Forum Replies Created
Very easy to do, takes about 14 days if you get the paperwork back on time.
Wells Fargo accounts can still be set up with our local banker with internet access, ATM cards sent to your Australian address so you can access your money in Australia.
Billpay payment facility where you can pay contractors and property managers money from your online account
Freckle,
I think the resource play has more than 5 years in it.
US are looking to over take Qatar as number #1 exporter by 2016.
New type of "horizontal fracking" drilling is unlocking huge deposits in Shale areas that the so called "Peak Oil" experts didn't account with their "running out Oil" predictions in the late 2000s.
If managed well by the Obama admin, this could be the one saving grace for the US economy and we are only at the beggining.
From a real estate play you really need a strict exit strategy, this is not a long term hold investment!
3 months on, finance approval seems to move slowly.
Have spoken to a couple of brokers and they are witnessing domestic application volume increasing which is making some brokers less motivated to work with foreigners when there is so much domestic demand coming through their doors.
Still possible but we need to be a little bit more patient.
<moderator: delete advertising>
Hi Stu,
Nigel is correct.
You would file a 2012 US TAX Return (financial year ending December 31st 2012)
Then in 2013 June 30th you would file your AUS TAX Return.
Your Australian accountant will need a copy of your 2012 US TAX Return to add this "Foreign Income/Deductions/Tax Paid" onto your 2013 June 30th AUS TAX Return.
Generally speaking, Australia has higher tax rates, and you will the difference in Australia.
In my first tax return case, I had so many expenses and little rental income so I didn't pay any US Tax and received a credit for the following year. This was also put on my Australian tax return and I didn't owe any Australian tax.
<moderator: delete advertising>
Exactly Jay, very tough to do from afar if you don't have a competent management/agent in place on the ground who has your best interests at heart. Hard to find and you can really only rely on testimonials of people who have done it from afar before and how they did it and who they used.
Like the old Warren Buffet quote:
"It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price"
Same goes with real estate.
You could get an absolute steal on the MLS… but if you don't have the expertise or someone else on the ground to manage it and ensure the asset performs, what is the point of looking for that needle in a hay stack?
Why not pay a little extra for the on ground support & expertise. Long term the absolute steal could turn into a massive headache.
Texas & Georgia surely becoming tight.
Interesting point Jay and Freckle make about the Hedge Funds underestimating vacancies, maintenance and property management headaches.
I have seen a couple of management companies crumble as a consequence of funds pushing too many properties on their books and they were severely under staffed.
Sure, every mgmt company wants more business, but at those larger scales they need to really be prepared and ready for it.
I was always worried about these large firms raising huge sums of money to then go and purchase thousands of homes in a short amount of time. Most are now bidding $20,000+ over listing price. Right now listing price is quite irrelevant..
Maybe quality control will come back and bite them.
Surely the current conditions are not sustainable.
Hi Jay Sizzle,
It is hard for me to trust an agent from now on, after I had put in an offer only to find out later the offer was never presented to the owner and the home sold for 10K less than what I was offering. The agent was pregnant and she may have just wanted to close out a quick transaction.
So from my experience, I think sometime you have every right to get in touch with the owner and address them on a personal level.
Hi Jotham,
Fair point you make. How rude of me not to introduce myself and the reasoning behind my hot air statement.
I own properties in both the US and Australia. My US portfolio is doing way better than my Australian one.
I am speaking from a bit of US property experience as I manage my portfolio from Melbourne and also manage a large wholesale US property company.
I was in a similar position 5 years ago, looking for cash flow rentals in Australia, but wasn't willing to invest in a mining town. Soe times you can't force something that is not there and need to sit patiently until the right opportunity presents itself. I am not saying there isn't CF+ property in Australia, just a little harder to find and get the hands dirty.
Fortunately, the GFC presented an amazing opportunity to invest in the US. Back then you could name your price for a lot of homes going into foreclosure and rent them out and collect 30% gross yields. So I decided to align myself with an American company who specialised in foreclosures and turnkey properties.
Gross yields in the US a few years on can still be achieved around the 20% but I am noticing bigger players now entering the market which is a good sign. The market is still the lowest it has been in 30 years inflation adjusted (source:bloomberg)
Case-Shiller index has just reported a 10.9% increase over the past year in US home prices (source:Case-Shiller)
Mortgage rates are at historical lows (source: Citibank), large Hedge Funds raising 2 Billion to purchase single family homes in Californai, Georgia, Texas (Source: Wall St Journal)
Only have to google "Blackstone group raises $2billion". ( Google search: Colony, Silver Bay, Blackrock, Roc-Bridge for more private equity firms now in this space)
Question I want to raise is: How many private equity firms are raising money to that scope to purchase Australian cash flow property?
Warren Buffett is stepping up his holdings in the real estate space. Berkshire Hathaway now own 14% of Wells Fargo Bank. Buffett has been quoted many a times on TV about if he found a way to manage single family homes at the volume he would buy them in, he would do it.
*More and more Americans credit ratings are starting to re-set since the 2009 crash
*Mortgage rates are still the lowest they have been in history (3.8% fixed for 30 years)
*Foreclosure inventory has dropped from 1.5 Million to 1 million in the last 12 months
*Supply is drying up and private equity are buying everything they can get their hands on
*Homes are selling for 50% below their replacement cost
*I expect to see more families enter the market and confidence rises
*Home Depot (America's version of Bunning's Warehouse) is hitting all time highs on the NYSE and revenue is still growing. If the largest homeware retailer in the country is hitting record revenue growth…a couple of American's must be buying or renovating or doing something to their house to add value
Confirms what we are experiencing on the ground Sam. More bids are needed to be put in to get the same results. Hedge Funds are bidding 20K over listings prices in some markets and am noticing more people at auctions and more out of town people inspecting properties. Now that the trend is our friend, lending is easing, investors will now start piling back in to the market and drive prices higher. This year will be another good year for people who have already bought and there is still some opportunity left if one is sitting on the sidelines
CBA offered a .5% discount to the current variable 2 years ago. Rolled out a huge marketing campaign behind it.
Something was fishy back then, and they obviously saw rates heading lower.
I don't feel we are at the bottom with interest rates yet and they obviously are betting on rates to move lower in the short term, but, I agree with Jamie M on this – don't lock it in to beat the variable, make it more of a personal decision to stabilize your cash flow over the next few years
Hi Bunjie,
Better cashflow opportunity in America in my opinion.
Gross Yields of 20%
Interest Rates at historical lows
Prices are at 1979 levels inflation adjusted
US market is already showing strong signs of recovery. The bottom was February 2012 and on its way back up
Hi Radicals,
Are you chasing cash flow? Or growth property? Growth property will obviously require you to keep up with interest payments and a lot more stress to holding a job and not over extending yourself. With cash flow property, the property pays for itself and can be a great way to start your portfolio.
Remember, you can only buy as much growth property as your current salary can afford, however you can build a portfolio a lot quicker and with more properties if you purely focus on cash flow.
I am sure both strategies work very well, and it just depends what the outcome you want at the end of the day? Live off your property rental income and not have to work again? or build a portfolio of assets that are growing in value and you can afford to hold onto them with your current job.
If you are in Melbourne, happy to grab a coffee to chat further
Hi intrigue,
From my understanding it is when you get paid the income. So I would invoice to get paid for July.
You would be better off delaying payment until July. Save you a full year of tax accountant fees etc.
Looks great on paper… So much land, so much short term demand for housing…But how do you know when supply catches up with supply and slows down?
And once that happens, what other industries can that local economy currently support outside of the oil & gas industry. Can these other industries absorb all of those jobs if oil & gas slows down?
A bit too volatile for my liking and not enough diverse industries present in these little country towns.
Hi Sbarka,
Apologies but I can't help with the Canadian Australian connection I am sorry.
Might be best to approach a larger firm, but you will pay for the advice.
Peter is a good man. Have worked with him before. Attention to detail and very professional!!!
Great to see a change in focus for you Peter!!
anyone can buy property in the US. That is the easy part. The hard part is aligning yourself with a trust worthy entity or individual who can manage the renovation, rental advertising, property management. Instead of looking for the needle in the haystack that might be a great deal, there are so many other factors that are crucial to making that 1 in a million property steal even worth the money you paid for it.
Agree. Billpay (send electronic check) can be frustrating having to send checks all over the country but it is the only way for most foreigners to pay your manager or contract worker.
To bring money back to Australia, you can send a billpay check to your currency provider, and then they credit the money back into your account. The most effective way as most banks will not allow a foreigner to send money internationally without all of this annoying security checks that just make it not worth it.
It can be done! I have done it for 4 years straight, however, cultural shock until you get used to it
Sundirt,
LVR is lower and interest rates are higher for foreigners due to the higher risk the lender would be exposed to. The foreigner would have no-recourse on that mortgage and no way for the bank to go after assets or funds if that foreigner defaulted on payments.
You need to be dealing with 500K plus in assets to have any negotiating power with some of the larger banks and already have an established credit history / relationship with that global bank to be introduced to their "US branch"
Interesting post this one.
Here is what I did 4 years ago when I purchased my first US property in Phoenix, Arizona.
Studied the Macro economics of America and what industries and economic trends were developing. (This is very important! Detroit looks great on paper, but when you dig a little deeper……not so great)
Decided to target Phoenix first. Needed to see it to believe it.
Was taken on a tour of the 6 best school districts in the city
Interviewed agents and construction teams to further get a feel of which area I would target and decide who I would use.
I wanted to make sure the agent I chose had dealt with foreigners before and also spoke to the clients of these agents to gain further inside information on whether I could trust them or not. Not treating this interview process seriously may come back and bite you. There are a lot of sharks who want to make a quick buck.
You need to make sure you have someone on your side, with experience in the market and foreign investors
Spoke to many locals in 5 different suburbs I was taken to. Asked them about the street, whether it was quiet, whether they would let their kids play out at night time. Again, I was trying to de-risk everything
Interviewed an attorney about entity structure
Set up a bank account
Spoke to an accountant about tax issues, then spoke to a specialist back in Australia that I still use today about AUS/US tax issues
Opened up a currency account to get wholesale currency exchange rates
Started to put in bids at around 25% below listing price to test the waters. Instantly had a few approvals, which kind of told me I may have been able to put in even lower bids.
Finally purchased my first home while back in Australia.
Renovating management was a bit hard via the internet and email was challenging. (I purchased a few turnkey after that. And then purchased a few foreclosures after the turnkey experience.)
Rented the property out.
Wasn't happy with my property manager and sacked him and moved to someone else. I am still finding today, the Americans go at a slower pace than we expect in Australia.
This might have been a basic overview but I hope it gives someone an insight who is thinking of investing.
The biggest thing a first time investor needs to do is to analyse the risks in each market you are thinking of investing in.
De-risk your investment by only investing in a market with good employment and population growth. Good infrastructure, schooling, landlord/business friendly.
Don't chase the returns. It is not worth the headache. I have had client after client come to me and say the same thing.
Every city has its bad areas. Even a solid city like Atlanta or Dallas still have areas to avoid. Leverage off the knowledge from people who have done it before. This will fast track your learning and help you make a confident and well educated decision on where you are going to target to invest.
Regards,
