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  • Profile photo of British BuyerBritish Buyer
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    Hi Gary

    Melbourne Beach sounds amazing.  But since I'm not planning to immigrate, it's probably better I invest in a large city with a good rental market and an international airport.

    BTW, what's the nearest airport to MB?

    And one more question, have you ever heard of someone getting an EB-5 visa by investing 500K in property?  I'm guessing not, since by doing so you won't have created any jobs for anyone.

    cheers

    Steve

    Profile photo of British BuyerBritish Buyer
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    A reader e-mailed me this great question:

    > Hey BB,
    >
    > I'm very intrigued by your posts, researches and efforts and I'm very curious as to how one becomes as successful as yourself. I've just turned 20 but have no deposit (just started saving) nor does my mother have a property of her own. I'm working full time for under 30k a year, if you were in my shoes how would you go on about investing? Or how would you go on about it in general. Sorry for this PM it sounds almost like a personal assault but I was also looking to start investing in the US (in particular, Miami) since my income does not cover for the overpriced costs of properties in Australia. Just looking for tips on how I can build up my wealth.  Thanks :)

    Here's the answer I e-mailed to him

    Hi

    The way to get rich is to be frugal at first.  You have to get a steady income, and then save more than 50% of it each month.  If you can't, you must work two jobs.  Other than borrowing money, this is the only way to build up some capital to invest.  You have to be willing to sacrifice for a period of time.  You have to be willing to stay at home when you know your mates are going out on a bender that'll leave them all a few hundred dollars shorter.  You have to learn to take the bus, ride a bike, or walk, instead of buying a car before you can afford it.  You have to eat cheap (no expensive restaurants) and drink less in bars (during my 20s I always took a hip flask of whisky with me when I went to bars, and while my mates drank 10 expensive beers I just ordered one and happily sipped from my flask to make the beer last the entire night).

    Under the right circumstances, these are things you just need to do for a few months up to a year, until you've saved enough.  And then you take the plunge.

    If you're young and fearless and have lots of time left to get back the money you may lose, you throw everything you've saved into one venture.  It could be a small business (I've done that twice in my life, and while these small businesses didn't become big businesses, they did turn small capital into big capital within a year due to hard work and commitment). 

    But I must add that the only way to run a small business is by using the same methods you used to get your initial capital: be ultra frugal.  Don't go around pretending your business is bigger than it is.  Don't borrow for the business unless it's got 100% certainty of success (which is almost unheard of).  In these kinds of small businesses, try to structure it so you can do everything yourself, or with very few other workers.  When it's your success on the line, you'll work much harder, longer and cheaper than anyone you could hire.

    Once your capital has grown ten-fold, decide whether the business is worth continuing.  In other words, if you stop doing all the work, will it still make profit. 

    If it will, expand it.  

    If it won't, ask yourself whether you're happy working in this business.  If you are, and if the income is satisfactory, continue.  If the work doesn't make you happy, quit.  Close it down (or sell it if you can) and take a holiday to a cheap place and reassess your life.

    Live cheap (or get a steady job) for the next stage,  Make sure your money is well-invested at this point (not too risky, yet not too conservative).  You'll be a bit older now, and a bit wiser, and you'll have more money.  Sooner or later you'll see the next opportunity.  Repeat above steps.

    I've had many businesses along the way, all of which I've sold or closed down, except for the most successful one  (a franchise company teaching Chinese entrepeneurs how to open and run English schools in China).  This company grew much too big for me to simply close down, although that didn't stop me from walking away (I just employ good managers, whom I pay well, and to my surprise the business continues to grow despite my absence).

    Hope you don't mind, but I'm going to copy both your question and my answer onto the forum (I won't post your identity though).

    Good luck!
    Steve

    Profile photo of British BuyerBritish Buyer
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    REGARDING LLC'S

    I went to see a CPA last Friday.  He often helps foreigners create LLC's to put their properties in.  He said the ONLY reason foreigners use LLCs is so that 15% of the total selling price of your property isn't withheld when you sell.

    He offers the following service:
    Creates LLC for $650
    He says every year the LLC needs an "annual renewal" that is less than $150 (but who knows if that's true).
    For $400 each year he'll help you do your annual tax return, and he'll provide you with an address and deal with whatever paperwork is mailed to you each quarter.

    I asked him "If I don't make an LLC, will 30% of my rent be withheld by the tenant?"

    He said he'd never heard of any such law.  My realtor, who was with me at the time, also hadn't heard of this obscure IRS law.  She helps her foreign clients rent out their properties (I hear her doing this all day long on the phone when I'm driving her around to see houses) and none of them have 30% withheld by the tenant.  The money is just deposited straight into their bank accounts.  Also, most of them don't have LLC's.  One assumes that they aren't declaring this rental income, but who knows.

    The accountant said, "Just let them wire the rent money to you overseas". He thought paying any tax on your rental income was a stupid idea, but did concede that it wouldn't be good if you were caught.  I should add that this CPA was Brazilian, so has a more fuzzy view of the law than your typical Yank CPA.

    As to the fear of being sued for your property if it's not in an LLC, he didn't see much danger in that.  I've been advised from another US investor that you can just buy insurance to cover you against this danger.

    I've also been advised, by other overseas investors, not to bother paying lawyers to open your LLC or to do your tax returns.  Apparently you can open your own LLC for only $150 using incorp.com and you can do your tax returns for free using Turbo Tax, an easy-to-use and free online tax program.

    I think the reason people wanting to invest in the US hear so much about LLCs before they get anywhere near the US, is because that is the easiest way for Cash Flow Companies to sell the property to you.

    A Cash Flow CO. will buy an REO, put it in an LLC, then simply "sell" the LLC to you (which just means putting your name as the sole owner of the LLC, and cancelling the original buyer's name from the LLC).  To do this, the new buyer does not even need to come to the US.

    This benefits the Cash Flow Co. since they do not need to have 15% withheld, and also because there are no closing costs (like when a private owner sells to a private buyer).  Closing costs are usually 1.5%  The accountant I spoke to says he can change the ownership of the LLC for roughly the same amount as the closing costs.

    The benefit to you, the new buyer, is you have an LLC already set up, so it's easier for you to sell it (ie. you won't have 15% withheld)

    Profile photo of British BuyerBritish Buyer
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    [/quote]

    Aus property market is a tough one, depends on state to state generally..

    Darwins going through a bit of a purple patch cos of govt and resources contracts, even was seeing growth during GFC. Sydney despite how expensive property is will still have a certain level of demand, one because council and govt are pretty tight on land release to reduce urban sprawl, plus banks are known to require developers a significant pre-com % before work begins. Qld and WA are having a minor correction due to an oversupply (basically all the developers were seeing record demand and growth in resi and specifically commercial – Perth were lowest vacancy in the WORLD tehn decided to all build not realising theres a time lag between start and finish and the market went from famine to buffet of properties). Melbourne im not too familiar, and im not to aware on Adeliade resi but their commercial should be booming in next few years with a lot of resource/mining companies moving there as mining projects take shape. Adelaide was the second best performing market as a whole during GFC, behind Darwin.

    My opinion on Sydney specifically is that we will probably see a lull or chop in capital gains growth across the board for a few years as wages growth should outpace property growth. We need to increase affordability as the ratio of median income: median household is circa 8 or 9 to 1, where as a rule f thumb or sweet spot is approx 3 or 4 to 1, where US is now if im not mistaken.

    But Sydney should be on another wave of boom, specifically closer to the city as the 2020 metro plan by state govt for future infrastructure has basically forecasted population growth half of what reality will be, so places closer to the city with stronger infrastructure in place should win out. Over the next 5 years I could see inflation creeping in mainly due to mining/resources, its been listed as a concern in the current RBA meeting minutes. What this means is that IR will be lifted to counteract, however eastern states like NSW and VIC who have no connection with mining will be paying for inflation from resource states through higher IR, could provide a little catalyst for a brief correction, however not major, as our lending practices, land release levels and relatively good monetary policy should avoid a GFC like correction, worst case scenario I would say 20% downside.

    Then again forecasting is a mugs game and anything can happen in the future, negative gearing or other tax  changes could provide a significant correction. Thats just my opinion, beauty of which i can change it with any further economic developments, im not married to my current opinion.
    [/quote]

    Thanks for sharing your thoughts on  the Aus property market with everyone.  You have some sound insights, which Aus buyers can use when weighing up the US vs. Aus market.

    Your predictions on the Sydney property market are similar to most pundits predictions of the Shanghai market: too expensive, yet likely to get even more so, due simply to pure economic muscle (with strong infrastructure being the backbone).

    One difference between Shanghai and Sydney is that it in the former it takes 18 years of household income to buy an average property (which is considered to be a 2 bedroom/1 bathroom apartment), whereas in Sydney you only need 8 years (your stats) and in Miami less than 4 years!

    Profile photo of British BuyerBritish Buyer
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    Zita wrote:
    Thank you to Steve & Pat for your prompt responses!

    Re: HSBC Bank types. After speaking in person to a Bank representative, he stated that The Premier Account does require $200,000 deposit, however I will follow this up. If perhaps it was required as an inital deposit and then later withdrawled, then your advice to then downgrade the Bank Account would work, but if my memory serves me well, not only did they require the $200K deposit, they also require the it to remain in the account. Again, I will indeed follow this up!

    The set back with wiring money from Australia to Miami is supose I'm wiring $50,000. With the 'Standard' Bank Account, the max you can withdrawl from an ATM is $400 daily (and the standard bank accounrt does not recognise you in Miamia). We are planning to travel for 15 days… It is not enough time to withdrawl the required cash and it  could potentially cost us missing out on a place if we don't have the funds available immediatly. I think you are right Steve, I will now investigate the idea of opening an account when we get there, so long as you arent required to do this in your home country first…

    Pat, this sounds like the way to go, i'll be visiting the closest ANZ tomorrow to follow up. I suppose again, not having the cash at hand for example at an auction, could cause us to miss out, but with 8-10 days to withdrawl it may just work. Thank you for that, I will keep you posted.

    Miami has been on my brain for weeks and months now and this forum has been such a fantastic way of staying on the game, with everyone contributing advice, support and feedback. Its funny when you discuss the idea of investing in Miami 'socially', the sceptisicm, the negativity and the naivity that so many people have towards the topic is amazing (despite thier lack of knowledge or research they all seem to have a preset mindset). I've had a variety of reponses when I raise the topic, most to which have been negative. Still, thats why the minority of people are fulfilling thier life's potential while the majority continue on with thier 'playing it safe' 9-5 jobs. No thanks!

    All the best to everyone and thanking you all for your great blogs!

    Hi Zita

    I'm very certain that if I'd opened an HSBC Premier Account in either Hong Kong or China they would not have required that I deposit any money.  I phoned up several times and checked on this.  They said that I must just deposit the money whenever I was ready.  I asked what would happen if I didn't.  They said that after 3 months they'd figure out my 3 month average, and if it was less than $100K I'd be charged the $50 fine for each month.

    But if you're not intending to buy for up to $150K then don't bother going the Premier route.

    If you're still wondering how to get your money to the US, just open a different  HSBC account (the one a notch below Premier).  I don't remember what it's called, but it differs very little from the Premier except that they won't offer you a mortgage (and there's no penalty for not keeping a certain amount of money in it).  What they will offer you is the ability to go to an HSBC in Miami and open an account there, and have the money TT'd from your overseas HSBC account to your Miami account.  I can't remember the exact cost, but it was small (maybe $20).

    Also, I don't think you will be buying any properties at auction.  It is too dangerous, since you have no idea what liens are awaiting you on the property.  For example, the property may be worth $100K, and you get it for 50K at the courthouse auction, but you didn't know that the old owner took out a second mortgage on it for 90K, which you now need to pay (the liens follows the property, not the person who borrowed the money and ran off with it).  So you'll end up paying $140K for a $100K property.

    The reason people are more confident when buying REO's from the bank is that 2 liens searches get done, the first by the bank before they put it on the market, and the second by you during the inspection period.

    However, there are people who buy properties at auction on the courthouse steps, but they're either gamblers or  they're professionals, meaning they know how to check with about 95% certainty how many liens there are on a property being auctioned.

    good luck
    Steve

    Profile photo of British BuyerBritish Buyer
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    gmproperty wrote:
    Hi Steve,

    Each time I travel over to Florida for any length of time I renew my FLdriving licence, but they only renew it for three months at a time as I travel on the visa waiver program. I have a car and a pick up here which are both insured with Geico. I always go to Driving Licence offices in person and have never had a problem getting a licence.
     
    I also believe each state has their own driving licence, so if FL wont let you take a test, maybe travel to Georgia?

    I am currently in Atlanta closing on two REO, I understand your frustrations, the two I am closing on I first looked at 6 weeks ago. 

    Don't lose too much sleep if you don't purchase a Property for yourself to live in, I purchased a "holiday home" north of Miami in a place called Melbourne Beach. I purchased it in 2004, and if you total the amount of time myself and my family have stayed there it only amounts to a few months. So financially speaking its just been a liability. On the other hand the properties that I purchased as investments in FL have been paying a monthly for years with only a couple of months vacant.

    My advise would be to use your cash on SFH, away from the coast (my place got hit by three hurricans in 2005) these purchases will be great experience, pay the rents in to the bank in Miami which you think you would have a chance of getting a mortgage for your beachfront condo.

    In six months you could buy four or five SFH with your 250K earning you $5,000 a month gross

    There is a British expat  forum that has been a great help to me over the years,  members are very friendly and would be happy to help you with any day to day issues in Florida, e.g driving licences! Most members are fellow brits who have moved to the sunshine state, can't for the life of me think why they would do such a thing :-)

    http://www.thefloridaforums.com/forum/index.php

    I love your posts, I log on most days to see what you are up to.

    Gary

    HI GARY

    I just joined The Florida Forum and requested info about driver's licenses and auto insurance.  I also spent half an hour reading other posts about how to get permanent residency, which I'll copy at the end of this post in case anyone is wondering how they can stay here permanently.  I can't imagine myself ever wanting to stay more than a few months at a time, but the thought has crossed my mind that when my kids need to attend elementary school I may put them in a school here.

    Which brings me to the topic of why I'm trying so desperately hard to get a place right up against Miami Beach.  The best schools in Miami are all along the beach, whereas if you buy further inland your kids might end up going to school wid all da udder brudders in da 'Hood.  Now don't get me wrong: I'm no racist, and my kids are mixed (European/Asian), but I don't want them mainlining before they get to high school.

    I took a look at Melbourne Beach on Trulia and Google.  It looks similar (geographically) to Miami Beach.  How much do SFH's go for just a few blocks from the beach?

    Here's the info on US residency:

    If only it was that easy as just filling in forms like it is in Canada and they look at what you have to offer, add up your points and say yes or no.  Unfortunately it isnt.  You need a basis for immigration to the US.  Here are the main ones.

    L 1 visa -you must have a business in the UK or have been employed as a manager of a business for at least one year in the last three years  and that business must transfer you out to its subsidiary or affiliate in the US.

    E 2 visa – requires that you have made a substantial investment in a US business, generally you need $100,000 plus to buy one,  though people have got through with less as start ups or semi start ups.  This is however a renewable visa but does not lead to permanent status.

    Work visa – you need to find a job where the employer will sponsor you for either H1B or  green card.   H1B either needs a degree or 12 years experience.      The jobs you have would not appear on the face of it to be the sort where you would be able to get sponsorship. Generally employers are only willing to sponsor where they need expertise from abroad that they cannot find in a US applicant.

    EB-5  You need to have a spare $500000 to invest in a scheme in an area of low employment or a rural area of the US or in a run down business.

    Diversity lottery —  Lottery for a green card,  people born in England, Wales and Scotland cant enter unless they have a parent born abroad, people born in Ireland can apply. 

    Family sponsorship – only works if you have close family who are US citizens or in some instances permanent residents.

    The immigration process takes a long time and in many cases, involves a substantial investment within the US which can be lost.  To be frank there are easier places to emigrate to!     If you still wish to go ahead, pick your basis of immigration and work towards this.  For example for E-2 most people need to sell their house to raise the capital to make the investment.   Dont hesitate to ask any questions.

    Profile photo of British BuyerBritish Buyer
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    patwx wrote:
    Thanks BB for sharing your experiences. I have really enjoyed your posts. I can understand your frustrations. As foreign buyers or potential foreign buyers, our number one enemy is time because we are not there for very long. The realtors know that and will take advantage of that.  They know that we will be desperate to buy something before we leave for home otherwise we may feel that the trip was a failure.  They have probably seen this situation time and time again.

    Yes, you are so right.

    And in fact, most realtors will try to take you to see only regular sales (ie. they'll steer you clear of REOs and Short Sales) so that they have a much greater chance of getting you to put in an offer that will, after some bargaining, turn into a sale.

    REOs, on the other hand, are just hit and miss, so the realtor does a lot of work but is most likely going to get no commission.  And you may as well just forget about Short Sales if you're only on a buying trip.  They can take up to a year to get an answer on!

    Profile photo of British BuyerBritish Buyer
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    TO WHITE_GOODMAN

    I wish I'd studied what you did.  Perpahs I'd be a Wall Street trader.  No, better yet, I could be a Shanghai trader, since that's where all the action is headed.

    What's your view on the Aus property market?  Bubbling, or sustainable due to the Chinese influence?

    Profile photo of British BuyerBritish Buyer
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    USProInvest wrote:
    Hi Steve,

    Thanks you for your prompt response and I understand where you're coming from. I am new to the forum and have been looking at Miami and Orlando prop on Trulia website for the last couple of weeks. To be honest, Ive got so confused and don't know which area of Miami I should be looking at. Please note that I'm not a Professional investor and your list of REO prop will be used to guide me in my research. At the end of the day, I should be liable for my action and should not blame you.
    Regards

    Hi ProInvestor

    Miami is a huge city, so it can be daunting when trying to decide where to start.  To simplify things (ie. if you're not familiar with Miami), you should just buy as close to the ocean or the intercoastal waterway that your money can afford.  There is only one bad area on the whole mainland coastline north and south of downtown Miami  that is a bit iffy, and that's South West Coconut Grove, and even there it might be a good investment, since the area might gentrify one day, and at least you'd be buying now at a discount due to dodgy neighbours.

    When it comes to the island that Miami Beach is on, everywhere is good.  There are some cheaper bargain spots on the islands between this main island and the mainland.

    Good luck, and if you find a particular place, send me the address and I'll advise if I know the street/area.

    cheers
    Steve

    Profile photo of British BuyerBritish Buyer
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    USProInvest wrote:

    Hi Steve,

    I am interested in the following list of REO prop in Miami in your earlier post. Can you send me that list to my email: [email protected]. Thanks

    This list will be divided into 2 sections:

    1. REO condos priced 20K to 40K that have just hit the market, and will give good rental returns (10% to upwards rental return after paying HOA and Prop. Tax).  The condos these buildings are in will all have been checked by myself and my realtor, will all be in good areas, and will all have pools and gyms.

    2. REO Single Family Homes that have just hit the market, that are priced between about 120K and 350K (so as to ensure that they are expensive enough to be  in good areas, but not too cheap so as to rule out financing opportunities), and that should offer about 6 to 8% rental returns, and very good capital gains opportunities.

    This list will be automatically generated by setting up parameters using the MLS listing for Miami (ie. if condos, according to buildings I've already checked out, or if SFHs, according to areas I've already visited). 

    My realtor will automatically receive daily updates (from the Miami MLS listings) to add to this list.  I shall make this list available to the public (free of charge).   However, I won't publicly display the list, so as to reduce the number of people making concurrent bids, and thereby working at odds with each other. 

    If you're interested in access to the list, you just need to e-mail me.  Once you've located an REO that interests you, you can make contact with my realtor and make bids of your own, according to the price asked by the bank.  There would be absolutely no fee charged by my realtor since she makes her commission (3%) from the seller (ie. the bank).

    Hi USProInvest 

    I made a bit of a premature announcement earlier this week on the forum, namely that I would offer recommendations regarding specific buildings in Miami worth investing your money in (a “list”).  I was still feeling “high” on the Miami property market, since I was in the very early stages of my investigation.

    For many reasons I’ve now decided it isn’t my place to offer people any advice whatsoever on where to park their hard-earned money.  I’ve only been in Miami for 2 weeks, am as yet nothing other than an observer, haven’t even made a single purchase myself, and now realize that I do not have the experience or contacts to give accurate info regarding this market.  

    Unlike a lot of buyers “on the ground” in the US, I’m not running a business, so there’s no profit for me if I can con you into making a specific purchase. 

    Yet if I advise particular properties to the 30+ people who’ve requested such information from me over the past few days, and if just some of them turn out to be bad investments, there are going to be a lot of people cursing me all over the various property forums. Also, I noticed that many of the people who contacted me for the “list” were the same guys running those Detroit, Atlanta and Las Vegas based Cash-Flow Companies.  They no doubt thought that, without putting in the work themselves, they could suddenly expand their services to Miami. 

    If I were to produce such a list, and even assuming I had accurately predicted good investment buildings, this information would be shared amongst so many overseas buyers that there’d be bidding wars that’d push the property prices higher than they’re actually worth.
     If you have any specific information (including a particular property or building) you’d like my advice on, I’ll be happy to give it on a case-by-case basis. 

    Regards

    Steven

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    white_goodman wrote:
    British Buyer wrote:
    I also believe in group behaviour, and have incorporated it into my few simple stock-investing rules:

    1. Don't buy too soon after the market has crashed (my mistake in 2000).  Ie. don't get caught by the Dead Cat Bounce, or Don't Try To Catch A Falling Knife

    2. Buy when everyone is depressed.  Don't let this negative sentiment affect your logic.

    3. Don't try to pick winners (this applies to me since I'm not a professional investor, and have no inside scoops on specific companies).  Just spread your money (and your risk) around.  For example, I bought $5K of every stock listed on the Shanghai B-share bourse, since there's no transparency in China, so there's no point trying to be smart.

    4. When markets are rising, go with the flow.  The Trend Is Your Friend.  Herd Behaviour can make you a lot of money.

    5. Get out when the market has surpassed all previous highs (and has surpassed your expectations for capital gains).  If your servants are putting their money into stocks, that's a sell signal.

    to be honest that only looks like a minor correction, looking at current correlations it will still go up as long as people/funds keep having to pump funds in the 'risk on' trade. Due to the expectation of the RMB appreciating in the near to mid term global funds, specifically from the US will look to carry exposure there as they benefit from capital appreciation and exchange rate appreciation. The only problem is it may be trading way above fundamentals (P/E ratios etc) which isnt automatically mean down, just means not a good area to be 'loading up'. You are correct about markets being highly correlated, the automated arbitration and hedging strategies adopted between stock indcies and other investment classes means there is very little difference between ivnesting in the S&P to the Nikkei to the ASX200 as a basket… if you were to overlay the charts of all major world indicies you will see how surprisingly similar they look when looking back to the start of heavy computer automation in markets. Those rules are a pretty good guideline especially number 5 with contrarian indicators. There was a guy (forget his name) that invested basically on the opposite of what financially hit the front page. Ie "Gold set to go to record highs", he would short gold or take an anti gold correlated position. Thats why im also keen to hit the US property market, even though the AUD could very well go higher, its starting to gain traction in the news media.

    If anyones interested in good books on investing id recommend Benjamin Graham's – The intelligent Investor (make sure you get the revised edition with a 2003 update)

    if you want a great book on speculation/economics/market psychology, I subscribe to George Soros – The Alchemy of Finance

    also its important to recognise theirs a major difference between investing and speculation, that being investment indicates you receive an income (dividends) where speculation is where profit is based on simply price gains. As a rule I weight my portfolio
    as 60% dividend stocks (investment – where you funnily enough want stocks to get cheaper), 25% speculation and 15% cash (savings account as I cant be arsed buying bonds)… obviously wightings all depends on financial situation and risk tolerance.

    Good input on the topic of stocks.  If mine was investing 101, yours was investing 505!

    Why do you want stocks to get cheaper when you've invested just for the dividends?

    I'm a total novice (or perhaps I should say "self taught") investor, so never approached the issue in the systematic way you have.

     My father is a non-materialist (was a low-paid government doctor before retiring) so got not lessons there. 

    At university I studied Biology, which turned out to be a total waste. 

    One of my greatest regrets in life was that I didn't get a degree in economics, since the flow of money, its efficiency, its wastage, and the wild variation in its value over time and distance, are truly fascinating to me.

    Due to my horrendous loss in the stock market back in 2001, I now keep 90% of my assets in property, with the remaining 10% in either stocks or cash.  I just "play" in the stock market, buying when it looks cheap, selling when its high.  I don't have the personality for owning large amounts of stocks.  Losing 30% of my net worth during a major market crash is just something I don't want in my life, and for me isn't worth the potential upside during a bull period.   I'm no George Soros! 

    I know I'm too overweight in property, especially since it's all in one country, which is why I'm trying to diversify out of Chinese property.

    Profile photo of British BuyerBritish Buyer
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    Zita wrote:

    Thank you for your well executed response Britsh Buyer, your wealth of knowledge is highly valuableand we much appreciate the effort and time you put into your posts.

    We noticed your previous post's have been somewhat slightly 'disheartened', and for good reason. There will always be hurdles, but you've come along way and your hard work and persistence will pay off!! So keep your mind on the goal at hand. In the interim, we wish the best to your son, ofcourse he comes first.

    Just a quick update from our end here in Sydney, and the steps that we are taking to prepare us for our trip over to Miami in March.
    I visited HSBC yesterday to find out what we need to do to open up a bank account in Miami:

    1. You need to open an account in Australia first and then a second account in Miami.
    2. There are two types of accounts: A Standards Savings or a Premier account.
    3. The Standard Savings Account is highly restrictive when it comes to access/functionability over in Miami:
    – You are provided with a debit card to be used whilst in Miami – Max withdrawl $400 daily.
    – You are not recognised in the Miami Branches therefor you cannot do much from that end.
    – 2% chagre on any amount you withdrawl (ofcourse you need to factor in the exchange rate)
    – Costs $200 to set up in Miami and you are not guaranteed apoproval.
    -2-3 days netbanking
    4. The Premier account
    – Requires that you deposit $200,000 + to be eligable
    – Ofcourse great access/functionality once over in Miami
    – $2000 daily withdrawl limit
    – You are recognised within the HSBC Miami Branches
    – Discounts on travel/accomodation/dining/home&contents insurance/home loans and the likes
    – Instant netbanking

    So ofcourse after depositing a lump sum as such, you would be expecting all the benefits and service +, and that is certainly what they provide. However, at this stage and on our first trip, we will not be dealing with $200,000 +. Ideally we would be looking at approx $30K + which now leaves us having to look at other avenues.

    One avenue being, cash. Has anyone travelled over with ridiculous amounts of cash. If so, what are your means of securing it and playing it safe? Or are there any other suggestions anyone could share in regards to this?

    Many thanks in advance,

    Hi Zita

    If you're planning to buy property  for about 50K, in which case you won't be applying for a mortgage, then you can easily come over with the 50K in your carry-on luggage.

    The limit for not needing to declare money at US customs is 10K, but if you're over the limit you just fill out a form to state how much you're carrying, and why.  This process took me about 1 minute.

    If you want to buy a house worth much more (eg. 100K) and then apply for a mortgage, carrying it on your person would probably also be OK so long as you keep a paper trail or your purchase of $ in your home country, your declaration at US customs, and your deposit into a US bank account on arrival.  Lenders require to see a paper trail to prove it's your money, and if there isn't one then they will probably ask you to season the money for 3 months.

    I do not believe that you need to deposit 200K in an HSBC premier account.  I think only 100K (here in the US) and only 80K in China.  If you deposit less than that then you just pay $50 per month.  Since premier account interest rates are so much lower than any others, it'd be in your interests to just open an HSBC premier account here in Miami, deposit whatever you've brought with you, get a mortgage, and pay the $50 "fine" for a few months.  Then, if I were you, just convert the premier account to a different kind of account within HSBC (this is what someone at Hong Kong HSBC recommended to me on the phone).

    Bear in mind that carrying over 50K in cash might be nerve-wracking. 

    Surely you're able to open an account in your home country that will allow you to request money to be wired to you when you're in the US? 

    The only reason I didn't set this up was because China is, as far as I know, the only country that won't allow you to request money to be sent to yourself overseas from a Chinese bank account.

    Let me know what you decide
    cheers
    Steve

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    As they say, "When it rains, it pours!"

    As if losing my dream home wasn't enough, today my Chinese stocks crashed (the reason I'm heartbroken about my "dream home" is because I'm absolutely sure I could have sold this house within the next 5 years for 1 million dollars, so if I'd got it for $281K, spent 50K to put in a pool and spruce up the garden, and another 50K to renovate, I'd have made $619K for very little effort, and I'd have had an amazing waterfront vacation home to enjoy with my kids for 5 years).

    But back to my stocks.

    I own a lot of Shanghai B shares at present.  I've made no property purchases (except the apartment on Hainan Island where I currently live) in the past 2 years, so I've been gambling my money on the Chinese stock market.

    I've made good returns until now, but last night (while I was asleep) panic hit the Chinese market (due mainly to the shocking inflation figure that just got released: over 4%).  So today I woke up $24K poorer.  Just what I needed.

    I guess the only good thing about not getting my dream house is I don't need to sell any of these stocks at present (I was short of $50K, which I was going to raise by selling some of my stocks).

    Since this is an investing forum, I thought I'd share some of my experience in the field of stock markets.

    Here's how I do my investing (despite losing so much in the past 24 hours, I've actually turned into quite a good stock investor over the past few years, having had an horrendous lesson back in 2000/2001 when I lost ALL MY MONEY!):

    I avidly read any financial news I can get my hands on, and try to get a broad understanding of global markets (even though I've only invested in the Taiwanese and Chinese markets over the past decade).  Since financial markets are so interconnected, you have to have a feel for world sentiment before taking any serious bets.

    I also believe in group behaviour, and have incorporated it into my few simple stock-investing rules:

    1. Don't buy too soon after the market has crashed (my mistake in 2000).  Ie. don't get caught by the Dead Cat Bounce, or Don't Try To Catch A Falling Knife

    2. Buy when everyone is depressed.  Don't let this negative sentiment affect your logic.

    3. Don't try to pick winners (this applies to me since I'm not a professional investor, and have no inside scoops on specific companies).  Just spread your money (and your risk) around.  For example, I bought $5K of every stock listed on the Shanghai B-share bourse, since there's no transparency in China, so there's no point trying to be smart.

    4. When markets are rising, go with the flow.  The Trend Is Your Friend.  Herd Behaviour can make you a lot of money.

    5. Get out when the market has surpassed all previous highs (and has surpassed your expectations for capital gains).  If your servants are putting their money into stocks, that's a sell signal.

    Here's a graph of Shanghai B-shares:
    http://www.bloomberg.com/apps/quote?ticker=SHBSHR:IND

    Notice how it rocketed up about 40% since June this year, then crashed 6% yesterday (boo hoo).

    What's going to happen next?  Ah, the million dollar question.  I have no idea, but am almost certain that some time within the next year it'll pass it's previous all-time high of 390.

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    Interesting day I'm having.

    I just found out that I didn't get my dream waterfront REO.

    I hate conspiracy theories, but it seems to me there's more than a 50% chance I've been taken for a ride on this one.

    My suspicions have come simply from the fact that the listing agent representing the bank has been absolutely unapproachable from the very beginning, which made me believe that I have been bidding against a buyer of her own finding.

    I offered $281K cash last week (Wednesday, I think) and early the next morning my agent gets an e-mail saying we're closing the bidding today.

    What I think happened is that the listing agent already had a buyer set up (for maybe 250K, already higher than the 224.9K asking price) but when my offer came in she thought "damn, now my client will have to pay even higher, in cash, so I better close the bidding before we get an even higher offer of 300K plus).

    I think what we'll ultimately see is that the home will sell for about 285K.  If so, then I'm 90% sure there was cheating in the bidding.  However, if it sells for 300K or above, then there probably wasn't.

    Since, on this first trip, my only goal was to buy a SFH near the sea, and since not a single SFH REO near the sea has come on the market since my dream home on 30 October, I'm getting a little fed up.

    Also, my 2 year old son is sick, and I have my suspicions it might be related to my absence (he also got sick 3 months ago when he was separated from his mother during the birth of his baby sister).

    Anyway, today I started thinking about going back to China early, so I called the car rental company to let them know I'd be returning the car a week early. 

    They told me that it'll cost me about $600 extra to do so!!!!!

    Why?  Because I rented for a month, and was quoted a monthly rental rate (only $675).  If I want to return it after only 3 weeks, then I'll be charged a weekly rental rate ($450 per week).

    I said, "Can't I just park it in your lot and get on the plane, and you guys just ignore it until the 25th?"

    They said, "Sure, but they'll still charge me the extra $600!

    Next shocker was trying to find out how to renew my expired US driver's license (probably a long shot, since I got the license back in 1989).  I was put on hold by the relevent department for over 20 minutes, by which time I gave up.  I then tried to make on appointment online, and got told the nearest slot is December 23 (just to make an enquiry)!

    Fine.  I'll just do the test again, I thought.  So I phoned up to book the test, and discovered only permanent residents can get a driver's license in the US.

    The reason I want a license is because I want to buy a car, and if you don't have a US license you will be charged sky-high insurance, even more than renting a car (or so I've read on the Lonely Planet forums on this topic).

    Since I don't want any surprises when I leave, I also thought I'd check up on traffic fines (I haven't had any, but I've noticed there are cameras set up above many traffic lights).  I got told that you don't get your traffic fines until 3 months after you were photographed.  There is no online system (like in China, where the photo of the incident will appear online within 24 hours).  But in the US, they mail the fine to you after 3 months.  What about if you're a foreigner and don't have a US address and have already left?  The fine will be attached to your name, and when next you enter the country it will appear on the computer at immigration (according to the car-rental company). 

    As if you don't already have enough to worry about when entering this country as a foreigner!  I still have very un-fond memories of being led away for questioning by US Immigration Cops for not applying online for a visa waiver.

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    One more thing the above agent told me:

    He hasn't seen any amazing deals during in the second half of the year.  When asked to elaborate, he said:

    During the first half of the year there were more REOs than buyers, and good homes and apartments often went for much less than their market value.

    I asked him if he thought that was a result of the Foreclosure Moratorium (due to banks fraudulently foreclosing on homes).

    He laughed and said that was just a media hype, and had no impact on the ground.

    He surmised that the reason we aren't seeing amazing REO offers hitting the market in great numbers is because the banks are wisening up.

    They've decided to pace the supply of REO's hitting the market so slowly so as to leave a hunger amongst buyers.

    This is bad for the property market in the long run, since it will delay the length of time that it'll take for all the REO homes to get worked out of the market (at least another 2 years).  It'll keep home values down for longer, and may even result in more foreclosures.

    But it's good for the banks, since they get to place a floor on home prices by controlling the supply.

    Another agent offered his advice:

    REOs always slow down just before Christmas, because judges refuse to take cases towards the end of the year because they're trying to wind down for their holiday.

    Another theory is that politicians may put pressure on courts not to evict people during the holiday season.

    Anyway, I'm hoping that the beginning of next year will see a greater supply of REOs hitting the market.

    Nearly everything I've been looking at lately has been sitting around for months already, and has been nibbled at and then spat out by other (you can see this on the MLS listing, because these kinds of homes get a pending sale, but the buyer pulls out during the inspection period).

    What every investor wants is a virgin property that's just hit the market, is well priced, well located, and sexy enough to make your move.

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    In the last few days I've learnt a bit more about the Miami property market, and the more I learn the more I know how much more there is to learn.

    My agent introduced me to the top-selling agent in her office, so I sat down to have a chat with him.  What I was most interested in finding out from him was how long I'll need to wait to hear back about my REO dream home offer.

    This is what he had to say:

    Never get personally attached to a particular property, and never assume you'll get it.  There are way too many factors at play in each individual case, and these are all out of your control.

    He listened to me giving a description of the property I'd put an offer on, how much I'd bid, and the feedback from the bank's listing agent.  He immediately pointed out "Your greatest enemy is the bank's listing agent".  I asked him to explain, so he told me this story:

    He had a cash buyer from overseas, interested in a beautiful REO beachfront apartment listed for $550,000 by the bank.  His client put in an offer for $570K.  After a few days the listing agent contacted him to ask him if that was his "highest and best".  This often is agent-speak for "there is more than one person interested in this property".  So his client upped the offer to $590K.  Next day he gets asked again "is this your highest and best?"  This went on for over a week until his client went up to $660K, and then refused to go any higher.  The bidding was then closed, and the next day the apartment was sold to somebody else for $665K.

    While it's hard to know exactly what happened in this case, this is his explanation:

    The listing agents for an REO only get a small commission for selling the REO (let's say $1,000).  But the buyer's agent gets 3% which in the above case is $19K.

    Therefore, the listing agent will do everything possible to find a buyer through one of her own contacts, Ie. through one of her friends or colleagues.  For example, if she knows her colleague has a rich client, and she believes the property is a good deal, she'll phone that agent, and the agent will phone the client, telling them there's a great deal and that he'll have the inside info during the bidding.

    Throughout the bidding process the listing agent tells her colleague's client all the highest bids, so that he's assured of winning the bidding if he just offers a few thousand more.

    After the deal is sealed, the listing agent gets her 1K, plus a big gift from her colleague's 19K commission, and everyone is happy, except for all the outside bidders who just got cheated.

    The reason this problem persists is because even the banks are happy with the system.  Without this cheating, in the above situation the bank would only have made about $570K, but instead they got $665K.

    I'm wracking my brains about how to get around this fraud.  I can only think:

    A. Try to choose as your agent somebody who works for a huge agency that gets to list a lot of REOs.

    B. As soon as you see an REO listing that you want to bid on, try to contact that listing agent yourself (without your agent's knowledge).  That way, she can introduce a colleague of hers to be your agent.

    While it's a bit depressing to discover the market is often rigged, it's also refreshing to know that once you fully understand the game, you could become a successful player yourself.

    Until such times, I do not think it's a good idea for me to be advising anybody regarding purchasing in Miami.  I'm still just a little fish lost in a big pond. 

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    white_goodman wrote:
    Floating the RMB would be the major balancer of the current account deficit problems the west have at the moment… China needs to really be brought into line at G20, likewise the US who are ruining export economies.

    Reasons im looking to the US:
    – negative sentiment on US is very high both domestically and internationally
    – Fed and treasury have drawn a line in the sand and will not let asset prices deflate significantly further. They cant provide all this stimulus, QE etc then if another problem hits say "no stimulus, its bad economic policy"
    – hyper inflation is NOT on the table despite how much i disagree with current economic policy
    – treasuries are so over bought (no yield) that investors are forced into risk assets such as stocks,commodities and this will eventually be reflected in property which naturally has a time lag.
    – doom and gloom/NWO forecasting is the flavour of the month (Glenn Beck, Alex Jones, Harry Dent, Gerald Celente etc) despite how viable it sounds, however markets rarely react in the way the majority perceive it as going
    – My mum and dad think investing in the US property market is a bad idea – contrarian indicator
    – with investing it is unwise to bet against the US – Warren Buffet

    Some good points.  I'm interested in the US for the exact same reasons.

    And I enjoyed the map.  Obviously one has to take it with a pinch of salt, but it's still of some use to investors wanting to choose a zip code to invest in.

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    Zita wrote:

    Good Afternoon All and British Buyer in particular.

    My partner and I have been compelled by your posts and everyone else's on that note, since we discovered this forum a few weeks ago.

    There was a turning point about a month ago when we both started to gravitate over the idea of investing in Miami (as this has always been a fantasty for us both) rather than going all out in the Australian Property. Our goals were so high and so are Aussie prices, Miami just suddenly looked so attractive and achievable? We were pleased to see that Britsh Buyer with all his experience and knowledge had also hand picked Miami as choice for investment, which confirmed to us we were on the right  track.

    I popped down to the local Travel Agency today and deposited return flights to Miami for March next year (although after reading recent posts, I'm anticipating that we won't miss the boat?) We have alot of research and actions to take between now and then, however, I believe it is an exciting venture and if done right, can set us up for a rewarding future.

    Topics and information that really concern us now after learning the basics, is such details financially (looking into opening a bank account in Miami if necessary, a solictor/agent) making appropiate contatcs prior to heading over, having a select few properties on the market that we will attempt to go for, knowing the do's and don't of property buying in Miami, knowing whats is good for value and what is not. So as mentioned, alot to do, but you guys have inspired and helped already!

    So on that note, happy to join the forum and share eveything and anything I learn between now and then as you have and are doing.

    Good luck to all! :)

    HI ZITA

    I think coming in March is a very wise choice.

    The weather will still be nice (up until about early May, after which it'll be too hot).

    REOs will probably hit the market in greater numbers at that time.

    It gives you enough time to prepare properly.

    And don't worry about a turnaround happening any time soon.  For anyone reading this forum, if you're overly obsessing about US property and are frustrated at your current immobility/ability to come here yourself and do some buying, my advice is to just relax.  The US isn't going anywhere, and US prices aren't going to go up for some time yet.

    There are still serious systemic problems in this economy.  People in the US are still living beyond their means, jobs are still being lost to China, and there are still a hell of a lot of people waiting to have their homes foreclosed upon.  Only through extended economic pain (like they are experiencing now) will Americans finally begin to start thinking about possibly taking the steps towards initiating the very hard economic and political policies required to repair this once-great country.

    So there might be some small upward momentum in the property market starting as early as next year (simply due to prices having fallen too much), but there isn't going to be any remarkable upward trend until the country figures out what its new role in the global economy is going to be.

    I think it would take so little to fix the US economy, but they have created a culture that is not conducive to rational behaviour.  There's no stoicism (like there was in the 40s and 50s), there's no understanding that doing what's good for the group will ultimately benefit oneself, as the whole group rises together.  There's only obsession with oneself.  Every time I see someone on TV here come up with a decent plan about how to reduce the debt, or reduce job losses to China, some selfish corporation or group will stand up and scream about why it shouldn't be done (eg. Wallmart shouting about why the US shouldn't press China to float the RMB, since they're scared US companies in China will be picked upon).

    The current economic order may have worked well for the West from the 1980s up to 2008, but there was no strong China to compete with.  China is the sole cause of all the economic uncertainty in the world right now.  China is the reason Aus property prices are sky high.  China is the cause of the US property bubble (China bought all that cheap US debt, which made its way into the property market).  China is the reason for the 10% unemployment in the US (ie. the disappearance of the US manufacturing industry), and China is the cause of US trade deficits, since Americans are addicted to cheap Chinese products.

    I am not blaming China for being predatory, since they have only being playing a part in the game created by the greedy and selfish West, a game called globalization.  From the 1800s until recently, globalization has benefited the West, not the Third World.  The West got to rip all of the Third World's resources out of the ground and bring it back cheaply to drive Western factories, and then sell those products back to Third World citizens, who remained enslaved to the West due to their own governments being too corrupt and inept to protect their citizens.

    Only a few non-Western countries were able to figure out the rules of this globalization game, and to get in on the action: Taiwan, Japan, Singapore, Korea, Hong Kong, Botswana (sold its diamonds and redistributed the wealth, instead of hoarding it for the political elite).  But since these countries were all relatively small (the biggest being Japan, and I remember how nerve-wracked the US was back in the 80s during the rise of Japan), so they were by-and-large just welcomed to the party, and given seats at the far end of the table, so long as they knew their place.

    So, for the past 200 plus years, globalization has been a wonderful game invented and propagated by the West, because they always won, not because they were as smart as they thought they were, but because the competition was pathetic.

    But along came China, stealthily growing in economic clout, but keeping as low a profile as possible.  But since 2008 it has become obvious that there'll be only one winner in the globalization games of the next 30 years (basically until Chinese workers become middle class and aren't prepared to slave away in factories for a pittance).

    So what the West needs to do is backtrack on its past 200 year game-plan.  They need to rethink globalization, not necessarily by abandoning it altogether, but by figuring out how to tweak the system in their favor.

    I can think of a number of ways, eg.

    1. Let Asians buy green-cards (with, let's say, a $500 000 input of cash into the US – either by buying property or investing in a business).  You'd be shocked to know just how many people there are in China with half a million dollars cash to spare.

    2. Force the Chinese government to fully open up the economy to foreign investment (especially the media).  That way the American news channels can start brainwashing Chinese consumers as to why McDonalds is so good for you, and communist dictatorships aren't.

    3. Force the Chinese RMB to be floated.

    4. Force the Chinese stock markets to be opened to foreigners.  What would then happen is that rogue international traders would create bubbles, which they can then pop at their own whim, sucking trillions back to the West, and leaving economic and political upheaval in their wake.

    Because China knows that the above ideas would be disastrous for the Chinese economy, and may lead to the downfall of the Communist Party, they'll never allow it.  Ie. this is the part of globalization that they are rejecting.  Fine.  Then the West has every right to backtrack from it's globalization path, and reinstate protectionist barriers. 

    This will scare the hell out of the Chinese, since there'll be nobody to buy their factory-made products, so they'll suddenly come back to the table and be willing to discuss opening up their markets much faster.  This won't stop the ultimate rise of China, but at least it will give the Western economies a much-needed boost during the next 3 decades.

    US society reminds me of kids at an unsupervised birthday party, where everyone is on a sugar-rush, throwing plates and ripping down the curtains.  They know they're going to get into huge trouble when the parents come home, but they just can't help themselves.  A bit like Lord Of The Flies.

    I'm not saying I'm not a bull on US property in the long run.  I'm just saying that the current woes being experienced in the US have been decades in the making, and they finally exploded into a huge crisis in 2008, creating the greatest downtown since the Great Depression.  It's likely that the US will figure its way out of this current maelstrom sooner or later, but I'd say later rather than sooner.

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    THOUGHTS ON REO PURCHASING

    Each day I wake up wondering whether I'll hear back concerning the REO SFH with waterfrontage that I put in a bid on 7 days ago.

    Here's a breakdown of how it all took place.

    The REO was put on the market on 30 Oct, for $224.9K

    It was the very first home I viewed (I saw it on 1 Nov), and I knew it was special, simply because of the water access (ie. place to moor a yacht)

    For the rest of that day I viewed all 9 other homes for sale within a 1km radius.  All were REOs, all asking 300K upwards, and incomparable to my dream home (the reason houses here are expensive is because we're on an island, just a few blocks from the beach)

    The next day I offered $281K cash.

    The following day we received an e-mail from the agent representing the bank, saying that "today is your final chance to improve your offer if you wish to, because bidding closes at 5pm"

    For the last 5 days I've just been waiting for news.  The only news received so far was an e-mail 2 days ago, from the listing agent, sent to all parties who made offers, saying "thanks for your offers, we've sent them all to the bank, so don't phone us or e-mail us unless you haven't heard back from us 7 days from now"

    There's certainly no point trying to phone them, because their phone goes straight to voicemail. 

    I'm relating this story now to give you all an idea of what it's like when trying to buy REOs.  The banks behave like arrogant pricks, the listing agents behave like arrogant pricks, and we, the buyers, are left in limbo without any information. 

    I've asked several agents how long it normally takes to hear back regarding REOs, and the answer is that there is no rule of thumb, but expect to wait at least 10 days.

    This makes coming to the US on a rushed REO buying trip very difficult.

    As I sit here, nursing my frustration, I'm beginning to wonder whether I shouldn't consider seeing some Regular Sales (ie. owners selling, not banks).

    Apparently, if you want to have an even worse wait, try to buy a short sale.  You have to wait anywhere from 3 months to a year!

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