Richard
How have you found investing in the New York market?  In your earlier post you recommended against it but have property in Niagara Falls.  Did you have a bad experience with your current investment/property mgmt etc?   

I bought in Jamestown and have found it to be ok so far.  While unemployment is higher than normal and property taxes are obscene in NY State, it seems to be very well yielding? 

Interested to hear your thoughts.  I am also quiet keen to invest in Austin, Dallas or Houston so if you could post about your experience here that would be great.     

Josh

Is the australian trust for income splitting purposes?  Assume that it is not for Asset protection as you can get that through a multiple member LLC in the US.

Personally, I wouldnt setup an australian trust for my US property investment.  Its only my wife and I so im not worried about the possibility of family trust distns at the moment.  Trust losses (if by chance you made them) are trapped in the trust to only be offset against future income.  I know the purpose of investing in US property is to positive gear but this wont always happen – say you have alot of repairs for example in a particular year.

My $0.02 worth…

Is this a joke Vince?!

Kong,
Vince probably knows alot more about this topic than I do, but i can answer what i know fyi on the above.

Structure – most foreignors setup using a two member LLC or hold directly (as an individual – ensure sufficient liability  and property insurance if taking this route) 

Finance- tough one.  I financed my places in NY using seller financing. US Banks dont really want to lend to foreigners though. HSBC and Wells Fargo have non resident alien programs, but they dont make it easy.  Just alot of forms to fill out.  You dont need an IRS number, social security number, US credit history (but will need to verify your oz employment history, financial records, payslips, Tax return etc).  Chat to them.  Also, often the rates are 2-3% higher than locals pay.  Can also look at hard money loans but this is a temporary measure as rates are significantly higher. Suggest not borrowing using oz funds.  You then have too much forex exposure, and are at the mercy of the oz rates (when they inevitably go up here).

1031 exchanges.  Too hard to smmarise.  Have a look for your answer: http://www.realtor.org/library/library/fg408 Great site for us rentals with other useful educational data. 

Research:- I found most of my info on yahoo real estate, aol real estate and homepath and bestplaces.net for vacancy rates, biggerpockets as a US investment property forum,  city-data for unbiased, locals kowledge on areas realtor as metioned above and of course my favourite for stats: trulia.com.  http://www.redcapitalgroup.com/ has some good local info but i think its mostly focused on the multi family sector.  fyi, if purchasing purchasing homes privately check out craigslist in the city your looking at.  homes.com and investorloft.com are also useful. 

homepath.com shows foreclosures.  Stay away from realtytrac etc.  Huge fees for minimal service.

Hope all this helps. 

Josh

Just do the research properly before setting up a single member LLC.  In the eyes of the law in the US, if someone was to sue you it is unlikely that the LLC would offer sufficient protection as it may not be deemed a proper 'business'.  IRS treats single entity LLCs as sole proprietorshops.  This is just something I have heard online in the forums etc so look into it and suggest getting an attorney in the state you are purchasing. 

Not sure on the answer to the question on protecting your US assets from an Australian creditors sorry.  Most people are trying to protect their oz assets from US liability not the other way around! If the property in the US is in an LLC and that has been properly been setup your assets and liability should remain in the company. 

re australian trusts, just remember that losses are trapped in the trust . 

Try ozforex.  They charge only $15 for the transfer (and obviously theres a less favourable rate than the cross rate).  

The income/losses from overseas are assessable the same way as oz property income.   Your overseas income is assessable in oz when derived (ie when you receive the rental income).  ie you need to include the loss or income in your oz ITR in the year it is earned.  You cant just wait until your ready to bring it back.  You also need to do a US tax return each year.  CGT upon disposal will be charged like it is over here – eg 50% discount when held greater than 12 mths etc.  Theres a link and detail in one of my earlier posts about the rules around the exhange rate that you use to convert it to AUD.  The ATO is strict on this.   While it seems that by having to do a return in oz and the US you are getting taxed twice, you would receive a foreign tax credit on your oz return for any tax paid in the US. 

No effect on the yields other than potential currency losses.  The major effect on the yield is interest.  We cant borrow at the  same bargin rates that Americans can unfortunately. fyi I borrowed at 7% using vendor financing over there. 

Cheers
Josh

It seems that US banks (with the exception of HSBC and wells fargo from memory) arent interested in dealing with foreigners, regardless of whether they have cash – thats why their banking system is going down the toilet.   Best bet for financing there is owner financing (thats what I did for my US properties).  

Mike and Bron have some links for US financing on their site:
http://usaforeclosures.blogspot.com/2009/12/finance-for-foreign-nationals-and-llcs.html

Cheers
Josh

Chiz
Just to clarify my point,  I dont know what the non-resident rules are for NZ around CGT but im pretty sure their tax law operates the same as ours.  Your right though – either way you'll get stung eventually.  If you dont pay tax on foreign investment disposals in oz and are an Australian resident (for tax purposes) you are breaching the tax law!   Suggest getting advice from an NZ acountant if you own property there.    In oz, dont forget about the CGT discount which is available to individuals, trusts and superfunds.  This is available after youve held the asset for 12 mths. 

Losses on the operations of your foreign investment are not quarantined.  They can be deducted against any other australian income (eg salary etc) from July 09 onwards.  Foreign capital losses, like oz cap losses ARE quarantined to be used only against future Capital gains you might earn. 

Let me know if you have any further questions. 

Cheers
Josh

ps fyi, i own a few rental properties in New York state, but am also an Aust Chartered Accountant. 

Rather than email, Its good to list info on the site so others can benefit.  Other people will have recommendations to, but for me personally.  The below have always been fantastic. Ive sent others to these guys and had good reports.  Solicitor:  Paul Scara Property lawyers in Newtown.  Not the cheapest but extremely thorough.  Worth it.   Building inspector:  Matt from Aussie Building inspectors.  Very good builders.  We have used these guys on other purchases since and are very happy with them. Mortgage broker:  Neil Williams.  Based at Padstow and Chipping Norton but will come to you and manages the whole loan process (chasing banks for loan docs, signatures, arranging the refund for your first home owners grant etc).  Finds the best loan that suits your circumstances.  Fyi, it was with CBA. Free to use them – banks pay the brokers.  Insurance:  Home and contents insurance with Allianz  Up to you about the buyers agent.  If your new it might be worth it, but suggest that knowing your market is a worthwhile substitute to getting one of them…

Agree that Sydney prices are becoming ridiculous. A mate of mine recently bid on a 1 bedroom apmt in Potts Point (no views or Car park)  and it went for 700k.  When prices of a 1 bedder are 10 times the average wage its time to consider selling imo. I know there is still strong demand and limited supply blah blah blah but its becoming a serious problem.  The only thing holding up this market is the willingness of buyers to pay these prices. 

When sentiments change – prices will drop (aka London, UK)….