US IPs
- Thread starter Haggis
- Start date
Having recently lived in the midwest area of US I have a couple of learnings.
1) US Banks will not lend you any funds for an IP unless you have a green card.
2) If you have a any kind of working visa US banks will not lend you any funds until you have sufficent credit history built up. This usually takes 12 months.
3) There are no high stamp duty charges on purchase however property taxes in the US are paid yearly and depending on the area can be quite high. On a $USD200K property in a city like Milwaukee expect to pay around $USD3,500 to $USD4,000 per year.
A very, very brief insight ... I know. This is however a start ...
1) US Banks will not lend you any funds for an IP unless you have a green card.
2) If you have a any kind of working visa US banks will not lend you any funds until you have sufficent credit history built up. This usually takes 12 months.
3) There are no high stamp duty charges on purchase however property taxes in the US are paid yearly and depending on the area can be quite high. On a $USD200K property in a city like Milwaukee expect to pay around $USD3,500 to $USD4,000 per year.
A very, very brief insight ... I know. This is however a start ...
Learning man,
what you said apply partially here on the west coast. I live up and down the west coast and have bought and sold properties. Here is what I know from my personal experience and friend's encounters.
1) Banks will lend to overseas investor even if the overseas investor does not live in the States, it depends on the down payment and interest rate. An overseas investor will be required to make at least 30% down as compared to as little as 5% for locals.
2) You are right in pointing out the credit history. Credit history is everything in borrowing money, one late payment may cost you half a point. Overseas investors should probably look at 2.5 points higher than advertised rate. How to get the rate down? Make more downpayment and find a place with existing tenant.
3) In Washington state and California, where I have lived, the property tax is 1% on the property value, not sure about the rest of the country. However, property tax is deductible against your overall income tax (including rental of course) obligation.
Here is something that is worth exploring. In the US, we have this tax law which enables us to make tax deduction on mortgage interest paid on our second home overseas, which means, when I buy a home in OZ with mortgage, I can deduct the interest against my income here in the States. I'm wondering if OZ has similar kind of legal treatment for overseas second home.
However, when you sell a property, you are at a big disadvantage compared to the locals. US tax law allows one to sell one's main residence (defined as occupied by owner in the 2 out of the last 5 years ) and keep the initial 250,000 capital gain entirely (500,000 for a couple). As you can imagine, lots of owners/investors are quite busy switching their main residence every couple of years.
what you said apply partially here on the west coast. I live up and down the west coast and have bought and sold properties. Here is what I know from my personal experience and friend's encounters.
1) Banks will lend to overseas investor even if the overseas investor does not live in the States, it depends on the down payment and interest rate. An overseas investor will be required to make at least 30% down as compared to as little as 5% for locals.
2) You are right in pointing out the credit history. Credit history is everything in borrowing money, one late payment may cost you half a point. Overseas investors should probably look at 2.5 points higher than advertised rate. How to get the rate down? Make more downpayment and find a place with existing tenant.
3) In Washington state and California, where I have lived, the property tax is 1% on the property value, not sure about the rest of the country. However, property tax is deductible against your overall income tax (including rental of course) obligation.
Here is something that is worth exploring. In the US, we have this tax law which enables us to make tax deduction on mortgage interest paid on our second home overseas, which means, when I buy a home in OZ with mortgage, I can deduct the interest against my income here in the States. I'm wondering if OZ has similar kind of legal treatment for overseas second home.
However, when you sell a property, you are at a big disadvantage compared to the locals. US tax law allows one to sell one's main residence (defined as occupied by owner in the 2 out of the last 5 years ) and keep the initial 250,000 capital gain entirely (500,000 for a couple). As you can imagine, lots of owners/investors are quite busy switching their main residence every couple of years.
Thanks for the feedback.
I am looking to produce high cash flow (over 20%) from buy & hold properties in the US. I have looked at NZ and although the returns are generally higher than Oz they are not as strong as some in the US.
I am trying to piece together what lending is available so thanks for your comments lilith & learning man. Also structures, bird dogs and most importantly, property management.
Predictably where there are high returns there are also problems, usually with lower quality tenants (and the occasional drive by shooting - 3 murders a day in Detroit?!)
Check out mrlandlord.com
Structures seem to be pointing to a LLC or a C corporation which is cheaper with share holders in Oz. Lots of varying opinions because peoples understanding and circumstances are all different. Tracking down an accountant who specialises in this would be good. - any recommendations?
I am looking to produce high cash flow (over 20%) from buy & hold properties in the US. I have looked at NZ and although the returns are generally higher than Oz they are not as strong as some in the US.
I am trying to piece together what lending is available so thanks for your comments lilith & learning man. Also structures, bird dogs and most importantly, property management.
Predictably where there are high returns there are also problems, usually with lower quality tenants (and the occasional drive by shooting - 3 murders a day in Detroit?!)
Check out mrlandlord.comStructures seem to be pointing to a LLC or a C corporation which is cheaper with share holders in Oz. Lots of varying opinions because peoples understanding and circumstances are all different. Tracking down an accountant who specialises in this would be good. - any recommendations?
I strongly suggest your checking out the neighborhoods very carefully in the US because the wealth and income disparity is way starker than Oz. Therefore, if you invest in the wrong side of the town, you won't see your money back for years. Inner-city problems are rampant, and since our population is more spread out, the pace of urban renewal is way slower than Brisbane, Melbourne and Sydney.
Generally speaking, population in the US is moving westwards. It's better to use local accountant since every state has its own set of realty/rental codes that may affect your return. I looked up some Queensland tenancy codes earlier, it seems to me that Australia is more protective of landlord than the US. Kicking out a tenant is a huge headache here. That again emphasizes how important it is to choose the right burb.
Generally speaking, population in the US is moving westwards. It's better to use local accountant since every state has its own set of realty/rental codes that may affect your return. I looked up some Queensland tenancy codes earlier, it seems to me that Australia is more protective of landlord than the US. Kicking out a tenant is a huge headache here. That again emphasizes how important it is to choose the right burb.
thanks for the responses people's!
What about the tax law robert kiyosaki quote's? the one that allows you to defer paying tax if you sell your property and then roll the money into a more expensive one. do you know if this is still an option? and while we're on the subject, does anyone know if there is any sort of tax dodge like this in aus?
haggis, what do you mean by bird dogs?
Lilith said:
What about the tax law robert kiyosaki quote's? the one that allows you to defer paying tax if you sell your property and then roll the money into a more expensive one. do you know if this is still an option? and while we're on the subject, does anyone know if there is any sort of tax dodge like this in aus?
haggis, what do you mean by bird dogs?
Bird dog is the name given to people who source property. Sometimes this is where someone would start in investments if they have no cash but have time. They would be a bird dog, find a property to supply to an "angel" (the investor who has cash but no time) and split the profit.
Don't know where this terminology started but it seems quite popular in NZ and the US.
Don't know where this terminology started but it seems quite popular in NZ and the US.
<<<<What about the tax law robert kiyosaki quote's? the one that allows you to defer paying tax if you sell your property and then roll the money into a more expensive one. do you know if this is still an option? >>>
This only applies in Australia to your PPOR. You can sell your PPOR and move into a more expensive one and its not subject to capital gains tax. This is a good way to make money - buy a PPOR, renovate it, sell it a few yrs later, buy another more expensive PPOR, fix it up, sell it and buy your next one etc.
This only applies in Australia to your PPOR. You can sell your PPOR and move into a more expensive one and its not subject to capital gains tax. This is a good way to make money - buy a PPOR, renovate it, sell it a few yrs later, buy another more expensive PPOR, fix it up, sell it and buy your next one etc.
