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It might have been one of those once in a lifetime deals – mining boom and high dollar – GFC and cheap US property. I’m sure there are deals but you might have to have lower expectations?
I must have been very lucky as we went through a buying group but survived the experience. I met the property manager at a dinner as they had come out to Australia for a working holiday and the properties have been managed well for the last few years and I wish I had more. I agree the property management is the key to making investing in the US actually work.
Hi Ziv,
That’s a good question. I’m not going to provide tax advice, but for my older homes, the quantity surveyor (QS) has depreciated most of the renovations done prior to purchase (they have an effective life) of around five years depending on whether you choose prime cost or diminishing value methodology. Then there is a small amount of building allowance over 40 years. The value of the depreciation percentage wise will be the QS estimate of whatever was spent on renovations.
The depreciation expense means I won’t have to pay much tax on the cash flow positive returns until the depreciation and interest expense run out in the five year term. So I went from paying net tax to not paying tax for a few years. I am claiming back some of the tax I paid last year by giving the ATO an amendment for the depreciation expense.
For new homes the depreciation expense would be much higher – same methodology as Australian homes.
For the IRS (US tax), you don’t have to pay a QS for a report and the depreciation for me is a higher amount over 27.5 years. Under the double taxation agreement you can claim the IRS tax back from the ATO.
Regards David
The RBA has an inflation target of 2-3 % not zero. Enough said.
Thanks Terryw that's exactly what I was looking for. Cheers David
I mean the interest is tax deductable as the purpose was to generate income.
Thanks for the tip on NST
I have a cousin in Spain who is a real estate agent so when I visited them in 2010 I asked if there was any property worth investing in. I was told not worth the risk. You’d need to be very careful about risk to your rental income and do all the due diligence.
As a relatively passive investor, I wouldn’t put more than 10% of my portfolio in the US. Id look for a couple more US houses then I could check out a few of Zivs Japanese apartments at greater than 10% yield if I had faith in the yen.
It would be a nice to have foreign currency earnings if the A$ falls.
Jay has a point about directing passive investors to high yield US funds instead. Only then you still have management risk and fees to consider.
Ziv, how do you estimate the risk of vacancies? Are there statistics on vacancy rates?
Thanks Ziv. This may be a stupid question but what is MB on the floorplans?
Cheers David
Good one!
Ziv
How do you know your capital will be preserved with a falling population and tenant base?
Cheers
David
I’d use the same due diligence processes as expressed by others recently for US market.
I have cousins in Spain who are actually real estate agents and they told me to stay well clear of Spain. I’m not familiar with Portugul but would be very cautious about body corporate tenure and holiday letting comes with risks in any country.
You might do better just finding some cheap holiday bookings there?
Good posts thanks Alex and Freckle.
Shows the importance of Hispanics immigration with positive birth rate contributing to overall population growth and housing demand in the US along with interstate migration from Northern industrial states to the South and West.
That explains why US population is growing where European and Japanese populations are falling, in some places dramatically. If you are investing in a country or market with a falling population, you really have to ask yourself is the house and specific housing market I’m looking at going to be a good long term buy?
The probability of US population growth soaking up the excess supply in the US could make US houses bought below replacement cost a good investment proposition even if the US declines in economic terms relative to China and Asian countries.
Great idea! Count me in. I’ll be interested in how you share the info and do the technology.
Most people can see this is the Asian century where Asia will regain its former strength it had in previous centuries as the US loses its dominance. But I can’t see an Asian property market with growth prospects that has proper governance eg security of property rights for foreign investors. If I did I would consider investing there.
So Im looking at the US like investing in the UK in the 20th century. It’s losing ecomically to Asia but still has good investment opportunities if you seek them out. Having a foreign currency hedge is a plus.
Hi lilystar. What a crazy idea -haven’t we learnt from Europe? I imagine it would result in a market like Tasmania with a higher yield and lower capital growth as many of the young Kiwis are here in Queensland where there are jobs.
Cheers David
Oops sorry lawsjs I also got it from another source.
This article agrees with what you are saying about the market:
Cheers
David
