8 Tips For Canadians Investing In U.S. Real Estate 

Are you a Canadian investor with an eye on the red-hot U.S. real estate markets? 

If you are, break out the Tylenol, because complicated legal and tax issues can give you a headache before you’ve even started!

Our lead attorney, Scott Smith, recently met with Canadian real estate investing coach David Dubeau to discuss the issues Canadian investors face when investing in the land of the Yanks. Scott has a lot of advice in another article, [[LINK]]] but in this article we’re going to look at the “investment checklist” Lauren A. Cohen introduced during the meeting.

You can check out the talk between Lauren, Scott and David below, or keep reading to get a free download of Lauren’s Eight Steps to Successful Real Estate Investment Across Borders.

Lauren’s Investment Checklist

Lauren’s checklist is designed to ensure success when you're investing across borders. These elements are interconnected. That means you shouldn’t focus on one and ignore the others. 

Here are her tips for Canadian investors looking to make a play in the U.S.

Tip #1 Study The Local Market

Real estate is always about “location, location, location,” right? You’ve heard that one a million times, as have we all. But you need to truly understand the reasons to select a particular location over another.

Where in the U.S. should you invest? Are you looking at one city or region or multiple areas? Why?

Just as in Canada, there are hot areas and not-so-hot areas. You’ll need to look into state and city tax and zoning considerations before making your play.

Your coach/mentor (see the last tip) will help you find your way so you don’t waste time looking at properties in areas where you’re likely to fail.

Need tax help? See our article How Are Canadians Taxed If They Invest Or Do Business in The United States.

Tip #2 Define Your Investing Goals

Lay out your goals in the beginning. Where do you want to be in three months? What about in three years?

If your short-term goals do not match your long-term goals or if you don't consider your long-term goals at the beginning of your journey, you're going to end up in a world of hurt.

Here’s an example of what we mean: If you invest in your personal name because you found a good deal and want to act fast, you may very well realize down the road that you should have set up the appropriate asset protection structures first (often a limited partnership for Canadian investors). Then you may have to go back to square one and fix everything. 

A failure to plan is a plan to fail!

what types of properties should you invest in?Tip  #3 Know Which Property Types To Target

What types of properties should a Canadian investor look at and why? 

You have a lot of options to consider: Vacant lots. Residential. Multifamily. Commercial. Industrial. Mobile Homes. Retail. Real Estate Investment Trusts (REITS). All of these could potentially qualify you for immigration status (though REITS have to be set up very carefully to qualify).

Refer back to your short and long-term goals. Here again, your coach should be able to offer guidance, as there aren’t really any one-size-fits-all solutions.

“As soon as you're investing in multi-family properties with five or more units, you could be ready to invest in a commercial building, and commercial financing is a little easier to come by because it's not only based on your credit score,” Lauren says.

“In the U.S., unlike in Canada, your credit score dictates everything. It’s like the be-all and end-all. And when you're dealing with a commercial property it's also based on the returns on that property. You're going to show tax returns—kind of like buying a business. So it's all about how creative you can be when it comes to financing.”

Tip #4 Choose the Right Legal Entity

Do you need an LLC, a corporation, or a partnership? 

“From a pure asset protection standpoint, it doesn't matter what's happening on the Canadian side of things,” Scott says. “So if you already have a Canadian tax treatment that you like, the Limited Partnership structure is going to be the right structure on the U.S. side of things for you to then channel into whatever Canadian asset holding company you have.”

#5 Decide Whether To Invest Alone Or With Partners

A lot of Canadians like to joint venture with other Canadians who already have properties in the U.S.—especially if their partners already have access to financing. 

Maybe you want to create a real estate fund. Maybe you already have partners that want to invest with you. You may need to bring in a securities attorney, but there is a way forward that is right for you. 

Can’t find the way forward? Then you need to … wait for it … Discuss your needs with your mentor. You may also visit DavidDubeau.com if you need help finding other capital sources. 

#6 Learn How To Purchase Properties in the U.S.

Canadian investors can apply for a mortgage with an American bank or with Canadian financial institutions with operations in the U.S. You’ll probably have to show your passport, international credit report, employment history, residency verification, tax submissions, and proof of down payment.

Generally, dealing directly with Canadian banks means better mortgage rates. Think about it: Canadian lenders are naturally more comfortable lending to Canadians. A Canadian bank with U.S. operations will often approve your financing quickly and relatively painlessly. These would include Royal Bank of Canada (RBC) and Bank of Montreal (BMO).

What about your investing strategy? There are a lot of different strategies: the BRRRR Method, flipping, the buy and hold method, wholesaling … Some of these qualify for visas and some of them don't. Again, that's why your short and long-term goals are so important. Do you want to buy properties outright? Do you want to buy them “subject to”?

Side note: Everybody wants to buy “subject to" mortgages and they're going to be available in a big way in the next year. Why? Because forbearance is going to come due. Forbearance was implemented in the U.S. so mortgage holders could flip payments to the back end of their payment schedule. Any COVID-related pause on mortgage payments is ending and some property owners are simply not going to be able to pay their mortgages.

#7 Know The Immigration Considerations

Do you need a visa to invest in the U.S.? Does getting one mean you have to spend a lot of time in the U.S.?

Getting a visa is often about giving you options. Just because you get a visa does not mean you have to move to the U.S.! 

That's why Lauren loves Treaty Investor (E-2) visas, which are for citizens of countries with which the United States maintains treaties of commerce.

The Treaty Investor visa is based on a substantial investment in a non-marginal business. It gives you, the private investor, the flexibility you need. With this visa you're never going to have a problem coming and going across the border. 

But again, you don't have to move. You can remain a Canadian taxpayer and resident. Or you can be a resident of another country and stay in the U.S. on an E-2 visa from Canada.

You have to have an “active” business to qualify for a visa. You have to figure out how to turn what's usually considered a passive investment (real estate investing) into an active business.

You need to be at least 50 percent owner in the company making the investments.  You have to show that you have boots on the ground if all you're doing is becoming an equity partner in the company.

tips for investing: download

See below to get your free copy

#8 Partner With Professionals (And Find A Mentor!)

Lauren says her favorite words are, “Stay in your lane.” 

Don’t try to play realtor, lawyer and accountant. Put together a team that can guide you, help with due diligence, analyze the price comparisons, and perform deal analysis. It's important when you're working with people on cross-border deals that it's not their first rodeo. 

You may be an experienced real estate investor, but it’s important that you (and your tax and legal advisors) know the differences. Dealing with Americans is different than dealing with Canadians. Not getting the right advice is going to end up costing you more than you will pay to get the guidance you need.

Make sure your team members are vetted and reliable. You need to think about immigration and securities. You need Canadian counsel to make sure that your estate in Canada is protected. Someone will have to help you with taxes on the CRA side and the IRS side.

This can be overwhelming if you don’t have help. That’s why you need a coach.You need somebody that understands everything on both sides of the border. You need somebody that has been down this path, someone who can guide you. Otherwise you’ll invest haphazardly and without a strategy.

Start with our investor quiz and we’ll help you put together the right team for your goals—a team that will evolve as your needs change.

“Without a professional team, investors will get set up right for what's going on at a specific time and point in their life. They don’t think that anything might change ... because they don't know what triggers different considerations,” Scott says. 

“If you have a limited budget, that's fine. Just budget out an hour per quarter to meet with your team. It will only cost a few hundred dollars or whatever the case may be, and it is going to potentially save you tens of thousands of dollars.”

In other words, as Scott says, you should avoid tripping over pennies on your way to dollars and you’ll be set up for long-term success.

Get Lauren’s Guide

Before you get a coach, you can get a guide. This article is a very basic overview of Lauren's popular guide called Eight Steps to Successful Real Estate Investment

Across Borders. It will help you figure out your next step. 

It’s a $47 value, but if you use the special code for Royal Legal Solutions readers, you get it for free. The code is REI4FREE.

About Lauren

Lauren, originally from Toronto, is founder and president of e-Council Global and is a cross-border strategist experienced in both law and real estate. She hosts a podcast, Investing Across Borders and works with us to help Canadians looking to invest in U.S. real estate. 





Asset Protection Structures For Canadians Investing In U.S. Real Estate

There’s another Gold Rush happening in the United States real estate market, and Canadian investors are getting in on the action.

Joe Biden’s $1.9 trillion coronavirus relief package in March (which followed relief packages going back to the start of the pandemic) gave Americans a bit of relief, and many of them put the extra money directly into savings.

“There's an opportunity like never before in real estate, and it's all artificially created because of the stimulus,” says Scott Smith, head attorney at Royal Legal Solutions. “Savings rates are higher than they've ever been, so once the coronavirus scare is over and people are back to work and businesses are working again, people are going to be less afraid. They're going to spend, which means that we should expect a rapid influx of money over the course of about a year.”

So how do Canadian investors take advantage of this real estate Gold Rush?  How do you start acquiring the right assets AND make sure that you’re protected so you don’t lose them in a lawsuit?

Scott recently discussed these issues with Canadian real estate investing coach David Dubeau and Lauren A. Cohen, a cross-border strategist experienced in both law and real estate who founded e-Council Global. Before you go, check out our article based on her Eight Steps to Successful Real Estate Investment Across Borders. You may also be interested in How Limited Partnerships Protect Canadians Investing in the United States.

Set Up Your Investing Structure The Right Way

There's a lot of opportunity awaiting Canadian investors in the U.S. real estate market. But before you can take advantage, you need to understand that it’s a different game in the U.S. You'll need to establish the proper legal framework to do business safely and profitably.

“I've heard of different nightmare scenarios where Canadian investors bought properties in the States and they weren't set up properly,” Lauren says. “And they either got double taxed or they got sued. They lost a ton of money.”

“As you might know, the United States is a very litigious country,” Scott adds. “We have unlimited liability here, which means that a single lawsuit can go after as much money as they want.”

Insurance is a component of asset protection, but proper corporate entity structuring is an often-overlooked aspect as well.

“Entity structuring is important because you can’t simply hope that the insurance company pays out. We know that insurance companies are profit-seeking corporations and that we can't rely on them to do the right thing, especially when claims get very expensive. That's why we use asset protection tools—to cap our losses,” Scott says. “Even in the worst case scenario we know we're going to be okay.”

Total Asset Protection requires anonymity - man in hoodie

Anonymity is your friend.

How Anonymity Protects You

“The goal of my firm is always to put our clients in a position that makes it look like they own nothing on paper," Scott explains. "People that don't look like they own anything don't get sued."

That's why the best asset protection strategies make Canadian real estate investors unattractive targets for litigious lawyers.

“And if you are sued, you lose little to nothing because of the protection and the structures are there to minimize damage.”

How The Structure Works

So … What are we looking for when we're building an asset protection structure?

You aren’t going to rely on an LLC, because LLCs in Canada are taxed at a corporate tax rate. Instead, you’ll use an entity called a Limited Partnership . The Limited Partnership offers unique asset protection benefits to Canadian real estate investors with assets in the United States. It protects your American-based assets while minimizing your tax responsibilities.

You can own this Limited Partnership (and all the assets underneath it) anonymously. Remember: People who look like they don't own anything don't get sued, so that’s your first line of defense.

Adding Land Trusts To Your Strategy

The next part of a secure asset protection structure is the “secret sauce” for Canadian investors, because it will help you acquire assets with the best financing you can get.

A Land Trust will let you own the property anonymously. It also allows us to avoid something called the due on sale clause.

“This means you can actually buy the asset with the absolute best financing and then you can transfer it into the Land Trust and you don't have to worry about the bank having a problem with you transferring the asset because a Land Trust will avoid the due on sale clause of your mortgage.”

This is a huge cost saving measure for Canadian investors.

Holding the property underneath the Land Trust gives you access to better financing rates. Because the property is actually owned by (for example) “123 Main Street Trust” (according to the deed records), no one can get more information about that trust because everything about that trust relates back to a law firm an attorney—and all that information is protected by attorney-client privilege.

What if they sue the property anyway? What if grandma got hurt on the stairs and they're blaming you? They sue the Land Trust. And the liability there is blocked by the Limited Partnership.

"This means they're not able to to go after you personally," Scott explains. "Any of your personal assets or other assets are protected. The only thing that they'd be able to go after is just the one asset held in the Land Trust because the limited partnership structure is what caps it and stops it from being able to go after anything else.

In a Limited Partnership structure you (the Canadian investor) are the limited partner. The partnership also has a general partner—this will be an LLC or a C Corporation. 

“Inside of a limited partnership, only the general partner is liable for actions taken—not the limited partners. That means that all of the income and all of the benefits flow to you as a limited partner. You don't have to pay any of the extra tax, but you get all of the protection of the limited partnership. If there's any liability, it’s going to be held by the LLC or C Corp—which don’t own anything.

There are worst-case scenarios they can attack an entity, but the only thing they're going to be able to attack here is an entity that doesn't own any assets.

What About Taxes?

The LLC is a great investment vehicle in the United States because it qualifies for pass-through treatment in the American tax system. However, Canadian laws treat the LLC differently. Corporate taxes apply to LLCs in Canada. As a result, the taxes are often too high for most investors to justify …. Unless they have a Limited Partnership.

Income taxes within Canada can be high, but the Limited Partnership agreement allows investors to gain liability protections while managing these profits in a tax-friendly manner. Of course, to reap these benefits, the LP must be properly constructed.

The Limited Partnership is a flow-through entity, so all income is taxed at the individual level. Income is also subject to U.S. federal income tax at the top marginal tax rate (currently 37%).

You will also be subject to Canadian taxation. However, thanks to the income tax treaty between the two countries, the U.S. tax paid counts as a foreign tax credit in Canada. This means the combined U.S. and Canadian tax on income on your real estate business would be 53.53% for (for example) an Ontario resident, since that is the top marginal tax rate in that province.

At Royal Legal, we hate corporate tax rates. The cool thing about Limited Partnerships is that they provide the exact same protections that an LLC does, but you don't get hit with corporate tax rates. All of the money flows from the investment property, to the Limited Partnership, then to you. The money never touches the LLC or C Corp.

“So for tax purposes all of the money is treated as a disregarded entity or a pass-through entity; the money never touches an LLC but all of the liability will rest inside of the LLC or C Corp.

For more information, see our article How Are Canadians Taxed If They Invest Or Do Business in The United States.

How Are Canadians Taxed If They Invest Or Do Business in The United States?Buying and Financing Real Estate

You may acquire assets directly in the name of the Limited Partnership. However, some of Scott’s Canadian clients can get better financing rates if they acquire the asset inside of their personal name first.

“That's not a problem either,” Scott says. “You can just acquire that asset inside of your personal name, then create the Land Trust. Next, you’ll create a warranty deed to transfer the asset it into the Land Trust so then it's now held by the Limited Partnership.”

No matter what type of financing or what type of asset you’re working with, you're going to be able to find the way to hold that asset anonymously, in a way that's protected. You're also going to be able to always be able to take advantage of the best possible financing and have the best possible tax advantages.

Frequently Asked Questions

How will My Assets Be Protected if I partner with other Canadian investors to buy Property In the States?

You will designate all the investors taking part inside of your Limited Partnership documents. Is there one person or multiple people? Each of them should probably have independent advice as well just to make sure that their structures are set up properly.

If it's just a few people (your friends and family, for example), you're typically never going to have a problem.

If there's any type of fund arrangement, you may need to consult a U.S.-based securities/SEC attorney.

How do Canadians avoid double taxation?

“The best way to make sure that you're not double taxed is to be very clear about where your residence is,” Lauren says. 

Treaty Investor (E-2) visas are for citizens of countries with which the United States maintains treaties of commerce. The visa gives you, the private investor, the flexibility to invest across the border without moving.

“If you do have an E-2 visa you need to keep track of exactly where you are at any given time. I will not work with anybody that does not get cross-border tax guidance—no matter what country they're from. Whether you're immigrating or not you need that cross-border tax guidance.”

There's a lot of people licensed in Canada to help people with U.S. immigration or U.S. investing. But you still need a U.S. contact. 

“I have colleagues on my team that are licensed in the U.S. and Canada, so they're tax experts on both sides of the border,” Lauren says. “To me that's the best way to go because it's seamless.”

At the end of the day, the Limited Partnership structure is the ideal structure to avoid and minimize your taxes. 

Is the LP/Land Trust taxed by the CRA as foreign income?

“The CRA will tax the entity," Laura says. "That's why the structure is so important because if you set it up this way your tax liability is going to be minimized. But this is definitely a question for your tax advisor."

What about owning multiple properties? Should investors repeat the structure for each property?

“Typically what we want to do is hold no more than $500,000 in equity in any one Limited Partnership structure,” Scott advises. “If we're underneath that threshold (assuming all these assets are inside of the same state), then what we'll do is we'll just create additional Land Trusts and hold additional properties underneath the additional Land Trusts.”

If an investor faces a lawsuit against one asset inside of one Limited Partnership, the litigant can target all of the assets held there. This is why we cap the amount of equity at $500,000. 

“If you're risk averse, you can lower this $500,000 threshold and hold fewer properties in the LP. Or if you're buying multiple assets in different states, you do one Limited Partnership per state”

What does the Limited Partnership structure cost? Along with the LLCs, they can cost between $4,500 to $12,000. On the Canadian side of things you have to consider the taxes as a primary concern because the taxes will always outweigh the costs of additional structuring.canadian investor - patriotic usa image

Does Limited Partnership mean passive or active investing?

Limited Partnerships are a type of entity structure that allow you to own active investments (flipping for example). It can also allow passive investments (for example, single family homes that you’re leasing out and typically holding those for more than a year).

A limited partner in a Limited Partnership is a passive member; the general partner is the active component of the partnership. The “active” component in U.S. litigation is the one that bears all the liability.

Canadian investors need an active business to qualify for a visa. So when you’re investing in U.S. real estate, you have to figure out how to turn what's otherwise looked at as a passive investment into an active business. Each individual business needs to be actively involved and needs boots on the ground.

You need to be at least 50 percent owner in the company. You could create an investment company that could invest in different assets. But you have to show that you have boots on the ground, even if all you're really doing is acting as an equity partner. 

Does The Limited Partnership/LLC Structure Work For Every State?

Yes! Remember, it’s the tax implications on the Canadian side we’re worried about here. Again, the taxes will always outweigh the costs of additional structuring.

“If you end up becoming a U.S. resident then we can modify accordingly,” Lauren explains. But remember, getting a non-immigrant visa (which is one of the most common ways that Canadians access the U.S. market) does not require you to live in the U.S. You won’t necessarily become a U.S. taxpayer.

“But you have that flexibility to get a U.S. Social Security number, open a U.S. bank account, and build U.S. credit so there's a lot of advantages to getting this visa and as you're building your net worth and your portfolio in the U.S. it's it's it could be really advantageous.”

What is actually sold when you sell a property? The actual property or an entity? 

You're almost always selling the asset out of your entity because your entity actually has other things that are valuable in it. The entity will have the bank account and the credit history—things you'll want to retain even when you dispose a property. On the U.S. side of things, that allows you to be able to get access to business lines of credit after a year to two years.

Unless there's a good tax reason to sell the entity, you're almost always going to sell the asset and hold on to your entity.

Do I Need an American tax I.D. to invest in the States?


Is this legal?

You might be thinking this is too good to be true, and that’s exactly what you should feel when looking at advanced strategies. 

“You're always going to think that when you're working with high-level professionals who are blowing your mind about what is actually possible and what best practices look like,” Scott says.

“This is all on the up-and-up. These are the best practices that we do for liability and tax protection at Royal Legal Solutions, and we've been doing it for over five years for over 2,000 investors.”


Royal Legal Solutions is on a mission to help people find financial freedom. Take our investor quiz and see how we can help you achieve your goals in U.S. real estate or wherever your path takes you. As investors ourselves, we take pride in setting you up for investment success. There is no good reason to take unnecessary risks with your hard-earned assets. 


How Are Canadians Taxed If They Invest Or Do Business in The United States?

A growing number of Canadians are getting into the U.S. real estate investment game.

According to the National Association of Realtors, Canadian buyers spent $9.5 billion on U.S. residential property purchases during the 12-month period between April 2019 and March 2020. This means that Canada only trails China in the worldwide rankings of foreign investments in U.S. real estate by country.

As more and more Canadians look to acquire U.S. properties, investors must keep in mind the tax implications of purchasing real estate in one country while living in another.

In this article, we’ll explain the ins and outs of how Canadians are taxed if they invest or do business in the States and how you can avoid double taxation. 

How Are Canadians Taxed If They Invest Or Do Business in The United States?

If You’re Canadian, Don’t Use A U.S. LLC

We usually recommend that our clients in the States use a Limited Liability Company (LLC) to manage their real estate investments. Not only do LLCs protect investors from personal liability, but they also offer tax advantages compared to a corporation, allowing owners to avoid double taxation on their business’ profits. 

Under U.S. law, corporations are taxed on their profits, and then employees and shareholders are taxed personally on the income they receive from the business. This means that every dollar the business makes is taxed twice. With LLCs, the business is not taxed separately. Instead, all of the business’s profits are reported as individual income of the LLC’s owners. This is known as pass-through or flow-through taxation.

Unfortunately, both single and multi-member U.S. LLCs are recognized as foreign corporations under Canadian tax law. So, if a Canadian invests through a U.S. LLC, the LLC distributions would be considered foreign income that is not subject to a Canadian dividend tax credit or a foreign tax credit. Rather, LLC income will be subjected to double taxation, eliminating the benefits of pass-through taxation that make LLCs ideal for investors in the states. 

U.S. LLLPs And LLPs Are No Longer The Go-To

For this reason, Canadian investors had traditionally relied on U.S. limited liability limited partnerships (LLLPs) and U.S. limited liability partnerships (LLPs) when investing in the States. Historically, these structures had been viewed as partnerships for Canadian tax purposes and therefore allowed investors to avoid double taxation.

However, in 2016, the Canada Revenue Agency (CRA) announced that going forward, U.S. LLLPs and LLPs would be classified as corporations rather than partnerships. This may mean double taxation for Canadian investors who manage their U.S. investments through LLLPs or LLPs. 

Limited Partnerships Are The Way To Go

Now that LLLPs and LLPs are treated as corporations, the ideal structure for Canadian investors is a U.S. Limited Partnership (LP) structure. Similar to how LLCs work for American investors, LP income is not taxed at the corporate level; it’s passed through and reported on its owners’ personal income tax returns.

Plus, LPs offer Canadian limited partners comparable personal liability protections to LLCs without the double taxation that comes with investing in a U.S. LLC. It’s a win-win!

Avoiding Double Taxation

As you can see, intercountry taxation issues can be messy and complicated. In order to enjoy the tax advantages available through U.S. LPs, Canadians must ensure that the required documentation is drafted and filed correctly. Mistakes could result in substantial tax penalties, forfeiting your liability protections, or even losing your right to do business in the U.S. 

For this reason, Canadians who are thinking about purchasing properties in the States should consult with a  U.S.-based business attorney with experience in real estate investments before making any purchases. A U.S. lawyer can help you minimize your taxes and maximize your profits.





 Image by Allange from Pixabay