Australian Newbie looking to invest in US real estate

[Graham Jenkins]

Hey all, I live in Perth Western Australia and have been listening to the Podcasts for a couple of months.  I've had a good look at the Australian market and it is very difficult to find residential property that will cash flow.  Everything seems to about negative gearing and taxation advantages over here which just doesn't work for me.  Anyway, a mate of mine suggested the US property market.  So I'm just wondering if you guys know if there are any particular rules for foreign ownership of residential property in the US?

Cheers, Graham

[Ben Blondel]

Hi Graham, great to meet a fellow Perth native!

I recently moved to Jacksonville, Florida and have been down the podcast route your on. Your friend is correct in suggesting the US for cash flow property, they are very abundant here.

A couple of things to consider though:

1) Tax implications - Are you looking to quarantine the earnings in the US or bring them back to Australia? A good accountant will be able to guide you in the right direction on foreign tax treaties and how to use company structures to tweak the 'resident status' of your earnings. 

2) Liability - You would want to hold the property in a company, Americans are not afraid of litigation and this is your best hedge for protection. Each state has different structures that offer different levels of protection - I recommend you check out this book, it's a great resource on the topic: Rich Dad Advisor's Series: Own Your Own Corporation by Garrett Sutton

3) Are you looking to get finance or pay cash? There are financing options for foreign investors here, but you will need a much higher LVR, the rate won't be as competitive and mortgage brokers charge fees. Getting finance through an Australian bank might be very difficult. Alternatively, if you are in a position to pay cash, it will be a lot easier to acquire property and you will also be able to purchase at 'wholesale' prices - sometimes up to 50%. There are a lot of wholesalers out there finding deals and are always keen to get new cash buyers on their list.

4) Are you looking to be hands on with your business or do you want a turn key solution? There are companies who will take you by the hand each step of the way and charge a fee or take a commission on the sale. Depends how much time you have to dedicate to it.

5) Understand that the market is completely different to Australia - house prices can half just by being on the wrong side of the street. Make sure you have a good team that understand the area you are investing in.

6) Property Managers - You will need a great property manager with experience dealing with out of town investors. This will ensure you don't get a nightmare tenant and they have processes in place to completely handle the situation if anything goes wrong.

I'm sure there's a lot more, but thought that might help. I'm not a professional, I'm currently not even in a position to invest in the US (just moved here and will take some years to build credit here again). But I do have investments in Australia and this is just something that really interests me.

Best,

Ben