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What's the typical ROI on an average property for your clients (taking in account that I borrow from a mortgage broker vs. 100% liquid cash)? How much do your clients invest in one property on average?
Do your clients typically purchase their investment property entirely with liquid cash? or do they seek lenders (banks)? Also, at what price point do you see the most returns (ex. 150-200k home)?
Average yield is:
100% cash - 8 - 10%
Using leverage offered to my investors - 9-12%
When you start looking at capital appreciation to get an ROE (or ROI) using conservative estimates for cpaital appreciation over 5-10 years)
100% Cash - 15%
Levered - 20+%
These numbers are all before we split profit - they are the properties' yeild, ROE - obviously there is a split of profits between me (the partner that has the knowledge, enabling the investment and managing it fully) and the money partner (who wouldn't be able to invest in US property otherwise, who just gets quarterly cash and financials with updates on how hte investments are doing / the macro environment on where we invest)
Clients invest about $100-120K if 100% cash, or a little over 35% of that if using leverage. In fact, now that I have these mortgage products available to me in the US, I will be going back to my investors and seeing if we want to use this leverage to our existing properties.
My investors come up with cash in whatever way they want, I suggest they use HELOCs (home equity lines of credit) at about 3.5% variable, or take 2nd mortgages on properties at about 3% for 5 year fixed and use that money, otherwise we will be using my mortgage products going forward now
as for how much to spend, depends on the person/area - for me, I'm buying in the $90-120K range, newer properties with a good commute to downtown - I feel these places have hte most capital appreciation potential, which is where the money is to be made, its also nice that they yield about 9, 10%
Could you provide a conservative cost break down similar to this for a rental property in Phoenix, please.
Cost - $100K or so
Rental Revenue - $1K - 1,150
Mgmt fee (10%) - ($100-115)
Property Tax ($1K pa) - ($80-100)
Insurance ($600 pa) - ($50)
HOA - ($50)
Contingency - ($50)
Net income before tax - about $700 per month, or an 8.4% yield
but that's if you buy the right property - if you think you can just go down and buy any property and get that, you're joking yourself - people end up just blindly buying and get higher vacancy rates, higher required maintenance costs, lower rent on more expensive properties.
I would have to say, you send 100 people down to phoenix to buy a property, 80 of them won't be able to get conservative numbers like those, they'd come in closer to $500 a month (after considering vacancies, which for me is included in my contingency - most of my properties are 2+ yr leases, i know i won't get an increase in rent for 2 years, but the knowledge that good ppl are in my properties is more important right now)
Great thread! I've also been looking into doing this as I have a bit of money in the US in investments that aren't giving me great returns that I'd like to do more with.
Do you know of any people who have knowledge of the ins and outs of the tax implications of buying US property that you could refer? I'd definitely like to talk to someone first about whether this is something that's worth my while or not.
Also, do you use any specific source to get rental value figures or do you just browse Craigslist for ballpark rental numbers in the area you're looking for?
I'm looking to invest in a property in Denver - mainly because I've lived there for a few years so I have some knowledge of the area and friends there that can help with managing my property if needed. I'm looking at places under $100K - since that's basically the value of my USD investments at this time so not looking to have to borrow. What's your thoughts of the Denver market (if you've looked into the area?)
Great thread! I've also been looking into doing this as I have a bit of money in the US in investments that aren't giving me great returns that I'd like to do more with.
Do you know of any people who have knowledge of the ins and outs of the tax implications of buying US property that you could refer? I'd definitely like to talk to someone first about whether this is something that's worth my while or not.
Also, do you use any specific source to get rental value figures or do you just browse Craigslist for ballpark rental numbers in the area you're looking for?
I'm looking to invest in a property in Denver - mainly because I've lived there for a few years so I have some knowledge of the area and friends there that can help with managing my property if needed. I'm looking at places under $100K - since that's basically the value of my USD investments at this time so not looking to have to borrow. What's your thoughts of the Denver market (if you've looked into the area?)
Yes, i know the ins and outs of the US / cross border issues of ownership of US investment properties - this is an EXTREMELY specialized area of knowledge, so unless you work in that space, you should pay someone to advise you on it (or invest with someone who knows what htey're doing through joint ventures - i'll pm you my website, as this is what i do).
as for denver - great city, i don't know enough about the laws, rules, and regulations there (which is a HUGE issue), or the market there - i do, however, strongly suggest you do not mixed business with pleasure by getting friends to manage your property, even if they are getting paid by you - you definitely want a professional team managing your property otherwise you're just asking for something to go wrong in the future
as for rental rates, etc - i own a load of property in the states, so my knowledge is based on actuals
If anyone is interested, I now offer people the chance to buy properties that meet all my criteria, set up with property management, home inspections (reviewed by me and set up to fix all req'd shortfalls), and home insurance, for those wanting to 'manage' all other aspects themselves. Finding renters could potentially occur during my property search, but otherwise can usually happen very quickly in this market, in the areas I buy.
Furthermore, the next 12 months will be an amazing time to invest in US real estate, further spurred by today's news.
"The surge of home seizures may drive down home values, at least for a while, in a fragile market."
- What cap rates are you seeing (in particular I was looking at Las Vegas area)?
- What is your target cap rate when you purchase an investment property?
- Is your main goal to realize gains on capital appreciation or earn rental income? Or a combination of both?
- How does it affect individual's tax liability in Canada (if not going through a corp/LP/etc. structure but owning individually)?
- With the "top secret" structure you recommend for your clients, assuming high income investor (highest tax bracket individually), what is the effective tax rate to such investor on income earned through partnering with you? Based on your projections or historical data.
Thanks.
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'04 Acura MDX Touring Black (sold)
'98 Honda Civic SI coupe Silver (sold)
- What cap rates are you seeing (in particular I was looking at Las Vegas area)?
I wouldn't touch Vegas with a 10 foot pole - I find much better (yield & safety) deals elsewhere. I am seeing 8-11% cap rates
- What is your target cap rate when you purchase an investment property?
8-12%
- Is your main goal to realize gains on capital appreciation or earn rental income? Or a combination of both?
Rental cash flow now, huge capital appreciation over the next 5-10 years. I'll PM you my website which discusses/supports my reasons for this
- How does it affect individual's tax liability in Canada (if not going through a corp/LP/etc. structure but owning individually)?
This is where you have to pay big bucks!!! cross border tax is a HUGE headache and I couldn't even begin to try to explain all the things that you would have to consider. Just know 'individually' is the most efficient, through an LLC is the worst for Canadians
- With the "top secret" structure you recommend for your clients, assuming high income investor (highest tax bracket individually), what is the effective tax rate to such investor on income earned through partnering with you? Based on your projections or historical data.
Not top secret, I don't want you thinking this is some kind of 'i've got a secret, come work with me' kind of pitch - cross border tax and structuring is an EXTREMELY complex area, so most people could throw out a dozen structures, they all have their merits and downfalls. What I use is, by far, the best for me and my clients for many reasons, that's all. But i'm not going to tell people what it is as without a fundamental knowledge of US and Cdn tax law and legal liability knowledge, it would be dangerous.
To answer your question re: tax, well of course, you'd pay your marginal tax rate in Canada on your net taxable income from property investment - nothing more (just realize though that you can whittle down your actual cash income to very small amounts of taxable income). Many structures create tax inefficiencies due to cross border issues. You CANNOT pay less than your marginal tax rate unless you do something wrong/immoral/illegal
Thanks for taking the time to answer my questions. I've tried reading up on cross-border taxation and understand that it is complex. I've seen structures with over 80% effective tax rate (that assumes 43.7% bracket individually), which is what prompted me to ask you for an effective rate of your suggested structure.
Thanks for the PM, I'll check your website.
__________________ 2012 F30 328i Mineral Grey | Sport Line | Executive Package | Driver Assistance Package | Premium Package | Dakota Leather | Trim Highlight Finishers Coral Red | Head-Up Display | Sport Suspension 2013 F25 xDrive28i Space Gray Metallic | Technology pkg | Premium pkg | Executive pkg | Satin Aluminum Roof Rails | Lights pkg | Head-Up Display
'05 Nissan Altima SER Silver (sold)
'04 Acura MDX Touring Black (sold)
'98 Honda Civic SI coupe Silver (sold)
why be sad, there is NOTHING preventing anyone up here from getting a piece of the action (ok there are tax and legal issues) - why people park their money up here is beyond me.
and good for her, she worked hard, saw and took an opportunity, she'll have more self made equity at 20 than most people!
I would gladly purchase US real estate if I was able to leverage at 35%, can you provide some details on what is required from the investor in order to make use of leveraging?
Proof of income? Or is that not even a factor? I am a subcontractor so my stated income can be a little.. how do I say this.. misleading lol.
Feel free to pm me as well....
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