All Topics / Overseas Deals / US Property as 1st IP

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  • Profile photo of mj23001mj23001
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    @mj23001
    Join Date: 2012
    Post Count: 10

    I’m looking to start investing and while I know no one can give specific advice, I’m looking for opinions on this. I’m undecided if I should test the waters with a property in Australia first, then ‘recycle’ equity to then buy in the US. I would only be buying under-market value, CF+ properties if possible.

    I would be buying a property in the $60k USD range to start with and try and build a portfolio from there with CF+ returns & good growth potential.

    My main concern is that I feel like I would have difficulty tapping into any equity in the US properties so I could ‘rinse & repeat’ the process like in Australia.

    Profile photo of RedwoodRedwood
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    @redwood
    Join Date: 2013
    Post Count: 340

    Hi there, and welcome to the forum.

    Without the necessary due diligence, you may as well head to crown and bet on black rather than investing in the states.

    You can purchase a property very easily in the states in good locations for $60k with 50/50 cash/finance for a really good property in excellent location or 100% in most locations.

    However, there are a number of considerations involved before you get carried away with the great american dream, they are:
    1. travel costs
    2. sourcing costs
    3. structuring costs (you need to set up a LLC in the relevant state)
    4. buyers fees and attorney costs for closing
    5. property manager
    6. bank account opening

    and many more, let alone the fact that you need a team on the ground to be successful. Otherwise, you can be blinded by price based on a picture on the net, and realise either the property is not what it seems, or you are in a ‘slumlord’ area – that is low socio demographic neighbourhood – where your house will get trashed and moreover who will collect the rent?

    Apart from the above (please take the above as constructive based on experience) – you can definately fiind a property in the right location to achieve a yield of 10% + net and hopefully capital growth over the long term.

    You will be able to finance properties in the right locations which will benefit you in expansion and the rinse and repeat.

    Some areas to consider are Atlanta, Memphis and Florida and perhaps Texas with finance.

    Cheers Ivan

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
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    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    If I could add to Ivan comments the most important thing about investing in the United States is with you deal with.

    Part of the Problem is that they Americans have a ca do attitude but not a cant do attitude and what I mean by that is whoever you talk to they will tell you they can help you. Often you only know that you made a mistake when you try to re sell your property.

    So keep in mind that if you buy in America you have to look at the establishment of an LLC (limited Liability Company)
    Tax Returns and travel costs.

    So if you are going to buy in America you must do this for the long term with your aim to establish a separate income stream to what you have in Australia.

    We are base in Florida but rather than buy houses to hold we buy renovate and on sell to end users in other words home owners in Florida.
    Generally our investors are looking at around a 20% cash on cash net return.

    I believe the US market is a great market and may have many years of growth ahead so do your due diligence carefully and make sure that however you work with you have 100% confidence in.

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
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    Profile photo of mj23001mj23001
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    @mj23001
    Join Date: 2012
    Post Count: 10

    Thank you both for your replies.

    Without meeting face to face or a phone call, are you able to say briefly what the first steps are? Do you both know of lenders who are lending to non resident aliens? Is it still possible to set everything up before visiting the US?

    Forming the LCC and opening the bank account are a first priority in my mind. I already contacted some accountants listed on IRS.gov who say they service Australia and got no response. Theres another firm mentioned on Somersoft whose name I don’t recall who I am yet to contact.

    Profile photo of RedwoodRedwood
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    @redwood
    Join Date: 2013
    Post Count: 340

    Hi

    Both Nigel and I can have LLC and bank accounts set up from here. No point trying the IRS website mate.

    Before you set up a LLC – you need to decide WHERE you will invest as that will generally dictate in which state you will incorporate the LLC. I.e buy in Georgia and incorporate in Georgia, this will depend on your strategy, i.e 5 properties with five separate LLCs and a holding company to lodge one tax return rather than 5.

    Finance wise – yes, finance is available to aussies, both personal and SMSF – you can achieve a 60% LVR very easily, but finance will depend on the state that you operate in, the safer the market the easier to obtain finance.

    Again, you can set up LLC and bank account from here.

    Cheers Ivan

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
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    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

    Profile photo of jayhinrichsjayhinrichs
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    @jayhinrichs
    Join Date: 2011
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    MJ nothing to really ad to the above.. One issue is that 60k in most markets will put you squarely in a lower level type IP.

    Another thing to remember is that cash flow and capital growth do not go together in the states generally.. the greater the cash flow the less capital growth. the biggest capital growth states will be just like AU neutral to negative gear but one can make big capital gains.

    Profile photo of Judith OttosenJudith Ottosen
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    @tallpoppy
    Join Date: 2014
    Post Count: 36

    Spot on Jay. You need to decide if you want cash flow or growth as growth in the lower end has slowed after a little boost over the past couple of years. Many of my clients are now selling off their cheapies for something a little better so they can achieve more growth.

    Judith Ottosen | Tallpoppy LLC
    http://tallpoppyrealestate.com/
    Email Me

    Profile photo of lawsjslawsjs
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    @lawsjs
    Join Date: 2002
    Post Count: 252

    Funny looking on this site after so long. I was finally allowed back (though haven’t checked for a few years) after truthfully stating the hygiene habits I had experienced with local non-indigenous LA Notaries.

    I’ve done well, pretty much retired, my sister works 2 days a month (but at least 2-3 hours each of those days) is building herself a nice holiday house in a location she’s always wanted through hard bloody work and people still ask the US property market for the impossible.

    My advice…

    1) Don’t start in the US unless you have deep pockets (like I did for 10 years) or have deep knowledge and/or building skills (like my sister – emma171? from memory) but she now deals with commercials only for people who keep her (almost?) a secret (her investors returns are out of the park) and really couldn’t be bothered anymore dealing with people who don’t ‘get’ it.
    2) Save yourself a bucketload and ‘invest’ instead of work. IE: Today, as it’s mostly been for the last 5 years – chat to Jay.

    Look at the one guy who has been doing the same ol’ thing here since before subprime, with sage advice always and offers great solid returns. If only I could have my time again:):)

    Profile photo of jayhinrichsjayhinrichs
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    @jayhinrichs
    Join Date: 2011
    Post Count: 1,177

    Lawsjs nice to hear from you.. now if Freckle is allowed back on it will be like old home week.. Although the economy did not crater like he predicted ….

    Yes US re is in full rebound if you bought in the right markets. and your sister did follow the better trends.

    We are doing very well on our end.. the market has turned such that home owners are coming back into the market so we are able to buy fix and flip retail and returns are 3 to 5X anything you would get on a buy and hold cash flow property.

    I do still get e mails from AU who got caught up with bad AU marketers ad their counter parts in the US and paid far to much for property and bought in war zone’s… no help for them in most cases.

    Congrats on retiring not sure what was going on down there in your part of the world with aviation we have the Bermuda triangle something weird going on down there !!

    Profile photo of jayhinrichsjayhinrichs
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    @jayhinrichs
    Join Date: 2011
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    Lawsjs although your holdings I am certain are no doubt knocking it out of the park but you chose wisely in the first place gave up a little cash flow now your cashing in on Massive appreciation… good job… now cash out… you get US dollars they will buy a lot of AUD dollars and you are big winner… :)

    Profile photo of mj23001mj23001
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    @mj23001
    Join Date: 2012
    Post Count: 10

    For a first time property investor, a direct US investment is looking a little daunting. I’ve been in touch with a few BA’s who have a team on the ground but getting everything set up is very complicated. Some say don’t worry about multiple LLCs, others say setup an Aussie trust to own a holding LLC then each property much have their own LLC. Then there’s picking the right market and the right type of property and the strategy. Also an LLC will have nothing to begin with, surely theres complications lending to the LLC from personal funds?

    My accountant thinks I’m nuts. He acts as if I’m trying to be the next Donald Trump. I’m not trying to run before I can walk but at the same time, it gotta pay to set up everything right from the get go if I’m lucky enough to get some growth to build a portfolio.

    Steve’s passive income fund is looking attractive. It just seems like the difference is vast between an REIT and direct investment while juggling a day job and life’s other commitments.

    Profile photo of jayhinrichsjayhinrichs
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    @jayhinrichs
    Join Date: 2011
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    mj23001 your vastly over complicating it. you need ONE llc so you can have a US checking account.. there is absolutely no need to have a separate LLC for each property you may buy.. the only making money there is those that sell you the LLC.. also LLC’s depending on State cost 250 to 500 dollars max to draft and register.

    please view our FREE website http://www.turnkey-reviews.com you can look at 20 plus US Turn key companies without any pressre and get the true pricing without all the markup the sales companies add to them..

    good luck in what ever you do..

    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
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    Jay is correct I do not think you need to complicate things to much

    Below is an interview I did as a webinar with Emily Ray a very good accountant based in Florida that really knows her stuff when it comes to international investors it has her contact details at the end

    In terms of investing your success comes down to who you are working with. The right person will make invest great the wrong one a nightmare

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
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    Profile photo of lawsjslawsjs
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    @lawsjs
    Join Date: 2002
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    Jay, problem with selling is Au tax which as a resi I get hit with. I really can’t sell or I get crucified the simple way I set it up, and even structured carefully once you use the cash you get hit eventually. I just got offered US$1m more for a property than I bought in ’09 (only put down $150k which is the kicker:)) but after all is said and done I’d be lucky to get AU$500k out of it. Of course that is still a good profit but at near $100kpa cash+ pa it’s worth the hassles (hmmmm??) to keep it. Bus class airfares are AU$25-30k a pop for all of us so it’s easy to ‘sog up’ a little cashflow, but any big chunk gets grabbed by our feral tax office who believe in crushing the little guy. The US system is structured to encourage you to get big (then they get to rob more) but the Aus system is hit you hard early and stop you getting big.

    The airline has been raped by a vile and incompetent CEO who has no idea about airlines and should have been kept away from anything more complex than a mousetrap. Yes we do seem to do a good line in Bermuda Triangles down here! Good effort losing a Tripler!! Mate of mine who works in the sandpit was inspired, he moves large amounts of gold (I won’t say how much but it is significant) every trip he does to Europe. The problem of ‘getting lost’ clearly isn’t as hard as we all thought it was:) Saw a funny picture on the loss. The 777 was photoshopped in the driveway of a London Mews property, the caption ‘I told the neighbour if it isn’t moved on the weekend I’m going to call the Council!’.

    Hoping their other one wasn’t anything like AF447, though it all looks like a stall to me so far….

    Profile photo of jayhinrichsjayhinrichs
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    @jayhinrichs
    Join Date: 2011
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    lawsys,,, looks like you will have to continue to suffer through that cash flow dilemma…

    Yes some parrall’s to the AF 447 were captian was not in cabin and co pilot lost it some how… I start my IFR refresher today I fact so get to go smash some bugs in my Cirrus today !! you probably saw the splash down and rescue off of Maui…. that’s my plane. that one was bound for AU.. I think it was going to be the Cirrus demo. well 750k sitting a the bottom of the ocean because of a valve failure.

    What part of the country did Emma end up in ?

    I have my first trip to Singapore in Sept.. so excited to see that part of the world.. AU next.. and yes those BUS class seats are expensive but I just can’t sit in coach that long LOL…

    As for your US investments you could not have timed it better if you had a crystal ball and bought in a better market …. CA has always been one of the best markets in the US to buy for appreciation.. I know everyone talks about cash flow.. But when CA moves up you can ake 10 years of Cash flow in one year on appreciation moves in CA.

    This site has gone completely dead in the US property category only one who posts here is Nigel and me occasionally and the young man Engelo who is doing well up in Toledo Ohio.. I am quite fond of him.. he has gone through his learning curve.. and has a nice little business going… for those that want that asset class.

    Some of the other larger US and AU marketing companies that were the big one’s are re tooling as sales from AU have just fell off quite a bit..

    And of course I still get he odd e mail from someone who bought poorly in Detroit or some other Ghetto had no clue as what they did and have no chance of recovery and have in fact lost all their money.. its sad really.

    Profile photo of lawsjslawsjs
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    @lawsjs
    Join Date: 2002
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    I did see that Cirrus! You know the nick name for the Ocean between Hi and Ca is the Indian Ocean because its full of Chieftans, Navajo, Warriors and Seminole?? Can’t remember if I joked about that with you earlier?

    Really sad so many locals lost so much but so many in the US lost so much more I guess. Pity is the Aussies losses were generally avoidable. Still amazes me that anyone who has bought one property and sat in 78F&G for 13 hours 3 or 4 times thinks they are a capable of charging thousands for their expertise, but I guess thats the way of the world.

    I bought that storage business I mentioned that is very similar to yours. Cost a bomb but in a few years it will be good. If you get to Oz you have to swing by our place. We can rustle up a decent lunch if nothing else!

    Emma’s in Vegas still but (among other places) got a stunning place in the Bahamas. Apparently Vegas gets too hot and too cold from time to time:)

    BTW you mentioned the $ – I bought a couple of my places early on when the AUD was $0.48, so its only half way there:)

    I dont like the fact fully trained crews can stall a (seemingly) perfectly flyable aircraft into the ground from 30,000+’. Very hard to put yourself in the cockpit very tired, stressed about something else and not expecting anything untoward – panic and group think can set in quickly as you would know. However, once is careless, twice is a little more serious. Personally I think everyone should do aerobatics with their PPL but you really think 2-3 pilots with thousands of hours could manage to work out you need airspeed to fly in the 15 or so minutes before they try to make a hole in an ocean….

    Profile photo of EngeloRumoraEngeloRumora
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    @engelorumora
    Join Date: 2010
    Post Count: 618

    lawsys,,, looks like you will have to continue to suffer through that cash flow dilemma…

    Yes some parrall’s to the AF 447 were captian was not in cabin and co pilot lost it some how… I start my IFR refresher today I fact so get to go smash some bugs in my Cirrus today !! you probably saw the splash down and rescue off of Maui…. that’s my plane. that one was bound for AU.. I think it was going to be the Cirrus demo. well 750k sitting a the bottom of the ocean because of a valve failure.

    What part of the country did Emma end up in ?

    I have my first trip to Singapore in Sept.. so excited to see that part of the world.. AU next.. and yes those BUS class seats are expensive but I just can’t sit in coach that long LOL…

    As for your US investments you could not have timed it better if you had a crystal ball and bought in a better market …. CA has always been one of the best markets in the US to buy for appreciation.. I know everyone talks about cash flow.. But when CA moves up you can ake 10 years of Cash flow in one year on appreciation moves in CA.

    This site has gone completely dead in the US property category only one who posts here is Nigel and me occasionally and the young man Engelo who is doing well up in Toledo Ohio.. I am quite fond of him.. he has gone through his learning curve.. and has a nice little business going… for those that want that asset class.

    Some of the other larger US and AU marketing companies that were the big one’s are re tooling as sales from AU have just fell off quite a bit..

    And of course I still get he odd e mail from someone who bought poorly in Detroit or some other Ghetto had no clue as what they did and have no chance of recovery and have in fact lost all their money.. its sad really.

    Thanks Jay,

    Your praise is much appreciated :)

    Have a great day

    EngeloRumora | Ohio Cashflow
    http://ohiocashflow.com/
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    "Make a PASSION an OBSESSION and you'll never work a day in your life"

    Profile photo of kev311kev311
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    @kev311
    Join Date: 2015
    Post Count: 1

    Hi Ivan

    Interesting structure you have, thanks for the tips! I had heard elsewhere that for maximum asset protection, that it would be best to have a title trust(?) to own the property and an LLC above the trust. What are your thoughts of this structure?

    Also, what structure would you have that would own the ultimate holding company, on the AUS side of things? would you have an AUS company own that US holding company?

    Cheers
    Kevin

    Profile photo of jayhinrichsjayhinrichs
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    @jayhinrichs
    Join Date: 2011
    Post Count: 1,177

    Hi Ivan

    Interesting structure you have, thanks for the tips! I had heard elsewhere that for maximum asset protection, that it would be best to have a title trust(?) to own the property and an LLC above the trust. What are your thoughts of this structure?

    Also, what structure would you have that would own the ultimate holding company, on the AUS side of things? would you have an AUS company own that US holding company?

    Cheers
    Kevin

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    Asset protection for AU citizens is blown Way out of proportion.. contrary to what those that sell it suggest.. the average US tenant is not litigious and a simple umbrella insurance policy will protect you along with your standard home owner insurance. the reason most US folks use LLC is to get around lending laws.. and for tax purpose or to allow unequal distributions.. if you have a single member LLC and your sued. the judge will throw that entity out and the plantiff will just sue you personally any way as its an alter ego.

    But keep in mind NO one is going to get to your AU assets from the US.. much less a tenant living on government assistance.. tenants in the us by and large Have NO MONEY and therefor could not litigate if they wanted to.

    Profile photo of Lloyd James RossLloyd James Ross
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    @lloydjamesross4
    Join Date: 2015
    Post Count: 5

    Gross yields have dropped in the States since 2008 and are dropping further with renewed vigour in the housing mkt. Furthermore, the AUD is below its long term exchange rate against the USD so any chance of a substantial long term currency gain has dramatically decreased since 2012 when we were at or above parity.

    In addition, U.S. Banks no longer allow foreign buyers to set up bank accounts unless the customer flies over to the U.S. in person to open it. Buyers also require a POA to execute administration on their behalf for property income and expense transactions. Finally, without a competent property manager, it’s difficult to secure a tenant who pays rent promptly. You need a well oiled team machine to set up your US portfolio properly. And if the net yields are dropping as well as the opportunity for foreign currency gains then its difficult to say that the juice is worth the squeeze when it comes to investing in U.S. Property. If you want true international property bargains check out http://www.swedenbase.com …. selling homes with very large blocks for between AUD $20,000 – $60,000. Very high yields and highly flexible foreign direct investment rules.

    That being said, if you want the contact details of my USA POA and property manager I’d be happy to email these to you. My POA attorney will set up your LLC no worries and my property manager is pretty competent when it comes to managing unsavoury tenants and getting rent paid. The bank account however may require a quick flight to Hawaii to do in person.

    The tax implications are pretty straight forward as we have a favourable tax treaty with the U.S. so most Aussie accountants will know how to handle your tax.

    Be mindful of costs due to required renovations as well as any OHA costs (similar to body corporate fees) when buying your property. I agree with the above comments re location, Atlanta would be a good location to start from.

    Lloyd James Ross | RPM Queensland
    http://www.rpmqueensland.com.au
    Email Me

    11 Facts You Need To Know About Property Investing

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