All Forum Posts by: Sebastien Hitier

Hi @C. Wei, I am a foreign investor too (Hong Kong). I invested in Texas, buy-rent-hold properties as long term investment. I started in the Dallas/Atlanta/Phoenix area in 2014 and bought more there. You can DM me and we can discuss the experience, which was good.

Congrats @Robert Bird, as you say that you are a US person, do you need to keep some money to pay US federal tax on game-winning at income tax brackets?

Hi @Chris M., actually I published a book back in 2016, but it is about investing in the US. The US still has some of the highest yielding developed markets out there. 

Nomads like places where things are happening and where regulations are light. Concerning taxes, you have States that are truly liberal (Georgia, Panama, Singapore, Hong Kong), and States that give a special deal to foreigners (Portugal, Ireland, Belgium, Cambodia) while the locals are taxed at high level compared to US. The second one tend to be less predictable over long horizon. For background historical reading, I recommend "the sovereign individual", the 1997 book that made Peter Thiel ask for New Zealand nationality. Tax and regulation is a great topic for speculation and Nomad Capitalist provides an entertaining way to stay up to date. I don't think the Nomad is investing to make an income, more as a way to park money.

The wandering investor reviews property markets such as Kiev and Cairo which according to him are great opportunities. He reviews many countries and investments and he is not always bullish on real estate. Still, the problem with buying cheap real estate is that the rent is cheap compared to the cost of repairing an air-conditioning or solving a plumbing issue. This means that repairs can quickly erode the net yield.

There is also Sark, a tiny channel island with minimal state and UK like prices.

Tblissi in Georgia is a great city in a liberal state. IT now has an oversupply of airbnb, so it is currently hard to make a profit there, you can keep observing. Last shelling on the border by Russian artillery was in 2008, but they did not attack Tblissi.

Istanbul is mostly a citizenship deal, tax is high.

Panama and Dubai are 2 classic nomad destinations where real estate oversupply mean that rents tend to decrease with time. So these are hard places for real estate investors.

Malaysia still has low real estate price and is already quite developed as an economy, but I did not check rents yet.

Montenegro and Portugal are popular destinations with best climate in Europe, access to sea, and low 9% tax and lower prices for Montenegro.

Riga, Latvia seems to be about 23% tax, so it costs more, and it is really up North.

In the end, you can consider yourself lucky with all the exploring you can do. Be careful because tax is generally not about headlines, but all about the fine prints.

@Mike Lambert, which countries in americas and carribean do you think are attractive to real estate investors? 

I agree that short term rentals enhance yield, lifestyle and highest opportunity are not necessarily separate things, and US persons can open accounts anywhere. 

But there are times when some markets become overpriced. The current situation in South-West European countries is that a majority of people there are "investing" into deals with negative cash flow. You need to be aware of that. Short-term furnished rental was the arbitrage in Paris for 100 years. Paris, Barcelona, and San Francisco always were short-term destinations, short-term rental became a scalable business model for these cities with Airbnb, but the rules changed there. 

I hope I don't come out as too negative, but I meant to say it is not all mindset and self-imposed limitations. There are limitations from markets, and limitations from regulations. I am operating rentals for profit in US and a short-term rental in France.

There always are places with better opportunities and places where it is harder to do business. PM me if you have further questions.

I have experience with France, US, Japan, Hong kong real estate. People did ok in the 90s in Paris, but the prospects are not as good now because the proforma does not make sense. I could go on with the anecdotes from pro or semi-pro i know in France.

What is the economic rationale buying in portugal, france, spain or italy against montenegro, Malaysia or costa rica? There it seems to me that the proforma are better and the growth is more stable. So i am saying that's pigfs and california are more of a lifestyle play than a moneyball. Same for San Francisco vs Indianapolis.

Of course, if you make the lifestyle choice, you might make ends meet. No need to be negative, but the prospects are very different.

Concerning banking, i had difficulties remotely opening US in 2014 or BVI accounts last year at large banks with perfectly legitimate reasons that I could prove. In 2014, the banker told me that they would specifically not open an account for owners of residential rentals, simplest was to travel to US. Two weeks ago, an estate agent told me a person born in the US went to open a bank account to manage his house purchase in Istanbul, the turkish banker shouted him out: no US person! So it is not just impacting ML.

Enough about me and my friends. What is your actual experience?

@Cole Britting, PIGS economic affordability and growth is so low that it may not be profitable renting to locals. This and tenant-friendly law, mean it is not the place to start a residential rental empire. Still, it makes sense if you plan to live from internet income and enjoy cheaper living than NYC. 

@Bruce Lynn, the US applies FATCA regulation on all foreign banks on reporting US persons accounts. The risk for the bank is to get up to $160,000 fine per account not reported and further investigation would be conducted at the discretion of US to determine if penal liability (prison, billions in fines) apply. So they refuse US customers unless they are legally bound to take them. A lot of people who were born in the US but never lived there discovered recently that they had problems with their local bank.

@Grace Antoniou, I am an out of state investor from Hong Kong. Indeed, the information you give is insufficient. I understand that you plan to rent a shop in NY? Are you a US person? Why do you want to rent to yourself a shop in Albany NY from a UAE LLC? Is this pure real estate activity for that LLC or part of some other business?

People seldom do this because a foreign company in non-tax-treaty country gets 30% withheld on gross income and onerous US declaration requirements. Happy to discuss creatively here or on PM, but yes, you will eventually need to check with a US CPA.

@Martingale Kim, the situation you describe is typical of the last eight years:

• lower mortgages rates pushes house prices up. 
• rent does not go up unless there is wage inflation or gentrification. 

We saw many houses go from 80k to 200k while rent would go from 900 to 1200 per month.

Some locations in TX and FL have local tax that is following prices. This keeps eroding a larger part of the rental income, but appreciation is still good. 

What I do in that case is to keep the house if the appreciation is above 10% or if tax does not become more than 3 months of rental income. I would sell if the location is seeing less than 5% appreciation, rental yield is low, and tax is a high proportion of income.

Hi @Oscar Atlas, non resident investor from Hong Kong here, you may use census data to determine the fastest growing cities and incomes, affordability data you can infer from zillow, and check info on real estate cycles, those happen through a long term cycle of bank financing. PM me if any question.

@Benjamin Sussman, leverage depends on the borrower total income. In absolute terms, that 95% LTV or x20 leverage sounds standard for small investors with good income on the side. A conservative lender will let someone borrow 1.5mln with annual servicing of 90k (assuming 6%=3% ppal+3% interest) provided that one's income is above $270k for a 30% income ratio, and not much should go wrong.

How about borrowing $15mln if you make $270k (or 1.5mln if you make 27k)? Of course, if you have little or no other income source and the real estate earns only 6% net while each $1 borrowed requires 6ct to service, the 30% coverage income rule would only let you borrow 30% LTV, the lender will allow higher LTV because a distressed sale will be ok for lender, but the borrower will likely lose everything. A debt/equity ratio of x3.5 is considered standard (see https://www.investopedia.com/a...) by a real-estate pro. In this case, it is the borrower's responsibility to ensure that he is able to generate the cashflow needed to service the debt.