Like many Canadian real estate investors, I’ve had my eyes on the USA market for about 10 years now. The two particular markets that I’ve paid the most attention to have been Phoenix, Arizona, and Dallas/ Fort Worth, Texas. Why those markets you might ask?

Phoenix for its in-migration (Baby Boomers/ Snowbirds) an escapees from the mayhem of LA, immigration from Mexico, low taxes, and attractiveness to major employers (cheap land, labour, etc.) Heck, there must be a reason it’s the 6th largest metro area in the USA now? I must admit, the weather, and having an excuse to travel down there didn’t hurt, either. Add to that a 3 hour direct flight from Vancouver…bonus!

Dallas/ Fort Worth for the same reasons. Add to that a very stable/ diversified economy (think Alberta South with it’s oil and gas), and the fact that the recession and housing market crash sorta’ skipped them. Tons of Fortune 500 employers, and a large, growing population made this market look simply awesome. Unfortunately it’s a long ways away from Vancouver 

Phoenix first caught my attention back in 2006/ 2007 during the massive price run-up. Thank the good lord I never pulled the trigger at that time or I would likely be flat broke now. I watched as prices plummeted downward in 2009, and started digging around again when the market hit rock-bottom in 2011.

At that time, the market was flooded with bank-owned homes, and short sales, neither of which were very easy for someone living in Canada to purchase. Although the market was full of newer single family homes in suburban neighborhoods from $80,000-$120,000 a piece, these homes were largely inaccessible to someone living out of town due to the complexity of purchasing them. The other challenge was financing. At the time, the only way to purchase one of these bargains was to pay all cash, or to leverage a Canadian line of credit.

Fast forward to 2012, the market picked up, and the inventory dropped. Multiple offers and bidding wars on properly priced houses was the new norm. Again, not an easy game for an out-of towner.

Finally, in late 2013, the Phoenix market had appreciated by 30%, and the pendulum was swinging more towards a buyers market yet again. Sellers now had equity in their homes and most were no longer underwater. The short sales and foreclosures had all but dried up, and, yes, I was able to apply for and obtain financing from a US bank! Go figure?

With a pre-approval from an Arizona bank in hand, I confidently made my way down to Phoenix yet again to shop around for properties in late January 2014. The same places I had looked at back in 2012 were now priced at $150,000 instead of $120,000, but at $85.00 per square foot for a 15 year old single family home, I figured that they were still a bargain. Compare that to Vancouver prices at 10 times the price per square foot…

Working with my Realtor, we spent two days looking at about 20 properties in the West suburbs of Phoenix; Goodyear, El Mirage, Surprise, Glendale, Avondale, etc. I had been pre-approved for a purchase price of $150,000 with 25% down, so our target was single family homes priced from $130,000 to $150,000 with a min 1500 square feet and 3 bedrooms. Nothing older than 1995 as I didn’t want to be dealing with many maintenance hassles.

During this time, we also interviewed 4 property management companies. Each had their own unique strengths and weaknesses, but it was nice to know that we had options, as all 4 that we met with seemed very competent and able to do the job.

In the end, we narrowed our search down to 3 rental properties, and ranked them 1-3 in terms of preference. We then wrote offers on all 3. Numbers 1 and 3 were accepted, and #2 had another offer in the works, so we decided not to pursue it any further.

The #1 property was listed at $149,900, and after some back and forth, we were able to negotiate down to a price of $146,500. The seller took care of a number of maintenance issues including replacing several cracked windows, tuning up the air conditioner, and some minor plumbing repairs. Conditions were removed, and on March 12, 2014, we took possession.

I flew down again over spring break in late March, 2014, to take care of some further details. I met with the management company we had selected, and signed an agreement with them. We did a walk through of the property, created a list of maintenance items which would need to be taken care of prior to tenancy, and then handed over the keys.

The rental property was listed for rent the following day at $1050. Fingers crossed that we can find some good tenants. Will update in part 2 of this blog!

Sounds easy, right? Not quite so. The purchase side of things was fairly simple if you have the ability to pull the trigger when you see what you want.

The financing side was a bit trickier. Back in 2007, anyone with a pulse could get a US mortgage. NINJA mortgages were all the rage! In 2014, I felt as if applying for an FBI directors job. The lender looked through everything, and asked about absolutely every loan or financial product I had. The process was much more onerous and invasive than obtaining a mortgage in Canada, but I suppose that since they were stung so badly in the past, they are overly cautious now.

In the end, it all worked out, but the process took quite some time, about what felt like 500 emails, and lot’s of back and forth. Canadians should also expect to incur extra costs for visits to their lawyer or notary, as every document needs to be officially notartized (unless you travel down South to sign the paperwork.)

Stay tuned as I will post an update regarding the search for tenants.

By Chris Stepchuk