How do you invest USD earnings in this market?

Hello, I am a 26-year-old from Montreal who has been consulting for US companies (TN visa) for the past 3 years or so. During this time, I’ve been getting paid in USD and I have for the most part have saved up a large chunk of it minus all the expenses and taxes.

Given the relatively low conversion rate of USD to CAD for the past few years, I shied away from converting my earning in USD to CDN and make any sort of investment with my money in Canada. At the same time, given the volatility of housing market in the US, I also shied away from making any sort of investments in properties in the US.


I now have few options and would like to get your feed back on what your thoughts are:

1) Keep the money in USD in savings-
pro: money is safe
con: interest rates are almost at lowest now.

2) Convert the money to Canadian and invest in Canada:
pros: Although the conversion rate will be like 1 usd= 1.10 Canadian, I'll probably make more money in the long run on property than counting on USD to come up to the mid 90s level.
con: USD to CDN conversion may change dramatically depending on how the commodities do in the world market and it may be best to wait for some time.

3) Invest in properties in the US.
pros: More and more I am leaning towards investing in the US. Given the property market in places like Florida, TX, NC and CT have dropped considerably, I may be able to fetch some good deals.
Con: Given I do not live in the US managing a property thousands of miles away will add some complexities, ie: collecting rental income, fixing any potential issues with the property and not to mention US taxes.


I appreciate your comments and suggestions, especially if you have gone through the same experience as what I am about to go through. I know I am quite young and it is my first experience in investing, so any suggestions you want to give are much appreciated.

-- Thu Jul 16, 2009 7:58 am --

anyone?

I don't think investing in property for the purpose of making money on it is a smart move. People still have a pre-2008 mentality on this in many cases. They forget that property traditionally was not a good investment strategy. If you bought a vacation home, used it, and got your money back with inflation, you were doing well. The days of crazy increases in property values are gone and will never come back, not in our lifetimes anyway. Of course if you're a savvy property investor you could always make money, e.g. Donald Trump but I doubt he's been making much lately.

Doing a rental over a long distance is a bad idea, I know people who did it and you don't make any money because eventually you have to hire an agent to manage it. If you have lots of properties, that makes sense, but for one or two it doesn't.

If you're going to leave it lying around in a savings account the interest rates do seem to be better (although still pitiful) at US banks generally speaking.

Thanks Steve, I know of a couple of guys I grew up with who bought their first property soon after they got out of University by putting a little down. They rented one room and lived in the other while working downtown Toronto. Later when they worked their way up, they bought few more units. After 10 years now, one of the guys own 5 condos accross GTA. His investment was always around 15 to 20% down, he bought the best condos under 300K in the best locations and was always able to rent it out to professionals. I think the Toronto market is still very strong compared to US, you can't get a decent condo in downtown Toronto for anything less than 500 /sq ft (works out to roughly 350K for a 700 sqft condo). And my feeling is prices on these units are only going to climb upwards now down.

I think property investment for return purely on the investment is always a dicey thing to do. Investing in rental property is a different situation, if you can find renters. I'd be very cautious in this economy.