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That property is still for sale, and with 3 different agents which tells you something. Looking at market rents for 1 bed in Toowoomba it is < $200. The builder is paying over the top money to bolster the price. The key consideration is how long is the lease for and what will the market rent it for if he leaves. The expenses including 80% loan at 5% total about $10K p/a so to break even on $200 p/week rent you would need to buy it at under $120K and he has it on at $195K. Looks like good cashflow on the surface but when it comes back to market if you bought at anything near the requested price you would be losing money.
I wouldn’t say my US accountant is creative, but have found them reliable, responsive, knowledgeable and at a reasonable price.
Christine Bombard from http://www.bultynck.com/Which agent are you using in Kansas city?
I find the tenants in my US properties are like locusts and keep costing a lot in repairs, though some a stable and OK.
Hi Samantha,
If you haven’t done it already, invest some money first in education. I would recommend Steve’s property apprentice course for a good grounding in property investing. For a four thousand or so dollars it could save you tens of thousands in doing due diligence and going after right deal. The starting point of the course is working out your goals and what type of investor you are. This helps target your focus and run the filter over what you are looking at buying. You then also work out what you do and don’t have – time, capital, skills which you can leverage for the best return.
Read Anthony Robbins latest book – Money master the game. This is primarily American share market and 401K (their super type scheme) focused but has good general applicability. Basically it says to not invest in stock picking funds but in low cost market index funds.
You already have the concept of diversification for risk reduction, but this should be broadened to not just different commercial properties, but different property markets and different asset classes – shares, commodities, bonds. Another key is asset allocation between low, medium and high risk assets.Regarding commercial property, I own a few directly in trust and super structure and many more through syndicates. To start with I would recommend investment in a syndicate where you get to leverage on an experienced team of pros who select and invest in generally large multi-tenanted properties. This decreases your risk of reduced income from vacancies, involves very little time and can produce reasonable returns of 8%+ capital growth with a medium timeframe – generally 6-8 years. You can also put smaller amounts of capital like $50-$100K, whereas direct ownership means your likely to put $100’s of thousands into a single deal, often with a single tenant so you have a higher capital risk both in the size of investment and reliance on a single tenant.
It also gives you some exposure to the whats involved with a commercial property investment. Steve McKnight is looking a re-opening the Passive income fund for further investors. Have a look at it as a property fund investment as it provides a diversified tenant base, in an alternate growing Market (the US) with an experienced team and the benefit of regular briefings and Q&A so you get to understand commercial property investment further. In 2.5 years the unit price has increased 20% and we’ve received a bit over 12% in dividends. You’re not likely to get the same growth rate in my opinion going forward but see if it meets your objectives and allocate a suitable amount of capital.
Wishing you the best…
Brendan King
I increased The height in a lower room that was 2.2m to 2.4m by digging the floor, underpinning the footing and dropping the slab. Cost including extra drainage was about $25,000
I currently pay 4.84% on $945K (65% lvr) which is based on the bank bill swap rate of about 2.8% + a line margin which the bank calculates based on your risk profile which in my case is about 2%.
This is on a 3 month rolling period so the rate can be adjusted every 3 months based on bbsy and I pay a fee every 3 months for the rest, I think of about $300.Regard
Brendan
I have investments in commercial properties both directly and through syndicates.
My direct properties return direct yields of around 12% (which is high through negotiation, market timing and selection) and through borrowing 65% at 5% my cash on cash (coc) returns are above 20%. Typically commercial returns I would expect are 8% but as per above posts it depends on the tenant, area, property type and details of the lease. Lease is critical to closely examine as well as the real history of payments.The syndicated investments have built in borrowings of 40-50% and are returning 10-13.5% + capital growth
Direct single tenant investments are more risky in terms of possible vacancies, but through leverage and self management I get high coc returns.
The syndicates investments provide a good but not fantastic yields, but have a low aggravation and risk factor as the are multi tenanted and managed by someone else. I just get the quarterly payments to my accounts with no hassle.I don’t think you can readily get 80% over loans on commercial properties like on residential so it may be unrealistic to expect you can gear the properties to that extent.
I would recommend you start with a syndicated loan investment as you can start with lower capital like $100K and gain exposure to commercial returns while relying on the experience of the investment company.You can also invest in commercial through listed property investments on the asx. Yields are typically lower but you can trade in and out I a matter of days.
Regards
Brendan
The US passive income fund is an easy way to gain exposure to both the US currency and commercial property market.
Some of my reasons for investing in it are:- Experience of Steve and the team involved in property investments
- Integrity and transparency of Steve
- Investment philosophy of purchasing positive cashflow properties at below replacement cost
- Extensive due diligence procedures on every property purchased
- Ease of management – good on the ground managers and no hassle for investors
- Diversity of tenants and buildings
- I have been on the ground in the US and personally inspected some of the properties purchased or being reviewed for the fund
I invested $50K in the fund initially. For the 6 months to December I received a distribution of $1960 on the initial $50K, an annualized return of 7.84%
The unit price has increased from $1 to 1.09, a capital increase of 9% in 6 months.
This is with only about half the funds deployed.
I have since put another $50K and am likely to put more in.With investments in 16 other properties both direct commercial, through funds, residential properties both here and in the US I see this as a simple and high return investment with a team of proven and trustworthy professional property investors.
They have a proven track record of understanding the market direction and seeing the currency direction which, compared to the other REITs quoted by Freckle outperformed them significantly.
My expectation is that as funds are deployed and the market improves it will continue to increase the yield performance towards the 10% mark and the average capital base by a similar amount per annum for the next 5 years.
The opinions expressed are from my personal experience and expectations.
I recently filed a tax return for my LLC which has an EIN. The IRS sent it back with a box checked I need an SSN or ITIN and that I need to fill out a W7 form. SSN would be preferable I think, as most things you fill out in US seem to want an SSN.
I’m using affinity insurance for properties in ohio, kansas city, st louis, milwaukee. Have not had problems insuring them, but I they are all owned through LLCs, not directly by me.
I did have to specify when they were vacant, and think I had to pay a higher premium until tenant moved in.
In the mean time homeless people apeared to be utilising the property in Milwaukee,, and copper piping was nicked which I paid to have replaced just before the tenant moved in. I didn’t bother claiming on insurance due to excess.Haven't tried it myself yet as I am awaiting a critical mass of funds from rentals to minimise the % cost of transaction.
I would call ozforex, I presume they have a US based account and you can do an ACH electronic transfer to them from your US account. They then do the transfer to your Aussie account.
I'm using chase bank in ohio and the online system they have is good.I’m not sure what worldinvestor is referring to with the comment
“You also need to ensure that the bank you use in US for purpose of chanelling rental funds has an affiliated bank account in Aust, otherwise you will not be complying with ATO and will be a problem.”
What specifically are you not complying with?I have an SMSF as the member (shareholder) of an LLC in Ohio with myself as the manager with a Chase bank account with no Australian affiliation. SMSF has injected capital into the company and when funds at a comeback from rent it can come back as a return on investment and transfer through ozforex. I don’t see why the US bank has to have an Australian affiliation to bring funds back?
I purchased a unit in 416 St Kilda road for $270K back in 1999 from central equity. I had a valuation done last year which came back at $330K – an increase of 22% in 5 years (not great!). I have consistently had it rented out at $1540 per month over that time, with little or no rent increase. The unit is OK, but last time I visited the agent said not to try bumping up the rent as there are a lot of apartments in Melbourne available at the same rent but newer. I had the rental guarantee and they did pay the amount for a couple of months initially until a tenant was found. I think the company is OK, but there is a glut of development in Melbourne units. I wouldn’t buy one at the moment as the rental return isn’t enough to cover expenses (and possibly unreliable once the guarantee runs out) and you won’t be getting capital gains either.
