Buying Property in the USA

[JoanneL]

I noted recently a suggestion on this forum about buying property in the USA.

My husband is American and holds Aust Citizenship and I am Australian and hold USA resident alien status. My husband is also entitled to a Vet loan in the USA for $US27,500.

Has anyone purchased property in the USA recently as I would like to know:
1. How you sourced the property.
2. Who is managing the property.
3. What are the tax implications in USA and Aust. At present there is no reciprical agreement between USA and Aust and as I understand it, we would have to pay tax in both USA and Aust. My local Federal Member's office staff told me last year that US and Aust were negotiating a reciprical agreement and I am yet to verify that this has been finalised.

Thanks
JoanneL

 

[geoffw]

Joanne,

I can't help with the first two points, only a little on the last.

I had a property in England which was being let out for a number of years. The rent was not enough to pay the interest. I did not pay tax in England, because I was under the threshold- at one stage, I did have to fill out a declaration in England to confirm my tax free status there.

However, I could not claim the extra payments I made agaisnt my taxable income in Australia, as I would have been able to do if the property had been in Australia. At that stage, at least, payments made for an overseas investment could only be offset against income received from an overseas asset. I could accumulate those losses for a period of time- but as the house never became cash flow positive, I could not use it.

 

[Robert]

Hi Joanne

I know that JeremyL has been actively purchasing properties in the US. There was a really good thread in the old forum which discussed the implications of investing via the US.

So I'd suggest one of the best people within this forum to answer your questions would be Jeremy.

Or if anyone can find that old thread in the archives.

Cheers
Robert

 

[lawsjs]

The US and Aust were among the first to have tax treaty agreements - so your information re tax is about (to my best guess) 25 years out of date. You do a half resonable deal in US and you will walk over wrap returns. Market there is hot hot hot atm. As my broker there said "its not a question of which property you buy, just buy property"

Gte in and get your feet wet. Explore the VA loans - they are gold! If you married an american citizen thats an immediate 3-10% down instead of my 30%+down loans! Get into it...

 

[geoffw]

VA Loans Jeremy? What are they?

And is there a good web resource you could recommend?

(And I assume that my own "North Amreican"-but non-Anglo-spouse would not qualify forany US concessions!

 

[Mr. Fabulous]

Geoff, I'm pretty sure that VA loans are Veterans Affairs loans, for people that used to be in the service. But I may be wrong. I'm sure someone will correct me if that is the case.

Mark
'no hat, some cattle'

 

[lawsjs]

Thats right Mark, VA loans are Veterans affairs (or is it admin?) loans. Basically Uncle Sam (in his sometimes strange wisdom) will stump up any loss a lender incurs on a loan to a VA loan customer. Hence you can get property on very very low downpayments. (zero in some cases) I think you also get a break on interest rates. If for example you bought a 4plex (most you can buy and still qualify for non-commercial loans) give one of the tenants say $50/month rent reduction to collect your mail and get a phone line connected in your name. Thus you become an owner occupier whilst getting max rental $$. You are then on your way to doing very well! You should get into the US market if you can.

 

[Mike]

Hi Jeremy and Joanna,

Please don't confuse Double tax treaties with reciprocal agreements. Two different things. Reciprocal agreements can be anything from pensions, work visas, education, criminals etc. Double tax treaty with USA has been in place since 1983. Same arrangement applies with UK. Basically it means that income will be taxed at the source. If Joanna is earning income in Australia that income is taxed in Australia. If Joanna owns rental properties in the USA the income is taxed in the USA. If the properties are making a loss the loss is quarantined in that country. The loss is rolled over each year until the rent is greater than the losses. It's that simple.

Also works in reverse as in my case. I work in the UK and my job income is taxed here. My investment properties are in Australia and the income is taxed in Australia. I recently did my Australian return and made a loss of $11,000. That loss is carried forward each year until the rental income overtakes it. It's quite simple really.

This link mentions the double tax treaty:

http://www.investaustralia.com/FAQs...d is there one between the USA and Australia?

As for sourcing property in the US:

Ross Sondergeld has mentioned a guy called Bill Broadbent who began the buyers advovate revolution in the USA. He's also written a book:

Owner Will Carry: How to Take Back a Note or Mortgage Without Being Taken by Bill Broadbent, George Rosenberg

Bill's website is: http://www.arnettbroadbent.com/

Jeremy has mentioned a guy called Martin J. Stone (Marty). He's also co-written a book:

The Unofficial Guide to Real Estate Investing by Spencer Strauss, Martin J. Stone

Marty's website is: http://www.buckinv.com/

Apparently, both these guys are in California.

Jeremy has also recommended Kellie who can broker some loans for USA property.

Kellie Dutton
Tel (02)9456-2696
Fax (02)9456-2027
M: 0413-925-943
[email protected]

Regards, Mike

PS: I love this passage that I found on Marty's site:

Competent Investment Real Estate Brokers should be able to assist you in locating smart equity fixer uppers, developing a plan to capitalize on the condition and marketing or exchanging the financially improved properties.

The classic example of a sweat equity fixer upper is the building that has been run down physically from lack of care, or money to provide that care and maintenance.

The classic example of a smart equity fixer upper is the building that has been poorly managed with respect to income and expenses. Owners who are afraid to raise the rents to competitive levels. Owners who paid no attention to expense control.

In short, the difference between sweat equity buildup and smart equity buildup is the difference between solving physical maintenance problems and solving financial problems!

 

[lawsjs]

I was just talking on MSN to Spencer! They have a new book being released next Wednesday with a title that started (last year) something along the lines of 'How to avoid the next stockmarket crash with real estate investment' and has now been massaged (because it happened!) to something like 'making money in the stock market with real estate.' I can't remember exactly what it is..... Search Amazon.com for Marty Stone or Spencer Strauss.

The first book written was more a text book they decided (and even though I am quoted in it) a more friendly approach would work better, and tell people that the stock market isn't the only way to riches.

Marty's office has grown considerably since I first went there, though it is a still a very very low key affair. Most of his clients have retired, are comfortably multi millionaires and 'work' at his office for something to do. Deals come up at the office first, therefore they hang around waiting for them! He mentioned once one of his clients who owns 4,500 apartments.

There is a fantastic property poster in Marty's office that he found in a building he bought. I was looking at the standard waves and troughs, property vs stocks vs cost of living/wages etc when I realised the numbers didn't make sense. Then I looked up at the top. The title of this wall poster is 'WILL THE PROPERTY BOOM OF 1948 CONTINUE.......' Sadly, he wouldn't give it to me

On taxation, I pay US taxes, and Australian taxes, and claim credits for the tax paid in the US. Your gains and losses are as stated quarantined in each country. It is a little complicated and messy, but as I have said, it IS worth it.

 

[geoffw]

Some great info people.Thank you very much.

A small point on quarantined income.

The quarantined income apears not to be on a country by country basis- but on Australia vs non-Australia by category (four categories)- see http://www.ato.gov.au/content.asp?doc=/content/Individuals/19897.htm&page=4#H11

So you could offset UK passive income losses for IPs against income gains in the UK- but not, for instance, against against Australian IP gains or UK earned income.

 

[JoanneL]

Thanks

Thanks to all who replied. Some great info and additonal resources.

Many thanks
Joanne L.

 

[1Putt]

Q: Marty's Office and website?

Apologies if this question is a little dated:

Does anyone have a website URL for the Martin J Stone office that Jeremy and Mike mention? The URL in Mike's post doesn;t appear to be online any longer.

Regards,

1putt

 

[XBenX]

sorry, no info

i just wanted to mention thats its great everyone is reading the archives and searching them

there is a weath of information in there !!!

 

[chrisa]

Iam interested in investing in USA.Does anyone know of any books I can get with the how tos etc

 

[beech]

hi Joanne what i suggest 1st is get on Richdad.com.

its Kiyosakis forum just like here.

very creative RE investing over there and totally different to here.

lots of info on there and i suppose like here you have to work out for yourself what type of strategy you may put in action.

so off you go and read read read.

let us know how you go.