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I'm finding Texas has gone crazy at the moment, especially Dallas. There is very little inventory.
I would say Cap. rate is a much better guide than yield, as it is based on net income rather than gross.
Hi Jay
You are right, I think any landlord that has closed already and is looking at several weeks rehab, should get a builders risk policy. I just had a look a Zurich’s site and a rough quote came out at $375 with a $1000 deductible on a $60k property. Here’s the link:
http://www.insurancelinkdirect.com/buildersrisk/home.php
Then once the lease is signed, they could swap over to a standard landlords policy. Zurich also do commercial property insurance, with vacancy cover. But I couldn’t see if it covered residential properties as well.
Hi WI,
I agree, US landlords insurance does suck! I have policies with AllState and State Farm and both of them won’t cover vacant properties after 30-60 days. I have found a company called American Modern which offers vacant property insurance, but I haven’t used them.
With regards to the cover, make sure you get a minimum DP-3 cover, as you are covering the Replacement Cost rather than the Actual Cash Value, should your property burn down.
Hi Mick
I guess I was lucky then with Capital One! There is a big difference between getting an unsecured card and getting a mortgage though. I agree it is almost impossible to get an investor mortgage. When I spoke with Chase in April they said the mortgage market had improved a little but it’s still a long way off giving a mortgage to anyone that is breathing. I hope your mortgage situation improves soon.
Hi quickchick
After using the BoA secured card for 6 months I got offered an unsecured Capital One Platinum card in the mail. You need to make sure your secured card is reporting to your ITIN credit file.
I have banked with Chase for several years now they are great. Yes their fees are a bit on the high side but that’s an expense of doing business in the US. Their on-line banking system is very easy to use and will let you send out checks on-line. Great when paying bills that don’t accept credit card payment. You can also mail US dollar checks to them to deposit in your account. Their customer service is very good also with great fraud protection.
I do recommend Bank of America if you are building your credit, by getting their get their secured credit card. After about 6 months you should be able to get an unsecured card and then close your account.
Hi unitedvetsgroup,
I’ve just logged on to my Wells Fargo Online. Try going to Transfers and then adding a non-Wells Fargo account. You should then be able to enter the routing and account numbers and then transfer money to and from the account.
My main bank is Chase and I’ve found them great. Far better than the UK banks.
Hi TassieJH
I think you will need to check with your Australian tax office what needs to be reported to the IRS because of the tax treaty situation. Generally with LLC income it is passed through to the individual(s). So with single member LLC's you are taxed like an individual and with multi-member LLC's the members are taxed like a partnership.
Hi Morgan
TurboTax produces all the paperwork directly. The only form it doesn't produce is the 1040-NR, however it does produce a 1040. So you can easily put the figures onto the 1040-NR yourself. You can then just mail the paperwork to the IRS. It will also produce State returns for you which again will print out all the relevant forms so you can mail then to the relevant State.
Hi Morgan
I use TurboTax Home and Business. The software is really easy to use and produces all the relevant paperwork for your return. Also at about $100 it is a lot cheaper than using a CPA.
I personally and through my LLC's use Chase in the US. Their on-line banking is excellent and allows you to send checks on-line to pay bills as well as offering the usual services like debit/credit cards, wire transfers etc. The downside is that you can't open an account with Chase from outside the USA. Other investors on this forum seem to have had varying success with HSBC.
The main difference between checking and savings accounts is the interest that they attract and yes when you write checks they come out of your checking account.
The LLC doesn't have to be based in the state your properties are in. If there is a group of you buying properties together then having an LLC will make life easier. Each of you will be a member with assigned managing members. Members don't have to own an equal share and members can change their share in the LLC without changing the actual property ownership.
The downside to having an LLC own your properties is your insurance can be more expensive and financing can be more difficult if you are looking to use business credit and not personal credit. Also there is a bit more paperwork and cost in running the LLC.
On the plus side it does add another level of liability protection, however Landlords Insurance is your most important liability protection
Hi PQ
You can setup an LLC without an ITIN. I use InCorp (http://www.incorp.com). You can form an LLC via their website using your credit card. You will need their registered agent service as you are overseas. Once your company is formed call the IRS at the number above and get your EIN. Then sign up for a mailbox with UPS Store and get an account with Chase using your new US address. They will probably give you a personal checking account also. Where about in the US are you visiting?
With regards to liability having good landlords insurance is number one. I always increase the liability figure which makes it more expensive and then increase the deductible (excess) to make it cheaper again. From what I read most law suits are settled with an insurance payout as the tenant doesn't want to wait or have the cost of the courts. Having an LLC does sheild you a little from law suits but the insurance is the most important.
I believe an LLC works in that when the tenants lawyer is looking at your property records for a lawsuit, the name of you LLC comes up rather than your name, so it makes it difficult to see if you have any more properties (more to claim!). I believe the lawyer has to file a lawsuit before they can use discovery to see what other assets your LLC holds, so they are less likely to go for everything you own. Also an LLC sheilds your personal assets from being taken (providing you run your LLC properly). A single member LLC has less protection than a multi-member. I am not an expert on asset protection so I may be wrong!
Hi PQ
I apologise if my information is a little out of date, I'll up date it. With regards to opening a bank account, you should be able to walk into any branch of Chase or BoA, tell them you're a real estate investor and open an account with a passport and proof of address (non-US), without needing an ITIN. If you go the LLC route then you'll need an EIN number to open the account. The IRS have a special overseas number for getting an EIN (215-516-6999). If not you'll need an ITIN or SSN to use their website registration.
If you need a US address I use UPS Store. Their charges range from $30-$60 per month for a mailbox, which gives you a street address. You can just call them when you want your mail forwarded. The forwarding costs are extra.
Good luck with finding a property. The market has risen a bit in the last 6 months, but there are still great deals out there. I am about to close on a house in Indianapolis, 1000 sq. ft. 2 bed 2 bath built 1999 for $29,000. It does need $15k rehab, but still a great deal!
If you find the accountant/CPA route a little expensive (like I did) you can always get TurboTax. I use TurboTax Home and Business and the question and answer format is really easy to use. It completes all the relevant forms for you along with any state returns. The only manual process is that it doesn't automatically produce a 1040NR form, but it is very easy to take the information off the 1040 it produces and put it on the 1040NR.
CNN are doing a special on Detroit at the moment, with some interesting videos:
Hi
I have several properties in Indianapolis that return more than 10%.
RichardHi Rosemary
I agree with the advice above. The best way is to fly over to the US and get a feel for the market yourself. The foreclosure market can be a risky one and sometimes the foreclosure price can be higher than somewhere that just needs a lick of paint and some flooring. Do as much research as you can here, on this website and others and find a city that you like. http://www.Zillow.com as mentioned above is good, although the values can be inflated. http://www.Realtor.com is good for property listings and you can then contact the agents to find out more. When researching your city look at the employment in that area, are companies hiring? And also check the school district. Good luck!
RichardRichard
Can you give typical requirements and rates please? Are you able to refinance existing investment properties?
Thanks, Richard
