Frequently Asked Questions

Foreclosed American Homes has chosen a number of areas to invest, and a number of different capital cities across the United States. We have chosen these locations based on a number of factors such as the unemployment rate, prospective employment growth, the level of depreciation experienced in the specific area, and the rental yields being received, etc. We concentrate on these markets as it is logistically impossible to consider all areas across the United States massive Real Estate market. We have chosen a number of geographically and economically separate markets as we believe that in the long-term diversification will lower risk whilst providing the best opportunities.

Please see our ‘Cities’ information which explains in detail the markets we target.

Yes! Many countries across the world restrict foreign nationals from direct property ownership. These laws make it difficult to successfully invest in these markets. However the United States has no such laws targeting investors on a moderately small-scale, allowing access to this extremely large and diverse Real Estate market.

The best and most convient way of financing Foreclosed property deals is using cash! However as this is not practical for most investors there are a number of different methods.

• Accessing equity from exisiting Australian assets such as Real Estate by applying for a Line of Credit from your banking institution. Typically this can be done whereby you have equity available. It is a fairly straight forward process that can allow you access to funds that are charged at your existing mortgage rate.

• Use funds from your Self Managed Superannuation Fund (SMSF). There are a number of different ways this can be achieved and we would advise you to contact the administrator of your fund (such as your Accountant) to find the optimal solution. Alternatively you can ask the administrator to contact us and we will discuss it with them.

• Personal loan. This is not the optimal solution for most investors typically due to the term of the loan and the rate(s) charged.
• Financing in the United States. Due to the global credit crisis the United States based financial institutions are very reluctant to lend money, even to citizens of the USA, unless a steady income based domestically in the United States can be proven. There are some alternatives, such as vendor based finance, etc, however these terms can be mediocre at best.

The properties vary from location to location depending on the climate. They also vary significantly within each city however the properties that we buy most of are timber frame with a vinyl or stucco finish. The roofs are generally either tiles or bitumen. The benefits of these finishes is that since they are used extensively throughout the United States the components are common and thus fairly inexpenisive to maintain/replace when necessary. It must be noted that they are generally long – lasting, avoiding too many issues with replacement. We also tend to target newer homes which will also help with negating maintanence issues for many years to come.

Foreclosed American Property has appointed property managers in the USA to oversee all properties we purchase. We have gone through an extensive vetting process to ensure that you receive the best management of your investment as possible. All property managers are certified members within their respective field, giving you peace of mind.

Vacancy rates in the USA are higher than those in Australia. This can mean that properties take longer to rent or find quality tenants. Foreclosed American Homes mitigates this risk by a number of different methods.

We ensure that all properties are in the best possible condition to make them attractive to tenants. Our properties will be in as new condition after renovations, meaning we get more applications compared to other properties in the neighbourhood. We also advertise the properties extensively to ensure that we get the highest possible number of prospective tenants looking at the property. Of the applications received we will have them processed with background checks done to ensure the tenants placed are of the highest standard. We also encourage owners to give favourable terms in the lease in order to secure the longest tenancy possible.

If you are still concerned we can also offer pre-tenanted properties with tenancy agreements in place. At times we have properties available with long-term tenants who wish to stay for the foreseeable future.

The U.S.A & Australia have a double taxation agreement in place. This allows for credits to be applied in Australia for any taxes paid in the U.S. By effectively applying allowable deductions, tax on rentals can be very low as there are generous allowances which include mortgage interest relief and the cost of inspection flights, etc. Similarly by using your Self Managed Superannuation Fund (SMSF) to purchase, you can obtain very favourable conditions in respect to tax rates.

Capital Gains Tax - Capital gains tax varies, but if the property is owned for more than a year, then the rates will be roughly between 8% and 15%.

Sales Tax – In most states sales tax is not imposed on the purchase of property. However in 36 US states a real estate transfer tax of between 1% and 5 % is charged on the assessed value of the property.

Stamp Duty – In most states, when a property is paid for by a mortgage, a charge is made known as Documentary Stamps based on the amount of the mortgage. For example, in Florida, this is set at the rate of 35 cents per $100 of mortgage. In addition, you pay an Intangible Tax at the rate of 0.002% on the mortgage amount. Therefore, if you have a $100,000 mortgage, you pay $350 Documentary Stamps and $200 Intangible Tax. However, neither of these taxes apply if you pay cash for your property, which will be the usual for most investors.

Local Tax – Local taxes are paid in the state or county in which your property is located. The tax amount is on the assessed value of the property (which is likely to be about 75% of the market value). Taxes vary in amount depending on the local facilities. In 2006 ten states decided to review local taxes with a view to decreasing them.

Your rent will be received in US Dollars and deposited in your nominated US based bank account that we will organise for you. You will have full access to the account through internet banking, allowing you to see the deposited funds immediately, and transfer to an account in Australia if necessary.

Just as in Australia, the property management agreement will allow the property manager in the USA to attend to emergency repairs and repairs up to and including a certain limit before contacting you to ask permission. Therefore major repairs will not be carried out without your permission. In your monthly statement you will receive the invoices for the costs and these are generally tax deductible.

Yes! Travel to the USA is tax deductible if the purpose of your trip is to view, carry out repairs or maintenance, or collect rent, etc, from the property you own. The Australian Tax Office has a ‘predominant use’ test that it applies in order to determine the eligibility of the expenses to be deducted. Simply put the main purpose of the trip must be in relation to the property as opposed to a recreational trip. The tax deductibility of the travel can only occur once the property has settled. Therefore any trips made to the USA prior to owning real estate are NOT tax deductible.

Yes! It is your house to do what you like with! Any properties purchased through Foreclosed American Homes will be Freehold unless stated otherwise. This means that if your circumstances change and you require the funds used to purchase this investment property, you have the option of selling just as you would in Australia. If this situation arises, Foreclosed American Homes will be there to help – we’re only a phone call away!

At Foreclosed American Homes we are always optimistic about the market, otherwise we wouldn’t consider U.S Real Estate as an investment. The U.S residential market and in particular the areas we are investing in have experienced up to an 75% decline in value since the global financial crisis. Some homes, such as in Maricopa Phoenix, are selling well below replacement cost. With such dramatic falls in value, we believe that the scope for growth is high. However as we have emphized, this potential growth will take some time to come to fruition.

We believe that if you have a long-term investment outlook (over 5 years) you should see growth in the value of your underlying asset. Combine this with the fantastic rental returns and the U.S real estate market shows why we believe it is one of the most attractive investments worldwide!

Foreclosed American Homes has an established a relationship with OzForex. OzForex is a subsidiary of Macquarie Bank Limited, one of Australia’s leading financial organisations. OzForex is part of the OzForex Group which also includes UKForex, CanadianForex, NZForex and Tranzfers. We would encourage our investors to consider using OzForex as their systems for transferring funds are streamlined, easy to use, and have what we have found to be some of the best rates available. You are however under no obligation to use OzForex. If you have an established Foreign Currency account with any other financial intermidiatary we will help you as best we can!

Foreclosed American Homes has established relationships with a U.S based bank. As part of our turn-key service we will set-up the account so that you will be in full control of your funds at all times. The financial institution we use has a relationship with one of Australia’s ‘Big 4′ banks, allowing you benefits such as fee free withdrawals by way of your ATM card. You will of course have access to internet banking, etc. If for any reason you wish to use another financial institiution we will endeavour to help with that as well.

The LLC or Limited Liability Company is established for a number of different reasons. Firstly in order to separate your other assets legally from any obligations that occur in respect to your U.S property, such as litigation, the LLC is used. The LLC will help confine any exposure to whatever assets the LLC has at the time (such as the investment property). We encourage investors to use a separate holding company (or LLC) for each individual property they purchase.

The LLC can also be beneficial in terms of the tax treatment of your U.S income depending on the type of entity from Australia that purchases the property. Foreclosed American Homes strongly encourages you to speak to one of our professional Accountants and Lawyers based either in Australia or the U.S. Foreclosed American Homes will set-up this company for you at no additional expense to yourself without you incurring the hassle of dealing with the state and federal bodies.

Yes! As trustees of the fund you have the power to decide which investments you wish to pursue. We encourage investors to use this opportunity in the U.S real estate market to help diversify your portfolio, across both investment sectors, and countries. By utilizing the benefits of a Self Managed Superannuation Fund you can enjoy all the benefits of direct property investment in the U.S market, as well as all the associated tax advantages of a SMSF. We can direct you to one of our Accountants to help explain the benefits in more detail.

No! There is no ‘catch’. However we must emphize once again that this is not a short-term investment or ‘get rich quick’ scheme. Just as in Australia, real estate is an investment that will yield the most to the investor over the long-term. It is not an investment veichle that lends itself to short-term profits or speculative investment with only a short investment horizon. Let Foreclosed American Homes show you how to best profit from this amazing opportunity and you will have established a sound investment platform that should lead to long-term financial freedom!