Hi All,
I’ve recently moved from Sydney to the USA and very interested in property investing as a wealth vehicle. In a nutshell,
I have a property in Sydney that was my PPOR residence that was valued at $530k by the agent (wouldn’t be too far off) that I’m currently renting out to great long term tenants for $450 a week, with a balance of $315k, currently interest only (with some money going into the offset too).Obviously now being in the USA, it opens up unique opportunities that I may not have had before. I’m reviewing what my strategy is though as I obviously would like to purchase property eventually here in the USA as there are many areas with strong rent returns, but probably at the cost of capital gains (which I’m currently getting in Sydney).
I understand I have to factor in the exchange rate, but I’m curious to know what others would do. Would you look at cashing out the Sydney property to gather a few 20% deposits for some strong positive cashflow properties here in the USA? The ultimate goal is to generate a passive income from rental income.
P.S. Forgot to mention, if I hold onto Sydney, the alternate option would be to save up a 20% deposit here in the USA to buy an investment perhaps in the $100k ball park as a starting point.
Interested for some thoughts :)
-Rob
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This topic was modified 9 years, 8 months ago by
Draytone.
Hi Draytone,
I’m currently renting out to great long term tenants for $450 a week, with a balance of $315k,
.. which makes you about neutrally geared at the moment (or even positive geared?)
Would you look at cashing out the Sydney property to gather a few 20% deposits for some strong positive cashflow properties here in the USA? The ultimate goal is to generate a passive income from rental income.
I’d probably look at using some of the Equity and KEEP your Sydney place while immediately releasing enough Equity to buy your first few US ones. Selling involves a lot of extra cost.
With Valuation of $530k and $315k owing, there is over $100k of Equity available even on an 80% lend.
Let’s see what some of the finance people say about that one – oh, and maybe some “US centric investors” too,
Benny
Hey Benny,
That definitely is another angle worth visiting. I like the idea of starting small fries here in the USA and building some capital. Also, things are structured a little different and mortgage offset is not really a thing here from what I have seen (I could be wrong). In reality, I could free up USD $20k plus some extra to purchase a USD $100k property here that could fetch $1000 a month in rent return. (That’s just random numbers at this stage). That’d get me in without worry about LMI and I’d still be positive cash flow due to low interest rates and my deposit, so I could compound the rent collected as additional contributions to the mortgage balance.Thanks for the response.
-Rob
Have you looked much into the legalities of pushing in the US + the ongoing costs? The system is vastly different in the US than Australia, factoring in other ongoing State charges, maintenance req’s etc. I have clients who have purchased a number in the US, who factor in 20%+ of rent going to misc outgoings.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Rob,
before you get too addicted to positive cash flow properties look hard at the capital growth drivers in the market. Here are a set of rules on investing that I have been working on. Over the years I have asked many investors what they did that was so successful?
This set of rules come from those answers;
Rule 1: Preserve your capital.
Avoid high-risk high-return investments, only ever risk your return. Preservation of capital is the number one rule in investing; in the worst-case scenario you should always be in a position to recoup your initial capital investment. Losing your capital is equal to losing years off your life.Rule 2: Avoid being a forced seller.
Being forced to trade at the wrong time in the market cycle is a wealth killer. Avoiding being forced to market in property investing normally means keeping your loan-to-value-ratios conservative. The older you are the lower the ratios need to be.Rule 3: Capital growth creates wealth.
Capital growth creates future cashflow. Target high growth areas for long-term capital growth in your property portfolio. Capital growth creates wealth; the purpose of the early cash flow is to maintain debt while your portfolio is in growth phase.Rule 4: Buy when the markets selling, sell when the markets buying.
This means don’t buy at the top of the market cycle and buy when the property market in targeted area is unloved by buyers. Follow this rule and you will always come out on top.Rule 5: In the end money & time end up being the same thing.
Time is your most important asset. Make long-term investments and disregard the bumps in the road along the way. Losing your capital is equal to losing years off your investing life. Resist the desire to trade.Rule 6: Use leverage and keep your cash for a rainy day.
If you have the choice between investing with cash or with debt, preserve your cash and invest with debt.Modernity Investing
Email MeHi Mark,
Thanks for taking the time to respond. As someone who is very green with all this, I’d love to pick your brain a little regarding your response.What would you consider a “high risk high return” scenario? Example, the idea of me using 20% from the equity in my Sydney property for a deposit on a perhaps “not as great capital growth, but better returns”? Would this be too risky in your opinion? Ideally I’d like to sell some spare organs I don’t need to scratch together a deposit for my second place and not touch my equity in Sydney, as otherwise I might as well just take out a loan here in the USA for the deposit, which kinda defeats the purpose in my opinion, and not something I’d want to do.
Thanks again for taking the time!
-Rob
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This topic was modified 9 years, 8 months ago by
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