Buying property form the US - NYC

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  mskeggs on 31/05/2014 - 13:02

  Asx:URF fund invests in residential property in the area.
  Potentially fairly high management fees, but then you will have that too with direct investment. Worth a look.

  • 

    pitufon on 02/06/2014 - 08:51

    I have read the internet back to front regarding this topic. Thanks but I really would like to hear a hands on experience from someone.

    • 

      mskeggs on 02/06/2014 - 12:04

      No worries. I'd like to hear some real world feedback too.
      There are a couple of companies that specialise in helping buy US property that I have read about, and seen advertised in the investment property magazines, but they all strike me as being a bit skeezy.
      I'd be keen to hear just how involved the tax arrangements are.

      • 

        pitufon on 02/06/2014 - 12:27

        yeah me too. From what I know so far - the bank may not take the property overseas as a guarantee and may need to use something withing Australia. Ray White used to run some tours to the us with potential buyers, but I not sure if that's still running. I am seeing a banker this week and hopefully they can shed some light on some of my question.

        This is a venture that I really want to embark upon so I will make sure I keep updating this thread.

      • 

        mskeggs on 02/06/2014 - 12:46

        +1

        I think it will be tricky to borrow for AU banks to buy property in the USA unless you have a very substantial deposit, and even then I suspect it will require all sorts of non-standard approvals - to the point I expect most banks would just say no. Might be better to deal with US based lenders, especially considering:
        - They have much lower rates
        - They typically do fixed rate loans for the duration of the mortgage (30 yrs)
        - The asset and debt would be in the same currency, largely avoiding Forex risks.

        The drawbacks are I believe it is very difficult for non-residents to get normal loans. So maybe a US holding company and commercial finance? A higher rate but maybe not much different than AU rates.

        Most of the investment companies have been working on the basis of buying outright or using vendor finance. This is more achievable in non-NYC locations with many properties sub-$100k.

      • 

        pitufon on 02/06/2014 - 12:54

        and the plot thickens.

        Thanks for all this info.

• 

  mskeggs on 02/06/2014 - 13:04

  A few years old, but a thread at Whirlpool is good:
  http://forums.whirlpool.net.au/archive/1563684

  I personally think it is a good investment if there is a long horizon (10yr+) but it is administratively complex, with taxation hassles and financing hassles.
  That is one reason I looked into the URF fund that invests in NYC real estate, they handle the hassles, albeit for a pretty substantial fee. The other advantage is it is exchange traded, so you can buy smaller amounts and sell fairly readily (although it isn't very liquid).
  It also provides diversity with >100 properties. When hurricane Sandy blew through it hit 4 or 5 of their investments, which wasn't a big deal. But if I had bought one US property and it happened to be one of the ones hit it would have been a big problem!

  That said, I am not convinced by them. The fund is trading above NTA, which is very unusual for these sort of investments, and probably unsustainable. I have a small investment in them mostly as a way of keeping tabs on the opportunity.

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    pitufon on 02/06/2014 - 14:47

    I had read the article already, wasn't sure how reliable it was as it started 4 years ago.

    I have trustworthy friends on the US also. My aim is to get in touch with them soon, to see if they can help in some way.

    I am very new to the whole property investments game so still doing a lot of research into it. It just seems that property around Melbourne will no have much roi, as it is so damn expensive.

    • 

      mskeggs on 02/06/2014 - 17:31

      I guess to that I would say it might be a bit much to bite off for a first property investment.
      It sounds as though if it went badly, it would be a problem. I class US property for an Aussie as fairly high risk.
      FYI, there is an article in today's SMH comparing how cheap property in Melbourne is!
      Good luck.

      • 

        pitufon on 03/06/2014 - 07:57

        Thanks I am only looking into it at the moment. This is a long term project, which I would not embark until I've had more experience buying property locally.

        Between my partner and I, we have two houses already. And looking for the third one at the moment. If we were to buy in the US, it would be a few properties away.

        My family travel a lot to the US (NYC). It would be more of a holidays house than an investment property. But if i can get it to pay itself off it'd be a bonus!

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  Simon Worthington on 03/06/2014 - 11:38

  Hi there,

  My name is Simon Worthington i am the International Sales and Marketing Manager for Ray White. Ray White have opened a property management office in Atlanta and i have been helping Aussies buy property in the USA for the last 18 months. We have also been selling property through our Ray White offices in Indonesia, China and Singapore. We have approx 300 properties under management right now. We sent over one of our most experienced property managers from Australia to run the business and put our Ray White systems in place. I have also taken groups of buyers to the USA to check out some properties on Ray White's Buyer Tours. There's some great opportunities in the the USA and our clients have seen them. Many of our clients stated with buying just one property and are now up to their 10th house. We chose to open in Atlanta for a number of reasons. Atlanta's house prices are reasonable and about half the price of pre-GFC. Atlanta is now one of the biggest rental markets and the nett returns are high. Atlanta House prices are going up. Atlanta has lots of employment opportunities and many of the largest fortune 500 companies are based there as the State of Georgia has a lower tax rate and low union memberships. Coca-Cola, CNN, Delta Airlines, Home Depot etc. Atlanta also has the worlds busiest and largest airport. Financing properties is possible using USA banks. Deposits of around 40% are needed and interest rates are low. We also assist in setting up LLC's USA bank accounts and ITIN. We have a website www.raywhiteusasales.com with lots of further information.

  • 

    mskeggs on 03/06/2014 - 22:07

    +1

    Hi Simon,
    Are Ray White able to give details on things like property taxes, property management costs etc. to be able to get a complete picture of the costs on these investments?
    While a $100k house renting for $10k looks attractive from an Aussie perspective, by the time you account for property taxes, withholding taxes, management fees, admin charges etc. the return shrinks.

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      Simon Worthington on 08/06/2014 - 09:24

      Yes we have all the information you need. Basically after all expenses your nett returns are between 8% and 9% nett.
      Taxes paid on property income between 10% to 15% if income less than $15,000. You also have tax depreciation benefits. Property management fee 10%.
      If a US return (Form 1040NR) is filed claiming property expenses and mortgage interest and depreciation allowance then the income will be taxed at progressive US rates from 10% through to 35%. In some states, State Income Tax returns will be also be required.

      • 

        pitufon on 11/06/2014 - 07:39

        Hi Simon,

        Thank you for your post. However, I have zero interest in other place in the US other than NYC. Do you know much about the market/taxes there? In lamers terms what would I end up paying in fees etc if I bought a $500K place in Manhattan with a rental return of $2800-$3000 a month.

        Thanks,

      • 

        Simon Worthington on 13/06/2014 - 14:48

        Approx 15% to 20% tax on the rental income