All Forum Posts by: Account Closed

Craig, Something better than being a mentor is maybe partnering with someone on a deal. If you meet someone you like and trust (very important), and you yourself have some money you wish to invest I am sure you will be able to find someone who does deals and would be willing to split profits with you depending on your capital contribution. Furthermore, you can go to the site all day every day, call your partner and bug him/her with questions, listen to your new biz partner and find out how they find properties and how they know its a deal, find out who they're banking with, etc.... No need for gurus or mentors!

My mentor when discussing entrepreneurship, likes to talk about risks that entrepreneurs take. Is this deal the only way to get to your destination? Are there cheaper ways for you to get there? He would say this: never bet the farm.

The more speculative the investment the less I would put into it. Depends on my net worth. For example, for someone with over 1 mil in net worth may find considerable value in a larger property with reasonable cash flow, but may also dabble in a new strategy that is riskier but generate higher returns, particularly one in which they do not have that much experience. For example, 100k worth or 10% (or less) of your net worth. This to me is reasonable, as opposed to investing all your wealth, or something 50%+ of your net worth, into a higher risk strategy.

Yeah if the deal looks good then it should be considered, but if you risk everything you could lose everything. As my old boss said: never bet the farm.

Greetings and salutations! Welcome and hope you learn a lot. I have been investing in Chicago for a number of years all over. I have mostly been in the city, but some also in the suburbs. There are many many opportunities here as it looks like the foreclosure inventory here is going to continue its abundance. There is a lot of opportunity in transition neighborhoods like Logan Square and Bronzeville, and even more opportunity the west and south sides of the city. In some neighborhoods like Garfield Park, Austin, Lawndale over on the west sides, offer properties at 30 or 40k that only need 10 or 20k work and you can have Section 8 cash flowing properties that generate $2700 a month. Yes it is not in a fancy gentrified neighborhood as Lakeview, but nothing too difficult for an intrepid real estate investor!

The opportunities in Lakeview and Lincoln Park are limited because the prices are still to high for the returns to make sense. Like I mentioned before, I like Logan Square and Humboldt Park. Those are some good neighbrhoods and Logan Square has the long term potential of being the next Wicker Park. The suburbs provide huge also diverse opportunities.

A lot depends on how much money you have, how much timeyou have to spend and how far you are willing to travel. The interesting thing about Chicago is the diversity in which you can invest in. You can go for the high end Manhattan style condo investing thing (South Loop has some mad sales), which also have a lot of distressed inventory these days, or you can flip single family homes in either the city or the burbs. you can do the Sec 8 thing or be a big time developer and build a sky scraper. Infinite opportunities.

Traditionally, Chicago real estate ppl have started out by buying and renting the venerable 3 flat because it is an accessible product and has easy entry point because it can be owner occupied. These are cash flowing again, now that prices have gone down and rents have gone up. Thats also where I started!

Good luck. Let me know if you have any questions. Feel free to PM me.

I love Canada! I would be very happy to spend the rest of my days in the wilderness of BC. Some of my first clients as an agent were Canadians. There are Canadians investing everywhere!

This is useful - Foreign Investment in U.S. Real Estate - Ownership Alternatives
Is there a "Best" Way for a Foreign Individual to Own U.S. Real Estate?:
http://mcgladrey.com/Real-Estate-Advisor/Foreign-Investment-in-US-Real-Estate-Ownership-Alternatives

One of the ways they discuss is investment in the US via foreign corporation

What I did in one of my highend rentals is provide the option to use Internet wifi in the building for cheaper ($50/mo) than getting it themselves. However I stipulate in the rental contract that they may not engage in illegal activity or downloading copyrighted files, specifically mentioning bit torrent, and doing so is a breach of the rental contract.

I don't make much money on it but a number of tenants have mentioned it was what pushed them over the edge to rent a $3k apt, which admittedly is high.

I have been investing some of my own money in Chicagos west and south side communities for a few years, as well as in the burbs. Many of these would be considered "war zones". Most of the tenants are sec 8, but I have to say I've gotten to know some of the tenants and I like them a lot. Many are hard working blue collar types that do everything they can to support their families, and treat the property like their own.

A poster before mentioned needing to pack heat (maybe it was a joke) but I highly advise against that!!!! I, a small Asian man, have gone into these "war zones" for a number of years and have never had problems. I always talk to neighbors no matter how unhappy they look to see me (REO vacant house type situation). once you break the ice and don't come off as standoffish then the whole attitude changes. Don't ever brandish a gun. If I had one I would never bring it into a property. The closest thing I have to a weapon is my maglight which is very bright and have never considered using it as a baton.

Hi thanks very much for your replies. Finance Examiner you are right that this is not particularly useful for small investors. I have only used this structure in deals of more than a few mil from each investor as you mentioned. I figure as more and more foreigners come to invest in the US (yay the dollar) people on bigger pockets should be introduced to how internationals and not to mention most large multi national firms firms operate (especially in finance and more especially in the asset management business).

What prompted me was this Australian individual who was worried about the burdens of a foreign estate and inheritance taxes:
http://www.biggerpockets.com/forums/51/topics/63102-help-deciding-between-llc-or-individual-s-name-for-foreign-investor

As for financing because it is in fact unconventional and offshore we have ascertained financing from private banks. Not so much walking into a BoA as much as giving your Merrill Lynch guy a ring (owned by BoA). Some of my clients have had t he clout to have private bankers, and in my day job I know some private bankers, and through those connections I have been able to cultivate relationships in this field. Specifically in we have been buying large apartment complexes in cash, which is refinanced by the private bank. We never submit contracts from the offshore companies but from the US company that owns.

Jeff, thanks for your post but I do not believe that it is illegal for foreigners to avoid inheritance taxes with this structure. It is illegal for US citizens. For this reason of course I have hired big 4 accountants and international lawyers to advise on legality and procedure. As they say it they wouldn't let me so it if it were illegal. Furthermore if i was doing anythjng illegal, i am sure Deloitte will be the first to sell me out to the US govt than to jeopardize their status as a big 4 firm. I do not think that it is "crooked" to have offshore companies nor is it only for slumlords. The concern the Australian man I mentioned is a valid and real concern. The question arises why as a foreign national needs to pay taxes for services they are not privy to, especially as it pertains to estate taxes. In the UK you can even apply for your VAT tax to be returned to you.

Furthermore in regards to hiding ones identity there exists land trusts which has been used in the US to hide property ownership. There's a difference of course but the idea of hiding ones identity is not "foreign" and not without merit.

Have a great Sunday!

In the last few years I have been fortunate to have a number of international (non-US) persons invest in real estate with me.

One of the biggest concerns that international investors have is the tax burden that exists when investing in the US, especially on personal income taxes. Foreigners, especially from Asia, are not used to paying the high income taxes we have here in the US, not to mention estate taxes. In comparison to other Western European countries the US tax code is very tough on those who are from overseas that invest in the US, as well as US citizens living and working overseas. For example, in the UK there is no capital gains tax on foreign citizens and companies. Furthermore, the US is the only country in the world that taxes its citizens that live overseas and whose income is earned in a foreign country.

To alleviate this concern I have sought the advise of a number of lawyers, accountants and finance professionals, and after putting it in practice, I am going to share my experience with those on the BP board especially since after running a search I haven't read much about offshore companies.

One of the best ways that I have found for non-US nationals to invest in the US is through an offshore holding company. What my investors have done is place their capital in an offshore company which then operates in the US as a foreign company. This company then owns a certain percentage of a local US LLC. The offshore company is held in what is called a "nominee trust." A nominee trust is a trust created for the purpose of holding assets for beneficiaries whose identities are kept secret (this is available in the US, not just in internationally). In this arrangement, the beneficiary of the trust (the person providing the capital and the "real" owner) designates an individual or accounting firm to be the "nominee." This means in all legal documents it appears that the trust is in possession by the accountant. This means that no one can find out who the owner is without physically breaking into the accounting firm's office and looking for the signature of the beneficiary.

In this manner, profits from real estate investments can be returned to the offshore company, but the identity of the owner can remain secret, which mitigates the tax concerns that many international investors have.

In practice, it has not been too difficult construct such an entity. At first glance it appears complicated but actually works rather elegantly. One of my investors from Hong Kong actually introduced this concept to me, as it has long been a form of mitigating tax burden for individuals. In her case:
- Nominee trust is designated as accountant in Hong Kong (far away from Washington DC)
- Offshore company is registered in the British Virgin Islands and is owned by the Trust. Apparently BVI companies are under higher scrutiny by the US IRS compared to companies located in places such as the Cayman Islands. But I guess BVI is the cheapest. Costs about $100 to register a new company. Some accounting firms have premade "shelf" companies with preselected names which can be transferred immediately. You don't get to pick the name but you can get the offshore company made quickly and since the name was generated by a firm, it is likely quite anonymous has has nothing that can identify the trust's beneficiary. ).
- This BVI company registers as a foreign company operating in your State.
- Ownership of LLC which is actually used for real estate investing is by the BVI company.
- For deals where we both had money in the deal, my LLC owned a part of the LLC vehicle used to invest.
- For deals where I just earned a fee, like a standard waterfall arrangement, my company was paid a salary out of the investment vehicle.
- Foreign Investor money is flowed through the LLC to the foreign company operating in the US, and then back to BVI after corporate level taxes have been paid.

For my own accounting, ESPECIALLY business entities used to invest international partner money, I use a Big-4 accounting firm to do the books in order to protect my own risk of IRS audit.

The use of offshore accounts should be cautioned. There is a huge push from the White House to close tax loopholes and you can sure bet that by engaging international investors you are in fact making yourself and your company a target for audit. It is for this reason I am willing to pay more for my accountants to be one of the Big 4. For more info on this take a look at the "Stop Tax Haven Abuse Act" which has been introduced in the US Congress but not passed.

US citizens should be very careful when using offshore companies for investment, especially with their own money. Of course, all US citizens must report ALL income. However, big companies often use these same methods to save tax dollars (think: being a CEO of a company, being paid to your personal Cayman account by the company's offshore subsidiary, and not reporting a cent).

For example, a US citizen could open a offshore entity and just get paid to it. It would be very difficult for the person to remit the money back to the US for one's personal use without alerting the IRS, but one could use that offshore company to continue to invest in the US. One may not neccessarily need the money because, for example, if you wanted to buy a new house, you could just use the cash offshore to purchase the property and rent it back to yourself. Of course, this is an example of what the White House is trying to avoid, and this is NOT something I have done or would recommend doing. Note that the government is in fact cracking down and is willing to prosecute international firms and individuals that hide US client or personal money offshore (think UBS in Switzerland).

I have and currently used the above structure for foreign investors to work with me in the US. Investors have found such an arrangement beneficial to them and I have actually been able to convince a few prospective partners who were on the fence to invest because of this offshore structure.

Also, this structure will not help a company skip out on taxes at the corporate level, such as capital gains and corporate taxes. Only the hiding of the identity of the final beneficiary and mitigation of their personal income tax burden.

Good luck, and make sure you speak to a very very good accountant before you do any of this.

Edit: I just realized this is my 100th post! Glad to make it a useful one instead of one of my usual sarcastic/snotty remarks.

Check out an offshore holding company. I am about to write a post on this.