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One little warning I found when I was doing some research into investing in USA, because I initially did not see it myself and did not realise how much an impact it can make.
Property Tax is vastly different to what we have as an equivalent in Australia in rates I suppose. Because the property tax is the major supplier for funding for public schools in the area, they are generally alot higher than land rates in Australia. It is slightly complicated as it varies from state to state but for the purpose of this board I tried to find out exactly how Florida works.
Below is a quick example of how their tax system works.
"Example: Assume Homestead A has a market value of $400,000, an accumulated $100,000 in Save Our Homes protections, a Homestead Exemption of $50,000, and the millage is 5 mills:- $400,000 – $100,000 = $300,000
- $300,000 – $50,000 = $250,000
- $250,000 X .005 = $1,250 (Total Property Taxes)"
Unfortunately for investors, alot of these exemptions are not applicable to us as a lot of them are for owner occupied houses. So, typically in the above example, you may end up paying tax without any of the exemptions, obviously it is important to get an accountant in the US who knows all about this, but it seems you would end up paying tax on the whole $400,000 and at the millage of 5 mills, $2,000.
Another thing to be careful for is that they determine as the Assessed Value, it can be very different to what is the market value of the house. The link below has some information and an example table how the assessed value can work well if property prices rise as the assessed value is capped at market value, and then capped in growth by 3% or the CPI, whichever is the lower
http://www.brevardpropertyappraiser.com/mainhtml/howis.asp#exampletable
The millage rate varies county by county as well across the State. The link below has millage rates by county over the past 6 years (although not current to 2010). Again I am not an expert but I assume you add the millages together to get the total millage that you have to pay. And I believe Miami is in the Dade county (correct me if I am wrong) so overall for 2009 there was a millage of about 7.8 mills.
http://www.scribd.com/doc/19471833/Florida-County-by-County-Millage-Rates-20042009
Overall it seems that property tax is not too bad in Florida, I have not looked into it myself but I have heard that in some states in USA property tax can reach up to 3% of assessed property value, which as you can imagine can be a very significant chunk of your profits.
But I must stress that again it is best to talk to an accountant who knows alot more about this than I do.
Dick York
I would be very interested in how you get along. I also live in Sydney and at the moment and looking keen to invest in America, I am not sure what areas are the best, I believe there is oppurtunity accross the nation and sometimes it is just personal preference. One benefit of Miami I suppose is that it is a nice holiday destination so could be some added fun there.
If you have a good real estate agent there would you be able to pass on their contact details. I am hoping to build up some sort of team over there who can help me through the whole process and help me to see the feasibility of it all. I have seen a few services that provide this, but I do not see a reason to spend my money on something I can do myself, when I almost would prefer to do it myself anyway, I hate doing things without having full information anyway.
So once you have a real estate agent, what other people are required to help process an IP in Miami? A property manager, an accountant, a solictor. Do you have these contacts available presently?
Let me know if you wanted to discuss it further.
I agree with Glen, I am not sure of all the tax implications and FHBG and CGT and how all that would work having a holiday place for 2 weeks and then living for one. But I can imagine it just getting difficult logistically. I think the best bet would be just get a 2 (or more) bedroom place and rent out the spare room, maybe you could convince the tennant to pay a little more seeing as they get more space to themselves 2/3rds of the time, either that or at least they are looking after things and hopefully keeping everything tidy. Alot more stable and simple then a holiday place and renting it out to different people for 2 weeks every 3 weeks.
Definitely talk to an accountant to guide you through everything, as you are self proclaimed, new to all of this stuff.
Good luck with whatever you decide anyway.
British Buyer,
I was know in earlier posts you talked about some of the research you look at in the areas. But I was wondering how much you looked into factors such as unemployment. I read an article which was published within the last couple weeks showing that the unemployment figures for Miami had risen from 12.4 – 12.7%, well above the national average which is about 9.1%.
I was also looking at vacancy rates across the country. Florida has been consistently one of the highest over the last few years (around 17%), however this is state wide and I am not sure what it is specifically for Miami.
I was just curious what these sorts of figures do to your thinking of where to invest in America. I know in an earlier post you were saying it was more important to look at the capital gains which may (hopefully) occur so maybe the rental income is not a great priority. But with the high unemployment figures, and in particular rising figures, are you sure of the soundness of the investment.
I was hoping to be able to find out some things to see what the government is trying to do to fix these issues, such as investment in infrastructure or other ways to increase employment and stimulate the economy.
Anyway, just curious of your opinion on this.
British Buyer
I must say it has been really great hearing about your plans for the future. I am only new to investing in general, but from what I can see at the moment, there seems to be a great oppurtunity in US at the moment. I hear alot of bad stories about it however, but I still have a gut feeling that this is a once in a lifetime oppurtunity and I for one do not want to miss out on it.
Retiring at 38 definitely does sound like a dream, or even at least having the option to work or not, that is something I will be striving too. I am only 23 at the moment and I believe if I make the right decisions now I can set myself up to be very comfortable by then.
I have made a couple spreadsheets with some things, obviously not with too much detail, just basic things and it is hard to ignore the significant profits and gains I seem to be able to make using even conservative figures.
I hope you keep in touch as it would be good to know if you find suitable people over in Miami who you could perhaps recommend to others.
Recently I have been looking into all this American property. I am only new to investing in general and have not really invested anything, however I have started paying off the home I live in.
The main reason I was interested in America was that with the seemingly low prices it seemed like a relatively small investment, acquiring a property for less than $80k compared to Australia where finding something under $200k is next to impossible.
Reading through these forums it seems there are alot of horror stories and a lot of things that can go wrong so I definitely need to be wary of that.
That being said, if it is done right, it can be done with great benefit right? I have been trying to research as much as I can from Sydney, but obviously that is not the same as being over there and seeing it for myself. I have talked to some people over there, property managers, people who can organise finance, people who can find places for sale, but it is hard to know who to trust I guess because at the end of the day they just want your business so it is hard to know how legit they are being.
I am still looking into investing in America, but at the moment my options are very open, I am yet to take the first step into serious investment, I am trying to plan which would work best for me, but I also don't want to just hesitate continuously and miss out on an oppurtunity.
