 |
FAQ
Is it safe for an Aussie investor to buy property in the USA?
Absolutely. Unlike Australia, the USA offers foreign investors the same rights and rules to buying property as US citizens. Nevada especially has very friendly laws for investors and landlords.
I’m concerned about the state of the US economy, I hear they are going to go deeper into depression, how will this affect my investment?
Nobody has a crystal ball and can know what exactly will happen to the US economy, or the world economy for that matter. However we do have hundreds of years of history to suggest that property prices will go up over time. Property prices have dropped so much in the USA that they can’t go much further anyway, but if the property is rented out and you are making 10% net returns, you are always going to make money. Properties we are buying for $100,000 would cost close to double that to build. If you could buy a property in Australia for $100,000 that was valued at $350,000 4 years ago and cost $175,000 to build, it would be a no-brainer right?
How much will I make from Capital Gain in the future?
Again, that’s another question for the crystal ball that nobody has an answer to. But let’s say, hypothetically of course, that you paid $100,000 for a property today (less with the current exchange rate) that was valued at $350,000 in 2007. Let’s assume that property bounces back to only $200,000 in 10 years. This gain will occur when the US economy picks up and their dollar levels back to the long term parity against the Australian dollar (long term value parity rate is $1.00 AUD = $0.72 USD). Your $200,000 house is now worth $278,000 AUD. Your rental income will also increase over time (it is currently depressed) to let’s say, $1500 from $1100 today (chances are it would be more). Your rental income is now $2083 AUD per month. On these estimations, you would at least triple your money. We don’t have a crystal ball and we can’t say you will triple your money in 10 years, but there is a lot of evidence to suggest that a property that was valued at $350,000 would increase back to $200,000 and that the US economy will bounce back sooner or later, and in the meantime the property has been cashflow positive so has been no financial burden.
Why do you only buy in Las Vegas? I’ve heard about other areas like Michigan, Kansas and Texas where I can buy cheaper properties.
Our philosophy at LVIP is not to buy cheap properties, we buy quality homes in safe areas that we can justify will go up in value over time and we know will rent out. There are many areas of the USA where you can buy properties for around $40,000 that will yield up to 15% net returns. However, these properties are usually old and often in areas of lower socio-economic conditions where the quality of tenant will not be as good. In fact, you can actually buy properties in the USA for under $1000, but there will be back taxes owing and in an area where you certainly wouldn’t send your grandma to collect the rent (one of our criteria).
There are many other good areas to buy in the USA, but we know Las Vegas and have 10 years experience buying in that city. We have done property deals in many areas of the USA including California, Ohio, Texas, Louisiana and Arizona, as well as investigated areas like New York and Florida, after which we have always returned to Las Vegas.
Do I have to pay tax in the USA? Do I get double taxed if I bring money back to Australia?
Australia has a treaty with the USA to ensure citizens of either country are not legally obliged to pay double tax. How your taxes are managed will depend on a number of factors, including your current income situation, other assets, how the property is financed etc. We recommend every investor seek independent advice from an accountant that specialises in international tax scenarios. As part of your turnkey property purchase, we help you with making sure you have the best advice possible for your tax situation.
Can I buy property in the USA using my SMSF in Australia?
Yes you absolutely can. You will need to consult with your accountant for best ways of structuring the investment for your situation before making any commitments.