USA investment properties for an Aussie

[Corey Batt]

"America - land of opportunity!"

Karina, how many properties/gross vals do you believe is necessary to profitably hold property in the US? I'm assuming you would end up buying through a LLC?

 

[karina]

"America - land of opportunity!"

Karina, how many properties/gross vals do you believe is necessary to profitably hold property in the US? I'm assuming you would end up buying through a LLC?

Cjay, thats a difficult question to answer it depends.....it depends on the currency fluctuation, the capital growth achieved, how well you bought to start with, the complexity of your structure and how well the property was managed. Yes we use LLC's

Lets look at an example.

Address - 1945 Lena Carter Road, Buford, GA 30519
Rented: $1295 month
Purchased: 86,200

Video footage of 1945 Lena Carter Road, Buford, GA 30519
http://www.youtube.com/watch?v=4Y5rZccSrhQ&list=UUtQZwox-2O4ZBo5XwrUGL3g&index=1&feature=plcp

This property was purchased by one of my clients for 86k, last sold in 2007 for 220k, comparables in the subdivision are 120 -170k.

Is it worthwhile buying just one?....well I think if you buy well YES. My personal view is the more well selected property you buy the more profit you will make. More upside than downside in my opinion but you can still make money even if its just one good investment.

I don't have a crystal ball and I am no economist but logic tells me this is one of the greatest buying opportunities I have ever seen in my lifetime. Newer constructed properties can be bought for a fraction of their replacement value and can be rented out for a positive cashflow. US housing prices fell up to 70% on some properties that must present a good opportunity for capital growth when the market recovers. Add to that a market that is imperfect, banks don't know what they are selling and price properties below market value at times. Price reductions make no sense, I can't tell you the number of times I have submitted an offer and waiting to hear back only to log onto the net and realise the bank has just reduced the price of the home below what I have offered. The listing agents are not even aware there has been a change, why would they do this, they have multiple offers on these homes? There is no logic to whats going on and thats exactly where the opportunity lies, between all that chaos.

Now back to the example above if we were to assume that in 5 - 10 years time this property appreciated 100% from the purchase price of 86k to 172k thats not a bad profit. (I don't think thats unrealistic seeing that we picked this up way below comparables). If you have the means to buy 10 of them that's 10 times the profit.

We also have a $1295 month rental on this home so a positive cashflow position to start with. You could use the excess cashflow to pay down any debt thus increasing the cashflow on the property as time goes on.

I think the question you should ask yourself is, what would you do with the funds if you didn't buy in the US to achieve a better return. I personally can't think of a better investment opportunity than the US housing market at this point in time.

 

[MTR]

Update on Atlanta

Hi Karina
As you are in Atlanta at the moment can you provide me with an update on how it is on the ground? Do you still see the market rising and are US buyers now jumping in

Cheers. MTR

 

[BV]

This property was purchased by one of my clients for 86k

Hi Karina
How long ago was that?

 

[MTR]

Hi Karina
How long ago was that?

Hi BV

Karina is back in Syd now.

I did speak to her, she said it is almost near impossible to source properties in Atlanta at the moment, cos the big fund managers have jumped in buying bucket loads and they are not worried about the yield they will buy at 7-8%, most investors want more than this for the risk involved. I was buying at 15-17%

Also the banks in US starting to lend money and that has opened the flood gates. We are not too far off building again, when this starts prices will skyrocket. We were buying these at $18- 30 sq ft, actual buildings costs in Atlanta is $90 sq ft.

 

[BV]

thanks MTR

 

[marks]

Is it still a cash only environment for foreigners? What about someone who wanted 30-50% LVR investments?

 

[DaveM]

Interesting figures from a news article today..

http://www.smh.com.au/business/the-stats-that-matter-china-and-the-us-20130419-2i5pv.html

The Case-Shiller home price index is the best measure of US home prices, and it most recently showed that US home prices rose by 8.1 per cent in 20 big cities in the year to January. They fell by 20 per cent in a year at the depth of the global crisis.

All 20 US cities in the index posted gains, and in 19 cities the rate of improvement accelerated.

Gains were also strongest in cities that were hit hardest during the crisis. Prices in January were 13.4 per cent higher than a year ago in Atlanta, 13.8 per cent higher in Detroit, 15.3 per cent higher in Las Vegas, 12 per cent higher in Los Angeles, 10.8 per cent higher in Miami and a whopping 23.2 per cent higher in Phoenix.

The index also shows that over the long term many US home owners are sitting on solid capital gains.

Los Angeles prices are 80 per cent higher than they were in 2000. Prices in Miami are up 53.5 per cent over the same period. Prices in Washington are 87 per cent higher, and New York prices are 62 per cent higher. Other cities are weaker. Detroit homes are 20 per cent below their 2000 level, Atlanta prices are still only 3.1 per cent higher and Las Vegas is still only up 4 per cent.

Across Case-Shiller's 20 city sample however, prices are 50 per cent higher than they were 13 years ago. New-home construction in the US is also now at its highest level in a half-decade. Starts rose by 7.1 per cent to a 1.04 million annual rate in January, well above the consensus forecast of 930,000. Starts are not back to pre-crisis levels but, of course, nobody wants them to be. They ran at about 1.5 million a year in the '90s, and low interest rates and reckless lending practices fuelled by the junk bond boom pushed them above 2 million a year in 2003. They were back to 1.5 million a year by the end of 2006 as the first signs of serious stress in the junk bond market appeared, and were struggling to stay above 1 million a year when 2008 started. They bottomed out during the crisis at a rate of just 478,000 starts a year.

Read more: http://www.smh.com.au/business/the-...-and-the-us-20130419-2i5pv.html#ixzz2R4nYkUz4

Looks like Atlanta and so on are very much on the way up

 

[MTR]

Wells Fargo Closes Bank Accounts

Hi All
Did anyone owning property in US/banks accounts get a letter from Wells Fargo advising that your bank account will be closed effective COB 9.9.13.

My understanding is that this will effect any foreign investor who did not personally open a bank account. Many investors used lawyers to open bank accounts. I have 4 accounts in USA and I personally opened 2 accounts and will be transferring funds to one of these accounts.

My g/friends accountant emailed this -

"It has a lot to do with new money laundering laws and also new anti-terrorism laws which are designed to reduce terrorism by eliminating terrorist funding. Unfortunately the legislation catches almost everyone who is not living in the US. I am a US/AU dual citizen and I could not even open a US account several years ago until I appeared there in person".

I personally would not be keen to leave funds in a ledger with the property management company, but for some there may not be any other way around this other than flying to the US to open a new account.

How frustrating

MTR

 

[spooky]

Hi MTR

Do you know if the accounts that are to be closed are in personal names or are a company such as an LLC.
Cheers

 

[Nigel Kibel]

bank accounts

Most of the accounts were opened by spruikers on behalf of clients.

We encourage clients to travel to the United States to not only open an account but to meet the people who are representing them. Remember due diligence is essential if you are going to invest in the United States

I be-leave that it is possible to open an accountant by using a local lawyer. I am in the process of confirming this.

However my strong advice is to travel here at least once so that they can see the market for themselves and also meet the onground operators

 

[karina]

Wells Fargo was previously setting up accounts through attorneys however this has now changed.

This is their process.

A non-U.S. citizen without a taxpayer identification number may not open or be added to a deposit account, IRA/ESA plan, Express Send agreement, or safe deposit box as an owner or with transaction authority unless they are face-to-face in a store, business, or alternative banking location or an offsite location within the United States and in the geographic proximity of the team member's home store or Business Banking location.

In other words the client must visit the US and set up the LLC in the state the LLC is registered to do business. Some allowances may be made to set up in another state but this will need aproval so its best that clients travel to the state in which they are buying to set up the accounts.

Ozforex can set up LLC accounts in the name of the LLC (not all states but in Atlanta they can). This is a way to be able to wire money home and still have a paper trail through the LLC. Most property managers would have wire capability to be able to send the US$ to ozforex and the beneficiary of the funds can be an Australian bank account.

Ideally though it would be preferable to get to the US and set up a bank account. For anyone that owns US property I believe this can be claimed as a tax deduction.

Disclaimer - Please seek professional advice for all tax and legal matters from a licensed professional. This is not advice and no liability accepted.

 

[MTR]

Most of the accounts were opened by spruikers on behalf of clients.

We encourage clients to travel to the United States to not only open an account but to meet the people who are representing them. Remember due diligence is essential if you are going to invest in the United States

I be-leave that it is possible to open an accountant by using a local lawyer. I am in the process of confirming this.

However my strong advice is to travel here at least once so that they can see the market for themselves and also meet the onground operators

Two of my accounts were opened by a reputable lawyer and I still got a letter, and 2 I opened myself.

Three accounts are under an LLC, one personal name.

I have an account also with Bank of America, received nothing here and opened this myself.

 

[MTR]

Wells Fargo was previously setting up accounts through attorneys however this has now changed.

This is their process.

A non-U.S. citizen without a taxpayer identification number may not open or be added to a deposit account, IRA/ESA plan, Express Send agreement, or safe deposit box as an owner or with transaction authority unless they are face-to-face in a store, business, or alternative banking location or an offsite location within the United States and in the geographic proximity of the team member's home store or Business Banking location.

In other words the client must visit the US and set up the LLC in the state the LLC is registered to do business. Some allowances may be made to set up in another state but this will need aproval so its best that clients travel to the state in which they are buying to set up the accounts.

Ozforex can set up LLC accounts in the name of the LLC (not all states but in Atlanta they can). This is a way to be able to wire money home and still have a paper trail through the LLC. Most property managers would have wire capability to be able to send the US$ to ozforex and the beneficiary of the funds can be an Australian bank account.

Ideally though it would be preferable to get to the US and set up a bank account. For anyone that owns US property I believe this can be claimed as a tax deduction.

Disclaimer - Please seek professional advice for all tax and legal matters from a licensed professional. This is not advice and no liability accepted.

Hi Karina
Agreed it would be ideal to set up your own bank account, personally I would have it no other way.

For those in this situation, the way to bring money back home is signing up with Xe trade, I have been using this company for about 4 months they are excellent and no issues wiring funds, you can not do this direct from your bank account with Ozforex.

Hopefully this will get sorted one way or another.

MTR

 

[Oscar]

Hi MTR - I just got back from vacation, and yep, the letter in the mail. Same date 9.9.13.

I will eventually open an account in person as we travel to the US at least once each year. I will however need another shorter term option established before the 9th September.

 

[Deltaberry]

Missed the boat if you haven't already converted your cash to US$.

Right now I'm hoarding renminbi which is appreciating even faster than the US$. Pity there's a limit you can only buy RMB20,000 per day. But if you remember to do it at least a few times a week, you convert it pretty quickly.

At 82-83c AUD I'm swing-trading back to AUD and reselling on a bounce to 90c.

 

[MTR]

Missed the boat if you haven't already converted your cash to US$.

Right now I'm hoarding renminbi which is appreciating even faster than the US$. Pity there's a limit you can only buy RMB20,000 per day. But if you remember to do it at least a few times a week, you convert it pretty quickly.

At 82-83c AUD I'm swing-trading back to AUD and reselling on a bounce to 90c.

Not sure how this works, can you clarify for me "trading money for dummies"4
How much are you making??

 

[Deltaberry]

The Chinese Government imposes a limit that non-mainland citizens (including Hong Kong and Macau citizens) can only buy RMB20,000 per day.

So if you had A$1,000,000, you can only convert around A$4,000 of it per day in to RMB.

 

[MTR]

The Chinese Government imposes a limit that non-mainland citizens (including Hong Kong and Macau citizens) can only buy RMB20,000 per day.

So if you had A$1,000,000, you can only convert around A$4,000 of it per day in to RMB.

How risky is this at the moment though???? Your thoughts

 

[Deltaberry]

You're talking about buying RMB?

In the long run not very risky. The whole world is pressuring the RMB to appreciate. And the AUD is still historically high, just not as high.

Chinese growth is staggering. Properties in places like Qingdao, Xiamen, Guangzhou proper have doubled since 2011 again. The demand from in the know westerners to get in to the market is enormous.