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Car parks were a rubbish investment for us.
We bought 6 car park spaces in St Kilda (at the George) in 2005.
Cost approx $21,000 each and we had them for almost 4-5 years.
It was the biggest waste of money for the following reasons:
1) The average income in that parking centre was $108-$120 per month per bay before fees and charges
2) Management fees were 7%
3) Body corp fees were also payable, which were something like $40-$60 per QUARTER per bay
4) Council fees were $70 per bay per year.
5) When a tenancy was up, it took absolute ages to get another tenant, even though St Kilda is a vibrant area.
6) Conveyancing per bay was approx $1000 for buying and another $1000 for selling
7) This car park had both private and business spaces. The operator did not want to add our bays on to their books as they had enough already, so we were forced to find private tenants.
When we sold them, we struggled for 2 years to find buyers and overall, lost approx $40,000 on the deal as we were forced to sell well below what we had paid, just to get rid of them.The only good thing was that they were not in the city, so there was no congestion tax.
I will never again buy such a thing – it was a total money pit.
Another possibility to consider is Paypal.
Many people have a PP account which is linked to their Aus bank account.
Once you have a US bank account, set up another PP account linked to this and send money from one PP account to another.
Send it as Personal/Gift so there are no fees.
You then draw it down into your US bank account.You might have to check with them how much you can send without raising any red flags
I have some family members overseas who have PP accounts. If I want to send them money, I just send it through Paypal as a gift. They get a message telling them that there are funds available (it's instant) and then they draw the money down into their personal bank account. Just remember to look at the exchange rate offered by PP to see if it's competitive.
If you're talking HSBC, they do charge a standard $200 for an application to their basic banking account. It's a pain, I agree.
Because we Aussies don't have credit history there, you could possibly do some of the following:
1) Get an updated credit history from Australia (for free) to show them. They may not take it seriously or may even disregard it altogether, but at least it will show them how you are rated.
2) If you're paying cash for your properties, I don't think you'll need credit history as you won't be borrowing anything.
3) Transfer a large lump sum to the US bank account to show that you have some liquidity. Tell them you are prepared to put down a large deposit (perhaps 20-30%) and see if they can finance the rest. Perhaps start off with properties under 60K, which will lessen the risk to you and the bank.Best thing to do is pay for an airfare and 10 days accommodation in whichever area you are interested in, then open a bank account for free while you are there. Just take some ID plus some utility bills. That way you'll get to open a bank accont plus get to look around while you're there. Kill two birds with one stone, so to speak
Hi Runway – good posting, thanks.
Not seeing the property – I agree with you in many respects and yes, we can do much of the research from our computers. However, I still think that there is a due diligence process we should go through, even if it is to hire a local inspector to look at it for us. If there is no physical inspection of the property and the place burns down with a tenant in it due to poor wiring, can you imagine the lawsuit you would have! Often the websites show only one photo of the outside of the home – I have found that very few listings show the interior. It's very hard to gauge the condition under those circumstances and make a qualified judgement. The house could be completely vandalised inside.
Also, whilst we can use google for streetview of the property and its surroundings, I find that many times the streetview image is a few years old. What looked great in 2007, might be a very different picture if you were standing on that same street today.
Bad neighbourhoods – agree with you in some respects. A city like Detroit is a bit of a wildcard in that I think that there are still some good neighbourhoods there, as well as some dodgy ones. Their prices are incredibly low, properties in the better neighbourhoods look amazing and even if there are no capital gains for 20 years, who cares if you have a tenant paying you rent – it's still positive cash flow! It's one of those places where there are both good and bad stories.
I think you make some really valid points and I'm constantly tempted by what I see on sites such as Realtor and Zillow. When I see a property for 45K with an 900p/m income, I just want to call up the agent and buy it
It is my personal opinion that investing in Australia is just too hard. Prices are far too high and the rental yields are inevitably below or on a par with what I can get from a decent Term Deposit. Yes, it works for those who are after CG, but for those of us looking to free ourselves from our jobs we need immediate replacement income.
I think that the States has a lot to offer and there are definitely people who are making it happen for themselves.
Yes, I think the initial costs associated with the purchase (even travel) can be deducted when selling.
However, if you hold the property for 20 years, you have to wait a looooong time to get that benefitPersonnally, I hate the words "negative gearing". Anything that doesn't put money in my pocket from day 1 should be avoided. CG cannot be guaranteed and, as Steve McKnight says "whose worried about capital gains, if you have a property providing you with cash from the start". How will you be able to afford more properties if you are negatively geared??
That's a personal opinion though.
Wow, this has been an excellent read – Thanks BB and others.
I really like your "go for it" attitude.
Although I'm still in Australia, I have been doing masses of research and have found the property websites mentioned above in previous posts to be an great source of information.I am currently looking at Las Vegas for potential purchases and actually called a well-known agency there today. I ended up getting through to an agent who came across professionally and knowledgable. All I really wanted was to pick her brain about it all and she was very obliging. I spent 10-15 mins on the phone with her and gained a lot of info. For example, Nevada is a very pro-landlord state, compared to some of the others. This is a definite key point for us. BB, you should find out about this, as Florida may be more pro-tenant than landlord.
Our budget is a bit different to yours BB, as we are looking at homes priced between $30-45K cash. We expect them to be tenanted, otherwise we won't purchase. From what the agent told me, an average $40K condo in Las Vegas would rent for approx $700-$1200 per month. Even at the base rental, this would provide approx 21% yield (not taking fees into account). At the higher rental, we would get a yield of approx 36%. Holding just 4 properties this way would generate about $20K-30K income per year after fees. Of course it would work out much higher if we purchased SFH and avoided the HO duties.
In our strategy, we are not investing for capital growth and that's why we don't really mind if they are not beach front or even on the coast at all. CG will probably come around in the fullness of time, but the way we see it is each rental is like a personal ATM – it will chuck money at us month in and month out (for the most part), year in, year out for as long as we hold them.
Thanks for your updates on your trip, it is fanscinating to see how you are getting on.
To others, don't feel daunted by the fact that you are not over there and don't be afraid to make a call to an agency in the States. Call one of the well known ones and pick their brains, especially on areas such as pro-landlord issues. With so many properties lying dormant on the market, it will give them something to do and they will be jumping at the chance to speak to any potential buyer
When we sold them, we struggled for 2 years to find buyers and overall, lost approx $40,000 on the deal as we were forced to sell well below what we had paid, just to get rid of them.
