A. Yes, via what’s called a Foreign National Loan (FNL) product. All loan rules vary from state to state. As the GFC and the property market crash worsened lenders increased their required deposits for FNL from 20%, to 30%, to 40%, to 50% and then cancelled the product altogether two years ago in Nevada.
As the situation improves these loans will become available again but not in 2011.
A. FNL costs are typically similar to all US loans, about 2% - 3% of the loan amount depending upon lenders. A buyer can have their contract written asking the seller to contribute these loan costs. Rates are typically fixed for 10 – 30 years at 1% above the rate of the day for local buyers. There are normally not any prepayment penalties.
A. Yes, but again, not at the moment. It is easier to qualify for a refinance than a purchase and this is likely to be available sooner.
A. Absolutely! Nevada lenders will very likely again offer this product to foreigners. So in the future it may be possible for a foreign buyer to borrow say 50% of their investment property’s value, with a low cost and low fixed rate loan in the US and send that money back to Australia or your home nation, picking the time that exchange rates are most favourable.
A. There is most certainly a ‘double dip’ occurring but NOT all markets and properties are going down. Now is the best time to buy cheap cash flow properties in Las Vegas. I suggest holding off on expensive properties though. Boom, Bust, Recovery – Las Vegas perspective July 2011.
A. The answer to that depends who you talk to? I believe property should always be a long term commitment and that only professional investors should attempt short term transactions. I have always suggested ten years as a minimum time frame when considering any property investment for most people.
A. A good property manager is worth their weight in gold in any location. One of my key functions is to source and monitor property managers for my investors, to ensure they are performing well. The investor can then leave day to day management to a professional who will email when necessary and deposit your rent to your bank account automatically. They have all the tradesmen to handle any repairs, renovations or emergencies. They are also expert in proactively following up any outstanding rents. When you want to check on your investment take a tax deductible holiday to Las Vegas! Come and see a Cirque du Soleil show while you’re in townJ
A. No. A ready supply of quality tradesmen, a low cost wages system particularly in the south of the USA and inexpensive materials allows typical renovations to be completed quickly at just a fraction of the price typical in other countries.
Licensed tradesmen cost between $30 and $65 per hour. Unskilled labour costs $8 per hour. Home Depot has every item you may ever need to repair or renovate a property. Follow the link to see prices for yourself. www.homedepot.com
A. Yes, I have completed many renovations in the US. Have a look at the example bathroom, kitchen and pool renovation pictures with their costs added on various pages of the site.
A. All persons or entity’s who earn income in the US must file a US tax return
A. Personal taxes are much lower than in Aus and many other countries. There are also many additional deductions allowable here than in Australia but the concept of tax treatment is very similar.
A. You could ‘quarantine’ your tax treatment by creating an LLC which will only pay tax in the USA and only at USA rates.
You could keep your property in your own name and claim a loss in your home nation if allowable by that country. This has been the case since 2008 in Australia. Conversely, if you make a profit you would pay top up tax if applicable in your home nation. This can be why people seek to create an LLC when they have large profits.
A. Yes. A company is a separate entity with different tax treatments and rates.
A. Individual returns are due April 15th. Extensions may be filed and some company types can opt for different return dates.
A. The US fiscal year is the same as the calendar year, beginning Jan 1st and ending Dec 31st. Everyone seems to prefer doing their accounting when it’s winter!
A. If you are serious about purchasing a US property you should prepare yourself in advance as much as possible. That includes opening a US bank Account and an ITIN number.
A. An ITIN number is an Individual Taxpayer Identification Number and works as an equivalent social security number for a foreigner. It allows a foreigner with US income to file a US tax return and open a US bank account.http://www.irs.gov/individuals/article/0,,id=222209,00.html
A. You should apply as soon as you consider purchasing a US property. Your ITIN may take several months to receive and you cannot complete a tax return without making application.
A. Go to the IRS home page and read the information provided.http://www.irs.gov/individuals/article/0,,id=222209,00.html
Complete the form:
Application for IRS Individual Taxpayer Identification Number on the same page.
Post this completed form along with a US notarised colour copy of your passport and exception request to:
Internal Revenue Service
Austin Service Center
P.O. Box 149342
Austin, TX 78714-9342
OR make application as above once you have purchased your property and are lodging your first US tax return. Be sure to send a colour copy of your passport page that has been notarised by a US notary.
OR use a US tax professional to assist you in this area.
A. While it is always good to be as prepared as possible, these structures cost money to create and administer annually. Because the equivalent of stamp duty / transfer duty is virtually zero, I usually suggest people wait till they have purchased a property to create a structure ‘fortress’.
A. No. It only costs $15 to transfer ownership of a property from an individual to a qualifying party. At worst it only costs a few hundred dollars!
A. Yes and no. US land tax is called rates in Australia. There is no US state tax equivalent to what an Aussie would call land tax.
A. This stands for Principal, Interest, Taxes & Insurance. Most mortgages in the US are quoted and paid in this manner. You make one single monthly payment to the mortgage for the month’s Principal & Interest plus they collect 1/12th of the annual land taxes and hazard insurance policy and pay this on your behalf when it’s due. This collection is placed in a different account called an Escrow account.
A. See PITI. No, you do not have to have an escrow account but you can normally establish one at any point if you desire.
A. Unfortunately yes. Most payments can be automated or made on the web. But the US is still based on a system that uses cheques and physical mailing addresses.
A. In Australia and the USA, my accountants act as my home mailing address. They receive ALL my mail, open everything, scan and email this to me and keep the financial records for tax preparation. So I log onto the computer where ever I am in the world and receive my mail. You can ask yours or use mineJ
A. This answer changes as US bank and lending rules change. You CAN get an OZForex account and transfer your foreign money to US dollars on a day with favourable exchange rates and keep it in your home country till you are ready.
A. Similar to an Australian Real Estate Agent
A. I represent ONLY YOU THE BUYER, not the seller. This is a major difference from the Australian ‘buyer beware’ system.
A. Most sellers using a Realtor to sell their home agree in advance to pay two commissions; one commission to the listing agent who represents the seller and another commission to the Realtor who represents the buyer.
A. There are no set commissions in Nevada and each Broker and client has the right to individually negotiate an amount of compensation.
A. Yes. There may be a set minimum amount a Realtor asks as compensation for their services but this should be disclosed upfront. This has become more common as purchase prices drop and as the commission paid by sellers decrease.
A. An Exclusive Right to Represent Buyer and Agency Agreement stipulates that a Realtor is representing a prospective buyer for a certain period of time. It ensures that a Realtor is paid if a buyer purchases a property during that time and stipulates what that amount of compensation shall be.
A. No. A buyer absolutely does not have to sign an Exclusive Right to Represent Buyer and Agency Agreement. Equally though, a Realtor has the right to choose not to represent a client.
A. A US Realtor has access to thousands of listings available on the Multiple Listing Service (MLS) but only in the states they are licensed in.
A. No. I am only licensed to represent a client in Nevada. I have a trusted associate to whom I refer clients in San Antonio and I have property managers and tradespeople I use for my investor group.
A. A short sale is a property sale in which the sale proceeds do not pay off the underlying loan(s). A short sale is NOT automatic and a seller must seek ‘Short Sale Approval’ from their lender(s). Read more about Short Sales ...
A. A repo is the slang term for REO or Real Estate Owned by a bank. This is a property a lender has foreclosed upon to satisfy a delinquent mortgage. Read more about Foreclosures ...
A. Short Sale Approval is a banks written authority to complete a short sale transaction. It is not automatic and a seller must supply their lender(s) with a Hardship Letter and financial statements that demonstrate their particular hardship. Read more about Short Sales ...
A. A seller seeking to complete a short sale must write a Hardship Letter explaining their personal circumstances and their specific HARDSHIP. Typical hardships include family illness or injury, job loss or significant loss of income, divorce or split of domestic partners, death of spouse, adjustment of mortgage payment or unforseen increase in living expenses such as by the birth of a child. Read more about Short Sales ...
A. The Residential Purchase agreement is the contract between the buyer and seller for the property transaction. It providing both parties with legal protections.
A. COE stands for Close of Escrow and is the completion date of a sale/purchase transaction.
A. EMD stands for Earnest Money Deposit. This is the money you place into escrow at the start of a transaction to show good faith of your intention to proceed with a purchase.
A. yes, but a good Realtor has a number of items they write into a contract to protect their client and their money.
A. Escrow is an independent company or solicitor who ensures the instructions of the Residential Purchase Agreement are followed. They hold funds on behalf of both parties, check title and distribute funds at closing.
A. This form states that a property is subject to the terms of a short sale and is subject to a bank accepting both the seller’s short sale request and the buyer’s offered price. There is a number of days stipulated after which a buyer can walk away from the transaction if they have not received an approval from the bank.
A. A GFE stands for Good Faith Estimate and all lenders are legally obliged to provide a borrower with one. It details the costs of borrowing, the type of loan applied for and monthly payment information.
A. A HUD-1 is the closing document that shows all financial disbursements of a property transaction. It is important to keep this document for your US tax return.
A. The SRPD is the Seller’s Real Property Disclosure form. It requires the seller of real property to disclose to the buyer any material defects they know about the property. It is extremely important and a seller may be sued for lying or omitting information on the form years into the future.
A. This is a form that banks require all the purchasers of REO or bank owned property to sign. It states that the bank has never lived in the property and thus cannot complete the normal SRPD form so the buyer should take every precaution to check the property before purchase. It releases the bank from liability once the transaction has closed. Read more about REO Sales ...
A. At the risk of mirth, I suggest you trust me. View my clients’ Testimonials and Example Properties. You may ask for email addresses of past clients or come see me in action at Cirque du Soleil’s ‘O’ show. I am proud of who I am and what I do. I will represent you competently and honestly.
If you are interested in assistance with fitting US property into your financial plan I can be reached at firstname.lastname@example.org