Forum Replies Created
Leverage is a major issue for Aussies looking to invest over there and can really kill returns. The thing that has most impressed me with what Nigel is doing is that his clients are assuming existing loans, often at pretty low rates so the prospective returns on capital are quite high. You can probably find better rental returns elsewhere, but i would think that San Antonio is a pretty safe market relative to most and unless you can work out how to find pre-forclosures and get lenders to agree to an Aussie assuming responsibility for their loan i think anybody would find it difficult to beat the prospective returns on investment that Nigels clients have been acheiving.
Regards
Alistairlucigoosey wrote:Hello
I have been sitting and reading about the US market for hours, seems that there are ideas and theory's every where you look. I did some google searches on things such as "Best vacancy rates" "Growing US population" "Rising vacancy rates" etc etc.
So some of the cities that keep popping up on the good side areSan Francisco-Oakland CA
Austin Texas
San Antonio, Texas
Oklahoma City, Okla
Raleigh-Durham, N.C
PittsburghNone of the above areas are the ones being spruked by most companies in the Australian to US invest game.
Most of these companies are working in the following areas
Florida
Detroit
Atlanta
PhoenixCan anyone explain why? and also can any one assist and provide help in investing in these other cities?
Ta
Nigel, who posts on here operates out of San Antonio Texas, which is on your list. I have a few clients in common with Nigel who have bought pre-forclosures through him, some of whom have only just returned from a trip to view there investments. All were very happy. It would be worth your while to get ijn contact with him.
Regards
AlistairHi David,
Where is the project? There are plenty of builders who will take equity in a project if its a good one.
Regards
Alistairlucigoosey wrote:Funny thing this US investment, everyone has a totally different opinion of where to invest. Why doesn't anyone talk about areas such as San Fransico, Oakland, Memphis, Seattle As an outsider these areas seem to be very solid and they have cheap property's as well as forecolures aswell any thoughts experts?I'm sure there are opportunities to make money everywhere in the US at the moment. The problem is that to invest there successfully you need to do more than buy well. Finance is difficult, as is property management, and it would be very difficult for someone offering a service over there to solve these issues for their clients in every market, or for an individual to solve them for themselves. Also, some markets are more depressed than others and there are very different financial landscapes in different areas. If you find an attactive market and can solve the issues that have affected Australian investors over there for years then there is no need to look anywhere else.
Hi Nadaimee,
How old are you? The reason i ask is that the nearer you get to 55 the more useful super becomes as part of an investment strategy.
Regards
AlistairHi Mark,
I think you should use a broker who has a clue. Whoever gave you that advice clearly doesn't.
Regards
AlistairThe problem with speaking with local councils is that the people on the desk and who answer the phones are generally not decision makers, particularly not in capital cities. In rural areas things can be very different. I've personally made a lot of money buying property off people who have been given bad information by their local councils about the development potential of their land.
Congadulations on being in a great position. If you want to minimise tax and don't want to expose your PPOR too much you could also consider buy-reno-hold. Revalue your IP's after they have been renovated and draw equity for the next purchase. Given you have a strong income and no other debt, you should be able to acquire quite a few properties before you need to sell any.
Depending on your age and whether you are happy for your cash to be tied up, you could also consider sacrificing income into super and investing directly in property through a SMSF.
Regards
AlistairNo asccountant in Melbourne, unless you use one with a US office, is going to be able to help you. Even then, they will subcontract there local office to do it. It's easier to just go straight to a US accountant, you will need one anyway, if you do invest over there.
DA is called a Planning Permit in Victoria.
Finance for 4 units, if there are decent margins is easy. I would disagree with the people who have said it is too big for a first timer, i think its about right. The margins and actual cash profit, for the time and risk required, are generally too small on smaller developments. I've been in this game for some time, as both developer myself and broking finance for developers and I have seen very few smaller developments that have been successful without help from a rising market.
Without knowing anything about the project I would expect a 4 unit developpment near Dandenong would not have great margins and you would probably be better off either going for 3 or 4 units in a more expensive area or going for a larger development. As a rule you are going to be ablke to borrow 80% of costs, so $500K will get you a project costing around $2mill.
Regards
AlistairYou guys should catch up with Nigel. He has actually worked in realestate over there and has been involved in the US for a long time.
mortgagedetective wrote:Gidday Alistair,So what you are saying is your client paid you a fee for service as a financial planner to get advice on income and loan structure as he could have done with any other suitably qualified and licensed planner.
If your client were a prudent investor as you seem to suggest, why wouldn't he have simply taken this advice (given he has already paid you a fee) and used any of the mortgage brokers that rebate their commission to broker the loan? That way he would get the best of both worlds and you still get your advice fee which seems like a pretty fair deal all around.
Upon charging your client a fee for financial advice, did your SOA disclose to him that brokering of the loan, which was clearly separate to that advice, could be arranged such that he would become the beneficiary of thousands of dollars of mortgage broker commission? Did you do the right thing and work out the dollar amount those commissions would reach including his potential savings? If not, aren't you breaching your obligation to your client as a fee for service financial planner?
Your assertion that a mortgage broker paying rebates could not have provided this advice is likely to be untrue. At least two that I can think of who rebate mortgage broker commissions are also licensed financial planners. One of those is a CPA.
Interestingly, the rebate mortgage broker who is a licensed financial planner and CPA comfortably admits that, when it comes to the mortgage broker commission rebates, his competitor offers a better deal. As a result he gets the financial planning, accounting business and some mortgage brokering business, his competitor gets the mortgage brokering work of prudent borrowers.
This has naturally emerged and is neither a formal or commercial arrangement between the two businesses. (i.e. no referral or kick back agreement). It also seems like the cleanest model of all as conflicts of interest that can harm the client are kept to a minimum.
Personally, I'm not a big fan of the fox looking after the hen house and believe that clustering Financial Planning and Mortgage Brokering services on a commercial basis unnecessarily risks harm to the client. I'm not alone on that one, see here: http://www.heraldsun.com.au/business/barefoot-investor/how-to-spot-a-spruiker/story-e6frfim6-1225961603906
You are correct that any financial advisor could have given him this info, but they hadn't. If he had gone dirtectly to a rebating service I doubt he would have either. Maybe if he had gone tou one of your two friends, But then what was the fee cost? The upfront commission subsidises the cost preparing an SOA, and also pays for the other knowledge and advice that most investor clients require, while the trail allows ongoing general advice to be given for no extra cost. People have to pay to get good advice, rebates don't reduce this cost, they increase it because they add the cost of administering and paying the rebates into the equation.
I tend to agree with you in a general sense regarding the roles of financial advisors and mortgage brokers. I don't give investment advice for this reason. Most financial planners do a very poor job if they try broking and it is probably the same the other way around. However, when it comes to loan structuring, which really is the most important job of a broker when dealing with investors, it is necessary to take the superannuation tax environment into account and you can't do this without being a licensed financial advisor. The crossover is necessary.
For people who do not want advice, and consider brokers to be simply a service for providing a comparison of lenders then rebate sertvices are probably appropriate. However, there is considerably more that goes into the final cost of a loan or porfolio of loans than just interest rate, further their is opportunity cost to investors if they miss out on opportunities because they have not received sound advice as to what is possible.
Personally I do not rebate commission and have actually started charging for my company's services on top of keeping 100% of commsions. How is this justified? What many people do not realise is that there are a vast number of ways to structure debt and repayments that can save literally thousands of dollars. As an example we recently dealt with a gentleman who had only a PPOR and one IP, but was on a realtively high tax rate and was eligable to access his super through a transitioin to retirement pension, in this case setting up his repayments in the most advantageous structure, tax wise, has given him a potential saving in excess of $70K over 10 years (the end saving is dependent on movements in interest and tax rates, and also taxation of super). In this case we could have put him into the highest rate product we could justify as being appropriate and he would still would have been better off using us and paying for it that receiving the lowest rate product plus 100% commission rebate from elsewhere (obviously we didn't put him into the highest rate product). The advice this client needed, and this is appropriate to a large percentage of investors, included the use of super, and so could only be given under a formal Statement of Advice from a licensed financial planner.
The simple fact is that there are very few brokers, and definately no any rebaters, who could have acheived such savings for this client. No bank officer could, most accountants couldn't. There are plenty of people and businesses that can provide this type of result, from this forum Richard Taylor springs to mind as one who could and would acheive a similer result, but you are unlikely to get such advice for free or even discounted, it is valuable and you should be prepared to pay for it.
End rant!
Regards
AlistairHi Paul,
Have there been many vendor financiers receive ACL's yet? The process is not particularly easy and most brokers have not applied for or received ACL's and a significant portion have not even fullfilled the compliance requirements to become Credit Reps of their aggregator. The first half of the new year will be interesting as there will be a lot of people in the finance industry who cannot trade, I assume it will be the same with vendor financiers.
Regards
AlistairI'm currently going through the process of getting NRAS accreditation for a development i am a partner in. We are doing it mostly to hold although we have sold a few blocks to other people and are including their blocks in the process. Because the tax free amount is set a $9,140 the scheme works better from a cash flow point of view, the lower the cost of the housing. The strategy we have decided to use is to choose high quality blocks and build small houses that can be easily transported, so that at the end of the NRAS agreement we can transport the houses to cheaper blocks or sell them, and then build larger houses for sale. The scheme, if we are successful, basically will allow us to gain cashflow for 8 years from the blocks while still benefiting from the potential capital gains.
Melbguru wrote:I am wanting to get started in industrial property purchasing and wanted some information on how to start. Looking at the possibility of buying a 2560m sq block and putting two buildings on it. Land cost is $460k. Not sure on how much to build the buildings. I have been told the rental is 75 per sq metre. Total rental would be approx $190k pa. I wonder if the bank uses future income as serviceability and the new buildings would be part of the total security. Would it help getting a loan if I had two tenants lined up ready to move in? Is there such things as private lenders who would lend which may include giving me a higher interest rate for use of there money?Hi Melbguru,
If you can pre lease the sheds it will make a huge difference in both the valuation you get on the end product and your chances of getting finance. If the property is in Melbourne you have a number of options for financing something like this outside of tghe banking sector, but with the leases in place you could also probably use a bank. Feel free to email me on [email protected] if you would like any more detailed info on funding a project like this, Your options really come down to the specifics of the deal and your personal financial strength, probably not things you want to disucss on an Intenet forum.
Regards
AlistairHi Mark,
I encourage you to keep looking at ways to get the most out of you loan structure, there are a vast number of ways to do so, particularly for people with investments of significant value and even more so if they are self employed and/or getting to an age where they can access superannuation.
Regards
AlistairPandaQiQi wrote:Hi all,I'm a newbie to this site but already enjoy reading from this forum.
I have a BIG favour to ask. Does anyone know of a good property accountant in Melbourne? I have started my invenstment portfolio few years ago but only start reading books on Property Investment recently. I have a family accountant who doesn't like giving advice and who hates the idea of setting up trust.
Here are my current situation and I really need help to get the structure right before is too late
1. I have a PROP value at $500K (owe 360K) and IP value at $320 (owe 250K) under my own name
2. Started family partnership 6 years ago. We only buy CF+ commercial properties. I only have small portion in this portfolio but nevertheless is a starting point for me.The problem is I do not have any asset protection strategy in place and from my reading I don't think I should have done everything via my own name.
I've been asking my family accountant for advice and he reckons setting up and maintaining a trust is very expensive and will eat up my return in long run. Anyway, took me a good 12 months to convince my family to stop using him (he's a close friend of my uncle)
Now I desperately need to find a good property accountant. I'm 27 so I guess I still have time to reverse and learn from my mistakes.
Thanks in advance for the help.
Panda
Hi Panda,
If you are looking at risk management and asset protection as a significant part of the advice you want, you will need a lawyer and a financial advisor as well as an accountant. It's not an easy tak putting a capable team of consultants together, especiually as most have no interest and little experience in property investment.
In terms of an accountant I use Mory Kalkopf at Guests Accounting in Caufield and can't speak highly enough of him, I also know Mark Unwin pretty well, he is a very good accountant and a great guy as well but often does not accept new clients. He's still worth a try.
Regards
Alistairitsandrew wrote:Hi Nigel,I've found if something sounds too good to be true it usually is.
So:
if there is 100k+ profit in each property why aren't you flipping these for yourself instead of on selling them so cheaply. (btw what is your fee/commission in all of this)?
Why would someone discount a property >80%? Surely even a 50-60% discount would seriously undercut the foreclsoure market and get the vendors a quick sale with much better return.
How could selling for 30k fix their credit issue? Surely they would have to have moretgages quite a lot higher than 30k (ie. greater than the value of their property) for them to be in trouble?
Can you provide an address of a deal you've already done for 20-30k so we can check it out for ourselves? If you can show one that you've already flipped that would be even better.
Andrew
Hi Andrew,
I think you'll find that Nigels clients assume the loans from the vendors prior to them being foclosed on. They are not buying for $20K to $30k, that is the required investment to get the loan up to date and whatever else needs to be done. This is not an uncommon strategy in the US and is a good way for Aussies to get access to finance over there.
Regards
AlistairI would suggest not bothering with speaking to the council planners until you have a concept drawing for what you want to put on the site, as any opinions they give you will be meaningless. You would be better off concentrating on getting a good designer and consultant planner and take advice from them.
Regards
Alistair
