Everyone is talking up the USA opportunities at the moment, but are they really that much better than investing at home?
In my very floored example below I have very very roughly worked out a AUS vs USA property table using my AUS IP as an example.
I know I have left a lot of expenses out and made a lot of assumptions. (feel free to fix these up)What’s everyone’s opinions?
Assuming- Not taking into account-
-No maintenance. – Rates
-No body corporate. – inflation
-USA property gets a 15% yield for the – Land tax
Next 30 yrs with no capital growth.V. -AUS eventually
-AUS property gets 5% capital growth p.a. becoming +cf
for life of loan with no increase to rental yields
-Fixed interest rate for loan termAUS USA
Cash outlay – 40,000 40,000
Asset Value (less expenses) – 310,000 35,000
Loan repayments PCM- 1,820 0
Rental Yields. PCM- 1,200 437
Property management p.a- 1,008 516
Rental yields p.a less expenses- – 6,432 4,728
Annual Capital Growth- 15,500. 0
Overall Profit- 9,068. 4,728+ 30 yrs(AUS loan term). 272,000. 141,840
+ Asset value 582,000. 176,840405,160 more investing in AUS property.
Hi Cappy.
I find one big, glaring problem with your figures. I am pretty well researched on IP in the US of A and wish to know why you have allowed zero,0, nadda capital growth in your hypothetical USA property but have in your OZ IP? Of course this magnitude of omission in your figures will allow your Oz IP to kick the brains out of your USA IP.
Kind regards,
Ok if the US property has the same capital growth as AUS property it will have 52,500 extra, still leaving the aus property a clear winner. But then you could also argue that AUS would have better figures if you took into account negative gearing tax benefits and profits from rent when it would eventually become +cf.
I’m happy to be proven wrong, I’ll be looking to invest early next year and if I think USA property is more profitable i would have no hesitation to look at those options.
Cappy,
I agree with ALF1 and believe you have made too much of a generalisation of your inputs. I see your point of not being able to obtain finance in the USA and so you have to purchase a property outright. However this is only due to a lack of credit raiting, after 12 months or so you should have some sort of credit raiting to be able to obtain this finance for future properties, allowing you to obtain several +cf properties as oppose to negative gearing as you would have to in Australia.
I have made a couple spreadsheets regarding investing in USA and AUS and for me USA has been a clear winner, feel free to email me and I will show you the spreadsheets and you can judge for yourself.
James
Hi again Cappy.
I have no problems with your figures and yes, traditionally, Australian property performs much better in growth and our government does allow for depreciation and tax variation that often reduces the investors out-of-pocket costs on a negatively geared property down to almost nothing. However, there does seem to be one factor a lot of people contributing to this forum are NOT considering when looking to the USA to invest. Take a hypothetical US property that pre GFC was worth say $400K that you can now buy for say $50K. Is this property going to now slowly grow again from this level at single digit capital growth % rates OR, is the US economy going to do what it has always done after great economic upheaval – make great strides back into a 'bull' market, creating more business infrastructure, creating more jobs, creating more demand for owner occupier properties, leading to significant (and maybe at times, enormous) leaps in property values?
This is just my humble opinion Cappy, but I believe property values will return in many parts of the US to pre GFC prices and beyond and one cannot rely on the more traditional 4-7% rates of growth like here in Oz. Not too disimilar to what happens to real estate values around a resource boom i.e. checkout the cost of property in Karatha, Kununara, Port Headland 5-10 years ago and look at them now!Thanks for the input guys, do you have ip’s in the USA at the moment? If I was to decide to invest in USA next year do you think there would be any value in opening my USA bank accounts now and making regular deposits (genuine savings) to try and establish some kind of a credit history?
Very interesting topic Cappy, I’ve recently been looking at buying a couple of properties in America, not sure exactly where to look, but it certainly makes more sense than investing in Australia. I see what you are trying to do, but you can’t leave out some of the expenses. For example you have NO tax in Florida whereas in Australia you do, there will be capital growth thanks to the excessive printing of money and finally, where in the world can you buy a house for $50k with 4 bedrooms that’s only 6 years old fully paid off and never have to think about mortgage repayments or rent? AND the best part about it is you can buy a H2 Hummer for $18k!!! USD!!! In Australia you pay more for EVERYTHING!!! From cars to nappies…. its just plain dodgy!
I’m so close to leaving Australia, I just need to decide on what and where exactly.
Fantastic Plastic wrote:Very interesting topic Cappy, I've recently been looking at buying a couple of properties in America, not sure exactly where to look, but it certainly makes more sense than investing in Australia. I see what you are trying to do, but you can't leave out some of the expenses. For example you have NO tax in Florida whereas in Australia you do, there will be capital growth thanks to the excessive printing of money and finally, where in the world can you buy a house for $50k with 4 bedrooms that's only 6 years old fully paid off and never have to think about mortgage repayments or rent? AND the best part about it is you can buy a H2 Hummer for $18k!!! USD!!! In Australia you pay more for EVERYTHING!!! From cars to nappies…. its just plain dodgy! I'm so close to leaving Australia, I just need to decide on what and where exactly.Clarke, Philippines got 8 bedrooms for 50k and incredible CG.
Fantastic Plastic wrote:Very interesting topic Cappy, I’ve recently been looking at buying a couple of properties in America, not sure exactly where to look, but it certainly makes more sense than investing in Australia. I see what you are trying to do, but you can’t leave out some of the expenses. For example you have NO tax in Florida whereas in Australia you do, there will be capital growth thanks to the excessive printing of money and finally, where in the world can you buy a house for $50k with 4 bedrooms that’s only 6 years old fully paid off and never have to think about mortgage repayments or rent? AND the best part about it is you can buy a H2 Hummer for $18k!!! USD!!! In Australia you pay more for EVERYTHING!!! From cars to nappies…. its just plain dodgy!I’m so close to leaving Australia, I just need to decide on what and where exactly.
Yeah that’s true Australia is a very expensive place to live but that also means you generally get paid pretty well. I’m a carpenter one year out of my apprentaship and if I don’t do any cash jobs or overtime Im on 60k a year. Im not sure what wages are like in other countries but I don’t imagine a country feeling the pinch of the gfc would pay that well.
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