JF1304: A Canadian Investing In The USA with Glen Sutherland
Glen is buying properties in different states using turn-key operators. Remote investing is a great way to invest when you live in a less desirable area for investing. Glen has built teams on the ground and has tips and suggestions for anyone else who would like to invest in the US as a Canadian, as well as anyone who wants to remotely invest. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Glen Sutherland Real Estate Background:
- Host of the podcast and youtube channel “A Canadian investing in the USA”.
- Canadian investing in both Canada and the USA
- Started his Investing journey purchasing ‘buy and hold’ rental real estate locally
- Currently investing in the US by purchasing single family ‘buy and hold’ rental real estate
- Based in Cambridge, Ontario
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Glen Sutherland. How are you doing, Glen?
Glen Sutherland: Hi, I’m doing great.
Joe Fairless: Well, I’m glad to hear that. A little bit about Glen – he has four single-family homes that he rents out, he’s a Canadian investing in both Canada and the United States, based in Cambridge, Ontario, and he’s the host of a podcast and YouTube channel called A Canadian Investing in the U.S. No grey area there, it’s very clear what that podcast and YouTube channel is all about. With that being said, Glen, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Glen Sutherland: Yeah, actually that pretty much sums it up. I actually have five properties now and a sixth in Alabama, and I’ve got two under contract, so in the next month or so we’ll have another couple more to the portfolio.
Joe Fairless: Where are your properties and what are they?
Glen Sutherland: Right now they’re all single-family. I used to own some duplexes, but we sold those. I used to invest with my brother. We sold those about a year ago, so now it’s all single-family. Cambridge, Ontario, Strathroy, Ontario, Huntsville, Alabama, and two properties I’m gonna be getting in Kansas City, or Raytown, which is just on the edge of Kansas City.
Joe Fairless: Two in Canada, one in Huntsville, Alabama–
Glen Sutherland: No, actually there’s several in Cambridge, yes.
Joe Fairless: Okay, several in Cambridge (your backyard), and then you’ve got one in Huntsville, and you’re gonna be buying two more in Kansas City?
Glen Sutherland: Yes.
Joe Fairless: How are you finding these properties all across the United States? And I get the Canada thing, because that’s your backyard, but how are you finding the ones in the U.S.?
Glen Sutherland: In the States I’m using turnkey operators, because there’s a bit of a gap when you’re this far away. Until you have a team established, even if you just pick a specific market and you get established somewhere, until you have your contractors set up, it’s much easier to work with someone who can find the property (ideally wholesale) and then renovate it for you and still sell it to you undervalued.
Joe Fairless: How do you qualify the turnkey operator?
Glen Sutherland: Well, to be honest, the ones I’ve been working with, I’ve either gotten references from some people running podcasts, or I’ve worked with some of the other podcast hosts. So yeah, I don’t know. I guess whenever you listen to somebody for a few thousand episodes, you get to know, like and trust them, and you sort of go with that.
Joe Fairless: It makes sense. You said that you used to own some duplexes with your brother but you sold them… How come?
Glen Sutherland: The main reason was that we were just having problems… We didn’t have the hydro or the utility split, so we were having problems with the tenants having basically water battles. They’d hear the other one in the shower so they’d turn on the laundry… [laughter]
In Canada I property-manage myself, which I know is not the best idea, but in the States I use property management, obviously… But when we were managing ourselves, after a while it just took a toll. It was like, “Okay, this is enough. We can sell it above what we bought it for, we can walk away with some money… Let’s just do it.”
Joe Fairless: Why does it take a toll as a manager? I think it wouldn’t take a toll on the manager, it’d take a toll on the owner, because the owner is having to foot that bill with the water battles.
Glen Sutherland: Yes, but I was the property manager, so I was doing both. I was dealing with them calling me and complaining about each other, as well as dealing with water bills… I was having both sides.
Joe Fairless: Okay, that’s no fun.
Glen Sutherland: No.
Joe Fairless: The two that you’re buying near Kansas City – what’s the price point? What are the rents for and what can you tell us about them?
Glen Sutherland: The properties in Kansas City – I’m basically looking for stuff around the 1% rule. I wanna do better than that. Off the start, these first few properties — I’ve been going for B-class properties, so they’re really nice-looking properties, which I know I could do better by going down to the $65,000 range instead of up in the $100,000… But I’m still getting my toes wet, and it’s a comfortable factor. You look at houses and you’re like “I could live in these houses”, whereas whenever I got into some of the $65,000 ones…
I know you have to not get the mental attachment to it, but I believe that these should appreciate better being in a B neighborhood than the C neighborhood. I know that the cashflow isn’t as good; I’m only gonna make 10% without leverage, and it’s really gonna be about diversifying my portfolio.
The plan is to get a bunch of them that are these B-class neighborhoods so that I’ll make the 10% now. Once you add some leverage, you’ll make a little bit higher than that. And then go to some C-clas neighborhoods… I was already looking at putting seller financing on one in Indianapolis and in Jacksonville – the Jacksonville one will be seller financing – and just having a little bit of different things.
By diversifying in different markets, you’re dealing with different cycles for different states. I have properties in Canada, so you’re dealing with different countries… And ideally, I’m planning to move into different asset classes. I don’t know if I’m supposed to talk about your stuff, but on your next project, I plan on giving that a go and at least dipping my toe with your syndication.
I know the multifamily, single-family in different states are all running on different cycles, so you might be going down on some of them and you might be going up on others, and it’s just like a way to keep yourself going up, because ideally, I wanna get to a point where I can leave my job, and it’s a security thing. I guess this is like when people buy different kinds of mutual funds and stocks just to do different things, but I’m more interested in real estate.
Joe Fairless: What is your full-time job?
Glen Sutherland: I work for IBM, fixing bank machines and servers. [laughs] Yeah, not really related.
Joe Fairless: Yeah, that’s why I was like, “Okay, dead end there, so I’ll move on…” I was gonna tie that into something, but I couldn’t think of anything. Alright, so you’ve mentioned Indianapolis, Jacksonville, Florida, Huntsville, Alabama – you have property there – Kansas City, Missouri, and you’ve talked about diversifying in different markets and different states. Are there certain states or certain characteristics of states that you look for whenever you’re investing?
Glen Sutherland: Yes. A big thing I look for, basically, to start with, is the landlord laws. Ontario isn’t a really landlord-friendly province, so if I’m gonna go outside of that, I might as well pick states or other provinces that are more landlord-friendly, so I can have the law on my side instead of on their side. So I look for landlord states, and when I first broke it down, that gave me about 10-15 states that were landlord-friendly.
Then it was property taxes – I wanted property taxes not to be ridiculously high. There’s like some of the markets that are really landlord-friendly, but then the property taxes were gonna kill me. I looked at the vacancy rate, and crime, and I also wanted to look at areas where there’s a good job pool… Like, there’s big employers, but ideally it’s not one employer that provides all employment. So I want them to be around 20%-25% for that state.
Joe Fairless: Okay, 20%-25%. So no one industry makes up more than 20%-25% of the total jobs?
Glen Sutherland: Yes, that’s the idea.
Joe Fairless: Cool. Yeah, I’m with you on that. As far as landlord-friendly laws, you said you narrowed it down to 10-15 states… How do you quantify what friendly means, or qualify what friendly means? However you define it.
Glen Sutherland: Well, to be honest, I looked at a lot of online reviews of what — there’s been a lot of people that have written articles on that, but for me, if it’s down to making the eviction process simple and being able to hold a larger amount as a deposit for the renters… And if there was issues — like, states where if you had to go and get a judgment done, where you’re gonna be sitting held up in a court for like four months or six months until they can actually see you and your tenant might not be paying you, or only partially paying you for a long period of time… If I could choose places that wasn’t gonna happen, where the system was quick, and the system would ideally be favoring me, that’s what I’d pick.
Joe Fairless: A similar question for property taxes – you said some are high, some are not… How are you determining what high is?
Glen Sutherland: I was looking for ideally around like $1,000/year or less for like a single-family 4-bedroom 2-bath sort of area.
Joe Fairless: $1,000/year for a house?
Glen Sutherland: Yeah.
Joe Fairless: Wow!
Glen Sutherland: Yeah, well in Alabama the property I have is a 4-bedroom 2-bath and I got $560/year, the state with the second-lowest property taxes in the entire United States.
Joe Fairless: Goodness gracious, that blows my mind. How much did you buy that property for?
Glen Sutherland: $95,000.
Joe Fairless: A $95,000 purchase price, and the property taxes are less than $600/year?
Glen Sutherland: Yeah.
Joe Fairless: Huh… Okay. I’ve never looked in Alabama.
Glen Sutherland: It helps with the cashflow, yeah.
Joe Fairless: Wow…
Glen Sutherland: [unintelligible [00:11:45].15] Huntsville too, because it’s Northern Alabama, so you’re not gonna be dealing with Hurricanes too much, and that sort of thing… And they have Mercedes, and a rocket program, and the FBI, so there’s a lot of big employers. And it’s a growing city, so that’s my main reason for Huntsville.
Joe Fairless: That’s really interesting… I guess because I’ve just been focused on Texas, and the property taxes are not low in Texas, because there’s no state income tax, so… They get you one way or the other, that’s interesting. Okay, and then vacancy rate?
Glen Sutherland: Yes, I do look at the vacancy rate, too.
Joe Fairless: Okay, what do you look for?
Glen Sutherland: To be honest, I haven’t looked at vacancy rate that closely. It’s been sort of like something I kept in my backpocket. I’ve heard people talk on podcasts about certain cities, but I didn’t go into the states that website mentioned, and “Oh, this is my number that I need to get…”
Joe Fairless: Fair enough. And by the way, just for comparison purposes on the property taxes… I bought a house – and I still own it – in Duncanville, Texas, which is South of Dallas a little bit. I bought it in 2009 for $76,000. The taxes on it now are $3,000. Believe whatever you wanna believe from Zillow, but Zillow says it’s worth $161,000 right now, I bought it for $76,000; the tax is $3,000 and you’re saying you bought a $95,000, mine was $76,000. You bought a $95,000 house and your houses are less than $600. That’s incredible.
Glen Sutherland: Yeah. But when you’re talking about tax, we’re talking similar — not in landlord; you’re much more landlord-friendly in Texas, but compared to Ontario. You’re comparing similar taxes. My property is here $200,000(ish) and you’re paying $250,000 a year for taxes for these properties. You compound that with the landlord laws, and the rent is not phenomenally high here. For a $200,000 place you’re getting like $1,500/month in rent, and it makes sense to move your money to Midwest, where it will give a better ratio, right?
Joe Fairless: And on the moving money part, from where you’re at to the United States, what unique challenges do you have as a Canadian investing in the United States?
Glen Sutherland: Well, as you mentioned that, getting your money across the border – the first time I was doing it, I didn’t know better, so I was just wiring money from Canada to the U.S. I did a professional wire, so it was like $70 you just wasted sending money across, and I believe you don’t have to do that. You don’t even have to deal with the real banks, because then you can get a much lower interest rate, but now talking to sub-banks, that’ll do like 0,50% to move your money across, whereas off a start, a typical bank is taking 1,5%-2% as their points in order just to move money from Canadian to the U.S., on top of the exchange rate, so you’re losing money there.
Financing is a big challenge from the Canadians. It’s not the same. We go to any of these large banks or anything, and they’re like “Well, what’s your social security number?” and you’re like “Well, I have an ITIN number…” It’s like, I have an international tax ID number…
Joe Fairless: [laughs] Like, “What’s that?”
Glen Sutherland: Yeah, exactly, and I go “What’s that?” and they go “Well, it’s kind of like a social security number, or a social insurance number in Canada… Kind of the same thing, but I use it to pay taxes in the United States. That’s my tax number.” And surprisingly enough, if you do a little bit of research, you can actually find credit cards — you can find some that will build your FICO score with your ITIN number. It’s a little trickier to find some… You’re gonna have to find like basically pre-paid ones, and you’re gonna be treated like you don’t have any credit at all, and you’re starting right from scratch… But it is a way that then the banks will deal with you.
They’ve told me that once I’ve been down there for two years and have a bunch of properties that things are gonna get a lot easier. If I want to have some tax returns to show – I have one tax return, but once I have several tax returns to show that I’m a little bit more consistent and reliable… I’ve just set up some refinance on my property in Huntsville, so now that I will be able to show that I’m making mortgage payments, and… You’re starting from scratch, you’ve gotta show that you have a history and that you’re reliable to make the payments, and then things will start to grow for you.
But there are other options. There’s a bunch of Canadian banks that are down in the United States, as well. We have banks down there, for instance Royal Bank (RBC), BMO, which is BMO Harris in the States, and TD Bank… The tricky part I find talking with them is it’s depending on the bank loan-to-value ratios; really good interest rates though, and they only loan in the states they’re in. So you’ve almost gotta add a new thing to your criteria if you’re trying to buy a property, like “Where is my financing? Can I get financing from here, or there…?” Because right now I’m mostly dealing with private money, hard money, seller financing and insurance companies. [unintelligible [00:16:54].09] mortgages from insurance companies and there’s a lot less hoops to jump through. They’ll actually accept your Canadian credit score, too. It’s one way to get around it.
Joe Fairless: What was the first deal you bought in the United States?
Glen Sutherland: The Huntsville property.
Joe Fairless: Huntsville property. How did you get financing for that property?
Glen Sutherland: I bought it cash, because I thought it would be simpler, but in actuality it would have been simpler to actually close it with financing, because now it’s considered refinance, even if it hasn’t gone up in any value, and I’m still putting the same amount of mortgage on. You’re not gonna get the same rate on a refinance as the original purchase.
Joe Fairless: I wanna come back to that one… What’s the first deal that you got financing on in the United States?
Glen Sutherland: This Huntsville property.
Joe Fairless: Oh, on the refinance. So this is the very first time you’re getting financing, on this refi?
Glen Sutherland: Yes, that’s the first actual one.
Joe Fairless: Got it, okay. So you haven’t gotten traditional financing yet, but you’re working on it right now with the refi?
Glen Sutherland: Yeah, the refi is all approved, so that’ll go through, and then I’m planning to switch that out after a year to a lower interest rate. I’ve been talking to a lot of banks, which is really the system to use as a Canadian – just to call several banks every day and here a no, no, a no, and then a “Yes, we’ll deal with you, but these are our unique situations for a Canadian. We’re only gonna give 65% loan-to-value.” Some of them will give you 80% loan-to-value, but will want a higher interest rate. They all have different things. Or they want a certain number of tax returns. Some of them want co-signers by an American… But yeah, it’s a lot of just calling over and over again. I think a lot of people don’t have it in them to actually sit there and do that, and that’s why I’ve been mentoring a few people here in Canada, just to show them “Here’s what I’ve already done. Make it easier for you. You can use all these people I have already vetted and used, just to shorten the process.”
Joe Fairless: So for all the Canadians out there who are listening who are wanting to invest in the U.S., they can talk to you and you’ve got some shortcuts for them.
Glen Sutherland: Definitely, yeah. Ideally, I would love them to at least listen to episode one of the podcast, just so they have some general ideas of how it all works, and then feel free to call me. I sit on the phone – you can ask my wife – a couple hours a night just talking to people while I’m playing with the kids and doing stuff. Actually, I try not to do that, but… Yeah. [laughs]
Joe Fairless: Cool. And the podcast is called A Canadian Investing in the U.S.A.
Glen Sutherland: Yeah.
Joe Fairless: Sweet. What is your best real estate investing advice ever?
Glen Sutherland: I would say the best advice would be to be bold, be willing to try stuff, because if I just kept getting stuck in like Canadian real estate… There’s so much more for everything if you’re willing to just step outside the box and do a little bit of research. You get boxed in with financing in certain spots, which is one of my reasons I switched… But if it feels uncomfortable, it’s probably a good idea to try it.
Joe Fairless: How have you applied that in your life?
Glen Sutherland: Well, I guess the obvious one is going to the states and taking the jump. I know we don’t do a lot of real estate meetups here; as far as I know, there’s only one other person I know that’s actually been investing in the states. Everyone stays in their backyard, a lot of people aren’t even willing to cross the province to do investing.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Glen Sutherland: Sure.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Okay, best ever book you’ve read?
Glen Sutherland: I can probably do the obvious, Rich Dad, Poor Dad… Or maybe The Millionaire Real Estate Investor. I like that one as well.
Joe Fairless: Best ever deal you’ve done?
Glen Sutherland: I would say any of the properties that I have in Cambridge, Ontario. Right now, because I’m still new in the United States, those are really high cashflow deals, but the market in 2017 – every property gained about $100,000, which makes phenomenal equity that I can refinance and turn into whatever I want. But without that, it really would have stunted my growth a lot in order to get to where I’m planning to go.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Glen Sutherland: Well, I guess my biggest mistake was my first rental property I bought when I was still new. I didn’t really understand how to properly charge the right amount of rent. I basically figured it out the wrong way by figuring out what it cost me, and then charging a little bit more than that, which was really backwards. Then I ended up having tenants walk all over me, and I ended up having to go through the Landlord Board in order to do the eviction process… And we had the police involved because people were running a scam out of my property…
Joe Fairless: What were they doing?
Glen Sutherland: It was something to do with Rogers, which up in Canada it’s like a telephone internet company. So they had a whole bunch of boxes, and stuff, so the police basically froze the property and I couldn’t even empty the property out because they wanted to go through everything.
Joe Fairless: [laughs] Fun stuff. If you have a similar situation, next time how would you approach it?
Glen Sutherland: Well, now I run everything like a business, so whenever someone’s late on the rent, I give them an N-4, which in Canada is like your notice that you have 14 days to pay your rent or leave.
On the 2nd of the month I am there with the paperwork to get that set up. If they don’t pay it on the 17th, I’m dropping off their L1, I’m getting the paperwork done… I basically have written out in a book how I want the properties to run, and whenever I kind of like get emotional or get into it, I just look at the book: “This is how it runs, these are the rules, and I can’t take favors because I like this tenant, or whatever. We have to run the process right through”, which I didn’t do off the start; I would take favors… “Yeah, sure, you can have an extra week, or two weeks…” “No, I’ve gotta start the process.”
Joe Fairless: It’s a slippery slope.
Glen Sutherland: Yup.
Joe Fairless: Best ever way you like to give back?
Glen Sutherland: Well, my big thing right now is doing the podcast and the YouTube channel that I’ve just started in the new year. I’ve been doing it every week, I’ve been trying to give all of the information that I’ve been coming up with as I come across it. People – they can go to my website, GlenSutherland.com, and they can message me there. I’ve just been getting into many e-mail conversations back and forth, and lunch meetings just to walk people through how they can do this.
Joe Fairless: Well, Glen, thank you for being on the show and talking about how you as a Canadian and real estate investor are investing in the United States, what you look for, the landlord-friendly laws, specifically the eviction process and how simple it is, as well as what type of deposit can be held… The property taxes – you blew my mind with Huntsville, Alabama, the $95,000 property, less than $600/year in property taxes. The vacancy rate crime and good job pool or diversity; you don’t want any one industry to make up more than 20%-25% of all the jobs. And then your unique challenges as a Canadian investing in the U.S., and some shortcuts along the way.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Glen Sutherland: Thanks, Joe.