Investing Overseas

[Aceyducey]

Has anyone in the forum experience/stories/advice on investing outside of Australia?

So far we've confined our activities to the Mainland, but would be interested in anyone's experiences of pitfalls/successes particularly in New Zealand, Sout-East Asia & Eastern Europe.

Cheers,

Aveyducey

[tonyd]

Hi Aceyducey,

I control a property in NZ.

The good things about investing in NZ...
Great opportunities for positive cashflow properties (I'm happy with my 16% yield)
No stamp duty.
No CGT.
No GST on residential investments.
Wraps allowed.
The exchange rate.


The not so good things...
Low/zero/negative capital growth in all cities/towns except Akld, Wgtn, Chch, Hamilton and popular tourist spots.
It can be difficult to find a reliable property manager if you are not living there to check up on them.
If your property is negatively geared or has a paper loss, you can only offset the loss against future NZ profits.
Recent problems with poor building standards in Akld.
The exchange rate.

I'm a novice investor but I think that, regardless of where you choose to invest, nothing beats market knowledge!
Which means you need to go to these places and learn the market so you don't buy a dud... just like a Sydney investor looking to buy in Brisbane.
But you knew that.

Hope that helps!

cheers, Tony

[lawsjs]

Sometimes I dunno why I bother cos no one listens, but.... We are becoming a global village, if you cant work it out now, in years to come you will say 'why didnt I?'

When people say 'should I buy interstate?' I often think - for the pretty average returns interstate why not do the same thing and buy o/s? You would probably see the property just as much and the returns are so much better. BUT I am the only one who says this, and has actually done it, so I guess I am once again talking to the pot plant for all the convincing it will do......UNLESS I charged $15000 for a seminar (or a network of speakers ummmmm let me think of a name, HK enterprises or chargestlyer for example) in which case you would be jumping to pay...

[Jude H]

Hi lawsjs,

Last year I was trying to find out the ins and outs of investing o/s. Got stonewalled at every turn. Was speaking to REA's and Finance Brokers in England, Canada and U.S.A. Obviously I didn't speak to you. If you would be so kind, I am listening....

[yuch.]

Jude,

The property you bought in NZ, did you borrow from an NZ financial institute?

And does it affect your overall borrowing capacity here in Oz?

[silas]

Hi I currently have one property in New Zealand and am currently revaluing and looking to get another couple in the next couple of months.

Feel free to email if you have specific questions or want any other information.

Mark

[Jude H]

Hi Yuch,

Tony D has property in NZ. I don't.

[Tony]

Hi Lawsjs,
I'm all ears on what you have done with regards to overseas property purchases & any other observations you may have.

Regards Tony.




Originally posted by lawsjs
Sometimes I dunno why I bother cos no one listens, but.... We are becoming a global village, if you cant work it out now, in years to come you will say 'why didnt I?'

When people say 'should I buy interstate?' I often think - for the pretty average returns interstate why not do the same thing and buy o/s? You would probably see the property just as much and the returns are so much better. BUT I am the only one who says this, and has actually done it, so I guess I am once again talking to the pot plant for all the convincing it will do......UNLESS I charged $15000 for a seminar (or a network of speakers ummmmm let me think of a name, HK enterprises or chargestlyer for example) in which case you would be jumping to pay...

[tonyd]

Originally posted by yuch.
Jude,

The property you bought in NZ, did you borrow from an NZ financial institute?

And does it affect your overall borrowing capacity here in Oz?

Hi Yuch,

I assume this question was intended for me.

Yes, I borrowed from a NZ bank - ANZ.

It hasn't affected my borrowing capacity because it is cashflow positive.
When I arranged a mortgage for my PPOR (in OZ) the banks wanted NZ bank statements and rental receipts to prove it wasn't affecting my OZ income.

I was living in NZ when I signed up the IP deal though (I told them I was going to OZ).

I just fired off an email to a mortgage broker in NZ get more info. I'll post it when I get a reply.

cheers, Tony

[simonjulie]

Tell us js
We might not have been ready for it last year but we are now.
Things like
Tax implications etc.
Kind regards
Simon

[tonyd]

As promised...

From a mortgage broker in NZ...

Yes we can arrange finance for Oz based investors buying NZ property. Most lenders are ok with this.

Non residents living overseas - proposals will be assessed on the strength of the application and on a case by case basis.

New Zealand citizens based overseas will be considered if they have good cash flow and meet the Bank's credit policy.


Hope that helps.

cheers, Tony

[Jas]

My understanding is that the LVRs are crap - 65%-75%.

Also tax credits are kept in the country, and can't be transferred...

But I never managed to get much further than that.

www.housemouse.co.nz is a place to start (he posts here sometimes)

Jas

[geoffw]

Also tax credits are kept in the country, and can't be transferredNot my understanding, though could be wrong...

If you had two properties overseas, in two different countries, and one made a profit, and one did not, it's my understanding that the loss on one could be offset against the profits on the other property

However, you could not

1. Offset losses against Australian income
2. Offset losses against overseas income in a different class. So an IP loss in the UK could not be offset agaianst earned income in the US, UK, or anywhere.




Different subject- Jeremy, aren't you in Berowra? How did you fare with the fires?

[geoffw]

In response to the original question. I did have a property in England, which I bought while living there (in 1988), and renovated. Cost was GBP 50K - value two tears after (including reno) was GBP40K.

Needless to say, I did not sell then.

But the big problem I found at the time was that property managers did not keep me well informed. Inspections came up a treat- but when I went to visit 10 years later, the condition was really bad.

OK, I did not know that much about property at the time.

But it was "negatively geared" for the 9 years we rented it out- and I could not claim any of the losses against my income.

The losses could possibly be carried forward should I ever gain a profit OS again.

[Jude H]

Hi Tony,

Thanks for the info. Would you please supply contact details for Broker? Where is he based?

[tonyd]

Jude,

See PMs.

cheers, Tony

[Aceyducey]

Me too Tony!

Thanks,

Aceyducey

[lawsjs]

The L/V's I got in US were crap but with creative financing (10% down with a further 10% carried by owners) it wasn't too bad. I literally doubled my net worth in just over a year. My USA beachead is now self sufficient, and in fact the only positive geared property I own. It is now generating its own borrowings and building steadily. The USA is as I have said before is about 2-3 years behind us, UK 1-2. I want into the UK as the returns in CG terms are great. Rental returns are shocking, and it would be an alligator requiring feeding. That said, I am sure the returns in time would be great. Be aware housemouse is straight henry kaye, nothing more, nothing less. Wish her well, as an in for educated foreignors something I would entertain, but do so with your eyes open. Her investors WILL be burnt in time. I guess 1-2 years (which is completion date for most OTP properties currently being marketed) The argument that you buy at a 30% discount works only so long, sooner or later the valuers and banks lending will object to loaning 30% more for their other clients on the same property. Ipso facto 30% discount IS the market value!
The US is amazingly creative and huge. I would recommend going anywhere OS - at the very least you won't lose and it is FUN!

[Jude H]

With all due respect lawsjs you have not told us anything. Your first post and our subsequent replies indicated you had/we wanted knowledge. The ins and outs. As I replied earlier, I tried to invest o/s last year at was stonewalled at every turn. I even tried the famous Mr De Roos for advice with no luck. Question is simple. HOW do we, as non residents, buy/ get loans etc in an o/s country?
Who is housemouse?

[Mike]

Hi Jude,

As I am in the UK I can probably be of some help in finding some suitable property for you no charge. How positive geared will depend on your budget and therefore what area you can buy in to. Ripple effect at the moment has prices of top end property in London softening while best growth is outside London. Lending requirements in UK for IPs usually require rent to be 130% of mortgage repayment ie positive geared. That is not achievable in London with an 85% LVR loan because rental yields have fallen due to strong growth over the last five years. So securing a loan here will depend on the rental yield plus suitable deposit to ensure rent is 130% of mortgage payments. Bear in mind Landlords are not up for electricity, water, gas, telephone, internet or council tax. The tenant pays these costs so that improves cashflow substantially but doesn't figure in lending requirement which is based on rent as I mentioned.

When considering the importance of capital growth, bear in mind that London and S.E. England have best long term growth so investing outside that region may be good for short-term growth now but will eventually fall behind in the future.

Regards, Mike

[lawsjs]

Jude,
Very simpy I went to Ca. set up a bank account with Bank of America, rang about 200 RE agents until I found one who thought I was serious. Then I signed on about USD$1.2m worth of income property, on my last day of a 2 week trip. After that I went home and worked out how I was going to get a deposit together. I maxed out my credit cards and got a $100k AUD line of credit. Once I had the LOC approved I could pay back the CC's and used the 100kAUD as 10% deposit. The sellers I got to agree to loan me 10% so I could meet the banks 20% down requirements. In that way I managed massive gearing. I recently sold one building and bought another which required a 30% down as it was commercial. I _still_ ended up $30kUSD short on that deal, but found a loan shark (who charged me $6k USD fees for a 25k loan, but I got the property) so I have that too. Thats pretty specific! Have a look at housemouse.co.uk. She introduced me (very nicely) to her broker who can get 15% down (with the aformentioned 130% rental reqmnt) but I have managed to find another broker in UK who can get me 5% down. Housemouse is extremely cagey yet is doing nothing illegal and I would recomend investing with her if you have no other UK link. She is a more down to earth Henry Kaye. She is also smart, dedicated and knows her markets well. She buys for discount, then onsells. Provided the market remains healthy everyone will be happy! I expect she will become a developer in short order. When I met her, I would have been prepared to hand over about stg20k, but I got so few specifics about any projects she was doing (possibly luckily:)) that I thought I would do better to know more and do it myself. Even the blanket 'well where do I start then?' was answered with 'well I get so sick of people asking me that' Fair enough, I do too, but I actually wanted to start!

Housemouse I assume worked out 'her' HK strategy herself, and we all know it works. Hard in this country and in US as the finance is 'lesser of purchase price or valuation' I would assume this will come in to UK in short order.

You can buy anything anywhere if you have a big enough downpayment! Its that simple! The trick is to get in with as low a downpayment as possible, and that is dependant on how soft the market is and how malleable the sellers are.

[beech]

hi Jeremy,that 1st inv in USA was a condo i think wasnt it?
How many apartments were there and what was your initial return?(if u dont mind,that is)

And finally what sort of arrangement is made with the vendor re payments,& over how long?

Darren

[Sunstone]

Dear guys,

USD$1.2 million = AUD$2,142,857.10 (AUD$1.00=USD$0.56)

20% deposit

10% from seller (Explained.)


Balance of deposit = 10% = $214,000 (AUD)

$100k from LOC
$44,642 from loan shark.


Still the shortfall on getting the deposit is $55,358.00

Hmmmm.........


Cheers,

Sunstone.

[Mark Laszczuk]

Sunstone,
If you want Jeremy to explain the shortfall, why don't you just ask him, instead of implying some bending of the truth or something? In my experience, Jeremy has always been very forthcoming and open about any enquiries people have for him.

Mark
'no hat, some cattle'

[Mike]

Hi Folks,

Quote from Jeremy -

"Housemouse I assume worked out 'her' HK strategy herself, and we all know it works. Hard in this country and in US as the finance is 'lesser of purchase price or valuation' I would assume this will come in to UK in short order."

"Lesser of purchase price or valuation" is also applicable to UK unless you are doing a major renovation like a conversion then the eventual mortgage will be the new valuation of the property. Housemouse aka Lady Lea aka Lea Beven gets her developers to gift you the deposit to get that 15% discount. Same effect as Henry Kaye's cashback technique just done differently. One HK technique not yet available in UK is the use of Deposit Bonds. Lady Lea also does investor deals if you just want a cash return. Jeremy posted the incorrect website. The current website is actually:

http://www.housemouseuk.com/

Old site where deals where posted:
http://groups.msn.com/Housemouse/propertydeals.msnw

Lady Lea's professional team:

FPD Savills - Finance Packager - Mike Perrin
Mike deals with finance on all of housemouse JV deals Tel 0207 330 8553
http://www.primepitch.com/finance/savills.html

Jackson Stephen Accountants - David Cowen
David specialises in property tax accounting and looks after housemouse accounts
http://www.jackson-stephen.co.uk/JS%20HomePage.htm

Tudor Rose Solicitors - Neil Cloutman & Sue Strong
Neil and his cracking team do housemouse discounted deals.
http://www.trsolicitors.com/

Jane Watts is another Mortgage Broker I've met at a seminar.
Tel: 01707 876811/889796
Mob: 07976 813914
Fax: 01707 876821

Disclaimer: Providing this info does in no way imply that I endorse Lady Lea as a competent or reliable source of investments because this is her first foray into newbuild developments a-la HK. Therefore, she has no track record in this type of strategy. She does have 10 years as an investor doing refurbs and does also have a knowledgeable professional team which is in her favour. She does research her developments carefully but in a hot market the risk of vacancies due to a shortage of renters is always a worry. Renters can be found but usually only when the expected rent is dropped significantly.

[Sunstone]

Dear Mark,

Okay. Yes there is a shortfall.

Part of this post was thinking out loud as too many people do not question the information that is presented in front of them.

Jeremy, how did you fix this shortfall?

Cheers,

Sunstone.

[lawsjs]

You are mixing my old and new deals. The 3rd note I got was to cover the shortfall on the 8 plex I just bought. My first deals were when the AUD was at .64US so the numbers got better as the AUD fell. O/S property is a very nice hedge against currency fluctuations and government policy.

The first deal I did I got 10% back from the seller, a small cashback on settlement and a further 10kUSD to 'repair' termite damage (they have friendly termites in Ca - I was terrified when I read the pest and building!) The second deal (this is now 4 years ago!) ran along similar lines. I ended up with 3 loans on one property and 2 loans on another. The gross return is about 14% on one property and about 12% on the other. The loans are expensive, but the CG is great. If you sell a property in USA and roll the proceeds into another one, you don't pay tax on the profit. If I was to export the money I would be subject to a 3.33% non-resident witholding tax. They want you to roll the money into bigger buildings to collect more tax from you in the future.

[Mark Laszczuk]

Jeremy,
I don't know if you do stand alone's (I assume your purchases have been apartment blocks), but I read on another site that the majority of stand alone's in the U.S. market are actually negative geared.
This was actually a surprise to me, because having read books by a few U.S. authors, I was given the impression by all of them that positive cashflow properties (stand alone's) were a dime a dozen over there. Do you know if this is true or not?

Mark
'no hat, some cattle'

[lawsjs]

Mark,
Stand alones, or 'Own your owns' are often positively geared, or what I would term 'neutral' as they are _just_ positive. Don't forget that are a lot of people who want cash+ properties there too, so you have to look hard. They are there! The guys I bought through www.buckinv.com pushed me into the bigger 4 and 8 plexes as these are true cash positive properties. You can get owner occupied loans on 4 plexes, but 5 and up are commercial properties. If we lived in the US (on this forum) you can bet your bottom dollar, or pound for that matter! we would all have lived in a fourplex at some stage and then traded into bigger stuff. 3% down is possible on owner occ's (resident) but commercial is 20%+

BTW - I also got a 25k personal loan to fund any unforseen extras. I ended up with a quite a bit of cash left over.

[Jamie]

Hi Jeremy,

Was just flicking thru the RDPD forum and saw this. Thought it was relevant given the discussion about investing in the U.S.

The numbers seem unbelievable, yield over 26%, purchase of 9 units for US135k. Have you seen deals like this? Reading thru the US forums they seem to spring up all the time. Also, they seem to factor in a lot of maintenance costs upon purchase. HAve you found the multis that you look at are usually in need of a reno?

Appreciate you opinion,

Jamie. :p

Heres the excerpt:

"Here's the deal: (low income area)

A 6 plex
A Duplex (all 2 bedrooms)
A 2-bedroom house

All units (total 9) selling for 135k. Have not run comps yet or seen the properties yet. I have an appointment with the listing agent tomorrow to look at the properties and will run comps following a 2-day real estate class/seminar (which includes running comps) this weekend. 7 of the 9 units are currently rented and the two that are vacant just opened up recently. (this info was obtained through the agent). Current income from the property is 2950.- a month. The agent stated that the reason for the sale of the property was due to the owner's old age, (in his mid 70's) and that he would not carry the note because of his age.

[brains]

Hi,

Could i ask what "running comps" means?

Also could you point us to said forum?

Thanks

[Jude H]

Thankyou to all for info. I appreciate your help. :)

[Mike]

Hi

"Running comps" I presume means determining the market value of the property using comparable sales data ie recent sale figures of similar properties in the same area.

The RDPD ie Rich Dad Poor Dad forums are at http://www7.richdad.com/forums/index.jsp

Regards, Mike

[lawsjs]

All those deals exist. Be careful with USA though, bad areas are BAD BAD. It made me very unafraid of bad areas in Aus. For example none of my property managers have been shot at in aus when they turn up for a property inspection. This has happened in LA, not to my properties (which I thought were 'bad') but to ones fairly close buy. High cap rates will usually be there for a reason. My advice - don't buy anything with a cap greater than 8, in a hot market it would be trouble.

(CAP is net return rate) 8CAP = 8% net return (excluding finance)

[lawsjs]

Tried to edit my last comment but couldnt. This site sometimes has mange AND it reminds me too much of work! (same software on our union site)

It was MY property manager who was shot at by BOTH husband and wife when she turned up for an inspection. I understand it was NOT a pleasant situation and she eventually got help from police after she locked herself in the bathroom and used her 'cell.' Gives you a new perspective on 'bad!'

ALWAYS rely on cross checked local advice, and be VERY aware of high returns. There is usually a reason........