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,

Steve McKnight

P.S. If you're interested, I run a mentoring program that could help take your investing to the next level. It closes soon though, so check out http://www.propertyinvesting.com/results2008prereg2 while there's still time.

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

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

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.

See what's happening at www.cashflowproperties.co.nz

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

Viral Kanabar
beFREE Business Services
www.beFREE.com.au (all self employed must visit this website)

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

www.propertyknowhow.com.au
www.changingplaces.com.au
Buyers advocacy
Australian and New Zealand The United States Property Researcher and education

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.