Could anyone who has been a USA landlord – for whatever duration please post their experiences so far – here
– Wanting to get a feel for how things have gone. Things that are different. Cash flow is what was expected . If not why not. Unexpected costs. Good experiencesHow did you go about finding a property manager / tenants. How have they performed so far.
Cheers Wobbly
I would be interested in this too.
Hi Wobbly,
First of all, I need to point out that I do this for a living, so I've probably been able to spend a lot more time on it than the "average" investor ever would. Finding the right management takes time, but when it happens – it just makes your life so much easier.A good management company assist us in finding tenants, collecting- and distributing rents, inspecting the property, as well as being on call pretty much 24/7 – they are also able to advise us on acquisitions, based on current rental demand.
It also takes a lot of time to find a company that's BOTH good with the tenants and also able to communicate with foreign investors – it's a huge difference for them too, dealing with local buyers vs. international buyers, as obviously the requirements are different.
It's a common (mis)conception (in my opinion) that the bigger firms are always better. In some cases, it will make sense to use a larger firm – but for personal attention and instant service, I find that I'm happier with smaller firms a lot of the time.
A good firm might charge you 8-10% of rental income, while the smaller will do less, but this is an expense where I would advise spending just a little bit more, and make potentially huge savings in the long run!
I just got my first rental property last month. We were lucky to get one that already had a tenant which were the original owners. My property manager was recommended to me by the real estate agent that brokered the sale.
He collects 10% of the rent as commission. I opened a US bank account while I was there last March so they will deposit the rent there. At this stage I’m thinking I’ll use paypal to transfer the money back as they don’t have exorbitant fees like the banks does.
One thing that I know I need to look for is an accountant over there to file my federal tax next year. So I’d be interested if anyone has used one that is familiar with Australian/US taxation.
Still early days at this stage but definitely the rental income is aroun 10% return.
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 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.I meant to add. this property was listed for sale through MLS for $20,000.
The thing with US properties you have to be vigilant on is a few things (as I recently thought similar thoughts).
You are better off buying the property outright than getting a loan attached to it because a) banks in Aus won't (will very rarely) lend you a loan b) if you manage to get a loan you are playing with international exchange rates.
Between the US and Aus there is a double tax system. Therefore you get taxed two times.
You cannot negative gear your property.
Whilst yields are quite high (up to 12%) vacancy rates are also high thus cancelling out the returns.
If you'd like to eventually live in said house in the states, you would have to become a US citizen which means you'll have to jump through many many loop holes
Anyway that was more than enough information for me to choose against said option
All good points except the double tax system. Tax paid in the U.S. is offset against tax paid in Aus.
Really? Okay well then my research was flawed… Can you further explain that a little?
Income is taxed in the U.S. as it is here, then there are tax credits for tax paid overseas back in Oz
Ah okay… Awesome!
In addition to that, my research also tells me that if you are taxed here and US, pay tax in US and claim tax credit here, you can also negative gear here if you borrowed money here for the property.
Jason700 wrote:Between the US and Aus there is a double tax system. Therefore you get taxed two times.US and Australia have agreement with respect to taxation. If you submitted your US tax return in the States, when you file for return here in Australia, simply include your US tax returned, the ATO will take that into consideration when your tax receivable or tax payable.
trhia wrote:In addition to that, my research also tells me that if you are taxed here and US, pay tax in US and claim tax credit here, you can also negative gear here if you borrowed money here for the property.You may be eligible for tax deduction benefits in US, even if you borrow funds in Australia. Then balance tax (paid in US) can be shown to ATO for further deduction as tax credit. Most importantly, all types of loans (credit cards, personal loan, equity released loan from Australian property) can be considered for tax deduction in US.
I have been researching US market for a long time.
So back to the OP's query. I have two properties, one in Eastpointe, one in Grand Rapids. I purchased through Cashflow Gold. I honestly dont know how anyone would do it on their own unless they went over to the US for some months to not only find properties, but to find reliable and honest people to do business with. Part of CF Gold is that you are buying the contacts (accountant, property management etc). The contacts have been awesome to deal with; prompt replies, helpful and onto things. One property is returning 16.9% net after all expenses and the other 19%. These returns are a bit lower than initially predicted owing to increased renovation costs (initial costing was only an estimate) and slightly lower monthly rental (by $25 – $50 per month). The whole process took a lot longer than I thought it would (from Aug when I started looking, until settlement in Dec/Jan and tenants in place by Feb).
Dont forget to allow for Accountant, LLC setup, insurance, initial property management fee for finding tenant – 1 mths rent etc and also for the property manager to hold funds in their account for mainentance eg $1000 – that kind of thing.
Positive Aussie wrote:trhia wrote:In addition to that, my research also tells me that if you are taxed here and US, pay tax in US and claim tax credit here, you can also negative gear here if you borrowed money here for the property.You may be eligible for tax deduction benefits in US, even if you borrow funds in Australia. Then balance tax (paid in US) can be shown to ATO for further deduction as tax credit. Most importantly, all types of loans (credit cards, personal loan, equity released loan from Australian property) can be considered for tax deduction in US.
I have been researching US market for a long time.
Thanks for letting me know! I didn’t know this as a US Accountant is the last missing piece for me. So I am currently in search for a good one that can deal with my situation. Cheers!
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.
Thanks for the advice. I’ve sent them an email just now. You’re scaring me tho regarding their fees! Have you used them yourself? I’m going to need them to file individual US tax returns as we bought the property in our names. Hope it’s affordable.
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.
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