Seminars -USA Property or Overseas Property

Intro

I have been to a lot of seminars about different ways of making money. I have also seen a lot of programs on the web.

I have written a Seminar Guide -A good seminar vs A scam & how to avoid getting ripped off on how the standard seminar works so you better evaluate whether a seminar you attend is good or dodgy (and whether you should sign up).

Starting with Property, in the next few articles I will explain some of the seminars and ways to make money

Overseas Property (such as USA)

What is it: Buying USA property (or overseas) in the hope of putting money in the pocket each month (and maybe even having the property go up in value if you have bought it cheap/values go back up).

 

Positives:

  1. 1.       Positive Cash flow –Australia properties typically have negative cash flow. Overseas properties  can have positive cash flow, meaning you get paid cash each month above the costs of owning the property.
  2. 2.       USA – Possibility of upturn (&capital gains) –The USA market has fallen substantially. In some markets* (though definitely not all) they will gain some of their previous value in the next few years.
  3. 3.       Tax Deductions –The seminar I went to on this talked about claiming 1 tax deductible trip each year of visiting your USA properties. Although this is only once you have purchased the properties could be a tax-effective way of getting a USA holiday every year (obviously this would need to be confirmed with a USA accountant).

 

Negatives:

  1. High chance of getting burnt -The USA property laws are VERY different to Australian laws. VERY VERY different.  A lot of things are opposite. Can’t repay your mortgage– Australia – become bankrupt, USA – hand back the keys.

 

New train station being built – AUS – good, people want to live there, USA – bad attract bad quality tenants.

  1. 2.       Obstacles & Costs to get started –To try to avoid getting burnt you need to do a lot of homework (even then it is no guarantee you won’t get burnt). And a trip or 2 to the overseas country (note DO NOT buy overseas property without seeing it).
  2. 3.       Need 100% cash -Hard to get a loan (& leverage) –Americans don’t like to lend to foreigners (currently it is hard for American citizens to get a loan). Australian banks won’t lend with USA property as security (that should be a warning bell right there – means banks don’t think it is secure).

 

Need equity – so you need to use equity (probably from a previous property) to fund USA purchase. And even if the USA property grows in value – it might be hard to leverage that amount to borrow to fund/deposit for the next property.

  1. 4.       Complexity & Cost – Doing things overseas is complex.  Being a non-resident of USA means you are subject to different rules – and a lot of people might give you the wrong advice. You will need to do a USA tax return (or a few returns if you set up different USA entities to hold your properties).
  2. 5.       Managing Properties, Distance,etc. –You are on the other side of the world – which means their 9-5 working hours will mostly be in the middle of the night or early morning. I have heard USA property management is mostly at a much lower standard than Australia – i.e. no monthly statements, people pay rent in cash which the agent picks up, etc. You are really reliant on the property agent to organise fixing things if anything goes wrong.

Rating & Comments –

So:

 IF you find the right city (that is economically strong and will rebound),

IF you find the right property (that is in good repair/can be fixed up & rented),

IF you get the right tenants (who pay the rent when property manager comes to pick it up in cash),

 IF you get the right property manager (they are generally woefully behind Australian standards)

IF you get the right advice & don’t have legal problems (you wouldn’t buy in your own name over there)

THEN I think there would be an opportunity to make money each month (and probably when you sell).

BUT if any of the above go wrong, then you can have massive problems or a large chunk of your money (houses are a commodity over there – you might buy a house for $70k that nobody wants to buy back from you for $10k).

Need Advice – so this is an area where you really need someone who has done it before and has all the contacts. Even then it is not a guarantee that you will not lose money (or make enough money to make it worth the extra costs compared to what you could make investing in Australia)

Your Work: Med-High, Value of course: High, DIY – Low, Cost: Medium

Posted in Making Money, Property

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