All Forum Posts by: Samuel Chua

If there are 2 properties in the same neighborhood and same build quality ,lets say in a B- neighborhood where property A is valued at 150k and property B is valued at 250 K ; and the median price in that neighborhood is 270k ... do both properties appreciate at the same rate or does being close to the median have an affect on the appreciation ?

@Krishnan T. I do not have much knowledge but I believe that house appreciation grows with the market. Meaning that if u are selling your property at 150k where it can be sold at 250k, u are actually depreciating the entire market unless the demand is very high. If the demand is very high in this case, property B will definitely appreciate slower than property A as property A can grow alot more before it hits its "market max" growth rate.

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Originally posted by @John Warren:

@Samuel Chua although properties do run out of depreciation after 27.5 years, you can always sell the property and use the 1031 tax deferred exchange to buy a larger property! Using this strategy, you should be able to avoid having properties where there is no more depreciation left.

Thanks for taking the time to reply to me. Pardon my lack of knowledge but I am a foreign investor. Will this tax 1031 apply to me? And also, I do not quite understand when u said: "properties do not run out of depreciation". Is depreciation not the opposite of appreciation where a factor/many factors cause the value of a property/properties to drop. Thanks!

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Originally posted by @Larry Turowski:

Well, if you had a 5% interest only loan you'd be cash flowing. Or you need a property that cash flows better. How do you figure cash flow of $513.24 per month. Cash flow is usually considered after all expenses and interest and principal payments.

Oh yes, my $513.24 cash flow is after my deduction of all my expenses and repairs and insurances except my mortgage in this case. Hmmm, if i propose a 5% interest only loan, that would mean the lender would double his money in 14.4 years, am I right?

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Hi guys, I am interested in buy and hold properties and was wondering what happens if a house depreciates. What are the factors that would cause a house to depreciate? On that note, what should I do when my house depreciates? This is because when the house depreciates, all my cash flow becomes pointless and I might lose money even. Thanks!

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Originally posted by @Larry Turowski:

@Samuel Chua First, the rule of 72 has to do with how long it takes you to double you money and is really kind of stupid and useless. Forget about it. What you are saying is you getting 10% interest only (either monthly or in one balloon payment in 7.2 years) $75K loan. That is $625 interest per month and you'll be cash flowing, before interest, $513.24 per month. Yes, you'll be losing money.

Thank you for replying. Do u have any advice on buy and hold properties then? On the note of money lending. Thanks!

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Hi guys, Ive just heard of the rule of 72 when it comes to borrowing money from lenders. But when i applied this calculation to my property, I realized i will be losing out more money. For example, If I lend 75k and return double the amount in 7.2 years (lets say someone deals with me) and I purchase a property of 70k which produces a cash flow of $513.24 (not including mortgage since I pay everything up front with his cash). This would mean that in 7.2 years, I would have amassed a total of $44,344 in cash flow from my rental property. Now comes the hard part. If let's say I sell my property for $84,700, I will have a total of $129,044 in my account while I have to pay my lender a total of $150k which makes me at a total loss. If anyone could give me advice on this, it would be amazing, thanks!

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Originally posted by @Mitch Messer:

Hi @Samuel Chua and welcome to BiggerPockets!

Your tax situation will be influenced by everything from your home country to your personal assets to the states in the US where your properties will sit.

You are not going to find any book or generic advice here that will deliver useful advice that serves your needs. You need to talk to (a few) tax attorneys or accountants who work with international investors.

We work extensively with overseas real estate investors. I'd be happy to make some recommendations. Just connect with me here on BP and I'll make the warm introductions.

For the record, I receive ZERO compensation for making these referrals.

Sounds great! Thanks for taking the time to reply to me.

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Hi guys, I am a new investor looking to invest in US and I am interested in understanding how I will be taxed when I start investing there. I have researched and everything but I still do not have a clear view of the entire picture so it would be amazing if you had any book recommendations/advice for me. Thanks!

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Originally posted by @James Wise:

Originally posted by @Samuel Chua:

Originally posted by @James Wise:

Originally posted by @Samuel Chua:

Originally posted by @James Wise:

Originally posted by @Samuel Chua:

Hi guys, do u have any tips on investing overseas with a small capital? Thanks!

Welcome aboard Samuel. Small is subjective. What are we talking here?

Thanks for taking the time to reply to me! I currently have a capital of 10k currently but am willing to work even more to increase this capital. However, as a student, I fear that I am unable to raise a huge amount of money in a short time. Do you have any advice on this?

Keep it in your pocket for now. It's pretty hard to get loans to buy U.S. properties if you are abroad & you can't buy anything reasonable for $10,000. Keep stacking the cash until you are ready to make a purchase. Never a good idea to try & throw your money in the ring before you're ready to. Once you've got $40,000 or so you can pick up some inventory in the Midwestern markets with cash. Although if I were you I'd probably wait until you can pick something up in the $50,000 - $60,000 range as the risk will be lower.

Sounds great, a friend of mine also suggested that as an option for me. May I know after I achieve this amount of money, what my next move should be?

You can spend your time now doing research on the markets you like. The Midwestern markets are probably what you should focus on as they are where you can get in for that $40k+ amount.

Cleveland (my market)
Toledo
Memphis
Birmingham
KC
Indy
Detroit

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 loose 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.
Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

You probably want to look into Cleveland, Detr

Amazing, thanks for taking the time to reply to my question. I really appreciate it! I will take those words into account when investing :) Btw, thanks for giving me a general direction on an area where I can start my research on.

1 Vote

All Forum Posts by: Samuel Chua

Samuel Chua has started 27 posts and replied 78 times.

Post: What happens when a house depreciates? How do I prevent that?

Post: What happens when a house depreciates? How do I prevent that?

Post: What happens when a house depreciates? How do I prevent that?

Post: Rule of 72 - does it work for buy&hold properties?

Post: What happens when a house depreciates? How do I prevent that?

Post: Rule of 72 - does it work for buy&hold properties?

Post: Rule of 72 - does it work for buy&hold properties?

Post: taxation when investing in US for foreign investors

Post: taxation when investing in US for foreign investors

Post: investing overseas with a small capital