It's often said that if it looks too good to be true, it probably is.
So, I contracted a fantastic guy from National Property Inspections, who has been absolute GOLD. He was really worried that I was being led down the garden path by an unscrupulous seller, looking for some mug to buy his crappy condo. So he was really thorough and gave me an honest opinion about the area and the rental market. He's exactly what I needed - my own Inspector Rex.
He went out to the property last week and checked and photographed EVERYTHING! We now have a 35-page report, with every detail, from a missing disposal unit under the kitchen sink to a missing light fitting on the porch. There were a few other things that I wouldn't have been able to pick up from the photos - the shelving in the pantry hasn't been fitted yet and the oven wasn't working...... are you starting to see the light about getting an inspection? The dishwasher wasn't connected and the air-conditioning needs a service.
When I first read the report, I have to admit, I was a bit disappointed. The pictures look so great, but there are things that aren't exactly perfect about the place.... I did some calculations and worked out an estimate on how much it will cost to have it 'perfected'. All-in-all, the problems are minor and superficial. There are no issues with the building structure, the electrics or the plumbing, so those big cost items are clean and clear.
Basically, I've gone back with an offer - the seller can either fix the items Inspector Rex found to be 'defective' or he can take a lower price.
Either way, it's going to be too good, but absolutely true.
By the way, I still haven't parted with the money for the deposit. If Inspector Rex and Harvey Birdman can't see any problems, I'll sign, seal and deliver.
Today's lesson: the inspector and the lawyer are absolute MUSTS. Don't leave home without them.
Tuesday, November 30, 2010
Wednesday, November 24, 2010
Now I'm excited - Property to be inspected today!
Well, the last 12 hours have been s...l...o...w...
I've just been waiting for some news. The lawyer has been changing a few things on the contract, which I'm really grateful for - definitely worth getting a lawyer. (Now there's something you don't hear every day!)
In about two hours, it will be 10am in Florida, which means our new patch is going to be getting a quite undignified inspection - its plumbing will be peered at, its wires will be examined and its whole body will be felt and tested for defects. That poor condo is going to be feeling rather exposed, to say the least!
Anyway, hopefully she's spick and span and we'll be proud to sign her papers tomorrow morning! That is, of course, if we EVER get the HOA Disclosure, which is still on its way.
Patience is a virtue. Patience is a virtue. Patience is a virtue.
I've just been waiting for some news. The lawyer has been changing a few things on the contract, which I'm really grateful for - definitely worth getting a lawyer. (Now there's something you don't hear every day!)
In about two hours, it will be 10am in Florida, which means our new patch is going to be getting a quite undignified inspection - its plumbing will be peered at, its wires will be examined and its whole body will be felt and tested for defects. That poor condo is going to be feeling rather exposed, to say the least!
Anyway, hopefully she's spick and span and we'll be proud to sign her papers tomorrow morning! That is, of course, if we EVER get the HOA Disclosure, which is still on its way.
Patience is a virtue. Patience is a virtue. Patience is a virtue.
Tuesday, November 23, 2010
Rental Markets for Investers in US Property
The rental market is a real concern, when we're looking to have a reasonable cash flow. Some areas of the US have huge vacancy rates, as people have moved out, looking for work in other cities. The average vacancy rate is around 10% across the country, with Florida recording 13.2% for the third quarter of 2010.
13.2% seems a bit high. However, in the third quarter last year, it was over 18% and hasn't actually been as low as 13% since before the financial crisis. So, I think we can make the assumption that the rental market is pretty 'normal' now in Florida, considering that a large number of condos are on the short-term market for holiday makers, which naturally pushes Florida's vacancy rate up.
The states that are coming in behind Florida, with higher vacancy rates, are Michigan, Indiana, Arizona, South Carolina, Texas and Mississippi.
The state with the lowest vacancy rates is.... Alaska! Brrrr!
Where do I get my info? The US Census data - http://www.census.gov/hhes/www/housing/hvs/rates/index.html
13.2% seems a bit high. However, in the third quarter last year, it was over 18% and hasn't actually been as low as 13% since before the financial crisis. So, I think we can make the assumption that the rental market is pretty 'normal' now in Florida, considering that a large number of condos are on the short-term market for holiday makers, which naturally pushes Florida's vacancy rate up.
The states that are coming in behind Florida, with higher vacancy rates, are Michigan, Indiana, Arizona, South Carolina, Texas and Mississippi.
The state with the lowest vacancy rates is.... Alaska! Brrrr!
Where do I get my info? The US Census data - http://www.census.gov/hhes/www/housing/hvs/rates/index.html
US Attorney at Law - Real Estate
I have my own Harvey Birdman!
At a very reasonable fee, I'm getting peace of mind - or is that piece of mind? It's certainly a piece of his mind - the lawyer will be reviewing the contract, making any comments or revisions, checking the title and survey and reviewing the settlement statement and closing documents. It's a solid double-check on the Title Agent.
I think that's a pretty good deal.
At a very reasonable fee, I'm getting peace of mind - or is that piece of mind? It's certainly a piece of his mind - the lawyer will be reviewing the contract, making any comments or revisions, checking the title and survey and reviewing the settlement statement and closing documents. It's a solid double-check on the Title Agent.
I think that's a pretty good deal.
Monday, November 22, 2010
XE Foreign Currency Transactions - Banks can buzz off!
OK - to wire transfer from an Australian Bank to a US Bank, including currency conversion costs $$$.
Saving myself the pain of all those bank fees, I signed up for a free foreign exchange account. Here's how it works:
http://www.ozforex.com.au/how-to-send-money-online.asp (OzForex - for amounts over AUD2000 - these guys are really helpful)
http://www.xe.com/fx/how.php (no minimum)
HOA Fees & US Property Tax
Checking all those peripheral fees and charges.....
The title agent (like our Settlement agent in Australia) didn't send me enough information! I won't be signing a contract today until she sends me the HOA Disclosure Summary.
Home Owner Association (HOA) fees are something to look into before buying an apartment/condo. They are the equivalent to our Body Corporate fees in Australia. It's really important to make sure you have a copy of the property's HOA Disclosure Summary. This will give you the details of your costs in the upkeep of the property. HOA fees in America generally cover outside building and garden maintenance, and any other common area maintenance (club house, pool etc). They usually also cover building insurance, but not your internal building insurance (personal property, liability etc - which is another cost to look into). Although the current owner has told me what the HOA fees are, I'm not trusting that - I definitely need a copy of that disclosure summary.
Another yearly fee will be property tax (equivalent to our rates). The property tax paid the year before purchase may not be the same in the next year. A change of ownership or property improvements triggers reassessments on the property that could result in higher property taxes. The County Appraiser's Office deals with valuations so that's my next stop - to check the rate of taxes for next year.
I have engaged a professional property inspector, who will check all the electrics, plumbing, building etc. The cost of that service will be $300.
The title agent (like our Settlement agent in Australia) didn't send me enough information! I won't be signing a contract today until she sends me the HOA Disclosure Summary.
Home Owner Association (HOA) fees are something to look into before buying an apartment/condo. They are the equivalent to our Body Corporate fees in Australia. It's really important to make sure you have a copy of the property's HOA Disclosure Summary. This will give you the details of your costs in the upkeep of the property. HOA fees in America generally cover outside building and garden maintenance, and any other common area maintenance (club house, pool etc). They usually also cover building insurance, but not your internal building insurance (personal property, liability etc - which is another cost to look into). Although the current owner has told me what the HOA fees are, I'm not trusting that - I definitely need a copy of that disclosure summary.
Another yearly fee will be property tax (equivalent to our rates). The property tax paid the year before purchase may not be the same in the next year. A change of ownership or property improvements triggers reassessments on the property that could result in higher property taxes. The County Appraiser's Office deals with valuations so that's my next stop - to check the rate of taxes for next year.
I have engaged a professional property inspector, who will check all the electrics, plumbing, building etc. The cost of that service will be $300.
Sunday, November 21, 2010
Forming a US Limited Liability Company
Praise the Lord for 24 Hour Tax Chat!
OK, so I've just formed a US Company - what else would I be doing on a Sunday afternoon?
Basically, the tax is horrendous if you buy as an individual (30% tax on the GROSS income). By forming a LLC, the company is taxed in America, between 10% and 35% on the NETT income (after expenses). Then, in Australia, we are just taxed on the gap, if our tax rate is higher than the tax rate in America. So, basically, the most we will pay is the Australian tax rate on the 'profit' we make - exactly as it would be here!
The cost to form the company was about $1600, which includes the company formation, bank account, US address and mail forwarding, plus 12 months' tax advice, preparation of tax returns and monthly bookkeeping - not a bad deal. I'm sure we'll save more than $1600 in the first year, just with the tax advantages.
Do I need some kind of disclaimer at the bottom of these posts?
Disclaimer: If you take my word for any of this without talking to a proper tax agent or lawyer, you need your head read.
OK, so I've just formed a US Company - what else would I be doing on a Sunday afternoon?
Basically, the tax is horrendous if you buy as an individual (30% tax on the GROSS income). By forming a LLC, the company is taxed in America, between 10% and 35% on the NETT income (after expenses). Then, in Australia, we are just taxed on the gap, if our tax rate is higher than the tax rate in America. So, basically, the most we will pay is the Australian tax rate on the 'profit' we make - exactly as it would be here!
The cost to form the company was about $1600, which includes the company formation, bank account, US address and mail forwarding, plus 12 months' tax advice, preparation of tax returns and monthly bookkeeping - not a bad deal. I'm sure we'll save more than $1600 in the first year, just with the tax advantages.
Do I need some kind of disclaimer at the bottom of these posts?
Disclaimer: If you take my word for any of this without talking to a proper tax agent or lawyer, you need your head read.
Ugh - the time difference...
Think about it... when it's 10pm here, it's 9am there... when it's midday in Perth, it's 11 at night in Florida. There is not one window of time that is convenient for both parties. Therefore, every email is more like traditional post.... It certainly slows down the process and, let's face it, I'm not really the world's most patient person.
The biggest struggle is that I keep thinking I have a finite time to complete the transaction. I need to relax and go with the flow a bit here, otherwise I could make some costly mistakes. At the end of the day, I've got to remind myself that it will take as long as it takes.
Saturday, November 20, 2010
Oh my God - I jumped into a USA real estate investment!
After at least twelve months of dreaming and flicking through real estate pages, I made the leap to buy a property in the USA. Yesterday morning, at around 8 am, I put in an online bid for a Condo in Florida. Mine was the winning figure. Hoorah!
I am now on such a steep learning curve - it's like climbing Everest. So, I'm going to journal all the of things I should have known before I took that step off the precipice and into the vast unknown of foreign ownership. So, people, stop swooning over photographs on the net of far off places and fabulous investment opportunities. Take the ride with me, before jumping solo. No doubt, you'll know a lot more than you did before you came to this site....
In the last day, I have discovered a few things, but I'm still not very wise. There's a huge amount to learn and I only have two weeks before the deal closes. That means, I'm going to have to learn fast and be smart about finding the right people to advise me.
At the moment, these are the key issues I face:
Useful Links:
Just Answer - legal questions answered online
Florida Association of Building Inspectors
I am now on such a steep learning curve - it's like climbing Everest. So, I'm going to journal all the of things I should have known before I took that step off the precipice and into the vast unknown of foreign ownership. So, people, stop swooning over photographs on the net of far off places and fabulous investment opportunities. Take the ride with me, before jumping solo. No doubt, you'll know a lot more than you did before you came to this site....
In the last day, I have discovered a few things, but I'm still not very wise. There's a huge amount to learn and I only have two weeks before the deal closes. That means, I'm going to have to learn fast and be smart about finding the right people to advise me.
At the moment, these are the key issues I face:
- I haven't seen the apartment with my own eyes. That's scary just in saying it! So, one of the first things I need to do is get a Professional Inspection.
- In America, they use Closing Companies, similar to our Settlement Agents here in Australia. However, unlike Australia, the Closing Company has been selected by the seller. I need to pay a deposit of $10,000 to an escrow account (like a trust) and then wire the remainder after inspections etc have all been satisfactorily completed.
- Like anyone else, I'm very wary of scams and I want to protect myself. Therefore, I will be hiring a US Property Lawyer to review the contract for me and check that everything is OK - before I sign or send any money. I have contacted a number of lawyers who are registered with the Florida Bar and am awaiting a response....
- The property is fully furnished and has been completed by an interior designer, with lots of extra homely bits and pieces. I really have to think about whether it's suitable as-is, for a long lease arrangement, or whether it needs clearing out.
- That brings me to Property Management. Unlike Australia, property management seems to be a bit of a mixed bag in America. Some property managers still collect the rent in person. I have to find out if the property manager on-site is any good and, if not, I'll have to look further afield...
- On the subject of money, I'm not a full bottle on Taxation. I've had a quick look at it seems that as a foreign investor, I'm going to be lumped with a 30% tax on the GROSS income in America. That's something that I need to look into a bit further, as I think there might be better ways of setting up the ownership, that will help with that tax burden.
Useful Links:
Florida Association of Building Inspectors
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