US Property as 1st IP

Hi there, and welcome to the forum.

Without the necessary due diligence, you may as well head to crown and bet on black rather than investing in the states.

You can purchase a property very easily in the states in good locations for $60k with 50/50 cash/finance for a really good property in excellent location or 100% in most locations.

However, there are a number of considerations involved before you get carried away with the great american dream, they are:
1. travel costs
2. sourcing costs
3. structuring costs (you need to set up a LLC in the relevant state)
4. buyers fees and attorney costs for closing
5. property manager
6. bank account opening

and many more, let alone the fact that you need a team on the ground to be successful. Otherwise, you can be blinded by price based on a picture on the net, and realise either the property is not what it seems, or you are in a ‘slumlord’ area – that is low socio demographic neighbourhood – where your house will get trashed and moreover who will collect the rent?

Apart from the above (please take the above as constructive based on experience) – you can definately fiind a property in the right location to achieve a yield of 10% + net and hopefully capital growth over the long term.

You will be able to finance properties in the right locations which will benefit you in expansion and the rinse and repeat.

Some areas to consider are Atlanta, Memphis and Florida and perhaps Texas with finance.

Cheers Ivan

MJ nothing to really ad to the above.. One issue is that 60k in most markets will put you squarely in a lower level type IP.

Another thing to remember is that cash flow and capital growth do not go together in the states generally.. the greater the cash flow the less capital growth. the biggest capital growth states will be just like AU neutral to negative gear but one can make big capital gains.

Funny looking on this site after so long. I was finally allowed back (though haven’t checked for a few years) after truthfully stating the hygiene habits I had experienced with local non-indigenous LA Notaries.

I’ve done well, pretty much retired, my sister works 2 days a month (but at least 2-3 hours each of those days) is building herself a nice holiday house in a location she’s always wanted through hard bloody work and people still ask the US property market for the impossible.

My advice…

1) Don’t start in the US unless you have deep pockets (like I did for 10 years) or have deep knowledge and/or building skills (like my sister – emma171? from memory) but she now deals with commercials only for people who keep her (almost?) a secret (her investors returns are out of the park) and really couldn’t be bothered anymore dealing with people who don’t ‘get’ it.
2) Save yourself a bucketload and ‘invest’ instead of work. IE: Today, as it’s mostly been for the last 5 years – chat to Jay.

Look at the one guy who has been doing the same ol’ thing here since before subprime, with sage advice always and offers great solid returns. If only I could have my time again:):)

Lawsjs although your holdings I am certain are no doubt knocking it out of the park but you chose wisely in the first place gave up a little cash flow now your cashing in on Massive appreciation… good job… now cash out… you get US dollars they will buy a lot of AUD dollars and you are big winner… :)

mj23001 your vastly over complicating it. you need ONE llc so you can have a US checking account.. there is absolutely no need to have a separate LLC for each property you may buy.. the only making money there is those that sell you the LLC.. also LLC’s depending on State cost 250 to 500 dollars max to draft and register.

please view our FREE website http://www.turnkey-reviews.com you can look at 20 plus US Turn key companies without any pressre and get the true pricing without all the markup the sales companies add to them..

good luck in what ever you do..

Jay, problem with selling is Au tax which as a resi I get hit with. I really can’t sell or I get crucified the simple way I set it up, and even structured carefully once you use the cash you get hit eventually. I just got offered US$1m more for a property than I bought in ’09 (only put down $150k which is the kicker:)) but after all is said and done I’d be lucky to get AU$500k out of it. Of course that is still a good profit but at near $100kpa cash+ pa it’s worth the hassles (hmmmm??) to keep it. Bus class airfares are AU$25-30k a pop for all of us so it’s easy to ‘sog up’ a little cashflow, but any big chunk gets grabbed by our feral tax office who believe in crushing the little guy. The US system is structured to encourage you to get big (then they get to rob more) but the Aus system is hit you hard early and stop you getting big.

The airline has been raped by a vile and incompetent CEO who has no idea about airlines and should have been kept away from anything more complex than a mousetrap. Yes we do seem to do a good line in Bermuda Triangles down here! Good effort losing a Tripler!! Mate of mine who works in the sandpit was inspired, he moves large amounts of gold (I won’t say how much but it is significant) every trip he does to Europe. The problem of ‘getting lost’ clearly isn’t as hard as we all thought it was:) Saw a funny picture on the loss. The 777 was photoshopped in the driveway of a London Mews property, the caption ‘I told the neighbour if it isn’t moved on the weekend I’m going to call the Council!’.

Hoping their other one wasn’t anything like AF447, though it all looks like a stall to me so far….

I did see that Cirrus! You know the nick name for the Ocean between Hi and Ca is the Indian Ocean because its full of Chieftans, Navajo, Warriors and Seminole?? Can’t remember if I joked about that with you earlier?

Really sad so many locals lost so much but so many in the US lost so much more I guess. Pity is the Aussies losses were generally avoidable. Still amazes me that anyone who has bought one property and sat in 78F&G for 13 hours 3 or 4 times thinks they are a capable of charging thousands for their expertise, but I guess thats the way of the world.

I bought that storage business I mentioned that is very similar to yours. Cost a bomb but in a few years it will be good. If you get to Oz you have to swing by our place. We can rustle up a decent lunch if nothing else!

Emma’s in Vegas still but (among other places) got a stunning place in the Bahamas. Apparently Vegas gets too hot and too cold from time to time:)

BTW you mentioned the $ – I bought a couple of my places early on when the AUD was $0.48, so its only half way there:)

I dont like the fact fully trained crews can stall a (seemingly) perfectly flyable aircraft into the ground from 30,000+’. Very hard to put yourself in the cockpit very tired, stressed about something else and not expecting anything untoward – panic and group think can set in quickly as you would know. However, once is careless, twice is a little more serious. Personally I think everyone should do aerobatics with their PPL but you really think 2-3 pilots with thousands of hours could manage to work out you need airspeed to fly in the 15 or so minutes before they try to make a hole in an ocean….

Hi Ivan

Interesting structure you have, thanks for the tips! I had heard elsewhere that for maximum asset protection, that it would be best to have a title trust(?) to own the property and an LLC above the trust. What are your thoughts of this structure?

Also, what structure would you have that would own the ultimate holding company, on the AUS side of things? would you have an AUS company own that US holding company?

Cheers
Kevin

Gross yields have dropped in the States since 2008 and are dropping further with renewed vigour in the housing mkt. Furthermore, the AUD is below its long term exchange rate against the USD so any chance of a substantial long term currency gain has dramatically decreased since 2012 when we were at or above parity.

In addition, U.S. Banks no longer allow foreign buyers to set up bank accounts unless the customer flies over to the U.S. in person to open it. Buyers also require a POA to execute administration on their behalf for property income and expense transactions. Finally, without a competent property manager, it’s difficult to secure a tenant who pays rent promptly. You need a well oiled team machine to set up your US portfolio properly. And if the net yields are dropping as well as the opportunity for foreign currency gains then its difficult to say that the juice is worth the squeeze when it comes to investing in U.S. Property. If you want true international property bargains check out http://www.swedenbase.com …. selling homes with very large blocks for between AUD $20,000 – $60,000. Very high yields and highly flexible foreign direct investment rules.

That being said, if you want the contact details of my USA POA and property manager I’d be happy to email these to you. My POA attorney will set up your LLC no worries and my property manager is pretty competent when it comes to managing unsavoury tenants and getting rent paid. The bank account however may require a quick flight to Hawaii to do in person.

The tax implications are pretty straight forward as we have a favourable tax treaty with the U.S. so most Aussie accountants will know how to handle your tax.

Be mindful of costs due to required renovations as well as any OHA costs (similar to body corporate fees) when buying your property. I agree with the above comments re location, Atlanta would be a good location to start from.