Forum Replies Created
Jay
Yes, Aussie deposits can get you 7% totally risk free. take 30% off that for taxation and inflation of say 3% and there ain’t much left if any. I don’t think too many Aussies will be borrowing against Australian held assets to buy US property. They only need to think back to the 80s when a lot of farmers lost their farms through foreign loans when the currency exchange rate turned against them.
Regarding low price US properties, I agree. If you buy from a $2 shop, you know it’s not going to last and ultimately it will cost you more. I ruled out the Midwest for this reason. I have also seen properties being offered for sale from rehabbers for $60k when their listed purchase price was $12k. Must have been a good rehab!!
As you say, buy good property in good areas and set your sights a bit lower on returns and you can do well. Do the opposite and you get what you deserve. Everyone loves a bargain but buyer beware!
Many economists are saying that Australia is also in a housing bubble and our market is about to collapse too. They could be ri
Jay,
Aussie interest rates are comparatively high because of the strength of the Australian Economy. Unfortunately for Australians, overseas investors see our high interest rates and pour money into our bank accounts, etc. Ultimately this leads to too much money in the economy which then starts to overheat. Consequently, interest rates are raised to stem the tide of inflation and this sucks in more overseas cash. Just a merry-go-round. In the US, Aussies see the low interest rates and believe that with rates that low, as soon as the banks have money to lend, people will be falling over each other to buy their own home.
In Australia, a rental property might return maybe 6% GROSS, probably around -10% nett, with little chance of any capital growth in the foreseeable future as homes are now beyond the reach of many people. Suddenly, the US starts to look very attractive.There is a risk with any investment, but with the world shrinking, investing overseas is no longer an issue. Distance is irrelevant as the airfare to the US is not much more than flying from one side of Australia to the other, and just as tax deductible. The only shining light with Australian property investment is that on the whole, I think Australian tenants look after their property better, although that is a generalization as I have seen some shockers here too. Fortunately, we can get landlord insurance for any malicious damage, but as in the US, carpets need to be replaced, homes painted and maintained properly and usually at much higher prices. A $20,000 rehab in the US will get you a lot of work done. A $20,000 rehab in Australia might get you a new kitchen.
You pays your money and you takes your choice….I have spoken to Housebuyers USAquite a few times but I cant quite get my head around paying upfront to look at listings. Makes me wonder what they're afraid you're going to do. One place I know of, did send me some pics and information and I tracked down ho they were buying from in the U.S. and it was $10,000 cheaper so I guess they have to hide their sources.
I received the same information from them. I am only on their emailing list. I have never actaully dealt with them.
Jay
So as a matter of interest, what is the investment level required?
Jay,
Not sure what is on offer. Visited the website but not much information there. Is it a land purchase and then hold?Detroit Dan
I looked initially at Detroit but decided I wouldn’t buy anything I wouldn’t live in myself and the 20% returns you mention would definitely not be in an area I would live. I also wonder about 20% returns over the long term. These would appear to be older properties which would most likely need more maintenance. I believe a house roof in the US for example has a life of maybe 10 years. Maybe less in the rust belt. Aussies are more used to a roof lasting almost forever.
I think Australians chase the high cash-flow because interest rates in Oz are so relatively high. 7% on a risk free term deposit means there has to be a high return or lots of upside to make it all worthwhile. If I could get 10% net return with reasonable upside and little risk I would go for that. There are lots of people on here touting their buyers agent companies and it can be hard to distinguish the good from the bad. Any of these people who ask for “registration” fees are going to rip you off. Period. Would any Aussie pay a real estate agent just to see their listings? I don’t think so!
So if any agent out there can GUARANTEE me at least 10% return plus capital growth, I’m listening.
rlillycrop wrote:Hi MorganTurboTax produces all the paperwork directly. The only form it doesn't produce is the 1040-NR, however it does produce a 1040. So you can easily put the figures onto the 1040-NR yourself. You can then just mail the paperwork to the IRS. It will also produce State returns for you which again will print out all the relevant forms so you can mail then to the relevant State.
Do you use the Premier version?
jayhinrichs wrote:Portpirate,
there you go, its like us crazy americans running up thousands of dollars of credit card debt at 18 to 30%… And then investing in the stock market.. Your better off paying off debt , getting into a cash position then investing. its epidemic here. Credit is far to easy. I did not realize your mortgage rates were so high.
At the end of the day 18% plus returns on rentals in the US is just not sustainable. If it was the case the US buyers would have bought them all. Heck there is 300 million of us and only 30 million of you. What your countrymen are doing is buying half of our JUNK and making a bunch of promoters who have no concience a lot of money. Just keepin it real
Like I said for everyone who post of a bad experince there is 10 to 20 behind them that are too embarrassed to admit they got taken.
To complicate it further, Australians are required to contribute 9% of their income into a superannuation fund. Many Australians have started self-managed superannuation funds to invest in shares, property, etc. Recent changes in the law now allow borrowing for these purposes, however, money cannot be withdrawn to pay down personal debt. So even though, you may owe money on your own home, you can have a pile of superannuation money you can access to invest with. That is where a lot of investment funding from Aussies would be coming from.
jayhinrichs wrote:Well now the horse is out of the barn, If your saying Aussie investors are borrowing on their primary residences at 7 to 8% pulling cash out and investing in the states becasue they think they are going to get 15% to 20% return, and make the spread.Then what you have is a big transfer of weath, half of the aussies that do this will loose all their money buying in the wrong areas. and the US companies and the promoters will pocket their hard earned dollars and theri equity in their homes.
There is no way anyone should borrow on their homes or retirement funds and buy a property in the states unless they intend to use it. In the long run you all are going to lose money, not everyone one but at least 50% and the ones that get caught up with the companys like bilobunch invested with will get wiped out. This is just reality
Why do you folks think these deals are there for you in places like detroit, Dayton fort wayne , and other rust belt cities because the local will not touch them with ten foot cattle prod. There are plenty of americans that can afford a 30k rental they just know its money down the drain in the wrong neighborhoods. And if your going to venture into this asset class you need to own hundreds of them not just one or two it needs to be a business and run very tightly
I agree, but most Australians have a mortgage and even without pulling money out, if they have spare cash, enough to buy a US home for example, they would be better off chucking it in to their mortgage if they best return on offer was 8%, so they chase the 18% or so being touted. I have looked at the 18% return properties myself and I agree. You are buying huge maintenance biils, bad neighborhoods and no chance of capital growth. Sure, they are cheap (by Aussie standards) but I think I would pick an area with nice newer homes in good neighborhoods. Less return but safer with better long term prospects. Its all a gamble, but stack the cards in your favor.
jayhinrichs wrote:Bilobunch:Not sure where to start other than to say these kind of transactions give our business such a bad name. However for everyone that comes forward to share a horror story there are 10 like you that are embarrassed would never admit they made a mistake or got taken by a Promoter or buying service.
In the states we have our own versions of buying services. Google Armondo Montalongo you will see he gives free seminars on how to make millions and retire in a year with non of your own money blah blah blah. Then you go to the seminar you get all pumped up by the pitchman and you sign up for the 3k 2 day intensive training, They then go through the normal how to get rich quick stuff like short sales foreclosures how to do owner financing wrap mortgages and the like. The next big pitch and this is where they a really get the Americans is they then sell you a mentorship program for another 30k. With the idea that you have 8 hours a day contact with your personal mentor to help you through all aspects of the transactions. Well I have personally been to these companies they are all in Salt Lake Utah, The promotion companies have huge boiler rooms set up with 100 cubes and 20 to 25 year olds manning the phones big coolers of Red Bull and Mtn. Dew to keep them properly caffinated. These kids know no more about how to mentor someone than any other person off the st. so at the end of the Day someone who came to Armondo's Free seminar has spent oh maybe 40k and still has not bought anything. Then if you want to go with him personally remember he had a reality show, then you can pay another 10k to be his guest on a bus tour of all the deals you going to clean up on. He actually gets on TV and tells people they will start making 40k a month flipping houses if they just follow his program.
When you google him you will see all sorts of law suits etc. Being a hard money lender I have made loans to and talked to many of his and others students with the same horror stories.Ok back to the Aussie situation. I have stated before on this forum that people get way to caught up in return on investment other than capital preservation. And I agree with Speedy this USA buyer they were probably taken as much as the poor owner, However thats bad on them they should have no way put you in an invest how you described it, That shows a total lake of Due diligence and Charater on their part. However they are making profits on each of these sales this is how the business works. And by the time the out of area investor gets a property there is usually 2 to 4 fee's paid out to wholesaler local, Rehabber who bought it and sold it, Out of area marketing company etc etc. As a lender I will not make a loan on a property until I have seen a certfied HUD 1 when the wholesaler purchased the property then I can work the numbers from there.
It is standard in the industry to have between 15k and 50k mark up on these properties over all cost before they get to the end user. but hey thats capitalism and it works because the Aussies are paying cash most of these deals would never get financed by a US bank because the banks would not lend on properties with such big flip fee's in them its inflated value and not true market conditions.
As I read these post I may just start a constulting firm that has no financial interest in any property or area. And do a down and dirty due diligence for potential buyers for a flat fee say a few hundred bucks. I already know the top 10 markets and specific zip codes and markets not to invest in. As I would not touch them as a lender no matter what.
I use my full name on this site as my sign in so people can google me here in the states. Jay Hinrichs Portland Or.
having any investor loose all their hard earned cash by investing in a property that they had no business being in gives our industry a bad name and the good players a much tougher time. unfortunatly you have the heard mentality going on in Aussie from what I can see and as I have stated before the Foriegn investor really gets way to caught up in the % return. And thereby takes far to many risk's thinking they are going to buy a property that cash flows 18 to 25% year after year. Hey I am in the bizz and I cannot achieve those numbers. Of course I do not buy War zones either.
My other thought is I think Aussie investors could do really good just being the bank. And let a professional company like my company or any other number of good smart lenders lend your money. Be happy with 8 to 10% and know your going to in 99% of the cases never loose principal. I am just saying
Bilobunch
I guess the problem with Aussies getting 8-10% is that most Aussies are are paying 7-8% on their mortgages and if the returns are only 8%, they would be better off paying any spare cash off their loans, paying no tax. The advantage of investing in property has always been the capital gain aspect but with the uncertainty in the US market, it remains to be seen whether that happens. As a matter of interest, how would an Aussie become involved in hard lending?
Some cheap real estate in Christchurch atm.
Don’t know the fees but count on $250/hour I would imagine. Haven’t needed them yet but will in the not too distant future.
I think these people may be able to help you out. They help people like us with U. S. Properties.
http://www.ustaxcentral.com/Takes a couple of days to get an answer and like all accountants you probably have to sell your investment home to pay their bill.
Income is taxed in the U.S. as it is here, then there are tax credits for tax paid overseas back in Oz
All good points except the double tax system. Tax paid in the U.S. is offset against tax paid in Aus.
I meant to add. this property was listed for sale through MLS for $20,000.
That previous post didnt come out quite as well as I thought but the gist of it was:
Purchase price $39,000, Buying costs $8,300!! This is for a tiny 3 bedroom, 1 bathroom shack in Detroit
Taxes $2,300!
Not much left out of $800 month rent.Not sure what anyone else thinks but below is typical of what I think is profiteering. Take a look at the cost of the property and the buying costs. Anyone agree? <!– Main Menu
–>8510 Troy, Oak Park, MI
Total Cost of Ownership *: $47,300.00 Averaged Return per Year: 21 % Average Annual Rental Return: $6,274.00 Average Annual Capital Gain: $3,433.60 Average Gross Return: $9,707.60 Property Value in 10 Years: $88,936.00 Total Return over 10 Years: $104,377.00 Variable Data Values Used for Current Calculations Our Suggested Values Cost of Property: $39,000.00 $39,000.00 Refurbishment Costs: $0.00 $0.00 Buying Costs: $8,300.00 $8,300.00 Monthly Rental $800.00 $800.00 Annual Taxes $2,392.00 $2,392.00 Annual Property Management Fees $960.00 $960.00 Annual Insurance $775.00 $775.00 Rental Inflation Rate % 3 % 3 % Capital Growth Rate % 5 % 5 % Beautiful street in Oak Park. 3 bedroom, 1 bathroom bungalow. There is a 1 car detached garage and a basement. Hardwood flooring in the bedrooms.
Oak Park Statistics
Population 3,605 Total Housing Units 1,455 Owner Occupied 1,281 Rental Occupied 118 Rental Vacancy Rate 3.3% Average Home Sale Price $81,200 Click here for more statistics on Oak Park
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Average Nett Rent $5,473.00 $5,637.00 $5,806.00 $5,980.00 $6,160.00 $6,345.00 $6,535.00 $6,731.00 $6,933.00 $7,141.00 $62,741.00 $6,274.00 Capital Gain $2,730.00 $2,867.00 $3,010.00 $3,160.00 $3,318.00 $3,484.00 $3,658.00 $3,841.00 $4,033.00 $4,235.00 $34,336.00 $3,433.60 Gross Return $8,203.00 $8,504.00 $8,816.00 $9,140.00 $9,478.00 $9,829.00 $10,193.00 $10,572.00 $10,966.00 $11,376.00 $97,077.00 $8,089.75 Property Value $57,330.00 $60,197.00 $63,207.00 $66,367.00 $69,685.00 $73,169.00 $76,827.00 $80,668.00 $84,701.00 $88,936.00
