Tips for a successful investment in the real estate market

• Location its one of the most important point in real estate. Try to always be close to schools, beaches, transport and main attractions.
• Negotiate the price of everything. From the house price to the renovations. If you don't ask you will never get.
• Learn from your mistakes- A mistake can be a lesson for your next investment
• Buy with your brain not with your heart. 
• Look to gain not only capital growth but also get cash flow.
• Educate yourself before you buy. 
• Make sure that who give you advise its because they "been there and done that" 
• Make sure that you can afford the mortgage repayments.

Property strategies when buying property in the USA

There are 3 basic strategies when you buy properties:

1. Buy and hold- If you buy the property in good condition or already renovated then its likely that you would like to go for buy and hold. In a market where the property its still dropping in value you can not expect to make a profit if you buy and sell. With time properties are always likely to bring some capital growth. Make sure that you choose your property wisely to maximise the returns.
2. Buy renovate and hold- With this strategy you are likely to improve significantly the returns of your rentals. Make sure you keep the expense of the renovation within budget. Be aware that this will need more of your time and efforts as well as the funds available for the renovation.
3. Buy renovate and sell.- also know as flipping- This can be profitable but at the same time it can be high risk. You have to make sure that you buy in the right area, be well aware how much is the renovation going to sell and have a good idea of how long it might take to sell it.. it might be longer than expected.  Always keep in mind that higher returns comes hand by hand with higher risks. 

Reasons why is a good idea to invest in proper

Here are some of the reasons why real estate its always a good investment:

• People will always need somewhere to live
• Over time they always tend to go up in value. Its one of the only investments that if you didn't pick the right house it still bound to rise in value if you are happy to hold on to it.
• Over sixty percent of the people listed in the most wealthy people in the world have invested in property.
• There is little or no cost on holding on to a property if you have it tenanted and can provide cash flow positive
• You can add value by renovating it. 
• It's a very stable investment

DIY vs Aussie Agent

There is a pro and cons for everything, here are outlined the pros and cons of doing it yourself vs using an agent.

Using an Agent:

Cons
You will get a lower yield of around 12 to 18%
You will still have to do your own due diligence as you can not rely 100 per cent on their due diligence.
There will be extra cost involved on simple steps like setting up LLC, etc
The agents job comes at a price and you will find that some of the properties are marked up
You might still want to travel to the US to check up the property in which case you are still spending money reassuring their due diligence.

Pros
You could get away with not flying to the US to inspect the property.
You will have a back up of your own due diligence.
They will guide you all the way
You will save time


DIY
Pros
You save money by doing it yourself.
You get to enjoy  the experience firsthand of buying a property
you earn a higher net margin or yield.

Cons
You have to make sure that you do your due diligence right as there is no back ups.
You might get advantage of as you are from overseas
You need time and money to get to the States.

Did you know......?

• That lenders usually require PMI (private mortgage insurance) only when the buyer is putting down less than 20% of the home’s purchase price?
• That closing costs are negotiable and can vary by bank and lender?
• While practising your due diligence you should always review the title of the property? (Certificates of titles are public documents which people can review and look into)
• you should always  check for environmental hazards such us gas or water leaks?
• Is expected the further lower prices throughout the US as the recovery in the property market stills seems some way off. 
• The US is now the 2nd most popular place for overseas investors to buy property?
• The US its one of the only 3 countries that taxes its residents on world holdings?

Us cities with the most underwater mortgages:

 Some of the cities with the most underwater mortgages are:
Las Vegas, Phoenix, Modesto, Jacksonville, Tampa, Vallejo, Stockholm.

More about: Doing your due dilligence

Talk to renters as well as homeowners in the neighborhood. You will find that renters can be more will  honest about the negative aspects of the area because they have no investment in it. If you know exactly what  neighborhood, try to visit it at different times on different days of the week to see your future neighbors in action.

Generally speaking if you are a beginner in the  investment property field then the best  is a residential, single-family dwelling or a condominium. Condos are low maintenance because the condo association is there to help with many of the external repairs, leaving you to worry about the interior.

One positive side about single-family homes is that they tend to attract longer-term renters in the form of families or couples. 

One of the reasons why families, or couples, are generally better tenant than one person is is that they are more likely to have a stable finance and pay the rent on time. As a landlord you want to attract this type of demographic.

When you have decided on  the neighborhood, then look for a property that has appreciation   potential and a good projected cash flow.. Look around for properties that are more expensive than you can afford no only the one withing your budget as the real estate agent can often sell below its listing price.

For appreciation potential, you are looking for a property that, with some light renovations, will attract tenants who are willing to pay out higher rents. This will help you to get more for the house if you decide to  sell in the future.. As far as cash flow you to have to make an informed guess. Take the average rent for the suburb you choose and subtract your expected monthly mortgage payment, property taxes (divided by 12 months), insurance costs (also divided by 12) and a good allowance for maintenance. It s very important not to underestimate the cost of these last or you will pay for it once the deal is done. If all these figures come out even or, better yet, with a little left over, then you know its a good buy.

You will find that in every state you have has good and bad cities, every city has good  and bad neighborhoods and even every neighborhood has good  and not so good properties, but it takes a lot of time and research to line up all three. When you do find your ideal rental property, keep your expectations realistic and make sure that you have a clear idea of what you can afford and what your goals are.

What to look for when buying property

• Neighborhoods The quality of the neighborhood in which you buy will influence both the types of  tenants you attract and how often you face vacancies. For example, if you buy in a neighborhood near a university, the chances are that your pool of potential tenants will be mainly made up of students and that you will face vacancies on a fairly regular basis (during summer, when students tend to return back home).  
• Rents   You need to know what the average rent in the area is. If charging the average rent is not going to be enough to cover your mortgage payment, taxes  and other expenses, then you have to keep looking. Be sure to research the area well enough to gauge where the area will be headed in the next five years. If you can afford the area now, but major improvements are in store and property taxes are expected to increase, then what could be affordable now may mean bankruptcy later.
• Natural Disasters Insurance is another expense that you will have to subtract from your returns, so it is good to know just how much you will need to carry. If an area is prone to earthquakes or flooding, the extra insurance can add up and eat away at your rental income.
• Property Taxes  Property taxes are not standard across the board and, as an investor planning to make money from rent, you want to be aware of how much you will be losing to taxes. High property taxes may not always be a bad thing if the neighborhood is an excellent place for long-term tenants, but the two do not necessarily go hand in hand. The town's assessment office will have all the tax information on file or you can talk to homeowners within the community.
• Schools Your tenants may have or be planning to have children, so they will need a place near a decent school. When you have found a good property near a school, you will want to check the quality of the school as this can affect the value of your investment. If the school has a poor reputation, prices will reflect your property's  value poorly. Although you will be mostly concerned about the monthly cash flow, the overall value of your rental property comes in to play when you eventually sell it and retire someday.
  
• Crime No one wants to live next door to a hot spot for criminal activity. Go to the police or the public library for accurate crime statistics for various neighborhoods, rather than asking the homeowner who is hoping to sell the house to you. Items to look for are vandalism rates, serious crimes, petty crimes and recent activity (growth or slow down). You might also want to ask about the frequency of police presence in your neighborhood.
  
• Job   Locations with growing employment opportunities tend to attract more people - meaning more tenants. To find out how a particular area rates, go directly to the U.S. Bureau of Labor Statistics or to your local library. If you notice an announcement for a new major company moving to the area, you can rest assured that workers will flock to the area. However, this may cause house prices to react (either negatively or positively) depending on the corporation moving in. The fall back point here is that if you would like the new corporation in your backyard, your renters probably will too.
  
• Amenities Check the potential neighborhood for current or projected parks, malls, gyms, movie theaters, public transport hubs and all the other perks that attract renters. Cities, and sometimes even particular areas of a city, have loads of promotional literature that will give you an idea of where the best blend of public amenities and private property can be found.
  
• Building Permits and Future Development The municipal planning department will have information on all the new development that is coming or has been zoned into the area. If there are many new condos, business parks or malls going up in your area, it is probably a good growth area. However, watch out for new developments that could hurt the price surrounding properties by, for example, causing the loss of an activity-friendly green space. The additional condos and/or new housing could also provide competition for your renters, so be aware of that possibility.
• Amount of Listings and Vacancies If there is an unusually high amount of listings for one particular neighborhood, this can either signal a seasonal cycle or a neighborhood that has "gone bad." Make sure you figure out which it is before you buy in. You should also determine whether you can cover for any seasonal fluctuations in vacancies.
  Similar to listings, the vacancy rates will give you an idea of how successful you will be at attracting tenants. High vacancy rates force landlords to lower rents in order to snap up tenants - low vacancy rates allow landlords to raise rental rates

Important considerations when investing overseas:

When dealing with an agency is important to make sure you know who you are dealing with:

1: Meet the Team 

Find out who everyone is and understand what their roles. Know who are the people involved with this company.

2: Get referrals:
Get as many referrals as possible, see what they have to say, its hard to always have everyone happy so listen to what the complains are about.

3: Property Management but most important factor for investing is a good solid management team 
How they handle the following:

A: Repairs - 

B: Evictions -   how long to re rent and what cost associated with that ?

C: Payments -How do they processed.

D: Monthly reports (P & L Statements) profit and loss statement...

E: Rehab requirement  (what type of work is been preformed on the property)

4: Real Estate Goals
Have a plan with which will  exactly what you want to achieve with your real estate and how to act if things do go as plan. So many people overlook this important step when buying property.

5: Personally viewing the properties and the Team in action

View the properties and see how the company runs. Try to be there on weekdays so you get a good feeling of how things work.  Videos and pictures are good but not always tell the whole truth about the property.

And last but not least.. always ask for recent sales on the same street that you are buying and make sure that you buy from someone that owns rental houses in the same are to avoid dealing with just another salesman.

When buying a home in Atlanta, Georgia

The real Estate laws can vary from state to state. So here are some important considerations when buying a property in Georgia:

Time-  It can take between 3 to 6 weeks from when the contract gets accepted until closing the sale.

Representation - By Georgia law the seller is who should pay the selling commission, therefore must be represented by all agents.  The buyer can be represented if they had sign a Buyer's Agency Agreement.  It doesn't cost anything for the buyer to be represented.


Inspections - The inspections are done only after the contract has been accepted. The inspection can take between 7 to 15 days of the acceptance of the contract and both parties have approx 5 days thereafter to work out an agreement on what each party is going to pay per inspection report.

Inspectors don't have to be accredited or qualify by law, therefore its very important to check that they are a member of ASHI or GAHI

Binding contract - A contract becomes legally binding when all parties have sign it. Make sure all contingencies are detailed out in the contract itself.

Closing - In Georgia this is done by an attorney who represents the lender although both parties can have they own attorney present at closing to make sure the contract is fully followed.

Possession - This can be at any time from closing until agreed.

Closing cost - . Cost can be between 2 or 3 percent of the price of the home. Althought the higher priced the home the lower the closing cost run as a percentage.  Some closing cost are paid by the buyer and normally the seller can contribute to the buyers closing cost up to a 3 percent of the purchase price.
A HUD1 statement is prepared by the closing attorney outlining all cost and exact amount of money required to close and given to buyer prior to closing.

Lenders - in the case of buying with a lender, all lenders in this state must be licensed in Georgia in order to do business.

The top 10 cities in the USA with highest Vacant rate

According to the US Census Bureau the increase in vacant homes since the year 2000 has increance by 43.8 percent. This can be for a number of reasons, such as up for sale or for rent.
The census of 2010 shows that there were aprox. 15 millon vacant housing units in the US with a 11.4 per cent gross vacancy rate in the whole States.

Below you will find a list ranked by CNBC.com according to equal-weighted ranking in both rental and homeowner vacancies.

Here are the emptiest major US cities:
 

1. Tucson, Arizona

Rental vacancy rate: 15.9%
Homeowner vacancy rate: 6.8%

2. Indianapolis, Indiana

Rental vacancy rate: 13.5%
Homeowner vacancy rate: 5.2%

3. Toledo, Ohio

Rental vacancy rate: 19.3%
Homeowner vacancy rate: 3.6%

4. Memphis, Tennessee

Rental vacancy rate: 13.5%
Homeowner vacancy rate: 4.0%

5. Atlanta, Georgia

Rental vacancy rate: 11.8%
Homeowner vacancy rate: 5.4%

6. Baton Rouge, Louisiana

Rental vacancy rate: 13%
Homeowner vacancy rate: 3.9%

7. Dayton, Ohio

Rental vacancy rate: 10.7%
Homeowner vacancy rate: 4.7%

8. Detroit, Michigan

Rental vacancy rate: 17.2%
Homeowner vacancy rate: 2.4%

9. Houston, Texas

Rental vacancy rate: 17.4%
Homeowner vacancy rate: 2.3%

10. Kansas City, Missouri

Rental vacancy rate: 11%
Homeowner vacancy rate: 3.7%

Mantainance fees to consider when buying a property

It is very important to consider how much money to put aside for usual expenses once you bought the property. Considering you have purchase the property finance free here are some of the points we should look at:

• Management and mantainance (note that everytime a tenant moves out there will be an expense attached to it, like new paint, new carpet, etc)
• Letting fee  
• Tax and insurance (county and state taxes, LLC, etc)
• Vacancy factor  (see next post about vacancy rates in the USA)

However you should also consider that:

• Eventually be able to charge more and more for rent.
• Keep mind that any repairs you make to the property can be written off as well!

Some positive signs in the USA real estate

Residential property in the USA have increased in the month of August despite the ongoing tight credit and the disruptions by natural disaster was reveled by the National Association of Realtors.
Sales are higher by 18.6% more compared to the 4.24 million unit level in August 2010.
  
‘Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations. Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation,’ explained NAR chief economist Lawrence Yun.

 The main and biggest factor that is stopping home sales from a better recovery are mortgages being denied to creditworthy buyers.

 .

Options for borrowing to buy a property in the USA

There are 4 different ways to borrow money to buy a property in the US:
-Borrow from an Australian lender and then send the money to the US
-Borrow from a lender from the US. This can be particularly difficult as they will require proof that you can afford the repayments and generally Australians don't have a credit rating in the US.
-Borrow from a hard money lender. This has the major disadvantage of high interest rates together with a lower loan to value rate and more cash needed.
-Get a Vendor finance.

Useful links when doing due diligence and analyzing the US market and spotting the safe areas.

http://www.realtor.com/home-values/
Where you can find with a free report how much prices are around the area you are looking, how much did houses have sold in a specific area you select, trends, how long is taking to sell, etc.

http://zipatlas.com/
This web page will give you a report showing you right in the map a detail explanation of demography.
social and economic profiles, as well as statistics, employment rates, households and personal income and much more!!

http://www.zillow.com and  www.trulia.com
They share vital information about homes, real estate and mortgages. It gives information about  how much was a property last sold for, properties for sale in a specific area, foreclosure, etc

http://www.finestexpert.com/
They provide detailed investment property report, cash flow potential, etc.
A good way to find the most recent assessed price for a property in Miami, that is the amount of property tax you'll pay go to this government website:
http://gisims2.miamidade.gov/MyHome/propmap.asp Great web pages when doing your due diligence!

www.redfin.com
www,gosection8.com   - to see what is available in your area for tenants.
www.listingbook.com
www.spotcrime.com
www.rentometer.com
Great web pages when doing your TAX return http://www.trexglobal.com/property-management/landlord-resources/rental-property-tax-deductions

Frequent asked question about ITIN

To find out the answer to this questions 

• What is an ITIN?
• What is an ITIN used for?
• Who needs an ITIN?
• How do I know if I need an ITIN?
• How do I apply for an ITIN?
• When should I apply for an ITIN?
• Where can I get help with my ITIN application?
• How and when can I expect to receive my ITIN?
  
  
  
  
  go to the following webpage 
  
  
  http://www.irs.gov/individuals/article/0,,id=222209,00.html
  
  
  
  

Note that:

You can create an LLC without a ITIN but you  can not get an EIN without first getting your  ITIN. At least one member of the proposed LLC must have an ITIN.

As a non US citizen you can not receive a SSN or social security number. 

Notes about opening a bank account in the US

Having a bank account in the us can make your life a lot easier.. The challenge is to open  one without you being  there. Ideally when going to the US to inspect the property make sure you open your US bank account then as they wont have a problem to open it just showing your passport.  A lot of people have problems opening a bank account from Australia.
Having a holding account (a US foreign currency account with a bank in Australia can be very useful when   transferring the money from it straight to an account set up with a bank directly in the US.

Bank of America are heavy chargers when it comes to transfers of cash and they set a max limit when transferring of 5k with a transfer fee of 25 each time this is done. 
I believe the best way to transfer money and exchange it its OZforex or NZforex (see links at the bottom of this page)

To set up the HSBC account: the process takes approx two weeks after submission of application.The costs to set up the account are:In Australia $200 AUD In New Zealand $275 NZD this fees are payable on application.
Note that HSBC makes mandatory that you are an existing customer and hold an account with them for at least 3 months. Unless this criteria is not meet they will not process the account in the USA.






Useful link
http://www.us.hsbc.com/1/2/3/hsbcpremier/worldwide/buying

Setting up an EIN - Employer Identification Number- in the USA

It is essential to get an Employer Identification Number (EIN) and a Individual Taxpayer Identification Number (ITIN) to buy a property in the USA.

This is a free service offered by the IRD. Beware of  web pages that charge for this free service. Go to this link: http://www.irs.gov/businesses/small/article/0,,id=97860,00.html The best way its to do it on the phone  calling (267) 941-1099 (Not a toll-free number)  Note that due to the time difference you will have to call late at night.

Tips for getting a property bargain in the US market

1- Choose your geographical location, your budget. This can collide, there is no point in wanting to buy in NY if your budgets its 30k!  So first see how much you can afford and then the area that can provide that sort of target price. Put also in consideration that some cities would provide better cash flow than capital growth and vice versa.

2. Search and inspect as many properties as possible. If you can afford the time off it will pay off to travel to the states and see the property yourself. Know the area like the palm of your hand so you know to spot where the gems are.
I once heard that the pictures that you see of a property online you will find that 1 third are better than what you had expect when you actually see the property, another 1/3 are misliding and only 1/3 its what you would have expect.

3. Find out the property history - How many times was bought and sold, was it a foreclosure sale? How much was it sold for, etc. Its important to know how long its being in the market for when was advertise for sale.

4. Selling Times and discounted prices. Consider that the longer the time it takes to sell the most likely the are its not the best, as the ones that are likely to perform well have a convination of short time in the market and less discount by the seller.

5. Talk to people that know the market. Make friend with local people either in person or on line and try to get a good feel of why they like the place. Make out of your agent a friend and be clear of what you are looking for.

6.Caution. Take caution when the price its extremely good, you have to wonder if its because there is a flaw or what its causing the unrealistic price. In the US we are seeing amazing good prices for a property but make sure this is not because of the undesirable location or poor construction.  I wouldn't recommend to buy a property that needs renovation, although you might profit with the sale price you have to consider the hassle of repairing a house living in another country.

Cities where to buy real estate in the USA - Fast facts: Miami

Miami, the most populous in Florida and one of  most important financial centers in the US.
Miami has suffered one of the biggest drops in property value.  There are many Spanish speakers together with a boom of the Brazilians buyers who are enjoying the benefits of their emerging economy and their high exchange rate against the us dollar.


Facts:

• Known as "America's Cleanest City" for its clean air.
• Forbes Magazine named Miami the 2nd most miserable city in the US (high foreclosure rate and past decade of corruption among public officials)
• Tourism its one of the major industries in Miami with 38 million people visiting the city
• In the year 2000 Spanish was the fist language for 66.75% of residents, English by 25.45%
• Miami Airport its one of the busiest in the world catering for  35 million passengers a year

Tips for a successful investment:

Have a strategy:
Have a plan as what would you like to achieve with each purchase. See the big picture and have a course of action.

Invest like a business
Know how to make the most of your money by making it work for you.

Always educate yourself first.
Do your due diligence can pay off, don't expect to learn the hard way by trial and error.

Develop a Niche
Research about the type of investment and become savvy.

Know your market.
Knowing what your market wants its a key point to make a sound business decision on your investment.


Expand your horizons
Most of us would be happy with just one property but nothing stops us from thinking big and create a wider investment property portfolio that could help to generate an income and quit our day job!

Mitigate Risk
A good investor know its risk and try to reducing buy getting protection whenever possible.

Comparison of the sales agent charges in Australia to buy property in the USA

In some cases there are an initial agreement fee plus a second fee in this case so I will split them with a plus in the middle"


www.888usrealestate.com.au   
 $188 AUD plus  $3800 AUD  or  8% of property value whatever is higher

http://www.usinvest.com.au
995 plus 3005 aud


http://www.21stcenturyusproperty.com 
Membership for 1 property starts at 5.000aud


http://www.eccoassets.com.au
no charges - (they own the property rehab and resell it)


usprime.com.au/
 $495 for US Set-Up Service fee -+ plus adding value to distressed property

http://www.housebuyersusa.com/
$2950 USD Service fee per property

www.uspsa.com.au  
499 + gst  plus  buyers fee $3575

(and http://myusaproperty.com.au/services.php )
no resgistraion and no service fee (?)  They simply mark the property up?


www.cashflowgold.com   
initial fee  785aud +2995 USD  (total 3780aud)

Useful link to do your due diligence when buying property in the USA

Here are some usefuel links to see if the property you are buying its at the right price:

• http://profiles.nationalrelocation.com/profiles/search
• http://www.finestexpert.com
• http://www.zillow.com
• http://www.trulia.com

How to set up an LLC in the USA

A LLC or Limited Liability company, has become the most popular legal structure for property investments.  The requirements can be slightly different from state to state but although you can use an attorney to do this, unless you have a complex structure you could do it yourself in a max of 4 hours.

Steps to set up the LLC

1 Get a  copy of your state's LLC Articles of Organization form the Secretary of State office
This link is for Secretary of State - Georgia 
http://sos.georgia.gov/corporations/filing_procedures.htm in this case is 50 dollars fee for an anual registration.
This would be for Misouri
http://www.sos.mo.gov/BusinessEntity/BusinessEntitiesOnline/help/mo/notice.aspx



2 Select a name for your LLC that complies with the States rules. It has to be unique in the state where you are filing.

3. Complete the LLC Articles of Organization form where you outline what is the purpose of your llc, name, the address of where legal documents will be sent, the name of the register agent in the case of having one and the members of the LLC. This is a fairly easy form to fill.
Note that you will always require a "Registered Agent" to act on your behalf in the state of creation for the LLC.

4. In some states you are required to publish a notice in a local newspaper advising the intention of creation the LLC. This is only compulsory in some states as Arizona and NY.

5. Submit your Articles of Organization form to the Secretary of State office together with the fee applicable.  Fees can variate a lot from state to state, from 40 to 900 dollars. Note also that there are in some states corporate tax that are separate from the filing fee.


Note that if you are more than one person under the LLC you might have to loo into the Operation Agreement although its not required by the State its will be useful in case someone wants to leave the llc, how and when it will the profits of the company be distributed, etc. Don't leave this unanswer as, even in the case of being together in the LLC with family and friends can become a big problem. Make sure you are clear on all terms.


NOTE -  Be careful with costs associated of using an online ‘registered agent’ for your LLC, after 3-6 months there will usually be an ongoing cost for this.

Where do agents suggest you buy property in the USA :

Ecco Assets:    Michigan,
US Prime property:Cleveland, Memphis and Atlanta
My USA property: Kansas City, Dallas, Atlanta, Miami 
888 US Real Estate:: Kansas City, Atlanta,  Phoenix
House buyers USA:  Phoenix, Kansas City, Pontiac, Memphis, Atlanta
21 century Properties  – Phoenix, Kansas City, Atlanta and St Louis

Some properties sometimes are advertised by different agents so shop around!

E.g:
http://usprime.com.au/2011/06/24/atlanta-ga-53129/

http://www.888usaproperty.com.au/102717/#

Tips and information when investing in the US property market

 . What type of people does this area appeal? Would you like to live there.. Its a clicke but when buying a property its very important the location location location.... Being in the best spot is  paramount for a great investment. Are the schools, cinemas shopping malls around? This is an importact factor to consider when you are looking at selling with a good capital growth.
NOTE: In the US , unlike in Australia where we have good suburbs and bad ones in the US you might find a good street and walk 200 mts and be in a bad street!


  Is there much work around?  Hospitals, shopping malls and universities for instance are a good souce of income.

 . Where is the path of progress? Once you identify the best city for you, are you looking for property within the path of progress? In other words, which direction is the city growing? If the city is growing to the north corner because a new Toyota plant just opened, then all your commercial builders are adding strip malls and gas stations, etc.. Therefore, this is where jobs are heading and where everyone wants to be.

. Do you have access to a good property management?   This is very important as you will have to relay on them for almost everything. So spend as much time as possible making sure its the right chose. Note that the rent in the US its paid montly and some Property managers collect the rental income from the house and not all of them bank online.  Property managment charge between 8 and 10 percent commision.

- Are you getting the best possible exhcange rate? Shop arround for the best currency exchange, specially when transfering the principal amount.

- Dont believe everyting they say! Always take in considertation what the person its getting buy advising you to act. Are they getting a commission? That might influance what they advise.

- Settlment on a property it could take between 2 to 4 weeks at the most, depending what type of sale it is.

- Emsure you have done a pest inspection on the property.

- Research about the State taxes and the Goverment taxes that might be different from States to states.

Pros and cons of buying property in the USA

 Here are some of the things we have to consider before entering into the US market:

Pros:
Good rentals - cash flow positive properties unlike Australia
Straong Rental yeids.
Good potential for Capital Growth
Easier process to buy a propety with no stamp duty
Strong dollar meaning better buying power
You can claim your trip to the Estates if you are going to check on your property once a year.

Cons:
Property Managers are not as professionals as in Australia
Paying over the odds for the propety
Distance - you will be an absentee landlord
Buying in a rought area without knowing
Not easy to get finance in the US
You will have to consider holding on to the property for a while before you see some growth

Cash flow or Capital Growth?: cities to consider

Capital Growth  or Cash Flow?

High CG - Moderate CF : (From 75k plus)
Charlotte, Nth Carolina,
San Antonio, Texas,
Dallas, Texas
Phoenex, Arizona

Mid/low CG - High CF    (for around 40k to 65k USD )
St Louis
Memphis
Kansas City
Atlanta

Only CF   (aprox 20k to 35k)
Cleverland, Oh

Cities where to buy real estate in the USA - Fast facts: Kansas City

Kansas City  (KC)
I have not consider buying in Kansas as I believe it only provides with cash flow and I would like to see some capital growth as well.  Its been the focus of many Australian investors.

Demographics:  whites 62 per cent black 28 per cent Hispanic 9 percent

• Located in the state of Missouri, Kansas, is the largest city of the state. 
• Over 200 fountains in the city.
• Much of the city's murders and violent crimes occur in the inner core of the city
• Kansas City is headquarters to many fortune 500 including Hallmark
• is one of 10 regional office cities for the US Government
• In 2010 had a population growth of 10percent

Cities where to buy real estate in the USA - Fast facts: Phoenix

Phoenix

Althought I have originally consider this city for my 1st property I believe there is such a oversupply of houses that makes it quite risky in case of losing your tenant.

In recent years as many as a third of new home sales here went to investors and speculators Many of them are now competing with builders to dump their holdings, and prices in some developments have dropped by more than $100k.

• Capital and largest city of the U.S. state of Arizona.
• Has a subtropical climate and has some of the hottest of any major city in the United States with over 110 days in the year with an average temperature of 38 celcius and 5 days per year where the temperature drops to or below freezing.
• Demographigs" 76 percent white -non hispanic- 40.8 percent Hispanic 6.5 African 3 percent asian.

• Home of seven Fortune500 companies.
• In the late 2000 it has earned the title of "Kidnapping capital of the USA" in general the victims are belived to be related to the iligal drug trade.

Cities where to buy real estate in the USA - Fast facts: Atlanta

Atlanta
Atlanta its very popular for it's dramatic for a metro region with a population of more than 5 million people. 
While the city itself is home to only 400,000 people, the greater region includes 110 municipal governments, each determined to beat its neighbors in growth.
Atlanta is expected to have one of the  greatest job growth  and commuters from far-flung suburbs are fighting harder each day to get back inside the I-285 "perimeter" that encircles the city. That has already increased the prices in the more desirable north Atlanta neighborhoods, like Buckhead, forcing less well-heeled newcomers to look outside the perimeter for lower prices.


http://www.youtube.com/watch?v=B5C1TliFzxY

Facts:

• capital and most populous city in Georgia.
• Atlanta is considered to be a top business city and is a primary transportation hub of the Southeastern United States
• Atlanta has the country's third largest concentration of Fortune 500 companies, and more than 75 percent of
• Fortune 1000
• Atlanta has a reputation as the "city in a forest" due to its abundance of trees, unique among major cities.
• Atlanta has a humid subtropical climate, with hot, humid summers and mild winters that are occasionally cold by the standards of the southern USA.
• January averages 42.7 °F (5.9 °C), 
• High temperatures in July average 89 °F (31.7 °C) but occasionally exceed 100 °F (38 °C) 

Writing a Will for your USA property.

Something very important to consider is that the Will you have made in Australia its not going to have any effect in the USA. Therefore its very important to have another will prepared in the USA. Note that the information below may differ from state to state. 

If you fail to make a will before you die (called interstate) your property will be divided between your heirs according to a formula which its fixed by law. Your property does not go to the State unless there are no heirs.

When there is no will there is a personal representative appointed, usually known to you to manage your estate. The cost of this will probably be more than if you had prepared a will and the estate may be subject to a greater court supervision.

  

Things to take into consideration:

- A will its valid until changed or revoked.

-  You can not disinherit your  spouse without a properly executed marital agreement

- If you are not going to leave anything to one of  your children  its a good idea to mention in the will that  no provision is being made for that child.

-  A well prepared will could reduce the estate and income tax that may arise when you die. Estate taxes are usually the largest cash expense an estate can have. 

 - Marriage does not void a will (in Florida), but a spouse acquired after you wrote your will may receive the same portion of your estate that he/she would have received if had you died without a will (at least one-half).

- Make sure that if you contact an attorney, he or she should be  is certified in Elder Law or Wills, Trusts and Estates. 

The importance of setting up an LLC -limited liability company-- for your us property:

Many investors prefer to own the property through an LLC (limited liability company). Some of the benefits are:

• To protect  property owners from personal liability
• You pay less taxes and are protected against bankruptcy
•  Property can easily be placed in an LLC
• Putting property in an LLC places it out of reach of personal creditors

As per wikipedia definition:
"A limited liability company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions. LLCs do not need to be organized for profit.

Often incorrectly called a "limited liability corporation" (instead of company), it is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation and it is well-suited for companies with a single owner.

It is important to understand that limited liability does not imply that owners are always fully protected from personal liabilities. Courts can and sometimes will pierce the corporate veil of corporations (or LLCs) when some type of fraud or misrepresentation is involved^."


 LLC in Georgia

http://sos.georgia.gov/corporations/filing_procedures_llc_2001.pdf

Tenancy in your USA property: Section 8 Advantages and Disadvantages

What is Section 8?

Section 8 of the United States Housing Act of 1937 (often simply known as Section 8), is a system where the government provides payment of rental housing assistance to private landlords on behalf of the tenant. Approximately 3.1 million low-income households currently are using this system to pay for they rent.
It operates through several programs. The most popular one is the Housing Choice Voucher program which pays a large portion of the rents and utilities of about 2.1 million households in the US.

The main benefit about this is that you get a guarantee from the Federal government to make up the difference between the tenant;s contribution and the rent specified in the owner's contract with the government.
It will be in the best interest of the tenant to stay in this program as if he leaves it he will loose access for good.

Another great benefit its the amount of potential rents.

This could be some of the reasons why a landlord might decide to not have a section 8 tenant:

• Believe that the sec 8 tenant will not be able to properly maintain the property.
• don't want the government to be involved as there are inspection required by law and standards to be meet.
• wants  to charge a rent for the unit above Fair Market Rent
• fear to have to   initiate judicial action for eviction of a tenant (HUD requires that Section 8 tenants can only be evicted by judicial action, even where state law allows other procedures)
• racial profiling  (as a large percentage of Section 8 tenants are minorities)

Section 8 was quite criticized as it allowed low income earners to live in more affluent suburbs where they would be able otherwise.


If you want to read more about this go to
http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/hcv/project

Important questions to ask your property manager in the USA

Some of the questions to consider asking before you commit to a property manager:

• who does the trivial jobs like changing a light bulbs?
• Are property inspections detailed and include photos?
• how often they being in operation?
• how many properties do they manage?
• do they have a property on they own they are managing?
• do they include in the price of managing your property the usual inspections?
• how often do they inspect the property?
• How often do we review the rent?
• Will you get a written contract of what they are required to do ?
• What areas do they cover?
• When looking for a new tenant will they be available to show the property 6/7 days a week?
• How much stuff do they employ?
• Do you check the credit history, past rental history, employment etc of the potential tenant?
• Are rent arrears followed up every day, with letters sent out at the right time and in accordance with legislation?
• Would you always await my approval to repair an item?

Buyers tips for a safe investment in the US Real Estate

-Selection: One of the most important things to ensure when buying a property its that its not one of a hundred similar properties out there. At the time or rent or sell this will be a big plus. You also need to consider what American like. We like to be close to the city to commute less but they appreciate there to be out of the city and enjoy the peace and quit. 
- Financial Analysis- Ensure you have full understanding of the out goings of the property and keep a good record of everything that goes outs and comes in.
- Negotiation: Note that negotiation in different countries is different.
- Conveyancing: Ensuring you have full knowledge of the laws around property transactions.
- Property Managers: Being so far away from your property this is a key point so make sure that you know and trust your property Manager.  See the next blog with questions to ask when selecting a Property Manager.
- Do your own due diligence: do not trust completely on your agent for your due diligence, at the end of the day its going to be your property if there is a problem arising.

Paying taxes on your USA property

Australian pays taxes on US property, so you will need to get a ITIN Individual tax identification number which is used for federal tax reporting purposes. (Similar to the AUS tax file number- see the post regarding how to set up an ITIN)

A very important note regarding tax is that the US and Australia have an agreement with respect to taxation. If you submitted your US tax return in the States, when you file for return here in Australia, simply include your USA tax returned, the ATO will take that into account when your tax receivable or tax payable. So you don't have to pay tax twice!

Income tax returns for individual calendar year taxpayers are due by April 15 of the next year. If April 15 falls on a Saturday, Sunday, or a legal holiday in Washington D.C. or in the state to which the return is required to be filed, the returns are due on the next business day.

There are IRS tax forms (over 800 types) that are used for tax payers and tax exempt organizations to report financial information to the US Inland Revenue Service. The most popular of this form its the form 1040 used by individuals. Example   http://www.irs.gov/pub/irs-pdf/f1040.pdf?portlet=3

The Schedule E is used to report income and expenses arising from the rental of real property, royalties, or from pass-through entities (like trusts, estates, partnerships.

This is an example of it:
http://www.irs.gov/pub/irs-pdf/f1040se.pdf
 

It is very important to keep track of all expenses related to you property such as:

• Commissions or property management fees,
• Homeowners insurance and HOA dues,
• Real estate taxes and mortgage interest 
• Advertising costs,
• Cleaning, maintenance, and repair costs,interest expenses.
• Security deposits reimbursed to the tenant.
• and various other expenses, such as utilities, landscaping, garbage, and so forth.

To do this it would be very helpful if you use a finance software or a computer spreadsheet so that you can print out the monthly report easy at the end of the year.
Something to take into account its that the IRS limits your total losses from all your rental properties to a maximum of $25,000 per year.


NOTE:
Research about the local taxes and the Federal taxes that might be different from states to states
Useful links:
http://www.irs.gov/

Doing your "due diligence" when selecting a property

Here are some things to take into account when doing your due diligence:

That the master bedroom is in the ground floor.
Its better to have just one ground floor
Consider the rental yield averages
Population growth averages
Demographic of the area
Income earning averages
Population growth averages
Infractrusture investment.
Close to public transport and schools
Is it a safe area
stable areas near major metropolitan locations

Report about the housing situation in the USA and how to be prepare for the future.

Here I found a really interesting report (issued by Harvard University)of how the housing market its going with current issues. It identifies and analyzes the economic, social  and demographic trends to help you prepare for the future. I think its a valuable information for those how are looking at investing in the US.
 

http://www.jchs.harvard.edu/

PROPERTY SALES AGENTS IN AUSTRALIA

As a novice in this area I looked into the agencies available in Australia.

The following are:


www.myusaproperty.com.au   ( I personally didn't have a good experience with them. They were quite disorganized at getting back with me and even cancelled an appointment arrange the day before as I ddnt reconfirmed it in the afternoon.)


www.888usrealestate.com.au

http://www.usinvest.com.au

http://www.21stcenturyusproperty.com/propertyexamples 

http://www.eccoassets.com.au/09_properties.html

 

http://www.housebuyersusa.com/propertyexamples

www.uspsa.com.au

www.cashflowgold.com
  

http://www.americapropertysource.com.au

Anyone who had any experience with these agents, either good or bad, please post us a comment!! 

Welcome to USA Property Advice

We just launched USA Property Advice!

A few months ago I started my research of buying property in the USA. Due to the huge crisis, the massive amount of foreclose in the US I see the opportunity available to get a property with cash flow positive.
As I have never bough a house before it is quite daunting to buy one so far away and therefore I feel like I have to make quite much more research than usual to embark in this journey.  The idea behind this blog its to gather as much valued information I find through different sources to be able to make a sound decision when purchasing a property in the US.  Please feel free to add any comment, corrections, etc.

Note:I can not guarantee the accuracy of the information in this blog so only can be taken as a guide. Please do you own due diligence before buying.