20 US properties in 4 1/2 years
- Thread starter karina
- Start date
Karina
Do you pay stamp duty on transfer of land over in the US?
and is there an equivalent to landlords insurance where it covers damage and lost of rental income if the tenant bolts?
Stumpie,
A few answers to your questions.
1) Stamp Duty
There is no stamp duty payable in the US.
2) Landlord Insurance
We normally take out a building policy (but not landlord) so loss of rent is not covered however in Georgia the eviction process moves quite quickly. Vandalism is covered under the policy but of course "hard living" is not. A bond of 1 months rent is also collected at time of move in.
3) Taxation
I should start by saying I am not a licensed tax professional and cannot give advice on this matter so please seek advise from a licensed CPA. The information I am providing is not advice but general in nature.
If you own a US property you must lodge a return with the IRS. There is a tax treaty between the 2 countries to avoid double taxation, that is any tax paid in the US you get a tax credit for here (assuming you elect for your LLC to act as a disregarded entity for tax purposes)
When you purchase properties in an LLC you make an election of how you want to be taxed:
Option 1
LLC acts as a disregarded entity - that is income passes through to the members/beneficiaries of the LLC and they lodge tax returns in the US. Tax credit received in AUS for tax paid in the US.
Option 2
LLC acts as a corporation and the corporation pays US taxes and can distribute profits to the members/beneficiaries. Tax paid by the corporation does not receive a tax credit in Australia. You do however get a tax credit on the distribution paid by the LLC.
Disregarded entities receive favorable long term capital gains tax rates whereas corporations do not.
If you send me an email I can email you the US tax rate schedule, I have it in a PDF file but don't have a link I can post here.
A few answers to your questions.
1) Stamp Duty
There is no stamp duty payable in the US.
2) Landlord Insurance
We normally take out a building policy (but not landlord) so loss of rent is not covered however in Georgia the eviction process moves quite quickly. Vandalism is covered under the policy but of course "hard living" is not. A bond of 1 months rent is also collected at time of move in.
3) Taxation
I should start by saying I am not a licensed tax professional and cannot give advice on this matter so please seek advise from a licensed CPA. The information I am providing is not advice but general in nature.
If you own a US property you must lodge a return with the IRS. There is a tax treaty between the 2 countries to avoid double taxation, that is any tax paid in the US you get a tax credit for here (assuming you elect for your LLC to act as a disregarded entity for tax purposes)
When you purchase properties in an LLC you make an election of how you want to be taxed:
Option 1
LLC acts as a disregarded entity - that is income passes through to the members/beneficiaries of the LLC and they lodge tax returns in the US. Tax credit received in AUS for tax paid in the US.
Option 2
LLC acts as a corporation and the corporation pays US taxes and can distribute profits to the members/beneficiaries. Tax paid by the corporation does not receive a tax credit in Australia. You do however get a tax credit on the distribution paid by the LLC.
Disregarded entities receive favorable long term capital gains tax rates whereas corporations do not.
If you send me an email I can email you the US tax rate schedule, I have it in a PDF file but don't have a link I can post here.
ZachAnSel,
I have not invested in multi family above 4 units however if its of interest to you I suggest you read Ken McElroy's books. He is Kiyosaki's real estate Guru who presented in Sydney and he specialises in larger multi family.
His Website:
www.kenmcelroy.com
www.loopnet.com is good for viewing multi family listings.
I decided early on that to enter the US housing market I needed to get experience with smaller deals (single family) before I attempted to buy larger deals. Its something I would like to try in the future.
Tough one, if you believe there will be continued growth in USA then possibly worth jumping in.
Karina is buying much cheaper than her competitors there is no middle man, and that is the big one, however its a numbers game, in other words you want cash flow positive deals and you need to look at the bottom line.
Also, bringing back the rental income to Oz is very nice and luvin this side of things, another consideration.... do the homework if you have a spare $500K in 3 years time who knows you may be sitting pretty
Karina is buying much cheaper than her competitors there is no middle man, and that is the big one, however its a numbers game, in other words you want cash flow positive deals and you need to look at the bottom line.
Also, bringing back the rental income to Oz is very nice and luvin this side of things, another consideration.... do the homework if you have a spare $500K in 3 years time who knows you may be sitting pretty
Imho its way too late, USA property market is recover already. Let say property in Atlanta when Karina, MTR, others bought is around (approx) $40-70k.
Now you can still get $90ish but need rehab.
Then again AUD currency is 1.1 vs 0.8 ish now
But do you believe it will happens again in 10-15 years? One of my mentor called GFC 2.0
At that time, I hope our mature, capital, experience is ready. So we can hit hard, and more savvy
No, not at all, just saying look at the numbers Karina has posted these. If you think USA property will continue to rise and USA economy is slowly recovering then perhaps it is still an option for you, however I think the horse has bolted . Consider the Au$ now at 81, USA houses have already doubled from prices 3 years ago and you need cash you can not LVR your money.
MTR
Last edited:
Karina -
Echo the thoughts of others - well done and from memory MTR has been successful.
I do wish many potential USA investors from down under would read these threads like this and the others before investing in the USA.
My 2 cents is that the USA continues to provide opportunities for investors that perform the right due diligence before investing.
Even late last night I was trying to talk a family out of 3 property purchases in Deyton Ohio and another in Detroit, this is the 'cheap as chips' real estate enticing investors to buy in bulk, but its quality over quantity. To find the quality you will not do it from here, you need people on the ground - a team that cover the bases from property find, closer, attorney, accountant and property management. There is a heap of fraud - happy to provide real life examples, so please partner with the right team and it looks as though Karina's team has built credibility and reputation over the year, and kudos to you.
Where are the opportunities?
Well good question, Atlanta is heavily promoted but like Melbourne or any city, there is north and south, and the socio demographic is quite different in each area, something might be cheap in price, but look at the area, we term these 'slum lords' that it high turnover of tenants and potentially having your place trashed regularly - further - try to collect the rent from these places....many PMs over there physically collect rent, so please consider this risk.
Zillow is a good research tool for each area, ring a local agent to get a feel of the area.
Cutting the middle man - this is important, many properties sold to oz investors are overpriced - usually 'flips', ask the promoter how they are making money - usually a buyers fee plus a commission/ margin on the flip. Cutting the middle man and having access to stock will save you thousands.
Finance - Finance is freeing up in states, banks are more liquid and aussies can get a loan and open a bank account without walking into a bank. Generally I see LVR up to 60% for third party finance with a fixed rate/ term, however, be aware of the balloon after the fixed period which can increase significantly based on LIBOR. The other factor is vendor finance - this can be chaper but you need to know the right people. I have developed r'ships with the right people to see the 'real' rates.
Structure: I have seen heaps of people structuring deals incorrectly, buying 5 properties with one LLC - thats a mistake, ensure you seek advice around structuring the purchase of your property. Note, the LLC will own the property, not you or your Australian company or SMSF. Consider holding companies and remember each state has different tax rates, so a holding company and operating company may be suited depending on the amount of properties held. Have a good accountant there and remember that you need to lodge tax returns in the states which is an added cost.
Locations I have closed deal across the states. North is tough to finance, i.e Michigan North Dakota Ohio, however, I love Texas, its the beer and lifestyle, nah, its a great state thats why its more expensive than the others. Great economy, employment growth, population and capital investment, have been involved and invested in development funds there successfully. Generally you are looking over $100k for a good property.
Georgia - Atlanta is the buzzword, choose carefully, same applies to Athens. Florida is buyers heaven, be aware of sinkholes. Memphis is real popular, I don't like Memphis.
Of the above I love Houston, again I am biased.
Yes the AUD V USD is $0.81 but the reason property was so cheap since 2008 is that properties were foreclosed, and once they foreclosed, the owners of the properties were not able to buy for usually a period of 7 years. During this time, rents were high due to demand. Using Math - the property market will continue to open up over 2015 and 2016 as these owners start to enter the market to buy and they potentially will be able to access finance. This is an important consideration in understanding the US market and demand for housing.
Hope that helps and I am so happy to hear the successful stories above and the wonderful information that is presented.
Merry xmas to all and happy investing!
Cheers Ivan
Echo the thoughts of others - well done and from memory MTR has been successful.
I do wish many potential USA investors from down under would read these threads like this and the others before investing in the USA.
My 2 cents is that the USA continues to provide opportunities for investors that perform the right due diligence before investing.
Even late last night I was trying to talk a family out of 3 property purchases in Deyton Ohio and another in Detroit, this is the 'cheap as chips' real estate enticing investors to buy in bulk, but its quality over quantity. To find the quality you will not do it from here, you need people on the ground - a team that cover the bases from property find, closer, attorney, accountant and property management. There is a heap of fraud - happy to provide real life examples, so please partner with the right team and it looks as though Karina's team has built credibility and reputation over the year, and kudos to you.
Where are the opportunities?
Well good question, Atlanta is heavily promoted but like Melbourne or any city, there is north and south, and the socio demographic is quite different in each area, something might be cheap in price, but look at the area, we term these 'slum lords' that it high turnover of tenants and potentially having your place trashed regularly - further - try to collect the rent from these places....many PMs over there physically collect rent, so please consider this risk.
Zillow is a good research tool for each area, ring a local agent to get a feel of the area.
Cutting the middle man - this is important, many properties sold to oz investors are overpriced - usually 'flips', ask the promoter how they are making money - usually a buyers fee plus a commission/ margin on the flip. Cutting the middle man and having access to stock will save you thousands.
Finance - Finance is freeing up in states, banks are more liquid and aussies can get a loan and open a bank account without walking into a bank. Generally I see LVR up to 60% for third party finance with a fixed rate/ term, however, be aware of the balloon after the fixed period which can increase significantly based on LIBOR. The other factor is vendor finance - this can be chaper but you need to know the right people. I have developed r'ships with the right people to see the 'real' rates.
Structure: I have seen heaps of people structuring deals incorrectly, buying 5 properties with one LLC - thats a mistake, ensure you seek advice around structuring the purchase of your property. Note, the LLC will own the property, not you or your Australian company or SMSF. Consider holding companies and remember each state has different tax rates, so a holding company and operating company may be suited depending on the amount of properties held. Have a good accountant there and remember that you need to lodge tax returns in the states which is an added cost.
Locations I have closed deal across the states. North is tough to finance, i.e Michigan North Dakota Ohio, however, I love Texas, its the beer and lifestyle, nah, its a great state thats why its more expensive than the others. Great economy, employment growth, population and capital investment, have been involved and invested in development funds there successfully. Generally you are looking over $100k for a good property.
Georgia - Atlanta is the buzzword, choose carefully, same applies to Athens. Florida is buyers heaven, be aware of sinkholes. Memphis is real popular, I don't like Memphis.
Of the above I love Houston, again I am biased.
Yes the AUD V USD is $0.81 but the reason property was so cheap since 2008 is that properties were foreclosed, and once they foreclosed, the owners of the properties were not able to buy for usually a period of 7 years. During this time, rents were high due to demand. Using Math - the property market will continue to open up over 2015 and 2016 as these owners start to enter the market to buy and they potentially will be able to access finance. This is an important consideration in understanding the US market and demand for housing.
Hope that helps and I am so happy to hear the successful stories above and the wonderful information that is presented.
Merry xmas to all and happy investing!
Cheers Ivan
The "is it too late to buy" question I get asked a lot.
I am still buying as I see great opportunities still available in the atlanta market. I will try and outline my reasons below of why I am still buying illustrating some examples using recent property numbers.
These are the factors I think need to be considered:
1) What was the price at the bottom of the market
2) What was the price at the peak (just before the GFC)
3) The exchange rate, where it was , where it is and where it's headed
4) replacement cost of the property
5) Opportunity cost - what else would I do with the money if not use it on US property that could deliver a better investment
I will use the properties below to provide some current examples.
Example 1
Purchase price $97,500 (late 2014)
Last sold $166,500 in 2004
2004 was not the peak of the market, peak was between 2006 - 2007.
Lowest sale price in the subdivision was 69k in 2012 (bottom of the market)
Highest sale price in 2006 - $202,000
Replacement cost based on the insurance assessment is $191.000
House is newer constructed having been built in 2004.
Example 2
Purchase Price $65,000 (late 2014)
Last Sold $111,000 in 2001 (before the housing boom)
Lowest sales in the subdivision 37k in 2012
Highest sales in the subdivision 143k in 2006
Replacement cost based on the insurance assessment is $155,000
House is newer constructed built in 2000
The exchange rate.
Exchange is now around 80 cents with most economists predicting the exchange will sit around 72 cents by the end of 2016. There was an amazing opportunity to buy when the Aussie dollar was around parity but that currency play has now passed.
Is it worth buying with aussie dollar at 80 cents? Well that depends on which way the dollar is headed. If the aussie is going to slide further then you are actually making money on the currency as it declines further, bringing back more rent etc.
Opportunity cost
For me I can't identify an investment at this time that has more upside than the Atlanta opportunity. For someone like MTR that develops sites in AUS and has the skills and resources to do it it may make more sense to continue developing in AUS.
I am still buying as I see great opportunities still available in the atlanta market. I will try and outline my reasons below of why I am still buying illustrating some examples using recent property numbers.
These are the factors I think need to be considered:
1) What was the price at the bottom of the market
2) What was the price at the peak (just before the GFC)
3) The exchange rate, where it was , where it is and where it's headed
4) replacement cost of the property
5) Opportunity cost - what else would I do with the money if not use it on US property that could deliver a better investment
I will use the properties below to provide some current examples.
Example 1
Purchase price $97,500 (late 2014)
Last sold $166,500 in 2004
2004 was not the peak of the market, peak was between 2006 - 2007.
Lowest sale price in the subdivision was 69k in 2012 (bottom of the market)
Highest sale price in 2006 - $202,000
Replacement cost based on the insurance assessment is $191.000
House is newer constructed having been built in 2004.
Example 2
Purchase Price $65,000 (late 2014)
Last Sold $111,000 in 2001 (before the housing boom)
Lowest sales in the subdivision 37k in 2012
Highest sales in the subdivision 143k in 2006
Replacement cost based on the insurance assessment is $155,000
House is newer constructed built in 2000
The exchange rate.
Exchange is now around 80 cents with most economists predicting the exchange will sit around 72 cents by the end of 2016. There was an amazing opportunity to buy when the Aussie dollar was around parity but that currency play has now passed.
Is it worth buying with aussie dollar at 80 cents? Well that depends on which way the dollar is headed. If the aussie is going to slide further then you are actually making money on the currency as it declines further, bringing back more rent etc.
Opportunity cost
For me I can't identify an investment at this time that has more upside than the Atlanta opportunity. For someone like MTR that develops sites in AUS and has the skills and resources to do it it may make more sense to continue developing in AUS.
It's been an amazing journey for you, Karina, since we attended the Kiyosaki seminar close to 5 years ago. Kudos and well done !
