Hi all,
I know this topic has been discussed in the past.
But I made a trip to New Jersey / New York recently and noticed there are a number of positive cashflow properties there.
I am considering potentially working over there next year.. and wanted to understand how to go about purchasing properties there.
If I get a working Visa in the USA – specifically New York – and stay there for 1 year.. is it possible for me to buy a residential property (likely an apartment with 1-2 bedrooms) with a deposit of 5%? I have around $300k equity in my properties here in Australia and generally fund new properties by borrowing 105% of the property (so i can use 5% for closing costs inc stand duty) – would USA offer me such loans?
If I return back to Sydney (after 1 year) and then decide to sell a few years later and make a capital gain (say $100k), what do I need to pay the US and AU government and what restrictions do I need to be aware of?
Best regards,
AjayHi there – there is a double tax agreement with the US, so you get a Foreign Tax Credit.
You can use your equity here to purchase over there, you can borrow up to 70% LTV on the property.
Assuming you have read all the threads here – be careful – its not as simple as Oz property.
Structure carefully also.
Cheers, Ivan
Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
http://redwoodadvisory.com.au
Email Me | Phone MeSMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS
If you are serious about investing in the USA, Try listening to the Bigger Pockets podcast.
http://www.biggerpockets.com/renewsblog/category/podcast/
It will give you a grounding on the differences between the two markets and the problems investors face over there. You will find that there are significant issues with contractors, tenants, property managers and evictions. You also have to allow for thing like regular roof replacements, boilers and other costs we don’t pay here.
BP is also a great place to network with local investors in the areas you are interested in.
Listing to the podcast convinced me to invest in Steve’s fund, rather than doing it myself.
If you are serious about investing in the USA, Try listening to the Bigger Pockets podcast.
http://www.biggerpockets.com/renewsblog/category/podcast/
It will give you a grounding on the differences between the two markets and the problems investors face over there. You will find that there are significant issues with contractors, tenants, property managers and evictions. You also have to allow for thing like regular roof replacements, boilers and other costs we don’t pay here.
BP is also a great place to network with local investors in the areas you are interested in.
Listing to the podcast convinced me to invest in Steve’s fund, rather than doing it myself.Hi David,
Steves’ fund? Can you elaborate please?
cheers
PeteI purcased a property in San Francisco Ca in 2001. I had to pay cash as no bank in USA or Oz would give some. However, after getting a good credit history (Which is what you need to work on immdiately when you arrive in US), I managed to borrow 80%LVR from a USA bank. When I purchased in 2001 the AUD was 49c, so I have not been able to sell the property due to the exchange rate. However, if the exchange rate goes down to 50c, then I will sell. The purchase price was US$280K, value now is US$600K. It rents for US$3,500 p/mth and I get a US holiday out of it every year. The big thing to look out for is Property Taxes. We have stamp duty to pay in Oz, but in US it’s Property Taxes payable every damn year. Mine is $4,000 p/year. I would prefer to pay Stamp Duty in Oz then pay Property Taxes. So far I have paid $56K in Property Tax compared to $10K SD in oz. The other thing payable is Monthly Home Owner Dues (if purchasing a condo) are US$480 p/mth, so they are higher than in Oz – usually. If you are purchasing to live in yourself, like I did then the tax side of things are more simple. Hope this helps a little. Remember you are not just chasing the property markets, but the exchange rate also!!!!!!!!!
I live in NY….and I could never imagine buying an investment here.
Not to doubt you but based on what I know very hard to find CF+ property in good areas (I live in Brooklyn heights now but have in the pas lived in Harlem, UES etc)
My friends just moved to NYC and they are buying property with a rate of 2% fixed for 30yrs.
Bullshit. 30 year is around 4%.
Hi David,
Steves’ fund? Can you elaborate please?
cheersPete[/quote]
Hi Pete,
Here is the link to the funds website.
http://www.passiveincomefund.com/
I’m pretty sure its fully subscribed, so you may have to go on the waiting list for investors who want to sell out. I received my latest fund statement this week. In short, I purchased units at $1.05 just about 2 years ago. Check on the website, but they are now valued at around the $1.30 mark. On top of this I’m getting 8% PA a unit in dividends, based on a unit price of $1.00. I reinvest my dividends back into the fund, for compound growth.
Steve and his team do all the hard work, and are getting exceptional results. Being in the fund also gets you access to some of Steve other events,which I highly recommend attending.
I cannot speak highly enough of it.
David Hall
Hi Ajay
You will not be able to get a traditional bank loan with a 5% deposit.
From my experience investing in the USA you can borrow for an investment property 70% LTV as Ivan said however this may have restrictions on the maximum hour price you can purchase – e.g $200,000. There is also conditions that you will need to purchase in your own name. If you wanted to buy it in an LLC you would need to put down 35% deposit.
In the US they are more open to creative approaches to buying real estate and it is quite common for seller to carry back finance for you. I have obtained this on several properties my partner and I have purchased in the US. You can negotiate as small as a 10% deposit this way depending on the seller’s motivation.
To finance into a bank down the track you will need to provide 2 years of US tax returns.
If you want to live in NY I would probably buy in another state that has better returns 10%+ with your $300k and then from the cash flow use that as the rent for your apartment in NY. Then when you come back to Sydney you will still have the positive cash flow from your assets bought at $300k. You could buy several properties with $300k that would return say $30,000 per year net passive income with no debt or leverage into an owner financed commercial property to move from a 10% CAP rate to close 15% CAP rate.
Good luck with it
Steve
Thanks Steve – that’s very useful info.
A few questions below:
* How many properties do I think I could purchase with $300k assume a standard deposit rate (I think you mentioned 30% deposit is standard)? I realise it depends on the price of each property but what are some low/average prices for good cashflow positive properties in the US?
* When you mentioned that after returning to Sydney I could still have positive cashflow from my US assets bought at $300k, would the positive cashflow be taxed at a higher rate since I am from Australia?
* With your final sentence, what exactly is a CAP rate, did you mean the rental yield?Best regards,
AjayAjay – I lived in the states like you – however, why do you want to buy as many properties as possible with $300k?
What is the strategy? For me, there are drawbacks that need to be considered:
1. Exchange rate at sub 70 cents – more expensive to buy
2. Costs to structure the investment
3. Can you achieve Capital growth and yield? or is this a yield strategy? if just yield – why not just invest in Australia? cheap investments are not always good investments – you can achieve positive CF in OZ EASY
4. Get tax advice, by moving back to aus you will be a resident again
5. Invest in good areas not shit areas. General statement – I have a million examples to support why. Do your due diligence.Hope that helps!
To Success, Ivan
Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
http://redwoodadvisory.com.au
Email Me | Phone MeSMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS
You really also need to look at trading or making money. There are other issues like withholding tax which on rent can be around 39.6% or 10% on sale. If you have a c corp you may avoid the withholding on the sale but not the rent.
The other issue is estate tax or death duties. If you are a us citizen death duties only apply over 5 million however for a foreign national it can be from a dollar especially if purchased in an LLC.
Ivan is right it is very important to do you research and due diligence carefully.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Hi Ajay
To answer you first question about how many properties you can purchase with $300k at 70% LTV you could potentially buy up to 10 properties at $100k per property, but you will need money for closing. That could be another 2% of the property price. Another consideration on lendind restrictions is some lenders will want the property purchase price to be above a certain amount such as $100,000 and below a certain amount say $300,000.
Closing is the terms used in the US for settlement. You pay no stamp duty in the US which is great – we get robbed here on that. You do have to pay a small amount for title insurance charges which is the transfer of the title and insurance to confirm the title is all good and any attorney fees you negotiate. But I have paid as low as $200 for attorney fees and around $180 for title charges. Any delta is property taxes you will also need to pay based on the date you you buy
Alternatively if you do not wish to leverage and own property debt free you could buy one good commercial property for $300k or one or two multi-family properties at $150k each in decent areas in the US.
As an example I bought a warehouse in Florida for $90,000 that generates $1275 per month – this is owned debt free.
Another example I bought a multi-family duplex for $65k, carrying back finance with the seller with 50% down on 0% interest with balloon in 36 months with note payments of $500 per month paying off 100% principle. This generates $595 per door. This asset generates $1190 per month and I bought it tenanted. So using these as example I used $122,500 cash to generate $2,465 per month gross income. You need to add in costs for property management, maintenance (although commercial has little to zero maintenance – owning commercial property debt free is where you ideally want to get to generate a true passive income) and property taxes.
Look at your exit strategy before you buy – be clear about what your objective is. To generate a passive income or to hope for capital growth and sell it x years later. I prefer to buy for passive income as this is a fact I know today, where as capital growth you are buying and hoping on something to happen that is outside your control.
On your second question about tax here – I am not a qualified tax accountant so I am just giving my opinion so you need to check with a tax accountant but you will pay tax on your income in the US first and any tax you pay their is then offset against the tax you owe in Australia. Whether this is more I cannot tell you but you are credited any tax you pay in the US. Generally the tax rate in the US is lower than it is here.
Check with a good US tax accountant on the tax consequences and I can hook you up with one I use that Steve McKnight recommended to me.
The CAP rate is what we call yield, I am using US terms as you need to use them if you invest in the US as no one will understand you in the US talking about yields!! haha
You have to Take Action if you want it to happen and build your US power team around you. If you locate yourself in the US then you have a great opportunity to make it happen, but it can also be done remotely with the support of a great team on the ground from the US.
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