After months of researching the US property market via the net, magazines and semminars, I finaly hopped on a Delta flight to Atlanta in May 2011 to see if I could really make the returns I had been reading and hearing so much about. I spent a week in Atlanta GEORGIA and met and viewed over 50 properties with both a local agent, and an Aussie couple who have set up TOP RENTAL RETURNS there. I had made appointments before leaving Australia, and this was critical to ensure my time was well spent while there.
Doing my research here at home I became torn between taking the easy option and buying through a buyers agency here in OZ, or backing myself and going it alone, setting up my own team in the US. I even paid a $500 joining fee to a BA here to assist me with Bank and LLC set-ups, and although they did not have property to purchase in Atlanta, they were active in Memphis and Cleveland, where I also visited during my trip.
Luckily for me I struck gold with an agent in Atlanta who went out of her way to show me a stack of properties, and we spent two days driving around Atlanta viewing some good and some not so good. This gave me a great insight into the demographics of the various Counties and areas within them. They were also able to assist me with meeting their Broker who owns the Real Estate Company and property management agency. The guys from TRR were awsome too, and they were very giving of their time. Two other Aussie investors and myself spent a full Saturday in Michael and Bronwyns car viewing forclosed properties that were going to auction. These guys were mythodical in their approach to selecting the right property, and although I do not want to speak specifically about TRR I must say I was impressed.
I did also spend some time in Memphis and Cleveland, and although there are definately oportunities in these Cities, I made the decision that Atlanta was a better choice for me. Why? Probably for the extra time spent there and the contacts I had made. Also Atlanta just seemed to be better placed for future growth and GFC recovery.
So how did I fare, and which way did I decide to go? BA or DYI? Well both actually. I am about to settle on a four bedroom 2 1/2 bath home in Stone Mountain, ATLANTA with TRR. Very exciting as this is my first US purchase, and will probably prove to be my easiest as well. Fully renovated, and tenanted…too easy. Then there is my agent. Together we have put in around four offers to date, and I am about to finalise the first purchase this way, a three bedroom 1 1/2 bath Condo in Union City, ATLANTA for $25,000. I have had to pull out of two offers, one before getting the building inspection as there was an issue with the title, and the other after having the building inspection as it showed up too many structual, electrical and ploming issues. This doesnt bother me though, to me its all part of the experience (note I just fell short of refering to it as fun!). As I said earlier, my agent is Gold, and she works late into their morning so we can exchange emails, forms to sign and the odd phone call. Actually our communication has been so good I have only needed to phone her once in the 3 1/2 weeks I have been back from the US.
You can definately earn a higher net margin or yeild by going DIY around 20% to 25% compared to 12% to 18% NET, but be prepared to spend a lot of time doing the property searches, negotiating back and forth, and doing all the due dillegence that is required to make a sound decision. Then you still need to take care of any rehab work required, and get a good tenant. You also must be prepared to back yourself, and be prepared for the ups and downs that will come your way. For me, buying the condo is a great way for me to cut my teath on a DIY purchase, and the learnings will put me in good stead for future purchases. For me the risk ($25,000) is low versus the returns of 22%.
If you think DIY is the way to go for you, I would recommend paying a visit to the US. Stick to one area so that you can get as much information and knowledge as possible, this way when you get home you can be confident of making offers based on the areas you are buying into.
Finally, if you have decided to make the move into the US property market, I would suggest having your LLC and Bank Accounts set up and ready to go. Ensure your bank is set up for wire transfer before making any deals to avoid unneccessay frustrations that this can cause. Banks are not the easiest to deal with from here, and the time lines for getting this all set up can be weeks, so plan ahead. I would also suggest getting a good US tax professional to help you with your ITIN (International Tax Identification Number) and structure of your LLC.
I hope this helps someone planning on investing in the US, and I look forward to hearing your stories.
Good luck!
Tradeeba (Craig)Thanks for your input Craig.
I think the way you have done it is probably the best way to do things with the highest return. Not just the hightest return but the most rewarding experience.
Time.
It all comes down to time. Cut out the middle man and do most of it yourself.
Me? I had to use a buyers agent otherwise I simply wouldn't have done it. I just can't give it the time to do all the necessary research. What I had done so far was doing my head in.
The way I look at is stamp duty. The last investment property I bought in Australia I had to pay $17,000 stamp duty. The US buyers agent slugged me $4,000. But they did do all the hard work for me and I'm all setup and it appears to be going well.
Atlanta!! Well done.
Using a local agent depends on your own circumstances and how involved you want to get in the process.
Yes, you can certainly go over to the US, and if you have the time ( which is what most people don't have ), the money ( and most people don't seem to include what their time is worth, never mind all the other expenses ) doing research on areas, not just the cities, bit suburbs, then down to the streets, then what part of the street if it's a very long one that goes into different areas, are you after just a good cash flow, or are you after a higher growth? Has it been renovated if it was a foreclosure that tenants have made a mess of, if so, how good is the reno? Then you have the tenants and arranging property management ( which is where many foreign investors get most of the problems through). So if you are prepared for all that, then by all means go ahead, many have been very successful.
I also know of investors that brought through some of the better and larger known real estate agencies, and have been sold duds, which became a nightmare, again, you can be lucky.
If the above doesn't appeal to you, then you should investigate using a local agent, just make sure whoever you choose to buy through, is not just trying to sell on the basis of a high rental yield, and nothing more. As these types of properties can be the worst type of investment for unwary buyers. You also have to get the right tax advice, and there are only a few real experts who really know the U.S. Tax system.
So if you get the right advice, get the right help from the start, the cost of paying a local agent can certainly save a lot of problems and headaches, and can make the whole process a lot easier and more pleasant.
There are also various ways in which you can invest in the US.
I suppose it all depends on what the investor is after, whether for just a good positive cash flow, with a limited growth over time, or a little less cash flow but still giving a decent cash flow after expenses, but giving a higher growth, or even if you are looking at flipping and making a good gain over say 3-4 months, although that strategy is not for everyone and has a number of variables.
Even doing joint ventures. is a great way of getting into larger projects with limited funds.Also, why just follow the herd? Has anyone thought of other forms of investment property besides just single family homes? There are a number of different investment opportunities, many offering far greater returns than just a single home.
Just a few possibilities to think about.
I think the choice between a buyers agent vs. going "on your own" is going to come down to how much time you want to/is able to spend on the property purchase. When using an OZ agent, you just want to make sure that all info is disclosed upfront, and that you don't get "pushed" into paying a huge premium for a property. I don't want to hang out specific companies, but we have spoken/dealt with most of them, and they don't all have the clients' interest first. That is however also true for many US based brokers, who see foreign investors as an easy way to make money.
It's also worth taking into account that a trip from Oz over here for a week or two will run you between $4-$5K, so if you're only going to buy one property, you would spend 10%+ of the purchase price on an inspection, money that it might take you a year or more to earn back.
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HighincomeProperty
Once again you are on the money ," Do you want job" plus people have to take into account the time spent getting a decent discount from the foreclosure bank and that is made a lot easier when you have the software to obtain the correct information banks try to hide . <moderator: delete advertising>
Regards Leonard Wilton http://www.americanproperties.com.au
Great post TRADEEBA,
I’m currently starting my due diligence on the whole US investment system etc…
I have looked into the DIY route, but I think I may miss this step for my first purchase or 2 as I would hate to make any mistakes! I will definitely be going through a Buyers Agent, still deciding which one is best. I guess I’m going to have to base my decision off other peoples experiences and save myself the heartache of second guessing and picking the wrong agent with the right advertising.
How is your property with TRR travelling so far and how is the experience been so far?
Regards Brendon
Great to hear of your DY success.
My wife and I are looking to purchase at the moment in both Atlanta and Nashville.
I've been talking to many Aussie and offshore brokers, but no one specialises in the Nashville market (that I can find), so we are attempting to do this ourselves also.I'd be grateful if you or someone could answer the following, as I am getting a little stumped….
– Should we have the LLC set up prior to purchase?
– Are there any issues with having the LLC set up in GA, but to also purchase in TN, or vice versa?
– Can anyone recommend a reputable US firm to set the LLC up with, who might also be a tax agent?
– Property managers in Atlanta, any recomendations?
– The ITIN number. From what I understand, you cannot get this until after you have purchased? Do you actually need it still if you have and LLC with an EIN?Thanks in advance….tried the US Embassy here in Canberra, called the IRS in Philadelphia (no help!), US business center in Sydney, and have been searching on the web for hours. Would be great if there was a step by step guide for DIY non resident purchasers!
If you have the time to invest the time and money then yes do it for yourself. However finding quality contacts on the ground is a major problem. If you are going to use someone make sure that they have been around for more than 5 minutes and know what they are doing. Be wary of anyone dealing in a numbers of markets because they may well be dealing with so called wholesaler companies.
Nigel Kibel | Property Know How
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Even though I know it takes time and some money to DIY, I would suggest to DIY. It lowers your risk of getting conned, and helps you figure out how to do it, which can be very important if you're serious about buying in the US regularly and for the long term.
AussieMika,
I have a few remarks which may be of help to you.If you have a LLC set up interstate from where you are investing, you should register for business in that state.
Which involves an annual fee, and a registered agent who can provide you with an address in that state.Having done it the other way around, I recommend you have your LLC set up where you intend to invest.
Once you have a LLC, you will automatically get a EIN.
In Aus, a family trust does not pay tax itself, but determines who out of the beneficiaries receives the income, who then pay tax on their FT income from their personal tax return. Similarly, a LLC does not pay tax but allocates the income to an individual (or individuals) who then will have to pay tax on it via their personal tax return. (An LLC is known as a "pass-through" entity for tax purposes. Hence yes, you do also need an ITIN. But having a LLC and EIN, and owning property in the LLC name, makes it obvious that you need an ITIN, and it should then be somewhat easier to get one.The nearest thing I know of to a manual for overseas investors buying in USA, is Steve McKnight's USA Power Pack.
As far as contacts on the ground, that is a difficulty.
Even a visit personally will not necessarily help you get reliable contacts.Nigel Kibel wrote:If you have the time to invest the time and money then yes do it for yourself. However finding quality contacts on the ground is a major problem. If you are going to use someone make sure that they have been around for more than 5 minutes and know what they are doing. Be wary of anyone dealing in a numbers of markets because they may well be dealing with so called wholesaler companies.Agree completely We deal in Atlanta and Charlotte..We wanted to set up shop in Florida ( logistic wise to far for us) Spreading yourself thin is not always best option. So we focus on the two markets .Easier to maintain and control.In real estate running a tight ship is half the battle
Property management , finding the right team to work , researching the markets you want to invest in, flying in to check things out
Just a few check list items before investing ..is the other half of the battle ….
again just simple version
Alex
Thanks for the advice quickchick.
From what I have read, I agree, having the LLC in the state you are buying in makes more sense, so for me, thats a Tennessee LLC!
Interesting to see the mention above of Charlotte. That was the other market I was looking at. My concern there would be the current financial situation in relation to BofA etc. Not sure how much of an impact that may have on the Charlotte economy if things really do go south?aussiemika wrote:Thanks for the advice quickchick.From what I have read, I agree, having the LLC in the state you are buying in makes more sense, so for me, thats a Tennessee LLC!
Interesting to see the mention above of Charlotte. That was the other market I was looking at. My concern there would be the current financial situation in relation to BofA etc. Not sure how much of an impact that may have on the Charlotte economy if things really do go south?My office is based in Charlotte,so if you have any questions let me know if I can help answer them in any way.Charlotte like all markets good and bad. I sent a link out on this forum was a fox news report .Good things about Austin Texas and Charlotte NC …If you don"t see it let me know I can resend the link.
Sincerely
Alex
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