Investing in US property market now - best way?

Hi All,

I'm new to this forum.

I'm an Australian investor who is looking to enter the US property market now that it appears to be undervalued, with low interest rates.

I would appreciate input on how I can effectively invest indirectly in property (either via a property trust or through purchasing shares of an undervalued developer) - I would be looking for a property trust or listed developer who specialises in high quality homes, in premium residential real-estate areas such as Falls Church VA, Alpharetta GA, Prior Lake MN, San Clemente CA, Malibu CA, Woodland Hills CA, Bellevue WA, Medina WA etc. etc.

Also, if I were to purchase property directly in the USA, where would I be best to look for strong growth potential in the next 5-10 years and steady rental income? Also is it possible as an Australian to finance the investment in the USA?  where should I look for financing?

Any help is greatly appreciated, where I live in Australia at the moment property prices are insanely over-inflated and interest rates are floating at around 9% which makes positive gearing impossible, and dampens growth potential. The US appears to be presenting unique opportunities, especially considering the Australian dollar is floating around 94 cents to the USD, these conditions will not last forever!

Thank you

Allan

Allan,

Some thoughts about investing in the US:

1. Indirect ownership may be a good option, however remember it will be the quality of the management as much as the quality of the property bought that determines the return.

2. Direct ownership in the US poses some problems for non-residents. Chief among them is the ability to borrow without a social security number. There are ways around it, but they take time and can cost a lot.

3. The danger with investing OS is that you become as much a currency investor as a property investor. This is particularly so the higher the deposit you leave.

4. Local property laws differ quite a lot to those in Australia. For instance, the cost of managing the property portfolio will be higher.

5. Remember that the US is on the other side of the world. Communication will be difficult, and it is a long way away if you have to sort something out.

Therefore, if you go ahead, choose your assets wisely. I'd imagine it is better to buy good quality 'set and forget' rather than problem properties that are difficult to 'fix' from a distance.

Finally, remember that the tax laws will complicate your investing.

All the best,

Hi Allan,

Those points that Steve highlighted regarding OS investing are certainly very true and important.

It is possible for foreigners to invest in the US, many Japanese do, but it will be best if you had an insider there to guide you through the complexities of regulations and taxation, etc.

I am Australian and have owned 6-7 properties in the US. I lived there for 12 years under a work visa and was able to get a SSN (social security number) which is required to open a bank account and do just about any transaction there. it is possible without it but as I said, you will need a good advisor there to work with.

I've sold most of my properties there, I currently have one left, a house in Montana, which is currently for sale on the market there. since the US does not havve negative geraing taxation benefits, most people there buy properties for positive cash flow. M properties there have done well by me in that regard but I now wish to focus my activities here in Australia since being back.

Also, long distance property management through a local agent can be a nightmare when that agent does not do their job properly.

I would not recommend someone get involve in direct property investing there from a distance, I would go there and see and study the market for yourself and find a good person or two you can work with.

best wishes

JNM

The first thing you would need to do is obtain an ITIN.  This will allow you to open a bank account, have a property registered in your name and obtain a mortgage.  An ITIN is a number that allows non residents to carry out varied transactions and an application form is available through the Internal Revenue website.  You would also need a bank account that has on line services so that you can keep track of returns as Property Managers over there are not used to giving quarterly accounts.
Take the time to go to Steve's Mega confernence.  You will not be sorry.
Cheers,
Judith

Judith
If I knew then what I know now..........you know how it goes

DEAR ALLAN

HELLO IF YOU ARE INTERESTED I HAVE A PROPERTY THAT I MAY BE INTERTESTED IN SELLING IN U.S. THE TRICK IN THE U.S. MARKET IS A GOOD MANAGER, AFTER MUCH EFFORT I HAVE FOUND A FANTASTIC ONE THAT IS WELL STRUCTURED  EFFICIENT AND ORGANISED . HIS RESPONCE TIME HAS BEEN WITHIN A DAY AND MANY TIMES WITHIN AN HOUR.

THIS PROPERTY IS SHOWING MINIMUM 1LMOST 19% GROSS EVEN AT .91 EXCHANGE RATE. THE PROPERTY HAS BEEN RENOVATED SO NO WORK NEEDS TO BE DONE. I AM DOING A SUBDIVISION IN AUSTRALIA SO I CAN USE THE CASH.

ALL THE HARD WORK HAS BEEN DONE. PRICE IS $50 000AUS AND IS IN BUFFALLO IF INTERESTED PLEASE CONTACT ME ON 0425232692

A number of posts above have stated that Aussies need to obtain a social security number to then obtain a USA bank account.These comments are NOT true, contact HSBC in Australian and you can get a USA bank account and never have to step foot in the USA. I did it 18 months ago, completed the required forms, payed a $100.00 setup costs, waited 6 weeks and obtained a full USA bank account which I was able to access via the internet with no problems.GeoffB

It is a very interesting question indeed. Given the high levels of volatility it does make the mind tick over at the possibilities. If I lived there then it may be a different story. It would be hard to see any light at the end of the tunnel with the constant barage of negative media coming at you. A good time to have some cash in the bank and buy a bargain.

The task of buying in the US from here is simply too huge as a few have found (unless you consider yourself a sophisticated investor) . I will go out on lim and say that in my opinion that goes for any foreign market. There were posts on here years ago about steve (forum steve) buying a whole heap of USA property but I never did follow the progress on that deal.

Now more than ever you would have to personally be an expert in each regional market to have a prayer.

http://homeloanwarehouse.com.au/

We have a number of  clients waiting in the wings so to speak. Very odd waiting for the locals to foreclose or simply walk away from the units they reserved back as long ago as 2004. We are getting offered deals but there is still from what is being said an element of have we bottomed out yet? Just today the press noted California property losing $2,500US in every week. Keep that up and prices will be half by the time this is settling.

Very unsettling.

But then again we are in the same boat - waiting and watching for the right time.

Paul

Paul, Director - International Property Directory

I have a property in Buffallo which I have renovated fully 8 months ago, I have just changed the roof spend 4k. It is two unit apartment. Total rent is around 650 to 700 per month. Nothing to spend. I am happy to give you invoices or you can visit the property there. i bought it for 36k but wanting to sell for 30k or so. The reason, I wants to buy a home in Australia to live.

any question, feel free to email me back on info@befree.com.au thank you. Viral

befree bookkeeping service
www.befree.com.au (Bookkeeping/GST/Tax Return service from $28 plus GST per/hour)

You can open an account, however you need a social security number to get a credit card. if you travel to the states and open an account, provided that you can supply an address American Express have a service called gobal exchange. If you have an existing card in Australia they will issue you with a us card. This is very handy to keep your effective spending in the United States

Nigel Kibel
Australian and New Zealand The United States Property Researcher and education
www.propertyknowhow.com.au

Hi Allan

Following is the view of Alan Kohler of the Eureka Report.

But while the switch from Australian dollar to US dollar assets may not become a real option for investors until late 2008 or early 2009, I think subscribers should start thinking and researching for it now.

The risks to the Australian dollar (downwards, that is) are starting to build. While there might be a short-term pop to parity because of the massive coal and iron ore price rises coming through now, interest rates here are heading nowhere but down, in my view, and Australian assets look relatively overpriced compared with the US – especially housing.

You can now buy a decent Manhattan apartment near Central Park for less than the price of the same-sized place in Melbourne or Sydney.

And more fundamentally, the national median house price in the United States is now less than half of the Australian median.

According to the latest figures from the US National Association of Realtors, the US median house price is now $US195,900 ($210,645) – down 8% on a year ago. According to RP Data, the Australian median price has gone up 14% over the past 12 months and is now $466,209.

There are good supply/demand reasons for this, and neither the US housing glut nor the Australian shortage is likely to be cleared soon – although the collapse of margin lending in Australia could lead to a surplus of beach houses and flash investment properties, as geared sharemarket investors look to pay off margin debt.

So where to start in thinking about buying US dollar assets? Some strategists are just suggesting a US money market fund, but with interest rates on these around 3%, it is a pure currency bet.

In my view you would be better to look at cheap US equities instead, and there are two ways to do that from a distance without a lot of detailed research: follow Warren Buffett or invest in US exchange traded funds (ETFs) that are listed on the ASX.

Buffett’s top picks for 2008 are: Kraft Foods, Wells Fargo, Burlington North Santa Fe (a railroad business), GlaxoSmithKline (the drug company) and Carmax Inc, which runs a car sales website. He’s been a particularly heavy buyer of Kraft this year.

There are 14 international ETFs listed on the ASX, all of them “iShares” managed by Barclays Bank. The fees are generally around 25 basis points (0.25%) or less.

There are four US-based ETFs listed here: one that replicates the S&P 500 index, another that replicates the S&P midcap 400, a third based on the S&P small cap 600 and the iShares Russell 2000 small cap fund. There is another fund called the iShares S&P global 100, which matches 100 multinationals that have market capitalisation of at least US$5 billion.

The other ETFs listed here match a range of European and Asian indices.

All of the funds are unhedged, which means they are exposed to currency-related changes to valuation

Regards Peter.

Maybe you lads should have a look at the middle east for property deals (UAE). Currently live here and with the exchange rate you can get in relatively easily, loans are more or less easy to get, rental returns are magnificent (better than 20% yield and depending on  your tax arrangements depends on the overall result) For example a 120 000 dollar apartment three to four years ago now worth about 400 000 and rents (with rent paid one year IN ADVANCE) of around 35 000 with no other land tax, rates etc other than body corporate fees around 3 dollars per sq foot . Money is easy to get for everyone and rates are around 6.5%. Alternatively you can invest ungeared thru syndicates (Aussies cranked it up ) and that has returned 40% since august last year and is winding up and moving into Abu Dhabi from Dubai. If you have got that return in OZ in the last year  well done.Oh - I do have lots of Aussie property too but cant see things slowing in this part of the world for some years yet - they have too much money to spend... and so do the Russians that come here!

I have a brother with US property and think he has done some money on the deal now and with the FOREX risks just too hard..and likely to get worse before better - maybe manhattan might be an exception... stay clear I reckon!
just my thoughts but if you have some spare money and are looking for great returns email me - an dno - no kickbacks for me!!mwuillemin@mac.com

Before I purchased two properties in the USA, I enquired with the ATO about the tax implications of a CGT or rental tax.  I was informed by a specialist in US/AUST tax law that people who sell their properties and rent them will not be double taxed by the IRS and ATO, but rather only by the IRS as the transaction was carried out within the United States.  As far as indirect investing goes, I think many of the potential problems Steve pointed out above are true, but then again, If you can pay off an entire undervalued foreclosed property within 2 years on very reasonable terms, obtain owner financing a lot easier than in Australia (as many there are more familiar with the idea than in oz) and coordinate with property management services effectively (which is simple using todays advanced communications networks), you can pull off some incredible deals!...PS has anyone seen Chad Simons about? I'd like to discuss investing in Buffalo with him. take care all and Invest in the US!......opportunities abound everywhere on this globe, and the US right now appears to have the largest volume of opportunities

Every sensory experience is a perception. There is opportunity in everything, if only we reframe the images of limitations into ones of empowerment,we will see boundless opportunities around us- Warren Buffett did not turn 100k into 40 billion by investing in *hot* stocks. He invested in undervalued durable businesses that were in a bear market. When they saw gloom, he saw an incredible boom. I believe that this investing mindset is integral to achieving any form of success in property investing. My method of investing in grossly undervalued properties in the USA is very unorthodox and to paraphrase steve, I did jump out of my sphere of influence, and in my world, you are either growing or dying, I choose the former. Above all, action on knowledge is where the real results come from, and being able to push yourself to a state of incredible expectancy and beyond what anyone could possibly imagine you are capable of...to stretch your boundaries to unheard of heights and to live life fully are the essential ingretients of succussful investing- feel free to contact me by phone on 0433755011...i'm always looking for partners who are like-minded. I may be young at 27, but I do know a fair bit about investing in the US and am always seeking to expand that knowledge and build friendships.

Avi

Havent spoken to Chad for a week or wo but why not drop him an email

chad1609@bigpond.net.au

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

Thanks a lot for the email Richard  I will drop Chad a line.  I'm interested in purchasing a bulk lot of foreclosed du/tri-plexes from a bank in Buffalo and am attempting to gauge the market there also before the decision is made.  I may also require equity partners.  Would you know Richard what the best suburb stat site for US localities is in this area? I've found some sites very helpful for other growth states like Nevada-pinal county & Henderson Arizona, but found the Buffalo and Ohio stats quite limited 
Kindest regards
Avi

Every sensory experience is a perception. There is opportunity in everything, if only we reframe the images of limitations into ones of empowerment,we will see boundless opportunities around us- Warren Buffett did not turn 100k into 40 billion by investing in *hot* stocks. He invested in undervalued durable businesses that were in a bear market. When they saw gloom, he saw an incredible boom. I believe that this investing mindset is integral to achieving any form of success in property investing. My method of investing in grossly undervalued properties in the USA is very unorthodox and to paraphrase steve, I did jump out of my sphere of influence, and in my world, you are either growing or dying, I choose the former. Above all, action on knowledge is where the real results come from, and being able to push yourself to a state of incredible expectancy and beyond what anyone could possibly imagine you are capable of...to stretch your boundaries to unheard of heights and to live life fully are the essential ingretients of succussful investing- feel free to contact me by phone on 0433755011...i'm always looking for partners who are like-minded. I may be young at 27, but I do know a fair bit about investing in the US and am always seeking to expand that knowledge and build friendships.

Don't take this as advice, but futures based on the case-shiller indices are selling 2009/2010 contracts at as much as 30% discount to current prices....

Cheers, F.

Hi Alan,
           I have invested in the US Property Market and I have also written an ebook about this if you want to go ahead and invest in the US I suggest you read my ebook and that may help you decide if it's for you or not. Yes there maybe some good deals at the moment and great ROI but my ebook will give you all the details the good, and the not so good to US Property Investing and how to go about doing it the correct way being an Australian investor. My website details are below.

Good Luck!
Best Regards,
Donna Cox
www.seekingfortuneinnewyorkstate.com

Wow sounds an absolute bargain with personal email access.

I have owned Beachfront US property for nearly 25 years in CA (seen it go from $89,000 USD when i purchased it to over $2Million now) and financed over 100 Aussies into the US over the last 5 years and will answer any email question you have personally for nothing.

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Thinking of buying your next investment property using a SMSF. Email me for a copy of my SMSF EBook.

hi Donna,

Maybe you can tell us all about your successful deals in the US.
a lot of people got into trouble buying  over inflated property in New york State.

Like to hear a bit more in your 2nd post.
cheers

Hi all,
As Steve Mcknight suggests there are a lot of things to consider when you are on the otherside of the world....especially the point about quality of the management, this is a major concern to watch out for and I can only relate to Upstate NY as this is where I purchased my properties (and Richard take your point well done if it's worth $2m now - you have owned this for 25 years and you probably have a Social Security Number which means you are classed as a resident of the US) its different if you are doing this as non-resident starting out now.
Property managers are really a nightmare when it comes to communication ....I do know this as I had went through 5 within just 3 years.

It is very difficult to borrow as a "foreign alien" which is the term they use for non US resident ....Im' not saying it can't be done but it's even now extremely difficult for US residents borrowing ....I have just vendor financed one of my properties to a US resident because he could not get a loan because of the sub-prime lending disaster.
Property laws are very different to Australian laws and litigation is very high over there so you do need to set up a good structure for asset protection ....it's all in my eBook if you need to know more.

As I suggested previously my eBook is a great read if you are thinking about investing in the US Property Market, and as Richard Taylore suggested personal email access is an "absolute bargin" especially when you have someone that has done this as a "foreign alien" and knows the real facts! 

Best of Luck
Donna Cox
www.seekingfortuneinnewyorkstate.com

Yes it would be good if some could post sucess stories in WNY or other areas for that matter. I posted my loss making exercise earlier.

I do agree though that well informed investors could take advanatge of the current slump and pick up some good deals if they were that way inclined.  The AUS/US exchange rate is at record highs and it would be a reasonable expectation for the US $ to stop slipping but hey the FED is still pumping so who knows this time. I dont think teh US downturn is out of balance I think that the world is now getting back to its normal balance with China once again retaining its place as the biggets economy.

I'm heading out to NYC this summer and got myself a nice room in the Waldorf Astoria at a good rate becasue of the exchange rate.