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 :)

[Linda Weygant]

You didn't mention this, but I'm going to just put this out there as food for thought.

As a US Citizen, you're required to file tax returns in the US, no matter your dual citizen status, where you live, work, etc.  If you haven't been doing so, you will certainly be required to begin after you start investing in the US.  Which may bring up a question from the IRS about where your prior year returns are, if they don't exist.

I am not saying you are or are not compliant with your US tax filings - that's totally your business.  Just be aware of entering the US tax system if it is currently not aware of you.

If you're already compliant, great.  If you're not compliant, there are ways to become compliant (including a streamlined method).

[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.

[Brandon Goldsmith]

It sounds like you are off to a great start for your plan. A lot of it will come down to networking, which you will be able to meet many people on BP to help you with areas that might be a little grey right now. I would suggest trying to get into contact with a variety of American lenders, accountants and lawyers and see which course of action benefits your goals the most.

As you talked about, finding a solid team is crucial and can add extreme value to you and your future investments. Finding one part of that team is the first step and they will often have referrals for other people that will ultimately become a part of your team. A desired market will be different for everyone, depending on what they are looking for so in a sense there are no right or wrong answers. I am based out of Columbus, OH and I have seen a lot great things occurring.

Keep doing research and best of luck in your search! @Les Edwards

[Les Edwards]

Originally posted by @Linda Weygant:

You didn't mention this, but I'm going to just put this out there as food for thought.

As a US Citizen, you're required to file tax returns in the US, no matter your dual citizen status, where you live, work, etc.  If you haven't been doing so, you will certainly be required to begin after you start investing in the US.  Which may bring up a question from the IRS about where your prior year returns are, if they don't exist.

I am not saying you are or are not compliant with your US tax filings - that's totally your business.  Just be aware of entering the US tax system if it is currently not aware of you.

If you're already compliant, great.  If you're not compliant, there are ways to become compliant (including a streamlined method).

Thanks for the response. This is one of the few areas I'm prepared for at least :)

Greedy as they are!

[Les Edwards]

Originally posted by @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.

 Thanks James, great advice all around and thanks for expanding my list. Will be sure to give the articles a read as Birmingham was very much one of the "parts of Alabama"! Will check out some of those others that I hadn't looked into at all!

I'll almost certainly go through a bank and real estate agent for at least the first purchase and until I'm very comfortable with the lay of the land! The rest of the advice matches what I'm looking for and the good neighborhood portion in particular is a strong reason why I'm looking at a lot of the cities I am, the ability to get into good areas for good prices!

[Jordan Sinclair]

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 :)

Hi Les,

No land tax, council rates or stamp duty. Using a 1031 exchange also gives investors the opportunity to indefinitely defer CGT. These are just some of the reasons why people prefer the US for property investment.

Building a team in the Midwest may be a step in the right direction based on your critieria.

Cheers!

[James Wachob]

Finding the team is key. If you are able I'd highly suggest traveling to the city you decide to go with. Meet the team and see what systems and processes they have in place. If this is not an option you have plenty of virtual options like facetime, google hangouts, zoom.us, etc. 

[Les Edwards]

Thanks guys. Becoming abundantly clear that building the team is important.

Would love to make a trip over and check out a few of the cities and meet some folks on the ground when I'm allowed to do that again :)

[Drew Sygit]

A trip would be a great way to finalize your market selection!

Would recommend you start speaking to lenders first though. It's not typically easy to get a rental mortgage on a 1-4 family property, for someone living outside the USA. If you can't get a loan, you may not want to spend the funds to visit.

[Iris Cruz]

Hello @Les Edwards,

I hope you are well.

I'm also in Perth (and also an Accountant).

I'm happy to share with you what i have found so far and the people that i have connected ( who gave me great advise).

The markets mentioned by @James Wise are great, you will notice that some will have higher entry price than others but then it will depend on your budget.

Sure you will need a team and in regards to the loan, i would start preparing now (lodging past taxes and have those in order), then start establishing relationship with local banks.

Do not rush, do the things on your own time so you know where you getting into.

@Jordan Sinclair - great guy! who successfully built a team.

PM me and we can catch up for a coffee.

Take care and have a great weekend.

[Erin Dorsey Robinson]

@Les Edwards Hi Les, it's great to see that you have thought this through so thoroughly on the front end. I agree with much of the advice that has already been offered to you, so I won't repeat. My husband @Dwight Robinson and I own property here in Cleveland and would be glad to have a call or Zoom chat with you to talk about our experience investing here. We are biased, for sure! But it has been great for us and there's no question that you could be successful here also. Let me know if you'd like to talk further. Best of luck!

[Richard J Reid]

Hey Les, 

I have been investing in the USA for the past 7 years as a foreign investor mainly in Atlanta but also in Memphis. My advice is to do as much due diligence as you can and find a good team that you can trust and rely on. I have heard a few horror stories from foreign investors losing out to bad deals and bad agents so also ask for references that you can contact and talk to for feedback on people's services. I guess I have been lucky to meet the right people and I have had no problems. I am yet to visit any of my properties as the deals have all been done over emails and phone calls but they have all worked out great.

I would use your citizenship to its full potential as providing your taxes and credit rating is in order or at least if it can be built up you will get access to bank finance which has the best rates. I am stuck with hard cash loans with higher rates but they still work. Harder to find but if they see you are a serious investor with property experience anywhere in the world that is also an advantage. If you go the hard cash route show them you are serious and know your business as they can be very flexible.

The next few months could be some great oppertunites and looks like you are already off to a good start with the right mindset. Good Luck :-)