international investing- US

If you invest in America, there are 2 structures available: LLC (limited liability company) or C-Corp, the shares of the company is owned by the trust in Australia.

 

Because US is a broad tax country, you can quarantine the income in US. If it's not a broad tax country, you have to pay tax there as well as in Australia, no credit for the tax you paid over there.

 

How to bring back money:

 

1. money initially sent over for investment can be brought back tax free

2. I can charge a consultancy fee to the LLC there, so the LLC get a tax deduction there but I'll have consultancy income in Australia

3. Different to Australia, the cost to go over there for inspecting future purchase is deductible under US tax law.

4. LLC lend money back to Australia

 

The US insurance companies don't normally have landlord insurace equivalent. Only normal building and content insurance is available.

 

To get a credit rating with the banks in US, apply for a credit card and start using it. Generally >4 units are regarded as commercial over there.

 

Same as any investing, sensibility analysis and opputunity cost analysis should be performed. For the additional risk investing overseas, you need higher return (for yield or growth) to compensate it.

 

house relocation

1. rule of thumb - it cost about $40k to relocate and reconnect a house

2. make sure the relocater has adequate insurance - say if the house got damaged during transportation

3. finance - banks usually only lend on the land. After the house is relocated and reconnected, and got the permit from the council, then the house&land could be refinanced as a package

4. permit - check with council and town planner before relocation whether the house would ok to put on the land. - We don't want neighbour objected after relocation!

 

 

Transitional Growth

• Look for properties in areas of growth lag
• fundamental analysis: industry, population,infrastructure (new hospital, new schools,new shopping centers-where are the big boys spending money next? employment, transport, building trends
• adverse public perception
• Media attention
• look for emerging economies - do you own micro economic analysis
• prime location- water views, proximity to amenities
• rise in renovation and new constructions
• stage one of new developments with big marketing budgets - it's vital to get in early
• cost of living of the city reflects housing price level of the city,
• display homes - get on the waiting list of the big developers for their next display home
• due diligence

 

oppurtunities are often disguised as hard work and most people dont' recognise it!

 

what to pay for a business

buying business, target return is 20% after paying wage to owner, to cover the extra risk of being in business.

20% equals 5% term deposit return, 10% for risk, 5% for illiquid asset risk

 

normally when you buy a business, you ask for a few year's tax return to look at. Normally you are given 3 years.

 

Adjust income that doesn't affect the purchaser, e.g extraordiary items, voluntary exp such as donation, motor vehicle 

 

average profit of last 3 years

 

how much do you pay for goodwill, it depends on the busines, some will be 3 times of the profit, some just 1 time

 

good will tax for seller: 50% discount, 50% discount to small business owner, can roll over.  Equipments tax is different. It's in the seller's favor to allocate more return to good will

 

Look at the business and look at how many of them incl. freehold. sometimes the owner got so fed up, they discount everything including freehold.

 

There are agents specialise in cash business, easy to managing business

 

keep investment debt and personal debt separate, split the loan!

commercial proerty etc

airspace

volume metric title - qld

zoning

 

location, size, resellable   

 

 

1st thing you look at how much you need to put in, and how you can borrow more so it requires less capital, and do your oppurtunity ROI

 

cbd service departments: high fee, borrowing 70%, if<50sqm, if it's just one room like a hotel room, it's hard to finance, hard to sell ,capital growth might be limited. If you have a poor site manager, you can't do anything with it.

 

big commercial property - vendor finance a very good possibility. other things to look at include if they are on market rentals; strata title possibility : ask the owner to strata title it and I buy some of them

 

commercial lease option is for the tenant to opt out. There might be  a clause to review the rent to market rental on exercise of the option; in terms of who pays for outgoings, it stays with the terms of the original lease,  you can't just change it

property data solutions

 

room by room rental property insurance can be  a big issue. If the property is not zoned for this type of use, your insurance is invalid

 

Property under managment:

check efficiency of management, how?

check all operational contracts and side deals

what's your control

what's your exit plan

what's your disaster plan

can you sell the managment only, and you keep the free hold

commercial proerty price and due diligence

commercial property price works on capitalised rate= rent/cap rate, if it's vacant, it still has some intrinsic value depending on the building material, time on the market, vacancy period

 

is there high vacancy in the area, high vacancy of this type of property in the area, zoning and permitted use

 

more abt Trust

A good trust deed should be able to be amended so the trust can continue after 80 years. Appointership and the shares of the corporate trustee needs to be passed onto the next generation in the will.

family court sees through structure, so you need to shift the interest of the trust to your children instead of yourself, and that would carry some weight.

Piggy bank trust owns all the shares of the corporate trustees. It owns nothing but shares, not property, not business, not equipment. Therefore that's the only trust can have a personal trustee.

not every benefitiary needs to be named in the trust deed. If they are, then bank require them to sign the documents when you borrow!

set up a testimontory trust within the will to quarantine the benefit of the children, children will then have tax free threshold just like an adult. It's very important to think who can be the trustee of the trust when there is minor children involved, as the trustee has all the power and can flitter all the assets away.

If trust is not doing anything, you don't need to lodge anything, so no ongoing cost if inactive.

buying more properties in trust cost more in land tax as they have a lower threshold. When the entities are grouped, only the entity that owns the property pays the land tax. If a corporate trustee owns a few different trust, each trust pays their own land tax

Appointership is a job not an asset, so it cannot be taken away from the bankrupt - a court judgement when the other side try to take over the bankrupt's appointership of a trust.

Gifting of assets to trust:

If you borrow money from family home and gift the mone to trust for purchasing investment property, you forgo the right to claim interest deduction. In the event of bankrupcy, they can clay back the gifting up to 4 years ago.

It's better to have a signed and witnessed Deed of Gift to record the gifting. Sometimes you can have a blanket deed to cover continuous gifting