US Deeply intrigued by USA market.

Discussion in 'Where to Buy' started by GalacticExplorer, 25th Jan, 2017.

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  1. CK_Invest

    CK_Invest Well-Known Member

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    i'd be wary on vacant tenancy risk for 12% net, happy to be corrected as I must admit I have no experience in the USA

    Galactic let me know if you are able to get financing over there based off your AUD income,
     
  2. sharko23

    sharko23 Member

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    I lived in California in the late 90s and since then like most place property has boomed. I always feel like I've missed the boat on most property deals like that though.
     
  3. MTR

    MTR Well-Known Member

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    I will be in Atlanta in 2 weeks. Looking at more land purchases.

    We are developing property about 40% profit, it's a no brainer, can't do this in Australia now. Beginning of the building cycle in Atlanta

    Smyrna is good but at 300k it won't be cash flow positive it will achieve continued growth, but so will most of Atlanta, good times continue to roll on

    You mentioned Texas, also good, beware of high taxes and returns won't be as good as Atlanta due to higher entry level?

    MTR:)
     
    Last edited: 4th Feb, 2017
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  4. MTR

    MTR Well-Known Member

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    It crashed in 2007 and starting the next boom cycle in 2011, booming now
     
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  5. MTR

    MTR Well-Known Member

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    Omni

    It continues to amaze me, my old stock of 2011 is still rising, those 35k properties in 2011/12 now worth around 160k, that is US$.

    All I can say is inventory is low and while foreigners, hedge funds, US investors keep buying the gravey train continues
     
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  6. Redwing

    Redwing Well-Known Member

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    Just had a quick look at Allan Gray's fund upload_2017-2-9_11-23-5.png
     
  7. MTR

    MTR Well-Known Member

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    I can answer this you will not get a US loan from major banks as a foreign investor and you don't have a credit score/rating, there are products available but you will need to read the fine print. It will always come down to the deal.

    We have just been given the green light from a hard money lender for a development project but much higher interest rate therefore decided to go cash, not out of the question once we push volume. At the end of the day the only reason we were offered finance was because the deal stacked up and they were happy with the location.

    There are also States in US like Detroit where banks just wont finance any deals.

    Accessing equity from properties as a US investor is possible but they are not traditional banks for foreigners but they will be at much higher interest rate and terms are not attractive. Unless you have a huge portfolio of properties I would not consider this as you will go from cash flow to being in the red.
     
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  8. CK_Invest

    CK_Invest Well-Known Member

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    Thanks MTR for sharing your experience. I guessed Detroit would be on a blacklist and your post confirms that.

    There was another thread on here where someone was able to source a loan from HSBC San Francsico I believe despite being an 'alien'
     
  9. MTR

    MTR Well-Known Member

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    I read this, until it is signed on the dotted line its not a done deal.... call me a sceptic but I know someone who spent about 9 months sourcing a loan, thought they had it in the bag... but when it came to signing up it got rejected. Foreign investor can source bank finance for a holiday home not investment property, and they would need to tick servicing criteria

    I know an Australian who owns 44 properties in US and over $400K income that could not source a loan via the US bank route. I can assure you if it was that easy everyone would be sourcing loans.

    There is one forum member who has sourced a US bank loan at US variable rates but they are US citizen.
     
  10. Tenex

    Tenex Well-Known Member

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    US property market is a lot like Brisbane property market after the floods. If you bought in the right place at the right price, it was at the bottom post GFC and it only had one way to go.

    Not to say money cant be made in the US but if you are cashed up you can build / renovate or invest in positively geared properties here in Australia where things will continue to go up as a result of population growth. Why on earth would you want to convert your cash to a higher currency and take it to a country where captain koo koo banana is in charge, signing executive orders to pass the time?
     
  11. MTR

    MTR Well-Known Member

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    Because we can make 40% on our developments and 20% on flips and because we are doing this in a booming market

    40% on developments will be a tough gig today in Australia

    Cash flow property in Oz? not interested in buying in whoop whoop, no or little growth and a bucket load of maintenance issues, cash flow to negative very quickly and you won't get rich anytime soon with these
     
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  12. Tenex

    Tenex Well-Known Member

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    I wasn't necessarily referring to you, by the looks of it you have bought at the right time and if you are making 40% thenall props to you. I hope you make 60% instead :)

    The average joe in oz will have to convert their dollar to american and lose close to 30 cents in the dollar right off the bat, then go do research half way across the world in a country with a loose cannon for the president in the hopes of making top dollar? I would think twice.
     
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  13. CK_Invest

    CK_Invest Well-Known Member

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    Just to correct you - Converting at a market price today is not losing 30 cents right off the bat
     
  14. Tenex

    Tenex Well-Known Member

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    Right...... thank you for taking the time to correct me. What is it then?
     
  15. CK_Invest

    CK_Invest Well-Known Member

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    you haven't "lost" anything by converting AUD to USD at today's market rate.

    when you do your books, you start 'losing' only if the AUD starts weakening against the USD (assuming property prices were flat) after you transacted.
     
  16. Tenex

    Tenex Well-Known Member

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    LOL, at today's market rate yes, but you cant convert your money today, build the house, sell it at a profit and get your money converted back to AUD all in one day.

    Just a couple of months ago AUD was around the 0.72 per dollar. Anyone that was converting your money to USD wont do it out of the goodness of their heart, they are going to either charge you a flat fee or charge a few extra cents in the dollar which will be a big fee if you were to convert lets say 600k.

    So your 600k AUD is suddenly 420k USD and dollar for dollar you have gone down. Then lets say you have built using your 420k and managed to get a 30% profit margin on it making it to $546k USD. But by then donald trump signed a new executive order or went into war with north korea and AUD became dollar for dollar. Considering your back conversion fees etc, you will end up with 500k AUD which is 100k lower.

    In other words the currency conversion PLUS currency change can put you in a loss position. This is assuming you take the time getting to know the US market back to front and inside out, negotiate with all of your contractors from half way across the world and you actually do end up making a profit from your build.
     
  17. CK_Invest

    CK_Invest Well-Known Member

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    im not going to argue with you any further on this as you seem fixated on your idea of losing 30% straight off the bat if you exchange to AUD today.

    your argument is based on the fact USD will depreciate after you sell, what if it appreciates further tomorrow or in 3 months time or in 1 year time? or do you know something that the market doesn't know?

    I pay no "exchange fees" to convert my AUD to USD by the way, I am charged a small spread for converting from AUD to USD, if you think its going to be 30%, 20%, 10% well guess what - I pay zero commission and a small spread around 0.4% of nominal value for a round trip of converting AUD->USD->AUD

    in summary: you do take additional FX risk by exploring other markets, it can go against you or for you, but please don't imply you lose 30% of your investment by buying USD today
     
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  18. Tenex

    Tenex Well-Known Member

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    That boat sailed when you posted to "correct me"


    Its basic mathematics, when you have parity, a dollar exchanges for dollar and therefore one unit of your money has the equivalent buying power of one unit of the other money. Thats not including the conversion fee.

    When you convert at 0.7 to 1 your buying power reduces by that much AND you will pay a big fee to convert either as a flat fee or built into the conversion amount.

    Have you noticed when you buy imported products, say a bicycle, one day they can be one price and a few days later they go higher in price and when you ask the reason, they mention exchange rate? why do you think that is if it was that simple that you convert without any impact on the economics of the transaction?

    No that is a separate issue if you read the post, it implies that the currencies are always subject to change and if the USD does depreciate (which is highly likely given the current president) then you must cater not just for the risks associated with your build but also risks associated with the currency volatility.

    Thats because the fee is built into the actual conversion. So if the rate is 72 cents they might convert you at 69. Dont tell me you did not even know that. Do you think that banks and exchange booths are there just so that one day you show up and they can be of service to you? For free? with a smile on their face?

    Yes if you convert $2000 the fee is not all that much but when you are converting money to build a house, sell it and convert it back then it will be noticeable.


    I hire candidates who deal with pricing controls of import across multiple currencies. The currency exchange alone is one of the biggest issues with importers and exporters in this country which can send them broke if they dont have a team of pricing analysts onboard monitoring and managing this 24/7. You think its that simple that you just convert, invest, convert back and its happily ever after?
     
    Last edited: 16th Feb, 2017
  19. MTR

    MTR Well-Known Member

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    Can I change the subject :)

    I am currently in Atlanta checking out the 16 properties we have now purchased.

    Spent the day looking at various markets with some Aussies that tagged along, this place is absolutely buzzing.

    Developing/apartment happening in the inner perimeter of Atlanta.
    I am gobsmacked last time I visited Atlanta was 2012, massive changes happening today from my last visit, apartments popping up everywhere and development of sub divisions.

    We have also been looking at suburbs where houses are selling for $600K inner perimeter, these are the more desirable pockets, where you can also still buy $70K houses, which need renovation, less desirable location, this area is continuing to be very hot .

    Placed an offer on a multi unit site, we nearly had it in the bag, until someone came along with a much higher offer, we are low balling, harder to do in a hot market, however we have had some wins, just keep placing offers on the table and sourcing the deals.

    Will post some photos when back home.

    MTR:)
     
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  20. CK_Invest

    CK_Invest Well-Known Member

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    You need to change banks / providers if they are charging you an extortionate 4.2% spread to convert one way.

    I already mentioned I get charged 0.2% for one way conversion. So 72c = 71.86c

    There are hedging tools available to lock in the exchange risk TODAY at a set time in the future e.g. FX forwards; or more complex ones such as FX options.

    But hey, you should have already known this if you are hiring people in the field. If you and your candidates are not aware of this your business needs to hire more talented people.
     
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