How I invested in US property using my Super

Hi Paul,

I am new to this forum and came across this interesting thread, about using SMSF funds to purchase overseas property.

Just a question, did you get a SMSF loan from a local bank in Australia to buy the properties or just is it an out right purchase using the money in the SMSF.

Thank you

 

I used this as part of my strategy to purchase US properties in SMSF,

I started in 2011 with 3 properties in smsf fund, now I have 9 in smsf, no loans though

Word of advice when buying in smsf ....make sure you have an excellent US accountant that understand Oz SMSF and an oz auditor that is aligned

 

Hi Paul,
Is there a minimum balance requirement in SMSF before a loan can be drawn? Thanks

 

Thanks for the tip MTR! It sounds like you made a very wise decision to get into the market early, before property prices started to rise and it's clearly worked out well for you and continues to do so as the price trajectory is still, on its way up

 

Hi All,

Another interesting article you might like to read?

Detroit property values rise by double digits, reversing long-term slide

Detroit property values rise by double digits, reversing long-term slide

 

Hi there

An Australian bank will not provide a SMSF loan for security in the states - unless you use a related party loan which is different and complex.

Do not use a bank in the states for a SMSF Loan as many of them that came into play a few years ago a non - compliant.

Cheers Ivan

 

There is a bank I know that does a smsf loan on off shore property in one european country. Must be applied for in Germany through notary (who signs the contracts) and it is referred by the German office to the local AU offices of the bank subsidiary who vet the custodian trustee arrangements - No fee. 80% max LVR (although ours is around 50%) and 2.2% interest with $0 fees. No broker deals permitted. We had to provide a copy of the trust deed in German but that wasnt hard. The german lawyer carefully checked the english>>>german translation didnt change any meaning. That cost extra.

The one downside is the documentation for income, expenses, loans etc. All in German and poses a matter for audit. Google Translate helps me in that respect and avoids costly official translations. I have to rip PDFs back to word to translate then import CSV data into BGL 360 (based on converted amounts) works well. Provide source and translated version to auditor and all is well.

Agree with Ivan that many off shore lenders wont comply. Esp in USA. A LLC wont comply and US tax laws will not recognise a trust. The bare trust AND SMSF are both trusts.

Anyone know any other countries which are OK ?

 

Hi Ivan,

Thanks for the information.

Cheers
Mogan

 

Hi Paul,

Thanks for the detailed reply.
Cheers
Mogan

 

Hi,

This article demonstrates how property prices have been increasing by an average of 12% across Detroit, with some suburbs increasing by a massive 20% which is incredible!

As @geoffw mentioned in a previous comment, there is a window for capital gains at these high yields, much the same as Australian markets where Sydney/Melbourne's window has closed and as we await some time for the next one to open in other states like WA (Perth), QLD (Brisbane) or SA (Adelaide) etc. In my opinion, I couldn't find yields or capital gains like these in Australia so I chose to invest in the Detroit market while its on the rise.

It was a very easy process to purchase there and furthermore, settlement only took between 2 to 3 weeks, as there are no loans involved due to purchasing the property outright. My second property came tenanted, so I started receiving the rental income straight after settlement.

Should you trust Detroit's new home value numbers?

Hope you find these article links beneficial.

 

This is brilliant. Way to be a Pioneer, Paul. Which European country and bank is this please?

 

Hi,

Another article that may be of interest, which describes how first home buyers are on the rise in the city of Detroit:

• Metro Detroit's median home sales price was $180,000 last month

• City of Detroit's median sales prices saw 41 percent year-over-year bump

• Metro Detroit home sales up 5.1 percent in April from the same time last year

Median sale price, April 2018: $31,250
Median sale price, April 2019: $44,000
Percent increase/decrease: 40.8 percent

Buyer activity picks up in metro Detroit, as inventory issues continue

 

i think this can be a great diversification strategy that should be easier for immigrants who are Aussie citizens and also citizens of another country if buying from the original home country.
@mistrys , is it possible for you please to detail the buying process in a few steps? i understand the setting up an SMSF bit but the buying part is a little mistery.

 

Hi @paulF ,

I completely agree, it serves as a diversification strategy to balance out a portfolio or gain bigger returns for your SMSF due to cashflow and capital growth.

The steps that I followed based on my experience:

1) First you have a chat with the US agent to discuss your situation, what you're after and to answer any questions you may have.
2) You'll then be added to the mailing list where everyone is sent potential properties that can be purchased, detailing a cashflow breakdown and property information OR you may be contacted directly with a property that perfectly matches your criteria.
3) Discuss the property with the agent and confirm whether you'd like to proceed.
4) You'll need to send a deposit to reserve the property, I use OFX to transfer funds to the US directly from my SMSF
5) Review and sign the Purchase Agreement, completed by a legal team in the US (Agent can assist with this)
6) Take out insurance (Agent can assist with this)
7) Sit tight for 2 or 3 weeks and review and pay the Closing Costs Statement.
8) If any renovations are required, this can also be managed by the agent
9) The property is transferred to a Property Manager (Agent can assist with this too)
10) The property is YOURS!

As you can see, the process is pretty straightforward. As there are no loans required and its all managed by the agent, it's a much more speedy and simple process.

 

@mistrys , thank you very much that.
I'm guessing the process would be more complicated if the overseas property is more expensive than the funds you have in your SMSF and would need to take an overseas loan as mentioned in some other posts which I believe shouldn't be too hard to get if you are buying in your original home country.

For example, say you have 70k in your Super and the property costs 100k. The 30k plus buying costs would need to come from an overseas loan I guess.

 

Or a related party loan, this can be complex but doable.

 

Hi @Paul@PFI from what limited information I can find, Ireland seems to be an option too, not sure if that is a good investment at this point in the cycle though.

Did you end up buying more? Which country and bank is this please?

 

Hi,

How is your real estate investing in the US going?

How has detroit been lately?

 

Hi John,

It's going well, thanks. I've left it running in the background and letting time work its magic. I've only read positive things about Detroit that will help drive its economy upwards and along with that the property prices.

I haven't done a recent valuation on my properties but according to news articles, they have jumped 20%, take a look.......Detroit home values jump 20%, biggest gain in 2 decades

Regards,
Hemal Mistry