Australian based US Citizen Looking to Get Started

[Les Edwards]

Hey everyone, figured this was the best place to post. I'm a tax accountant in Australia with a strong background in property investment here, so pretty knowledgeable of the general gist of property investment and given my current investment strategy and goals I've ended up looking towards the US for my next, hopefully, few investments.

I'm looking for buy and hold investments with good rental returns on them on low cost of entry.

The basics of my situation are that I'm a US citizen who has never lived/worked in the US, have a stable job with reliable income in Australian dollars (the exchange rate is brutal these days!), looking to buy somewhere around August onward but happy to get in earlier if plausible, will have somewhere in the $40k USD deposit available at that point with the potential to get substantially more but the desire to use less and stretch it as far as I can across multiple properties if possible. Aim is to acquire multiple properties over the next few years if possible with strong cash flow to enable this as a priority. Capital growth is realistically a bonus outcome but obviously very much desired.

The areas that I'm not certain and looking for pointers in the right direction are as follows:

Investment Structuring - I'm pretty ignorant on this area in the US from both a tax and legal perspective. I know the absolute basics of the available structures and from my, admittedly, very basic understanding I would probably be best suited to investing through a LLC or perhaps a S or C Corporation. From a tax perspective the ideal result would be for the entity to be separate from myself as Australian tax rates are extortionate and my income is already in the extreme brackets of that, if it's possible to only have it be US based that is the ideal result. Legally I want the standard asset protection. I'm woefully ignorant on state taxes and their potential impacts in all this as well. I'm full bottle on the Australian tax aspects but the US part is still very hazy to me.

Financing - This is another area that I have a strong understanding of in the Australian market but I'm pretty ignorant in the US and finding information for my specific situation is generally pretty difficult. My understanding is that a good amount of lenders will lend to US citizens on foreign sourced income without any issues. So basically looking to understand LTV scenarios, interest rate penalties and the like as well as an understanding of what type of lenders are the best to be approaching for this.

Markets - This is the part that is probably easier to find options but I'm very much open to more suggestions. Based on what I'm seeking the markets that seem to consistently appear within my desired prices/returns are Cleveland (Ohio in general), Detroit, Memphis and parts of Alabama. Basically any other areas that fit in similar profiles to these players will be great suggestions for me to dig into. I understand the broader demographics of these markets but still very much in the early phases of delving deeper though I must say Cleveland has definitely shown some early appeal.

Other Costs - I'm just looking for a general idea of what to expect on this front of things, things such as land tax (if the US has it), Stamp Duty (again if it exists), insurances (required/desired), management fees (I want a property manager in place due to time zones/distance/peace of mind), etc, etc.

Finding a Team - This is one of the harder parts, I'm not averse to a trip to America for some research later in the year (if Australia ever opens its damn borders again!) but ideally I want to try and get together a team in my market that can handle most of the transaction and potentially future transactions. I personally think this is probably the most significant part of the overall process for me being where I am and with where I want to be.

Other - Any other general tidbits I should be aware of that are unique to the US market for anyone going from afar, or just in general.

Basically I'm looking for any suggestions that people have in relation to anything. Web material, books, etc, if you can answer anything then that is an even bigger bonus as time is money but happy and even eager to put in the hard yards just really looking for some direction to avoid wasted efforts.

Thanks for reading if you made it this far and really appreciate any advice :)

[James Wise]

Originally posted by @Les Edwards:

Hey everyone, figured this was the best place to post. I'm a tax accountant in Australia with a strong background in property investment here, so pretty knowledgeable of the general gist of property investment and given my current investment strategy and goals I've ended up looking towards the US for my next, hopefully, few investments.

I'm looking for buy and hold investments with good rental returns on them on low cost of entry.

The basics of my situation are that I'm a US citizen who has never lived/worked in the US, have a stable job with reliable income in Australian dollars (the exchange rate is brutal these days!), looking to buy somewhere around August onward but happy to get in earlier if plausible, will have somewhere in the $40k USD deposit available at that point with the potential to get substantially more but the desire to use less and stretch it as far as I can across multiple properties if possible. Aim is to acquire multiple properties over the next few years if possible with strong cash flow to enable this as a priority. Capital growth is realistically a bonus outcome but obviously very much desired.

The areas that I'm not certain and looking for pointers in the right direction are as follows:

Investment Structuring - I'm pretty ignorant on this area in the US from both a tax and legal perspective. I know the absolute basics of the available structures and from my, admittedly, very basic understanding I would probably be best suited to investing through a LLC or perhaps a S or C Corporation. From a tax perspective the ideal result would be for the entity to be separate from myself as Australian tax rates are extortionate and my income is already in the extreme brackets of that, if it's possible to only have it be US based that is the ideal result. Legally I want the standard asset protection. I'm woefully ignorant on state taxes and their potential impacts in all this as well. I'm full bottle on the Australian tax aspects but the US part is still very hazy to me.

Financing - This is another area that I have a strong understanding of in the Australian market but I'm pretty ignorant in the US and finding information for my specific situation is generally pretty difficult. My understanding is that a good amount of lenders will lend to US citizens on foreign sourced income without any issues. So basically looking to understand LTV scenarios, interest rate penalties and the like as well as an understanding of what type of lenders are the best to be approaching for this.

Markets - This is the part that is probably easier to find options but I'm very much open to more suggestions. Based on what I'm seeking the markets that seem to consistently appear within my desired prices/returns are Cleveland (Ohio in general), Detroit, Memphis and parts of Alabama. Basically any other areas that fit in similar profiles to these players will be great suggestions for me to dig into. I understand the broader demographics of these markets but still very much in the early phases of delving deeper though I must say Cleveland has definitely shown some early appeal.

Other Costs - I'm just looking for a general idea of what to expect on this front of things, things such as land tax (if the US has it), Stamp Duty (again if it exists), insurances (required/desired), management fees (I want a property manager in place due to time zones/distance/peace of mind), etc, etc.

Finding a Team - This is one of the harder parts, I'm not averse to a trip to America for some research later in the year (if Australia ever opens its damn borders again!) but ideally I want to try and get together a team in my market that can handle most of the transaction and potentially future transactions. I personally think this is probably the most significant part of the overall process for me being where I am and with where I want to be.

Other - Any other general tidbits I should be aware of that are unique to the US market for anyone going from afar, or just in general.

Basically I'm looking for any suggestions that people have in relation to anything. Web material, books, etc, if you can answer anything then that is an even bigger bonus as time is money but happy and even eager to put in the hard yards just really looking for some direction to avoid wasted efforts.

Thanks for reading if you made it this far and really appreciate any advice :)

Welcome aboard. Many markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

• Cincinnati, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Google Clayton Morris scam and/or Morris Invest scam for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.