Forum Replies Created
- kat13 wrote:Interested in the spreadsheets streamlineinvesting – are you able to message me your email or something?
you were not accepting emails, but below is my email, feel free to contact me
I think these guys are pretty much as low budget as you can get when setting up your SMSF. The fees and whatnot make it more attractive if you only have $60k or so to invest with, compared with the $200k that you mentioned earlier.
I will be honest, I personally have not looked into these guys, at this stage I do not have a SMSF, but I do plan on setting one up before the year ends. Hopefully by then I will know a lot more about this, or if you can test these guys out maybe you can let me know how it goes?
It is getting very difficult to find cash flow positive property in Australia, however note I am saying difficult, not impossible. There is still plenty of oppurtunities out there. The strategies that Steve outlines in his books are probably as good as any when you are hoping for a ‘formula’ for success.
In my opinion, the better oppurtunities I have seen for cash flow positive property are typically out in the country areas, not completely remote properties, but in small towns of around 10,000 – 30,000 or so, there are good oppurtunities for properties to be cash flow positive, or neutral.
Always talk to a few real estate agents in the areas, the ones out in the country seem to do the job for pleasure rather than money, so they seem to be typically more honest than city real estate agents. So just ask them the potential a certain property has.
Just doing a quick look on the internet now, this one the first one I really saw –
http://www.realestate.com.au/property-house-nsw-taree-110294369
Nice property in Taree NSW, $125,000. Potentially can be leased for $220 per week. With a 20% deposit, the principal will be $100,000. Interest only repayments at 6% interest gives $6,000 a year in interest. The rent gives $11,400. Taking away fees, maintenance, rates etc, I would say you would be slightly positively geared here, or at the very worst neutrally geared.
That is my advice when trying to find positive geared property, everyone else I am sure has their own ideas and can probably get a whole lot more creative than me.
I know it can seem a bit daunting to try and save enough for a deposit. I believe you should ideally try and save 20% of a deposit, one reason to avoid lenders insurance, and also because by doing so you should have enough equity in the property for future investments.
But with the median house price possibly around $400,000 in most areas, it is not likely to have $80k just lying around, not to mention all the costs associated with buying a property, such as solictor fees, stamp duty, mortgage fees etc etc. Nobody is really expected to have this sort of money just lying around.
If you are really desperate to get your foot in the door in terms of investment properties, there is no reason why you can’t go out into the country areas for investment oppurtunities, although the capital gains is typically not as high as city areas, the rental yields are quite often a lot higher, and it is typical to achieve a round 9-10% gross yield, and once all expenses are taken out you may be lucky and find it is positively geared.
The other benefit with country property is the entry level is a lot lower, it is not hard to find decent properties in smaller town centres for around the $100,000 mark. Then you only need to save up around $20k. It may not be as glamarous as going into a nice 3 bedroom penthouse apartment in the city, but it is definitely one way of entering the property market when you have next to nothing to start off with.
I have developed a fair few spreadsheets regarding property investing, buying verse renting was a spreadsheet I made, I could offer you a copy if you wish? However I feel it may not work perfectly in your situation.
I would be happy to develop a custom one for you though, I enjoy a challenge and like to try and develop a database of spreadsheets that hopefully I can use to help my investments in the future.
It would be the best way to see the financial side of the decision, obviously there is a lot of sentiment to be taken into account, but only you would be able to look into this.
I have noticed that banks in the US seem to be so far behind the times it is really not funny. They do not seem to believe much in customer service, they have a love affection with cheques still. I really hope they do improve the systems over the next few years because they really are behind the rest of the world.
When we purchased property in the US, obviously financial fluctuations played a big part in it, we were hoping to be able to get US dollars while it was weak so it would be another way to make profit.
But at the end of the day, we just figured in the long term, we should be satisifed with anything over parity, so obviously around 1AUD = 1.07 USD is great, but I believe most of our dollars we got for around the 1AUD = 1.02USD mark, so we were still delighted, we are in this for the long term so not too concerned about short term fluctuations, and we believe the long term is for the AUD to go back to where it historically was.
Looking just now, the exchange rate is around 1AUD = 0.98USD, so already we have made a couple percent profit on our investing! Happy days so far. That being said, we do intend to purchase a whole lot more properties in the future, but hopefully we will be able to use the rent collected from our existing property to get more properties, and not have to transfer across more australian dollars.
bigfirerichie wrote:Currently in Arizona. They won't notorise a document here for an Australian in case I'm a Mexican! Not just the banks that are backward! I set up a us bank account from Australia through HSBC, cost $200, but can be done. Never used it though as there was no branch in Vegas. Waste of 200 big ones. Signed up with wells Fargo when in us for a fee free account that now costs $13/month. Have an appointment on Monday with Charles schwab bank which reads ok. Will let you know how I get on.Hi Bigfirerichie,
Do you have a contact from HSBC who you dealt with? We've tried to open a bank account through them without much luck.
Cheers,
LennyFrom my experience I think it is very unlikely to be able to make money building a 'dream home'
That being said, I do have a plan one day to purchase a large acreage out in the country, and build my perfect home just as I want it, I am not doing this to make money however, I am doing this to enjoy my life and live in the exact home that I want to. I believe if you want to build yourself a perfect house, then you will not be doing it to make money, rather just for the love of being able to create yourself your own unique piece of art so to speak.
The most common way to make money from an old home on a big block of land is to knock it down, put up a block of units or townhouses, cheap and nasty kind that take a couple months to build, and them sell them all off and hopefully able to make a profit. Not exactly the most inspiring work of course, but at least it puts food on the table.
I have seen this effect with my investments currently in Florida. Countless times we would offer up to $5,000 over the asking price, typically for a $50,000 property, so 10% over the asking price, only to see us get out bidded, was never sure how many other people were going for the property, or what the final price was, all we knew that it was too high for us and at the price they would have paid it wouldn't have suited our criteria anymroe.
Also looking currently at the properties for sale, every day there seems to be fewer 'good' properties, and by good I mean ones that are not completely dilapidated or in war zone areas. The decent properties seem to be snapped up within hours of being put on the market. Not to mention the value of these decent properties also seems to have risen a couple of percent from the same time last year.
I just hope it does not get too out of control because we still hope to have a couple years to be able to build a great property portfolio in the US.
Eventually it will end, and we will have to come to a new strategy that matches the current economic climate.
worldinvestor wrote:Just emailed the contact, however this will only be useful if you are looking at Atlanta.Also, if you are using a lawyer to set up your LLCs they can set up your bank account, EIN etc.
Cheers
WIThanks very much WI. We’ve struggled to open a US bank account for over a year now. We actually had one open and then the bank closed without informing us due to the Patriot Act. It’s just ridiculous.
Great idea, we’re signed up. We’ve just had our first offer on a property accepted so excited to finally enter the market.
worldinvestor wrote:I set up personal bank account when I was in Atlanta.My lawyer set up my bank account for my first LLC. I have since opened several bank accounts for various LLCs myself from Australia, I have a contact person, happy to pass this info on if interested.
I am with Wells Fargo, I must say I think the US systems are miles behind Australian banking systems, don't understand this. TCC is probably right as far as Wells Fargo goes, but I am told that US banks in general are hopeless.
I am visiting Atlanta again in the next 6 weeks and will be setting up another bank account, want a bank that is affiliated to Australia, can anyone help with this question? ThanksWI
Hi Worldinvestor,
Could you pass on your contact? We’ve been trying to set up a bank account in the US for a while now. Our email is [email protected]
Cheers,
LennyHi Engelo,
Great thread mate. Definitely keep the posts coming!
I have a few questions as I live in Sydney and am thinking about undertaking a similar project. To give you some background, my mate and I are working full-time as engineers and have been looking at purchasing a property in the US for the last year or so. This is harder to do than it first seemed and we are now looking at buying a cheap property in NSW and doing a renovation to increase equity and rental return.
My questions are:
1) What do you do for a living and how do you manage to find time to renovate a property (you mentioned that this is your 7th or 8th project)?
2) How did you get started in this and what would you recommend for us as a first project?
3) How much of the work do you do yourself and how much do you contract out?
4) Do you have a team of people that you use (tradies, property manager, real estate agent)?
Once again, thanks for starting this thread and keep up the good work!
Cheers,
LennyI guess there are a few things to worry about, mostly just unexpected ones so it would be nice to have some sort of agreement in place so there was no confusion abou the unexpected.
Was sort of thinking that instead of just giving him so much, whatever money we saved we would put towards a holiday for something (we are going on a mountain climbing expedition next year) to sort of just give us something for free, or at least pay for it with some money we would not have otherwise have had.
Still sounds like a win win for everyone to me
You shouldn't need an LLC, all you need is the EIN and this should help you get a bank account. ITIN is for an individual only and seeing as you only have a company set up over there, there is no need for an ITIN. Luckily too because that form looked very involved and aparently can take a long time to get approved. EIN is relatively quick.
Sorry I made the mistake in my initial thing by not including capital gains in the property example. I guess the return for stocks would need to be GROSS returns of 9% not net returns.
I do not think property is that bad in towns like Tamworth, most likely the capital gains may not rival big cities, but it does not mean they still cannot increase. I guess I just am very keen on positively geared property and since that is very difficult to find in large cities, unless of course you do get creative and sub-divide, add rooms, renovate etc etc. Whereas plenty of rural properties are positively geared without having to do anything.
I was having a bit of a look at the numbers and comparing what sort of return you might need if you did invest in shares. Firstly the assumptions:
* Interest Rate of 7.0%
* Initial Net Rent of $610 a month (gross was $910)
* Capital Appreciation of 2%
* Rental Appreciation of 2%After 10 years, property value was $158,500. Principal still owing would be around $65,000. So value would be $93,500 after 10 years and a profit of $93,500 – $40,000 (initial investment) = $53,500.
Obviously I have made a lot of assumptions but bare with me.
Investing in shares a year on year net return of around 9% would be required, $40,000 x (109%)^10 = $94,600.
I will be honest with you I do not know too much about shares. But that is the sort of return you would need to make shares viable. Also remember I did make a lot of assumptions in the property example, and used 66% of the gross income as the net income when maybe 50% would be more appropriate.
From reading it seems you cannot afford to buy in your area, you do not want to move, so you will have to continue paying rent. I know a lot of people are a bit turned off by rural areas because I guess they see less oppurtunity or growth in there, which I guess is a fair assumption, but provided you purchase in a steady rural town that has some sort of population growth over the years, or at least something to keep people there, I would imagine you would be fine, at least not lose out on an investment. For example Tamworth amd Armidale has universities. Bear in mind a lot of people are suggesting that Sydney prices will take a correction in the next couple years so there may not be much growth in the Sydney market either.
I am also looking into rural NSW for some positively geared property. Just something that can pay itself off with hardly any input from me and in 15 years or so, it is completely owned (I prefer to have a property paid outright rather than just always the bank owning it), without me having to put forward a dollar of my own money apart from the initial deposit.
Below is an example of something you could easily do.
http://www.realestate.com.au/property-house-nsw-tamworth-107250602
Property for $130,000, with your deposit loan of about $95,000. Interest only that would be $555 a month in interest (7% IR). Currently receiving $210 a week in rent, $910 a month. So a gross profit of $355 a month. If you put it all towards paying down the interest and principal, would take around 15 years to pay it off, as I said before, without really putting much of your own money into it.
Down the line you could always renovate, add rooms, sub-divide (was a decent amount of land), to increase some equity and then hopefully be able to purchase your PPOR in your desired area.
There are a lot of benefits for both renting and buying, also a lot of disadvantages, many of them are not always financial. Things like in your own home you can just about whatever you please regarding decorating and internal design, but with renting you have the flexibility to change where you are living relatively easily. And as the rent is generally lower than mortgage repayments, you can find yourself living in a much more expensive place you may be able to afford.
As for financial reasons, I made a spreadsheet when I was first looking at buying a house to see if it was better for me to continue to rent and save more money to create a larger deposit, or if it was better to get in now with the deposit I had and start investing in a property right away. I can send you the spreadsheet if you want, feel free to drop an email and you can have a look at it and make up your own mind. In the end I chose to buy a place, I think it was actually even for me from a financial point of view, but there were other reasons which made me want to buy a place.
