden there’s a dip in the market or a pullback, that’s the time to buy it because you’re buying it on sale and you’re creating that margin of safety for yourself.

00:17:06:20 – 00:17:28:21

Jon Orr

So it’s like that’s the strategy that we’re always taking and going, like waiting. This capital’s in reserve. We always want to try to like structure our capital to be like, can we have access to capital at any time we need to? Because then we’ll move it into this deal that’s out there. And so we buy a deal on, say, in the stock market, which is an area, a zone or a market or an asset class.

00:17:28:23 – 00:17:41:03

Jon Orr

But we also do that with real estate. And so now give us some specifics. Where are we looking right now to help create that margin of safety in the deal in the States? And what’s specific to the states have that say cannot doesn’t happen?

00:17:41:08 – 00:17:59:15

Kyle Pearce

Yeah, for sure. And I want to elaborate one thing to before we dig in is I also want people to think about if I move outside of our local market, Right. So you and I, John, have lived here. I’ve lived here some very young since I was in grade two. You have been your adult life living in the area, essentially.

00:17:59:17 – 00:18:24:22

Kyle Pearce

Same with Matt. Right. So Matt is born and raised. Kingsville Boy. Right. So we know the area. You have so many advantages when you invest in your local market that you now have to either obtain some other way, right? You either have to do it through research, through trust, through someone who’s there. So when I look at, hey, if I’m going to put in that work or that effort, I look and I can look out to Alberta, I can look to New Brunswick, I can look all over the place.

00:18:24:24 – 00:18:43:18

Kyle Pearce

But the reality is I’m like, Well, if I’m going to do that work, I’m like, why not get this added diversification by looking to the U.S. takes us out of the Canadian market completely. So for us, that’s great. But this margin of safety you’re talking about, there’s multiple some are actually monetary margins of safety that we’re looking at.

00:18:43:18 – 00:19:07:09

Kyle Pearce

But then there’s also sort of we’ll call it like lifestyle margins of safety. So there’s like, folks, if you go all the way back to our early episodes and I sort of share my initial investment in Florida was specifically not because I thought Florida’s market was going to do anything in particular, but because I was like, If it doesn’t work, I have a place in Florida, right?

00:19:07:11 – 00:19:26:21

Kyle Pearce

Whereas if it doesn’t work and I have a place in Wisconsin, I Yeah, exactly. Are like, you know, in another in Detroit or, you know, wherever Cleveland like and I’m not trying to pick on these other places, but I’m not planning to ever holiday there for long periods of time. However, Florida I went there as a kid the whole time.

00:19:26:21 – 00:19:45:01

Kyle Pearce

I’m like, so I see that as an additional added margin of safety. It’s like a lifestyle margin of safety. And as business partners, we all look at it as well and we say, you know, if we buy in maybe nicer neighborhoods than we might when we buy locally, right? Like locally here, we’re buying for a very specific reason.

00:19:45:03 – 00:20:12:12

Kyle Pearce

When we look outside of Windsor, we actually are kind of looking and we’re willing to actually pay a little bit more on same price point in order to get into, say, an area, a market, a neighborhood that we’re like, you know what, I’m fine to not maybe cash flow as much as long as this asset is going to maintain value or grow in value, hopefully over the longer term as we just knock down any sort of financing on it.

00:20:12:12 – 00:20:32:16

Kyle Pearce

So we’ve been looking a lot in Florida. In Texas, we also you know, John, you and I have been to Houston a number of times. We really like that area. So I’m always looking in Texas as well as also as Arizona. I own a property in Arizona currently and those are three places that we look quite a bit in now.

00:20:32:16 – 00:20:57:09

Kyle Pearce

We’re not telling everybody else to look there. And some people might say, well, wait a second, isn’t the property tax expensive in Florida for non homestead? Yep. Yeah. So if you don’t like that, if you’re looking for Max return that, maybe Florida’s not a good fit for you, but for us, if the deal is right, we’re okay to take on a little bit of that as long as we’re getting some of these other boxes checked for us.

00:20:57:11 – 00:21:16:05

Kyle Pearce

So we’re at this place where we’re starting to look and we say, listen, if we can find a property with some easy financing options now I say easy. It’s like there’s a nuance to it because it’s actually a lot of learning to be done. But I mean, in a perfect world, hey, you find a seller who has seller financing, right?

00:21:16:05 – 00:21:39:18

Kyle Pearce

So meaning they don’t have a mortgage on this property and they’re willing to actually hold the mortgage for you, That makes things super easy. And if they have flexible terms. Right. So if we can put down less and in order to do this and they hold the mortgage for us, and even if this thing is slightly cash flow negative, I want you to think about this for a second.

00:21:39:18 – 00:22:18:06

Kyle Pearce

If I put down, say, 10% compared to, say, 30 or maybe even 35% that a lot of lenders require out of foreign investors, or if they’re willing to take maybe a 10%. I’ve got a lot of room there for me to go. You know what I’m willing to go maybe cash flow negative a little bit here on this property because and you know me, John, I calculate it and I share it with you and Matt and say, hey, it’s going to take us eight years to get to 30% down with this negative cash flow, meaning like that negative cash flow will only amount to the same amount as 30 or 35%.

00:22:18:08 – 00:22:37:13

Kyle Pearce

That we’d have to pay now, and it’s in eight years. How do we feel about that? Do we feel good about that? Are we able to float this without the assumption that we’re just buying it only for appreciation, but rather as a way to sort of store some of our capital, but not all of our capital? Remember, he said powder dry.

00:22:37:13 – 00:23:02:22

Kyle Pearce

I like powder dry. Now, it also doesn’t mean we’re going to buy 400 of these and then have no powder left because we need the powder to be able to sustain any sort of rocky ness that might happen. Right? We need to fix something. Capital expenditures. But the other thing that you and I and Matt are looking at quite a bit is we’re actually looking at people who might be open to the idea of a subject to existing financing.

00:23:02:24 – 00:23:22:18

Kyle Pearce

It’s kind of like an assumed mortgage, but it’s not assuming the mortgage. They actually keep the mortgage in their name and you make the payments. Now there’s some nuance to it. We’re not going to get into it today, but maybe we’ll do a whole episode on it. If you folks comment, rate and review and say you want to learn more about this idea, we will make an episode.

00:23:22:18 – 00:23:54:12

Kyle Pearce

We’re just not sure there’s that many people out there that are curious about it. If there are, we’ll do an episode specifically around it. But ultimately, at the end of the day, the way this works, as you can essentially take the existing financing and you work out a deal with the seller so that you can essentially assume the payments, not assume the actual mortgage, and you work out an agreement that way without triggering a do on sale clause, which again, a nuance that you need to be very, very cautious and aware of as you engage in it.

00:23:54:12 – 00:24:31:18

Kyle Pearce

So for us, we look at these properties and we go, does this fit our buy box based on where we are now? And we’re in a place now. We’re also starting to look at diversity from, Hey, when we get to the place where we want to say, work less or just head out somewhere for two, three weeks, we want to pick up properties that are newer in nicer neighborhoods that maybe we might flip to short term rentals from a long term rental and use them primarily as sort of business family sort of properties that we’re able to utilize and benefit from later in life.

00:24:31:20 – 00:25:01:03

Jon Orr

For me, this is a secret sauce. What I love because you you are like our chief negotiation officer. You’re getting in there and you’re trying to figure out what is the right move here. But this is the secret sauce that you, as our chief negotiation officer, tend to hold right to your heart. Like this is like something that you live for and live by, which is you’re always going into any sort of deal or negotiation or exploratory, you know, option.

00:25:01:05 – 00:25:23:18

Jon Orr

With the win win mentality, it’s like, I want to get in here. I’m not getting in here. Like, this is my secret sauce, isn’t it? Get in here and get the best deal for me. It’s the get the best deal for both for everyone. And I think this subject to availability that we’ve been exploring and making use of is it’s an avenue that allows us to apply that secret sauce.

00:25:23:18 – 00:25:50:07

Jon Orr

Like you have to get in there and talk to the people about what is it that you’re really after. If you’re seller financing, like you said, it’s like if I can get you to say 10% is a great down payment and then I can do some calculations about like how much that’s going to be if it’s net, you know, if I have negative cash flow, What you were been really doing and we’ve talked about this on previous podcast episode is the really secret sauce is trying to figure out what is it that you really want because it’s like a do you want the money and you’re going to go buy another property with it?

00:25:50:07 – 00:26:05:15

Jon Orr

Well, then that’s if that’s the case, then we have that. That might not be exactly what we’re going to be best for us. But if like if you are okay with take, you’re going to take that money and you’re going to dump it in an investment, say, on the stock market, you’re going to take it and put it in over here and you’re just going to like live off the proceeds.

00:26:05:15 – 00:26:21:24

Jon Orr

Well, maybe we can talk about what you really need and then we can negotiate on those terms because it will be what you want with, let’s say, your capital and then what we want. And that can then be a win win for both of us. And we don’t have to work with the bank or we don’t have to like go over here.

00:26:22:05 – 00:26:46:00

Jon Orr

For me, that’s the secret sauce that we want to think about. Then, not just real estate investing. This is like any sort of discussions you’re having with anyone is to go into those situations and go, What is it that you’re like you’re really looking for? Or What’s a hold up here? Like, what’s a barrier for you in this project or this idea or this next move or this sale or this?

00:26:46:04 – 00:27:05:13

Jon Orr

I’m buying a company or I’m selling a company. It’s what is it that we really want this other person to like what they’re really after? And sometimes people hold their cards tight and they don’t want to share that. But it’s like you have a really secret, sassy way to get people to kind of share that. And then when they do share it, that’s when the real power of the deal can come through.

00:27:05:15 – 00:27:15:18

Jon Orr

So when you’re thinking about it, we’re talking a lot about buying in the United States real estate. But if you zoom out, there’s a lot of principles here that we’re talking about that apply everywhere.

00:27:15:24 – 00:27:38:22

Kyle Pearce

100%. You know, and something that I think is important for people to consider as well, which never comes up, it seems, anyway. And what I see is this idea of currency risk, right? Like right now it’s about what, 136 Canadian, a dollar 36 for a dollar U.S. currently, and that’s fairly high relative to where we’ve been in the past decade.

00:27:38:22 – 00:27:58:02

Kyle Pearce

Right. So in the past decade now, mind you, if you go all the way back to when I bought my first property, I bought when the Canadian dollar was actually about a penny or two higher than the U.S. dollar. So did I know that things were going to work out the way they did while. No, but I did feel like the U.S. is the favor.

00:27:58:08 – 00:28:25:00

Kyle Pearce

And of course, that currency went down. Their currency went down after the financial meltdown. Right. In 2008. So we had a little bit of an advantage there where with the currency risk we took on, we actually won in that game. Right now at 136 or 137, it’s anybody’s guess where we go next. Some might predict that we’re actually going back to 150, which we were at prior to the financial crisis.

00:28:25:00 – 00:28:48:19

Kyle Pearce

And for some years. Some people believe, like we’re going back there. If that’s the case, then that’s kind of an added win. Now for you and I. We have sort of a bit of protection already. So like imagine this if you hit the eject button in Canada and then you convert everything to U.S. dollars. But you’re still earning in Canadian dollars unless you have enough rental income to sustain and so forth.

00:28:48:21 – 00:29:09:04

Kyle Pearce

Would you and I, John, earn a significant amount of our income through one of our active businesses in U.S. dollars. So it gives us a little bit of we’ll call it protection there that it’s like we already have these dollars every time we convert a U.S. dollar to a Canadian dollar, we’re essentially assuming the risk that we might lose on that transaction.

00:29:09:04 – 00:29:28:22

Kyle Pearce

Right. Because if it goes up or down, right, we don’t know. But in this particular case, for us not only getting that diversification, but also just for those who are thinking about these things, you have to really be able to if, let’s say, the currency swung in one direction or the other, how is that going to make you feel like is it worth diversifying out of Canada?

00:29:28:22 – 00:29:51:19

Kyle Pearce

If you know you’re staying in Canada, you feel like you’re going to stay in Canada long term and you’re kind of regardless of how the economy goes. So these are really important things. Now, if I think about this from those who aren’t in real estate or maybe they want less active real estate, right, like we’re going to be buying properties, these happen to be John, you, I and Matt have two properties under contract, one in Arizona, one in Florida.

00:29:51:21 – 00:30:13:22

Kyle Pearce

So those are under contract be closing in the next month. Now, it’s not that we’re like only looking at single family homes. There’s some others out there that might say, well, what about actually just an investment I don’t have to think about? Well, there’s funds, there’s investment funds out there. We actually have two on our desks right now that look really good and we’ve shared them with a couple of our investors that are out there from the community here.

00:30:13:22 – 00:30:37:04

Kyle Pearce

So there’s opportunities for you to take advantage. And the other thing is if you’re just index funding it, which is totally fine, there’s nothing wrong with doing that. It’s not what we do. But if that’s what you’re doing, are you in Toronto Stock Exchange overall market indexes? Are you in the S&P 500 or U.S. equities? Are you in a global equity fund?

00:30:37:06 – 00:31:06:11

Kyle Pearce

The real question you might want to ask yourself from a diversity perspective is where do you see the general economy going? If I’m indexing and do I want to shift some of that? Do I want an 80% Canadian sort of portfolio or do I want like a 80% U.S. equity portfolio? If, you know, great, go for it. If you’re not sure, maybe you want to just make sure it’s a better diversified across the U.S. and Canada and maybe globally.

00:31:06:13 – 00:31:29:20

Kyle Pearce

If we talk to Jim Chong, who is on episode, I’m not sure, but we’ll try to look it up and put it in the show notes. But what Jim was on, Jim is a very, very, very staunch advocate for the U.S. not only do to buy U.S. property for a number of years, but he also just believes the economy, like Warren Buffett, is going to outdo the Canadian economy and essentially all the others.

00:31:29:20 – 00:31:50:13

Kyle Pearce

So he is very much or very heavily into the U.S. market. So who are you and where are you going to feel most comfortable? I think is the secret sauce that I want to share with today. And the goal for this episode wasn’t to try to convince people that, hey, you should look to the U.S. It’s to say if you are, why are you looking there?

00:31:50:16 – 00:32:10:20

Kyle Pearce

And for us, part of it is personal because, again, like I like this lifestyle opportunity it might provide us later for our families. And the other part is a little bit of diversification at the same time. But by no means are we on any sort of we’re not hovering over the eject button here in Ontario or in Canada in general.

00:32:10:22 – 00:32:31:05

Kyle Pearce

So just make sure that when you’re hearing people and what they’re talking about, that you’re thinking about your individual needs, your goals, and does it help bring you closer to those goals? I would hope it’s going to bring you closer if you’re thinking about it. But then also, does it bring you closer to feeling comfortable and content with how you’re getting there?

00:32:31:05 – 00:32:53:02

Kyle Pearce

Because if it’s too hard, you might not do it. You might waste a lot of time, maybe you hit the eject button and then never act on it, right? So make sure it’s good for you and make sure that you have that team around you that you’re surrounding yourself with. To help think through some of these questions. Because, of course, if we could ask ourselves all the right questions, then we’d all have all the answers.

00:32:53:04 – 00:33:05:00

Kyle Pearce

It’s always nice to have somebody from the outside sort of looking in and just asking you those questions to get you thinking about things that maybe just never came up in your own mind yet for sure.

00:33:05:00 – 00:33:21:13

Jon Orr

And if you were listening to this podcast or other podcasts and you let’s say you, you don’t have that trusted person right now, it’s like, like I’m on this journey. It feels like I’m by myself. Maybe my business partners aren’t ready for this or, you know, maybe my spouse doesn’t talk to me about or we don’t talk about this type of thing.

00:33:21:13 – 00:33:41:06

Jon Orr

And I’m not sure where that trust could happen is we would love to kind of go down that route with you. Like like Kyle said, we also have a couple of funds on our desk for getting into, in this case, the United States in some properties. And if you’re interested to learn more, we’ve shared it on our email newsletter.

00:33:41:06 – 00:34:03:18

Jon Orr

And if you’re not on our email newsletter, you can go on over to Canadian well secrets dot com. There’s a button at the bottom of that page to sign up for our newsletter. We send out our regular updates each week, but also you can head on over to Canadian well secrets dot com port slash discovery hop on a call with us and then we can just talk about what’s you know what’s some of the right moves that you’re making and or you want to make and where say some of your capital lies right now.

00:34:03:18 – 00:34:14:21

Jon Orr

And maybe there’s some choices that we can help you make them, but also provide some some pathways forward. So head on over can you while secrets dot coms, few resources there for you to take action on.

00:34:14:23 – 00:34:36:17

Kyle Pearce

Awesome and friends, we’re loving the ratings and reviews we’re seeing slowly trickle in. We’ve got an ever growing list of listeners which is helping us stay in the top 200 business here in Canada on Apple Podcasts, which is amazing. So keep on listening. And when you listen through an episode, it’s telling the algorithm, Hey, show this to more people, which is working.

00:34:36:17 – 00:35:11:21

Kyle Pearce

That’s great. What also helps us is those rating and reviews. So do us a huge solid and essentially look out for your fellow Canadian wealth secrets seekers who might be looking for this particular podcast so that they can grow alongside you. So share it however you found it. And friends, until next time we will see you on the next episode.

00:35:11:23 – 00:35:20:11

Jon Orr

This is a reminder of the content you heard here today is for informational purposes only, you should not construe any such information or other material as legal tax, investment, financial or other advice.

00:35:20:13 – 00:35:42:15

Kyle Pearce

As a reminder, John. Or is a licensed mortgage agent with the bricks Mortgage license number 2323006803. Kyle is a licensed life and accident sickness insurance agent and VP of Corporate Wealth Management with the Pan Corp team, which involves corporate advisors and pan financial.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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