Forum Replies Created
I have to agree and disagree with some of the comments on here. turnkey vs foreclosure, as long as the turnkey operator is the entity that owns the poperty. Too many middle men wont make any type of deal stack up.
The investor needs to ask themselves what they are chasing.
If you are chasing rock bottom foreclosure prices and are happy to wait for the rehab turnaround and tenancy placement with the possibility that rent or rehab come in under or higher than expected then, then this way of investing might be a bit daunting to some investors. You will get better deals doing it this way, so there are some pro's and cons for this strategy.
On the other hand I have dealt with many investors who want the turnkey solution, (time poor people who want a an easy investing solution from day 1). You will pay slightly higher premium for this solution but it can be effective providing the turnkey operator owns the home and isn't just a marketing machine selling some else's product.
We have had investors who get appraisals done on these turnkey homes and still get into them lower than the appraisal value. Some have also taken out loans and the lender has valued the home higher than the purchase price.
As long as you cover all bases before 100% committing to the deal, you should do ok whether it is turnkey or foreclosure
Wells Fargo is becoming much tighter on foreign ownership of bank accounts. Easy to walk to into a branch with your passport and do it. Not so easy if you live in Australia.
LOOPHOLE 1 –
Some US Property Firms can open up the account on the owners behalf, (the US Property Firm manager will have minor stake in the LLC to make this happen and then the LLC is amended so the original owner has full control again)
LOOPHOLE 2 –
Our banker at Wells Fargo is still accepting applications and usually takes around 14 days to process. Can only set up an LLC account and must have an LLC prior to setting up. Not sure how much longer this will last. The FEDs are cracking down on this
Hi Enchanted.
This is exactly how I am set up for my structure. ( I am not licensed to give advice but can talk of my experience)
If you don't bring any US property income home then my accountant has advised me that I didn't have to declare it as income on my latest tax return. It has simply been income generated by a US entity and has stayed in the US so the LLC would only pay US tax. But because the LLC is a pass through entity, then the owner of the LLC will pay the tax on the US side.
The moment you bring it home, then you will have to declare foreign income and pay tax according to your trust structure and distributions.
The rules pertaining to the taxation of the foreign trust are complex and you will need a good accountant on US side to assist you. I wish I could help further, and am happy to put you in touch with an accountant
Guys, I think you will find the ATO is cracking down in the next few weeks on foreign property ownership. Some will be getting away with it right now, but come audit time could by in strife.
Our Melbourne accountant has just got through in writing from the ATO that the SMSF will be taxed at the highest rate if it owns property through an LLC set up and this would be classified as non compliance.
ATO will apparently be refining its foreign asset ownership regulations.
I hope this is not the case!!!
But our accountant has been working closely with the ATO for the past 4 months to get black and white answers in writing… Some people could be really stung with the 50% non comply penalty.
Sorry to be a drainer but as long as your accountant can get the ATO in writing that they approve you to buy foreing property in your SMSF, you are taking a bit of a risk
Josh, I don't completely agree with you from my experience in the market in the past five years
– Purchase already rehabbed and/or tenanted properties
Depends how much extra you are prepared to pay over the value of the home. Vendors will always charge more for this service. If you want to get in at rock bottom prices, then you will need to go the foreclosure route, with a trusted vendor.
– Look for companies that cater for remote buyers and provide all the services to make investing easy and profitable
Agree. Back end support is sometimes more valuable than the purchase at the time. Things go wrong and you need a team who you trust to act swiftly.
– Purchase from companies that provide management services in house
Don't agree with this. This does not guarantee the management service is currently performing for clients. We had a manager who dropped the ball over time and we had to move fast to find a new management firm. Sometimes these guys were victims of their own success and we sent them too many properties over what their set up could handle. You need to ask the question, how many managers are looking after how many properties and speak to someone who has a property under mgmt of this company.
– Consider vendor financing option to minimize risk and take advantage of leveraging
This financing can be dressed up to hide an inflated purchase price. I would be wary of this.
A US bank independently has the property valued so you know if you are getting a good deal or not.
We had a buyer purchase 50k under makret value, and the bank confirmed that. This was a good US bank loan, 70% LVR and 5.5% interest
– Look for section 8 tenanted properties (government pays the rent)
Completely disagree. Section 8 is good while the tenant is living in there. But it can quickly turn sour, and then repairing the property and re renting can be a long process. So your annual returns are not much better than sacrificing $50 less per month on a more consistent basis.
I have had this happen to one of my properties before. Take the good with the bad on section 8 tenants and it can work really well, or a slight slip up by your manager and it can reflect poorly on your ROI
– Never buy fixer upper homes and attempt to hire contractors remotely ( YOU WILL GET BURNED!)
This is where the good deals are in Texas and Atlanta at the moment. Hedge funds are making it harder to buy foreclosures with little to no need of rehab.
Just need a good company referral for this from people who have done it before.
I have had contractors in AZ take for ever to do a simple rehab. Need someone on the ground managing it for you that is external to the construction team
– Make sure the seller is the actual owner of the property and not a wholesaler. Wholesalers mark up prices so they are able
Agree. Some people are happy to pay a bit more for less headache in the buying process and have it cashflowing from day 1. Other want a killer foreclosure deal. We can offer both services depending on an investor's criteria.
I am going through this citibank application at the moment.
Still yet to be approved, but the lady seems to snowed under 90 applications right now. Everyone is starting to catch on
I own a couple of US properties in my SMSF, but compliance issues are the biggest hurdle for Australian investors.
You wont be able to live in the property if you are planning to move to the states if you are under the age of 65.
Most industry super funds wont allow foreign property investment and you will need to set up a SMSF with either individual trustees or a corporate trustee of the SMSF.
Not every accountant will understand the compliance issues in regards to SMSF investment in US property.
There are small issues like getting rent paid directly into your Australian SMSF bank account and not into your US bank account.
Borrowing needs to be structured correctly with bare trust agreements in place between your US LLC and your AUS SMSF.
Check with your accountant over these issues and if they look at you puzzled then we have a good guy in Melbourne who we can refer you to. He has ATO compliance approval on 2 different structures that will allow SMSF US property investment
Membership fee for information easily obtainable by networking on here and DYI via google… save that 5k towards another property purchase
I don't want to offend people on here, but the membership fee seems to be the "moron" filter for some of these companies.
I have no issue with paying a finders/acquisition fee, but an information fee is a bit steep.
Zmagen, great question.
By far the most important issue for a foreign investor is the back end support once you have purchased.
Sign up to a few different websites, and get a feel for their service through their email drip feeds and their credibility. I have noticed cross overs with the same properties and huge price discrepancies.
Tread carefully, but most of it would agree, it is an amazing opportunity, if you can get the management and back end support to work in your favour.
A company who values your relationship and repeat business will show their true colors post purchasing
A lot of our clients are using their 6% offset mortgage money and purchasing properties in the US that are generating 15-20% net.
If you do the sums, you will actually take 10-15 years off the life of your Aussie loan.
Pretty good result if you don't want to rely on a job to service this loan in the future!
There were a lot of American Real Estate guys coming to Australia doing what Steve was doing in the 90's.
Then the Australian positive cash flow market dried up and now all the American's are replicating Steve's strategy but on their home soil.
Steve seems to be focused on the US market. Same strategy he used in Ballarat, but different part of the world.
I find it quite lazy and narrow minded for someone to dismiss that Steve is not up to date with today's market.
If you stop believing the negative gearing myth, stop believing what your bank manager and financial advisors are paid to tell you, stop believing all the crap that is written in today's paper, and opened your mind………..you may find that 0-130 properties is actually easier today than it was back in the 90's in Australia.
A couple of rough valuation sites:
http://express.realquest.com/search.aspx
https://www.chase.com/online/Home-Lending/home-value-estimator.htm
Again, this will give you a rough estimate, but valuation numbers are hard to manage currently with so many foreclosure sales pulling pricing down in the same neighborhood.
Probably better off paying $150-$300 for a full appraisal prior to settling on the property
There are a lot more banks now setting up there own REITs and buying bulk SFH's, without even doing building inspections. We have seen this first hand and it makes an easy quick sale for our company, but more and more retail investors are finding if they are too slow to place a contract they have been missing out on a lot of properties.
Its frustrating for everyone involved, because we like to please everyone, but, its hard to cater to everyone right now without sounding like a sleazy salesman and using the "you need to be quick" line.
Being a wholesaler, the trend seems to have changed to that of 12-18 months ago.
Perhaps it is all the positive home building data coming out of the U.S. which is now bringing more larger players from the sidelines.
Shadow inventory has been slowly released for the past few years, which have kept prices steady, although we still have a bit to go in the way of cleaning out the foreclosures to a normal level:
Welcome Insanowayno,
If I could give you some advice: There are enough FREE resources online as well as on this forum to help you make a sound investment decision. You don't need to pay for this by way of a membership fee or anything like that.
<moderator: delete advertising>
I don't have a buyer's agent as such, do you need a more hands on approach Labrador?
If you don't and are just looking for some GA property that is turnkey, then head to:
http://www.atlturnkeylistings.com
access code: areiatlanta
There is about another 30 properties about to be posted onto this site in the next few days (fresh out of rehab and tenanted)
This site is from our wholesaler in GA and property management is also in place so all that is needed to be done is due diligence on the specific property including an inspection, appraisals, etc.
DWolfe.
You nailed it. Doesn't matter what market you are in (international or domestic). People you trust and a system that you will trust will be the important piece of the puzzle.
I agree, the bottom has probably passed us in a lot of US markets. Which is good from the retail investor view, as that they don't want to be catching a falling knife, and now we are seeing a lot more action, especially in our bidding wars at foreclosure auctions.
Getting into a foreclosure at 2011 prices is becoming a little trickier. We have had a few large institutions now approach us and try and buy everything on our books. Not a bad problem to have, but a suggestion that maybe the big boys/girls are coming back to the market now that more positive economic data is being released
Google the ticker code ITB (this is an Exchange traded fund that tracks a group of the largest home construction companies in the U.S.)
This will give you an understanding of the new home construction trend since 2008
We see this time and time again… brokers who charge $5,000+ fees to access the system created by someone else and classify the membership as exclusive…
Those homes look very familiar to Texas Cash Cow homes… Looks like US Invest is just leveraging off Texas Cash Cow's system and charging a fee for it!
TCCI look to be the direct source for those Dallas properties, I'm sure Peter from TCCI may or may not be able to comment. Thank me later Peter ; )
I agree, Gross numbers don't mean anything.
But Gross numbers are good from a macro level when deciding to choose a specific market.
I don't find it that surprising that Detroit scored the highest price-to-rent ratio (highest gross rent) but also scored the highest vacancy rate ratio.
As Streamlined has said, in the right market, 8% is a solid score, but for the newbie's on this sight, it is quite easy to find that 8% return in the US anywhere, but the tougher decision to make is choosing a market with employment growth, population trends, low vacancies & finance opportunities
Property management variations from state to state doesn't have huge a impact on the net return, nor does the annual insurance
Hopefully some people who are interested in seeing the US market from a visual macro perspective would appreciate the unbiased trulia link.
Richard,
Appreciate your honesty on this forum and it is great learning for everyone.
Have any Detroit wholesalers or turnkey providers on here had any luck helping you off load your property rather than wasting any more time with that Allen slime ball?
I feel for you Richard. It makes me sick how <moderator: delete personal comment> someone can easily shut down an Australian operation, obtain a US residency, and re-brand. I have noticed there has been at least 3-4 Australian "US property" company's re-brand in the past 12 months.
I had a deal go bad about 5 years ago and at the time it was heart breaking, but going through these experiences can sometimes be the best investments we ever make! Stay positive mate. In 10 years time hopefully you will be looking back on this experience with a huge portfolio and reflecting that this deal was the life changer!
Hi Streamline,
I think it is more an American term, as all the large data/research firms seem to quote this ratio to track housing markets domestically rather than yield.
The trulia rent-vs-buy quarterly presentation is worth keeping an eye on
