I've just come back from the US on my first property research trip – was great fun! Unfortunately I didnt get to buy anything because I really underestimated the level of competition for the good bargain properties. I had the impression that the reason for all the cheap properties is that nobody is buying…wrong! They are just not buying the crappy neglected properties in scary bad areas. To get the good properties, you need to know the areas well and strike quickly – by the time I had done my research on a property and decided to make an offer, it was too late! On the plus side, I guess it meant that I was on the right track. Anyway, I'm heading back in September and this time I'll be better prepared! Hopefully there will still be a few good bargains left for me to snap up.
One tricky thing that I didnt get a chance to figure out is… how do you attach a check for the earnest money to the offer without having a US checking account? I went to Chase Bank to set one up and they told me I'd need a US Address and an official bill (eg: cellphone) or insurance policy showing that US address – well I've got nothing to insure and non-residents cant get credit/cellphone plan without an ITIN & cant get an ITIN without a tax return. So I'm stuck. Except that I know that lots of Aussies have set up a US Bank Account, so how did they do it?
Cant wait to get back there!
HSBC in Aust can setup you up with a HSBC account for a fee of $200. If you want to save your $200, wait til you go back over there and then setup with HSBC for free. I didnt have a US bank account when I bought my properties and paid my deposit via bank trf from oz. All you need to do is transfer the earnest money via ozforex.com.au or your oz bank. This is easy once you have the routing number of the destination bank account.
Richard Lilycorp has a good link on setting up your ITIN http://www.us-property-investment.com/IRS-Tax-ID-Number.aspx
There will still be more than enough bargin prices in the US in September when you go back. The US property prices arent moving anywhere fast given the way their economy currently looks! .
Thanks Ambosh. Looks like a direct transfer is the way to go – I guess I dont have a choice without a bank account.
Yeah, I had a look at the HSBC website for USA – first there is no HSBC branch in the State I'm going to, but also noted that there is a requirement to maintain a $100K account balance! or a $50 per month fee. Neither is ideal for me.
I'm afraid Richard Lilycorp's info about ITINs is out of date as of April 2010 – the IRS changed the rules and you can only apply for an ITIN when attached to a tax return containing an amount to declare. I guess they want to cut down on the number of people trying to get an ITIN just so they can open a bank account!! hahaha.
I so hope you're right about there still being opportunities in September. I get a daily email from realtor.com on the properties I'm interested in and the prices are definately creeping up – slowly, but consistantly. Of course, there are still the cheap neglected problem properties in bad areas, but I'm not particularly interested in those. I might have to settle for lower quality by Sept.
When I first went to the US I didnt have a social or anything – but it was very simple to get a bank account from BANK OF AMERICA.
Pretty much anyone can get a bank account from them even without a social – you’ll need to show them passport/ drivers license (yes they accept australian DL) and SOMETHING (anything )wth an address … to be honest I cant remember EXACTLY what I used now but it was a piece of mail I had recieved I just showed them the printed address on the envelope. You could use a rent recipet or somehting if you rent a place to stay while you are there.The ONLY problem which you may have is how LONG you have BEEN in the US.
They ask you how many months you have been in the US in the past 2 years. You need to have been there in TOTAL for over 18 months to qualify. I actually had been there there entire 2 years.. but they don’t even check any records (not that I want to advocate lying about this) …the whole thing was very relaxed. For SSN they just entered 999-999-9999 until my actual SSN came thru and I went in to change it and I was also able to get a credit card then.The ALTERNATIVE way – and probably the way MOST offshore investors do it – is to set up an LLC. It’s very straightfoward to set up (though how simple it is to use for buying thrru an LLC I cant tell you as I havent done it) and you dont even need to be in the US to do it – You can do it all online through a lawyer that handles LLC’s just google “Setup LLC [state you need]”
Hi PQ
I apologise if my information is a little out of date, I'll up date it. With regards to opening a bank account, you should be able to walk into any branch of Chase or BoA, tell them you're a real estate investor and open an account with a passport and proof of address (non-US), without needing an ITIN. If you go the LLC route then you'll need an EIN number to open the account. The IRS have a special overseas number for getting an EIN (215-516-6999). If not you'll need an ITIN or SSN to use their website registration.
If you need a US address I use UPS Store. Their charges range from $30-$60 per month for a mailbox, which gives you a street address. You can just call them when you want your mail forwarded. The forwarding costs are extra.
Good luck with finding a property. The market has risen a bit in the last 6 months, but there are still great deals out there. I am about to close on a house in Indianapolis, 1000 sq. ft. 2 bed 2 bath built 1999 for $29,000. It does need $15k rehab, but still a great deal!
Thanks for the advice guys – Richard, your site is great, lots of good useful information.
It was Chase Bank that I tried to get an account, but it was a suburban branch so maybe they didnt have the correct info for non-residents. I've just booked my flight back there for Sept, so I'll try again when I get there. I also tried to set up an LLC online & they want an ITIN too – geez, its so frustrating!
So it looks like I'll have to buy in my own name, get a tenant in, earn some income, send in a tax return with an ITIN application, set up the LLC when I have the ITIN and then quit claim the property over to the LLC – all the while hoping to hell that no one sues me while the property is still in my personal name! I'll certainly be getting the top insurance cover possible…oh but wait, do you need an ITIN for insurance too?
Hi PQ
You can setup an LLC without an ITIN. I use InCorp (http://www.incorp.com). You can form an LLC via their website using your credit card. You will need their registered agent service as you are overseas. Once your company is formed call the IRS at the number above and get your EIN. Then sign up for a mailbox with UPS Store and get an account with Chase using your new US address. They will probably give you a personal checking account also. Where about in the US are you visiting?
With regards to liability having good landlords insurance is number one. I always increase the liability figure which makes it more expensive and then increase the deductible (excess) to make it cheaper again. From what I read most law suits are settled with an insurance payout as the tenant doesn't want to wait or have the cost of the courts. Having an LLC does sheild you a little from law suits but the insurance is the most important.
I believe an LLC works in that when the tenants lawyer is looking at your property records for a lawsuit, the name of you LLC comes up rather than your name, so it makes it difficult to see if you have any more properties (more to claim!). I believe the lawyer has to file a lawsuit before they can use discovery to see what other assets your LLC holds, so they are less likely to go for everything you own. Also an LLC sheilds your personal assets from being taken (providing you run your LLC properly). A single member LLC has less protection than a multi-member. I am not an expert on asset protection so I may be wrong!
There are many banks that will allow you to open bank accounts via the mail even if you don’t have a ssn or an itn. They will ask for a notarized copy of your passport and another form of government ID like a drivers license.
The four I recommend the most frequently are large banks with familiar names for my clients: HSBC, Chase, CITI, and Capital One. HSBC is the most popular with my clients as it is a large and well recognized international bank. All four will allow you to open accounts via the mail.
Here are a few tips to get the deal you want. I look at over 100 properties a month and I make offers on the spot while I’m in the house if I want it. As you have noted, much has changed, at least in Detroit, in the last two years. The market is very competitive with properties selling for upto 100% more than asking price if they are nice and truly under value. To make your offers more competitive, do what I do.
1. If you like the house, call your agent while you are still in the house and have him/her make an offer right away. This is assuming you already know and like the area, you have a decent knowledge of required repairs, and you have a team ready and willing to execute your plan.
2. Offer more than asking price. This is on a market by market basis, but in Detroit, many great properties (not ghetto properties) are listed very aggressively, as low as $10,000 USD. If the property doesn’t require much rehab (renovation) it’s very common for the property to be bid up to and over double the asking price. Obviously this is only advised if you know the repaired (after fix up value/after repair value) of the property. You still want to get a good deal. If a house is worth $55,000 USD fixed up, and only needs $10,000-$15,000 in repairs, you have some room to increase your offer.
3. Increase your earnest money deposit (emd) to a higher amount. In Detroit, a $1,000 emd is common. In this competitive market if I really like a property and I know it will be bid up in hours, I will submit my offer with a large emd. Following the example above, if the property is nice and listed at $10,000 with the repair range above, I would offer $17,000 with $10,000 emd deposit. What this tells the real estate agent (who wants to be paid and is very tired of investors not closing on properties) that I mean business. Many times my lower offer will be accepted over much higher offers because of this. Once again, only do this is you know what you are doing and you are ready to buy the house. Your emd is nonrefundable (except if the seller can’t produce clear title or the condition of the house has changed somehow since you put the property under contract) so there is no opportunity for second guessing yourself.
4. This may seem basic but submit your offer with a proof of funds (bank statement, retirement account, etc). This proves to the real estate agent that you have the liquid funds to purchase the property.
5. Offer to close on the property in less time. Usually banks want to close in 30 days. On all my offers I put that I can close in 7 days or less. If your offer is the same as another, this can and usually is the deciding factor.
6. Don’t underestimate the importance of the real estate agent. They are the gate keepers to the banks, their clients. Many times the banks will rely on the real estate agent when accepting the right bid. It’s not always about the highest price or the fastest bid. Having a great relationship with your real estate agent will increase the chances of your offer being accepted.
Hope this helps with your property acquisition. As a note, these points are only for those who understand the market they are investing and have teams on the ground they trust to do the work necessary.
Jeremy Burgess
The Detroit Market Expert
http://www.google.com/profiles/jeremyudwI have just been researching US deals online, and am absolutely blown away by the opportunities.
Why, can anyone shed some light, is property so cheap in the US? And rents so high? And still a rental market? I would have thought that people would have been jumping at the chance to buy their own property? I was looking at some properties that were lovely condos in gated communities, and the rental was twice what it would be to buy. I just don’t get how there is a rental market at all, when that is the case. (Or maybe I am just too used to Australian prices?)
Martha
Hi PQ
I'm looking to head over very soon. What areas are you visiting on your next trip?
Bek
Hey Guys,
just watch out for HSBC .They are easy to get set up with an evryday personal acct in yr name but
if you set up an LLC then try get an account they dont like to give you internet access for 6months!!???
Yes it makes it difficult !
B of A are excellent although they charge a $16 a month fee on a business acct..
There service is the best ive found and especially dealing form Oz . Their online helpline is aweome too.all the best
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hello,
Yes there are great deals in the US at the moment. Please contact me if you want more information – no I do not do a hard sell. I am interested in helping people – the competition for foreclosures can be high – but we can help.
Regards,
Steve
Steve
Please post some useful information on the forum which might help others rather than merely come on here to sell your services.
15 posts and 15 self promotions is not what the forum is for.
Get some runs on the board first by helping others and contributing to the topic.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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