US Detroit - turning the bend

Congratulations to you Steve... well done

Tax man is not the investor's friend in Australia and
If you are a developer even worse, they take a bite each way.... GST, stamp duty etc. etc.

Australia has been good in rising markets where you can jump in and capture growth but I agree cost of business is way too much.

US is providing cash flow from day 1 and of course massive upside, the economy is roaring at the moment.
Risk vs Reward..... my glass is overflowing, the opportunities in US is enormous, just have to step out side the comfort zone

MTR

 

I just bought a property in Alabama myself. Some good deals there also. Returns are not as high as detroit but well worth a look.

 

Love to see what you purchased, make sure you post on this...

Hey guys.......Becoming a very interesting thread....

 

@GentleChief @Karina @MTR

Just want to check that my antenna is currently tuned here.

You are each involved in businesses selling USA properties to Australians - correct ?

You are not just purely successful investors spreading the news.

 

Congratulations @sparky123

So you have bought properties in FL, GA and AL?

Good on you -

is that Birmingham city in AL?

Would love to hear your thoughts on the different investments and what is performing and what is not...

 

Wow @Karina !!

Good on you! Great going.
What are the numbers like in AL? I presume it would be Birmingham city.
Is that the next business venture on AL - If so please do let me know, would be interested in working with you as we did in GA

 

@GentleChief
@MTR
Thank you. I have PM'd you the details on the Alabama purchase. Returns in Alabama are higher than Atlanta but lower than Detroit. Looking to buy in Alabama and Detroit this year and possibly Atlanta if I can find anything under 100k. There is virtually nothing left under 100k in Atlanta.

 

Thanks
Got my 3 recent townhomes in Atlanta for around 85k settled December/February now these have jumped to $100k, low inventory

 

This isnt a contest. Just a question of disclosure and transparency. Neveretheless, you asked.... Here's a deal I think should be pretty easy for you to follow. Port Macquarie NSW

Equity used to fund 20% + stamp duty + closing costs ie 61.6K

Purchase Price 260K.
Stamp Duty $7,590
Legals /Depreciation Report $2000
Total cost @ 269.6K. Call it 270K
So we borrowed 270K at 3.99% .

Expenses
Annual repayments $10,773.
Annual Strata $1518
Annual Property Management $ $1397.76
Annual Rates $1584
Annual Landlord Insurance $251
Annual NRAS fee $611.27
Total annual expenses = @ $16,135.27

Income
The discounted NRAS rent is $233 per week. So total annual income = @ $12,116

Pre Tax Position starting from a "vanilla" position
Pre tax loss of @ $4019.27 ($16,135.27 expenses versus $12,116 income)
Depreciation is @ $5732 ( prepared by BMT)
Total deduction @ $9751.27 ( $4019.27 + $5732 )

refund on $9745.27 @ 45% Marginal Tax Rate = $4388.07
+ 11,114 NRAS credit = Total Refund of $15,502.27
Pre tax loss was $4019.27 so my net after tax surplus is $11,482.80

11,482.80 represents a return of 18.64% on 61.6K of equity - after tax

For 37% MTR the return is $10,702.70 so @ 17.37% ROE after tax
For 32.5% MTR the return is $10,263.89 so @ 16.66% ROE after tax


Cash used to fund 20% + stamp duty + closing costs ie 61.6K


Purchase Price 260K.
Stamp Duty $7,590
Legals /Depreciation Report $2000
Total cost @ 269.6K. Call it 270K
We borrowed 208K at 3.99% .

Annual repayments $8,299.20
Strata $1518
Property Management $ $1397.76
Rates $1584
Landlord Insurance $251

Total costs @ $13,049.96. Call it $13,050


The discounted NRAS rent is $233 per week. So total annual income is $12,116

Pre tax loss of @ $934
Depreciation is @ 5732
Total deduction @ $6666 .

refund @ 45% = $2999.70 + 11,114 NRAS credit = $14,113.70

Pre tax loss was $934 so my net after tax surplus is $13,179.70

13,179.70AUD return on 61.6K = 21.39% ROE after tax

37% MTR = $12,646.42 which is 20.53% ROE after tax
32.5% MTR = $12,346.45 which is 20.04% ROE after tax



Now, just to really annoy you and your mangoes....

We got valuations of 280K at settlement from some lenders ... so in many cases we were actually able to borrow 266K and we were able to get 10 years IO as well. So in those situations clients effectively contributed absolutely NOTHING to the deals... making their returns not just great, but stratospheric.

I can also give you the numbers for more expensive deals, such as Castle Hill. P/Price 600K. Valuations on completion were over 800K. 80% loans more than covered 100% of the purchase costs, stamp duty and closing costs. Again - my clients put NOTHING in effectively and are generating tax free returns from "air"

Or Elanora Heights. same sorts of numbers as Castle Hill. Or Enfield. or Bungarribee. Or Harris Park. Or Brunswick. Or the non NRAS dual occs in Orange and Bathurst, being revalued 70K above p/price upon completion... All of these deals generate 7-10K CF+ net of taxes.

But this really isn't about my deals. Never has been. They can be found in countless previous posts of mine, and have been available to anyone for years... I have always been completely transparent in making the numbers available. NRAS. Dual Occ. Whatever...

But this is about US deals. All I have ever asked US property sellers to do is account for the potential tax outcomes. When you tell someone that by investing 32K they will make 4.2K profit, you imply a return of @ 13.25%. But when they are really receiving $2671 ( call it 2.7K ) the return is 8.35%. I dont care what fruit you want to use to justify it. 8.35% is not 13.25%. 2.7K is not 4.2K. And 8.35% is about half the returns I just outlined above. ie 16.66% or better.

But as I said. This isnt about my deals. I already know that I get better returns using NRAS or Dual Occ than buying in the USA, without the risk or pain in the backside. It is not even close. It's no contest. But I also know that I need to borrow money to buy NRAS or Dual Occ and when that becomes a problem- as it will for most people- that's where US properties start to look appealing, because they can be purchased with smaller cash amounts. So as I have said from day dot, I am for US property.... but that doesn't mean anyone should just swallow loose, inaccurate, incomplete numbers that are potentially 40% out - whether yours or anyone elses.... especially when many US sellers are also asking for non refundable money up front just to show a property. Just present the numbers right. Don't attack or deflect or obfuscate when asked to provide more detail Provide the detail. Otherwise, the mangoes appear rotten.

 

This is interesting

Cities in US you can buy the most with $100K

Report: Detroit ranks #1 in how much house you can buy with $100K


1. Detroit, Michigan

The Motor City has suffered ever since large chunks of the automobile industry drove out of town. They left Detroit with a declining population, a rising unemployment rate and a glut of unfilled housing. Although things are on the up and up more recently, with incomes rising faster than rents, home prices are still low. We estimate that with $100,000 you could buy a 2,850 square foot home in Detroit.





Now lets look at square foot.
To think some of us were buying in Atlanta in 2011 for $18 per square foot Now lets put that in perspective, it costs around $100-120 per square foot to build in Atlanta today.
As build starts we will see prices rise, US is going through a building boom at the moment

 

Questiom for Steve and other US property Investors -
Do you find land tax to be much higher than Oz?? Which states have higher land taxes and which ones lower??

 

I don't pay land tax... unless I am missing something and I don't pay stamp duty....

I pay country taxes - same as Council taxes in Australia and IRS at end of the financial year

My County taxes for Georgia/Atlanta are around $2000-2500 pa each property for larger Single Family Homes, significantly cheaper for town homes. When I purchased in 2011 around $400 but prices have risen 400%+ hence the rise in county taxes

MTR

 

Sorry specifically property tax. I know it ranges between 1 to 2 percent a year. Basically costs associated with the Government not operational costs or upkeep.
Thanks!!

 

Superb post @MTR - tells the story of real CF and anticipated CG.
These 30-40 K house sold in the 110 - 150K prior to 2008.
Simple Stats.
Prices are climbing back to pre-GFC levels, with Investments flowing into Detroit in the Billions.
(as we have seen in Atlanta)
And stabilising economy and employment.

 

So I think this is what you are after

State/county taxes and tax on income generated each financial year

 

Really?! is that how Low you can go?
Calling Investors 'mangoes' who are seen as super seniors here and are well respected in the investing community. And who are experts, having achieved FF. Through their investing strategies.
Just feeling sorry for that comment - "Hurt people, Hurt people".
Learned it from school.

And sorry again - I believe I have exhausted all avenues of being reasonable.
And so have others. I shall end my conversation here.
Just before I stop commenting 3 very simple points here (very discreetly):

a) Where is the "Property maintenance" aspect of the calculations?
They don't take care of themselves you know.

b) Nett Cashflow Loss (Pre-Tax Loss) is what the recommendation here. Before ATO decides to subsidize and give a charity. What if ATO decides to rule against it in the next year's budget?

c) I don't go below the belt.
But this rant of your's is proving my ethical limitations as difficult.
Two investors in the last week asked me to compare your product with Detroit CF.
I said I don't compare Mr Mooney's NRA's to mine or with anything else.
That I have not met him personally, but I do respect him. You can check with them.
One said you get a 'bee in the bonnet' if it is not about you!
Shall leave it there.
I said to them investors, you as an investor can decide what is best for you circumstances.

-----

Ciao,

 

You still didnt answer the question. Its amazing. deflect. deflect. deflect.

You used Mangoes in your previous rant.

Buy a box of 20 Mangoes @ $40 dollars for the box, from the farmer direct

Cost price?
$40 - wholesale price from the farmer

Sell the individual mangoes for $3 a piece. (20 x 3 = 60)

 

I''ll ask again - are the three of you each involved in businesses selling USA properties to Australians ?

I think it is important to disclose this given the way you are feeding off each other in this thread.

If it is not correct then of course I'll apologise for indicating otherwise.

 

Mate, @Tonibell check out all the previous posts
And check out the signatures of the 'business members' of the posts.
And you may well understand. I run a fund management company with global investors who seek high Cash flow and Capital Gains, Detroit is my backyard.
I assist in getting deals.
Have a 11 member crew on the ground here, with a truck that I purchased for.
invest in sub 40K properties with high returns.

I am an Aussie in Detroit now sniping at the best Deals.
Check out my signature - my company's name is there.
And so are others, if they are in business.

 

Greetings from Detroit, just landed here a few hours back.
(After a 6 day break in Sydney for my son's 18th)
Working on sourcing the best CF deals.

(Off-market, Preclosure and Foreclosure transactions through live bid city auctions, owner occupier canvassing & short sales)

For e.g.

3 bed, 1 bath
12101 Plainview St Detroit (off-market)
Sec 8 Tenant Paying - $700 (rents paid by the US govt)
New Kitchen Cabinets + Paint
Price $35,500