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Yes agreed, there are a few. Not many though. The trouble is transparency of cost price they paid and rehab actual costs.
How can you really assess both these.
even price records on zillow are wrong or slow to update.
so how can people really know cost base.
If it is over valued then lending becomes impossible from us banks
I have to laugh really as US Invest pass themselves off as selling at market property. I now work with two ex-employees of US invest and they left as the property they were selling are 2nd or even third hand bought. In other words US Invest buy from other firms that buy at auction or as your should direct from sellers either private or banks.
The areas too are questionable: Tennessee, Kansas City….horrible high crime and negative property growth and near zero job/population growth.
Potential buyers look at these two links before you buy anything and check previous sale history through
zillow.com or trulia.com
http://www.deptofnumbers.com/employment/metros/
http://www.neighborhoodscout.com/reports/6259772/
2012 job growth
Texas
California
NY
This will support rental rate growth and property price growth, Georgia still offers some growth potential but every man and his dog are buying there incl Bank of China and Blackstone hedge funds. Florida, Nevada and arizona have bounced off the bottom just like the share market post GFC. They all have poor job growth and high unemployment.
recent US economic and employment data has been mixed, these areas will be the first to drop as there is no job growth to support prices.
Do your home work folks and dont buy from turnkey operators. If your not buying from a bank or private seller rule of thumb….dont buy
Mark
i did a duplex in Townsville $660K cost to buy new build
$12,000 strata title cost
revalued at $360K each
Worth it
Guys,
Buying within a SMSF is ok, although you cannot borrow for the property. This violates the in-house asset rule. You can hold it in an LLC (C-corp is not relevant except for tax election with the IRS) which technically is an in-house asset but the ATO allows exceptions to this rule PROVIDED THE COMPANY HOLDING THE ASSET (LLC) IS UN-GEARED. ie no borrowing.
Tax for SMSFs in the Us:
Option 1: Elect to be a disregarded entity/trust (SMSFs are not recognised in the US) – CGT relief but tax rates escalate quickly
Option 2: elect to be taxed as a C-corp (no CGT relief but lower tax rates)
So, the answer depends on how many your buying and your strategy ie flip or hold ?
Good luck out there, its a mine field.
btw getting loans can jackup the returns to 20%+, so those numbers are possible but best i have done in Tx was 14% on cash buy for a duplex in Dallas. Texas is second state in the US for job growth = good rental demand
In the second quarter of 2012, gross job gains exceeded gross job
losses in 41 states, the District of Columbia, and Puerto Rico.
California had the largest net employment gain of 108,383 jobs,
followed by Texas with 89,160 jobs and New York with 33,889 jobs
Mark
Loan Terms:
These are important as the repayments will be higher and tax deductibility lower for the shorter terms upto 15 years. We recommend that anyone looking to maximise cash flow and after tax returns go with the standard 30 yr term.
Rates are available for 4% – 7% on these 30 yr terms and 30% deposit in most states. shorter terms equate to a higher overall rate of payment and are meant to lure in investors.
Mark
Gnibbler,
Never heard of the banks requiring 2 years rental income certainly not the bigger ones. They are more looking liquidity from all sources. what they want to see in tax returns, income and wages and cash at bank. Also important is property equity be it in Australia or USA. The banks we are using will allow 70% of any rented property as long as it is tenanted.
We are only dealing in Tx and GA looking at Tennessee and FL.
Have you tried CITIBANK ?
Hi Sonic 81,
Citibank USA will provide any foreign national including Australians with a one-off US property loan.
Its a 4% interest with a 30 year term home mortgage and you need 30% deposit which you can have as cash or borrow in Australia from your property as a line of credit.
We have two clients doing these one in Australia and one in Singapore. I would be happy to provide you with the citibank lenders name and contact details, she is in Houston Tx.
Beyond that some bigger banks like Citibank and HSBC will do lending for higher amounts like $500K USD loans but they will do this on Australian property and at 2.1% yes 2.1%. You must be able to qualify for the premium loan though.
In the US there are several state bank options, we deal with two texas banks that will lend to foreign nationals and a Georgian bank that also will lens.
Rates are 6% – 7% and most are 30% deposit required and 30 year term. The rate is fixed for 3-5 year depending on the bank but you are free to refinance anytime to another bank.
AVOID VENDOR FINANCE PROVIDED BY TURN-KEY OPERATORS – Stick to actual US bank loans with real terms and no trick interest rate hikes. If vendors are financing their own property then they are usually unable to get true bank finance as the property is 20-30% over-priced.
Unfortunately the industry is rife with these operators, many on this forum which is why i try to stay off it…
Let em know if you need any help navigating these shark-infested waters.
Mark
Talk to a surveyor first to ensure you can subdivide, that would be my first step.
Step 1:
Dont buy off anyone who buys the property rehabs then onsells to you….your paying above true value.
Step 2:
Buy through someone that can get you US bank finance which means they are a US based operation as well as Australian, critical.
Step3:
Dont buy cheap rubbish stay in the $70K + zone. You can still get a gross rental return of 20% and a new home in good neighborhood
Step 4:
Buy in a city where there is good population and job growth…ie your place will rent (Dallas)
Step 5:
It can be best sometimes to use a family trust as the member of yourt LLC to own US property. That way you can split income and take advantage of the new $18,200 tax free threshold for any beneficiaries. Only adult children can use this though, minors are taxed heavily. <moderator: delete advertising>
Mark
The best way is to use whats called a Master LLC setup by an attorney. Which then has an operating agreement with all properties through a management LLC. This means each asset is protected but you dont have to set up anew LLC for each home. Cost is about $2500 so its worth it if your going to buy more than say 3 homes. <moderator: delete advertising>
Mark
Ivanc,
It can be best sometimes to use a family trust as the member of yourt LLC to own US property. That way you can split income and take advantage of the new $18,200 tax free threshold for any beneficiaries. Only adult children can use this though, minors are taxed heavily. As for the US tax i can recommend my accountant or several others in the Florida or Texas areas.
I recommend using financing to increase your property position over in the US, <moderator: delete advertising>
Mark
Would tend to agree here from an asset protection point of view.
SMSF & LLC
Needs to be set up with the SMSF as the member of the LLC as follows:
ABC LLC
ABC pty ltd ATF the ABC super fund
borrowing:
this is tricky due to the above setup. One could assume that the SMSF is purchasing shares in the LLC which then means it is an 'in-house' asset and the SIS act states these can be no more than 5% of the SMSF assets. There is an exception for "non-geared" corporations which would then preclude any borrowing in the SMSF name if using an LLC.
If you did not use an LLC then i would assume borrowing is ok ASSUMING that you have set up the holding trust to establish 'non-recourse lending' AND t is within your investment strategy.
Yeah so pretty straight forward
Why open a US bank account if you don't need one ?
If you have a Us agent buying property for you just do what we do for our clients. Rent from US tenants comes into our escrow account and is then wire transferred to their Australian and other non-Us bank accounts at no charge every month….easy.
I dont know why everyone recommends opening a US account, unless they are just not wanting the extra hassle ?
If you want to hold USD for some reason at nil interest rates then you can let funds sit in the escrow sub-account in your name but like i said its nil interest or close to so…why ? Plus there are USD accounts available …
First disclosure: my company is a US property facilitator.
I have been am still currently a US Invest member. Very slick operation but you have to wonder how do all the staff get paid ?
I looked at many properties they offer and still do. I have never bought because i cannot see the upside in purchasing what looks to be property bought, rehabed and on sold at a substantial mark-up. If you do buy this stuff, two things happen…
1. yield or rental return is diluted and
2. You sell at a loss unless you hold it for long-term.
Find yourself a good agent in the US you can trust OR stick to companies that do not buy the property themselves, why ? Ask yourself why someone would bother to outlay cash to buy a property and refurbish it if they are not making some extra cash on the deal ? Why not just arrange buyer and seller and charge a fee. Common sense really…
Apart from our group who are mainly in Texas and Florida, Karina at Select American homes operates in Georgia, with no purchase and markup, just a transparent facilitation fee, easy. The slicker and easier the deal looks the more you lose out of your pocket…. save yourself a packet, get a better return.
Sorry Rehabbers but we all know what the deal is…
