G ld Ru$h A U S T R A L I A N
I N V E S T O R S | SPECIAL EDITION
of Australian’s Discover Why Thousands Have Become U.S. Property Prospectors
Australia’s Leading Authority for US Property Investment
FINDING HIDDEN OPPORTUNITY IN THE U.S
REAL ESTATE DOWNTURN Australia's Property Investor Elite Share The Keys to Success In The Current Market ✓ Understand the Key Factors
that Caused the Global Financial Crisis and Effects on US Property…
✓ How to Avoid the Mistakes and Horror Stories and Make Real Cash Flow
✓ Why the Cheapest
Properties Might Not Be the Best
“Using these strategies is definitely going to improve my portfolio out of sight. ””
✓ Analysis from the Worlds Richest Investors
— Andy Harris, Adelaide
Winter / Spring 2011
Inside This Issue A Brief History of the Financial Crisis - What Caused This Mess?... Page 4 Australia V America... Page 6 How An Aussie Mum Created Massive Opportunity From The US Downturn... Page 8 TOP TEN Most Common Mistakes Made by Australian Investors... Page 10 A New Strategy For Investing... Page 16 *SPECIAL* 7 Reasons To Invest In Detroit Michigan …Page 18 A Real Life Case Study... Page 20 How To Purchase Properties As An International Investor… Page 21 And Much More…
For all magazine enquiries email info@USRealEstateAcademy.com.au
Winter / Spring 2011
WELCOME Welcome to our limited edition of Gold Rush Magazine. The US real estate market is getting more and more positive coverage in the press, but for the average Australian it can still be daunting trying to figure out where to begin trying to understand this opportunity. This magazine is really about giving people an insight into why the US opportunity is something everyone should consider. That’s not to say it will be right for everyone, but given the magnitude and the limited window of the opportunity, anyone who is serious about wealth creation should consider it. Sometimes I can hardly believe how much the US opportunity has evolved over the last two to three years. Just two years ago people would sometimes look at me with bulging eyes when I talked about the US as being a great investment option. Now, suddenly, it’s a hot topic. More and more people are getting interested because the media is suggesting there are golden opportunities there. And guess what? They are right. But just as there are plenty of cheap properties, there are also just as many money pits over in the US. A careful investor can make great returns, but it is important to take a structured approach and tread carefully. Here’s to your success!
ni r a k l u K a n e l Sa
Committed to Helping Australian’s Invest in the US With Confidence - Consultations Available 1300 039 662
WHY IS U.S. PROPERTY SO HOT RIGHT NOW?
There are a number of reasons that international investors are looking to purchase real estate in the US right now, not to mention some of the world’s richest...
1. cash-flow Properties in the US offer an opportunity to hold real estate that generates strong cashflow. In the Australian market such properties are difficult to find. Those investors who are looking for long term cash-flow to service existing debt or for lifestyle reasons are very attracted to this market.
2. price point Over the last 3-4 years the Global Financial crisis has caused a real estate crash, forcing prices down to levels that have not been seen for 30 years. This provides savvy investors with an opportunity to purchase real estate at discounts of up to 60% on current market values. In a number of markets it is possible to buy quality properties for as little as $40,000USD.
“It's tangible, it's solid, it's beautiful. It's artistic, from my standpoint, and I just love real estate. There are more opportunities now in American real estate than at any time in history.”
3. growth potential Buying properties at substantial discounts offers investors the opportunity to reap the benefit of future growth. Investors need to remember that entry in to the US property market is not about trying to achieve massive capital growth in the short term. Growth will occur as a result of having bought at such heavy discounts. Growth in property values is inevitable when market confidence and liquidity returns.
4. high rental demands The economic crisis has forced many people out of being home owners and into the rental pool. In well selected areas rental demand is high. Although property prices have fallen dramatically in some cities, rental rates have hardly dipped. This results in strong, attractive yields for investors.
“Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We'll break out of it. It takes time.”
Committed to Helping Australian’s Invest in the US With Confidence - Consultations Available 1300 039 662
FINANCIAL CRISIS When you talk to most people about real estate in the US, the common response is that the opportunity is too good to be true. It’s extremely difficult to grasp why the real estate opportunity is so extraordinary without understanding how the current market was created. The term Global Financial Crisis (GFC) has become so commonplace as to be part of everyday language. The media has done a great job in scaring the world into believing that the US real estate market is a place no-one should invest and holds it up as being responsible for all of the economic woes of the world right now. The footage being shown on television of ghost towns and deserted neighbourhoods is frightening for any investor. The bottom line is that the GFC has created a profound lack of confidence in the economic and property markets all over the world. ★ Countries worldwide have experienced falling stock markets. ★ Large financial institutions have collapsed or been bought out.
★ Even in the wealthiest nations Governments have had to create rescue or bailout packages to prevent their financial systems from collapsing. The cornerstone of this crisis has been the US residential property market. As was the case here in Australia, between 2002 and 2007 the US experienced a massive property boom. During these years the average price of real estate increased more than 70% across the country. Really hot markets like California and Nevada saw property prices double and triple, and all of this helped spawn a phenomenon called Sub-prime lending. Sub-prime lending was lending to disadvantaged, unemployed or low income people. Unfortunately it spun out of control as bankers started to believe that in a rising real estate market you couldn't make a bad loan. The incentives for bankers to keep on making loans was incredibly high. During this boom time, over 70% of loans were grouped together and turned into products. They were given fancy names and then sold off to banks and institutions all over the world.
Committed to Helping Australian’s Invest in the US With Confidence - Consultations Available 1300 039 662
Effectively the US banks and lenders were taking their very high risk loans and washing their hands of any of the risk. The GFC also has a cultural dimension. As a nation, the US has had an obsession with home ownership. They have written many public policies over the last 50 years supporting that any citizen should be allowed to buy their own home. Examples of these policies include:
★ All mortgage repayments are tax deductible,
★ $500k capital gains free tax allowances,
★ Creation of two Government backed banks that were specifically created to promote home ownership (their Balance Sheet today is in excess of 5 trillion US dollars)
★ Creation of non-recourse mortgages (Non recourse mortgages are loans which make it really easy for the borrower to default. In the US they have a phenomenon known as jingle mail. If a homeowner decides they can’t pay their mortgage any more, or they don't want to pay their mortgage anymore, they simply take their keys and mail them back to the banks and then walk away.
It is important to understand that none of these types of policies exists in Australia, Europe or any other British Commonwealth country. Right now more than 16% of Americans are living with negative equity in their homes, so people owe more on their homes than they are worth. In places like California, Florida and Nevada, that negative equity can be up to 30-40% of the mortgage value, so the temptation to default is huge. The GFC has created problems world wide and the effects of this crisis on the US are still being felt. The banks have stopped lending and it is investors with cash that are dictating the market. An astute investor can find good opportunities in this market.
The lenders have no power or authority to pursue them for their other income or assets. The result is that people can default easily and freely without any immediate penalty). Committed to Helping Australian’s Invest in the US With Confidence - Consultations Available 1300 039 662
Australian V American
One of the most common questions that investors have when they are looking at a US investment is how it stacks up against the alternative of investing in Australian property.
Perhaps the easiest way to contrast the two opportunities is through way of an example. So lets begin by assuming we have $45k to invest and assess what this money could do for us both in the Australian and US property markets. To give this opportunity some context, lets also take a medium-term outlook of five years. The reason for this, is that the US market is definitely a market where an investor really needs to take a medium to longer-term view. ‘Flipping’ properties is not really a strong strategy that can be used in this market-place.
Option 1 - Purchase an Australian Property So lets take our $45k and assume we are going to use it to acquire a property in the Australian market. The most common way of describing the performance of a property in the Australian market is to talk about its ‘yield’. Yield is simply a way of describing how much income a property generates as a percentage of the total cost of the property. In Australia right now, most people describe yield as a percentage before costs are accounted for. The after cost yields we can earn on the average Australian property are close to nil, if not negative. In essence this means on average it costs us money to hold properties here in Australia. If we assume that the banks will loan us 80% of the value of the property, this means we can go out and buy a property worth $225k. Lets drop this a little, because we need to account for closing and legal costs. So lets say we could buy a property worth $215k.
If the rule of thumb here in Australia is that property values double every 10 years, then we might be safe in assuming that over the next 5 years we make roughly $107k in growth.
As a return on our overall investment, we have returned roughly 50% over that 5 year period. One of the limitations with this strategy is the cash flow dilemma. This property is going to cost you money to hold. This means that unless cash flow is plentiful, there will be a limit to how quickly an investor can move forward with this kind of strategy.
Option 2 - Purchase an American Property Lets assume we go into the US property market and acquire a property (including closing costs) at $45k which is 50% of the current market value. The annual cash flow that can be generated from this property is 13% of the overall investment after expenses. In other words, during the time that you hold this property it is going to be putting money into your pocket.
The banks start to lend again and it becomes easy to achieve at least the current market value as a sales price. In growth terms you will have made 100% on your original investment, simply because you purchased at such a heavy discount, and when you combine this with the income stream, this equates to a return of over 160%.
Lets also assume that during the next 5 years, the US experiences zero capital growth, but that the market begins to stabilise and we see a return of market confidence.
r wealth creation. fo e cl hi ve tic as nt fa a is y rt pe ro ...P than the er tt be is gy te ra st e on at th ing gu We are not ar e differences in th ht lig gh hi ies ud st se ca e Th r. othe mbers basis. It does nu ly re pu a om fr ity un rt po op e th cial situation an fin al on rs pe e th t un co ac o int not take of each investor....
m u M e i s s u A How An e v i s s a M d e t a e r C m o r F y t i n u t Oppor . .. n r u t n w o D S U The rni meet Salena Kulka
In the aftermath of the GFC, Salena, a savvy Australian investor embarked on a year long journey to discover a structured approach to investing in US Real Estate. Since then she has become a recognised expert on the subject speaking to audiences all around the country. Here’s her story in her own words...
As a Chartered Accountant I have always been accused of being very conservative by nature. I guess this is probably true. My training had always been about looking for the holes in everything, focusing on research and always following a sound process. My 15 year career took me into some great accounting firms, major corporations and consulting practices, which reinforced this.
property as a vehicle for wealth creation is second to none. Over the last 10 years, we have very carefully become involved in some simple buy and hold strategies. Lo & behold, we were thrilled to see our wealth growing year by year. However with limited income and rising interest rates, what we also experienced was the overriding feeling of burden relating to all the debt we carried.
“...property as a vehicle for wealth creation is second to none...”
I first became interested in real estate over 10 years ago because of the passion my husband had for it. I was extremely resistant to his ideas of buying real estate, as I hated the idea of carrying debt and couldn't quite see the logic in using it as a vehicle for wealth creation. To indulge him though, I set about educating myself and trying to understand why he was so enthused about it.
I began to realise that our income was going to limit how quickly we could invest in properties and began to look for ways to reduce this burden through property developing and acquiring assets that created a cash-flow.
I read books, went on courses and most importantly spent time talking to successful property investors. Eventually the ‘penny dropped’ and I began to understand why Committed to Helping Australian’s Invest in the US With Confidence - Consultations Available 1300 039 662
had ...A friend of mine taken a one month d n holiday over there a ad during their visit, h bought over 100 properties!! I was astounded...
As soon as they were back home I started quizzing them on what they had done and how. I realised almost straight away that they had used no strategy and had taken what can only be described as a ‘cowboy’ approach to buying these properties.
“... Did the US property market offer opportunities to the ‘average Joe’ investor?..” They admitted they couldn't recommend this to me, since it was definitely a high risk investment. Needless to say, I was a bit disappointed. What this did do for me though, was spark an idea. Did the US property market offer opportunities to the ‘average Joe’ investor? Were there ways to access this market that might not be regarded as high risk? I began at that time, an amazing exploration of the US residential real estate market. Through my own trial and error, I began to formulate a process to access the market in
a way that mitigated many of the risks and ‘horror’ stories other investors have shared. My structured approach to investing in this market caught the eye of a major educational provider, who began to promote me as a speaker around Australia and an authority on US property investing in the current climate. During 2009 & 2010, I flew around Australia supporting many investors to purchase US real estate. My experience with investors over the last two years highlighted a number of shortfalls in the way that many US buyers agents are operating in Australia. Many investors that did my program were complaining about these providers and sharing less than positive experiences. Amongst other problems, I was concerned that none of these buyers agents have any ‘skin in the game’ - meaning the only person taking any risk is the end investor. I wanted to change this. After forming some strong alliances with other successful US property investors, Splash Property Group was launched - we wanted to take a hands on approach to helping Australians buy in the US property market. My story is not typical. I figured out where people were going wrong and then spent time and energy trying to figure out a better way. Don’t believe the hype. The US property market is an amazing opportunity for the person who has the right help.
I first became interested in the US market in 2008. A friend of mine had taken a one month holiday over there and during their visit, had bought over 100 properties!! I was astounded.
Most Common Mistakes Made by Aussie Investors
Trusting the wrong people to find properties for you... The people you choose to do business with can make or break your investment outcome when you are investing in US property. Make sure that the people you are working with understand the market you are buying in. This doesn't just mean the buying agent you select. There are so many people that are involved in the process of acquiring property in the US, including Attorneys, Trade-people, Accountants, Property Managers, Buyers Agents, Wholesalers etc. I have heard many stories of investors who chose to do business with various people without doing their homework on them and the result was some experience which left them feeling unhappy. Understand to what degree they support you after the purchase of the property. There are many reported instances of buying agents ending all communication after acquisition.
Buying Houses that ‘look good’... Too many investors get caught up in worrying about the aesthetics of a property. That is, judging a property by how pretty it is, rather than looking at the grassroots research and working out if it is a good investment. There are thousands of pretty properties sitting vacant. It is important to be asking the right questions. For example, is it a highly sought after property? It is no good buying the best house in the worst area. Many buyers agents realise that people buy on emotion, so look out for pretty homes in poor areas.
Looking at too many cities... One of the biggest mistakes we have seen investors make is trying to research too many markets at once. The reality is that it takes significant resources, time and effort to fully understand a market or city
at a grassroots level. You can not possibly get a detailed enough grasp of a city by reading high level reports and commentary. To really understand whether a property will be a good investment and learn about a city it is important to hone in on a small selection. Trying to understanding many cities at once has often resulted in investors buying in poor areas, with limited information.
Not taking a medium to Long term view of the market... It is important to understand that in entering the US market, an investor needs to take a medium to longerterm view (5-7 years as a minimum). The US economy has suffered tremendously and it will take time for market confidence and liquidity to return. Both these factors are critical in the recovery of the property market. Do not be fooled by people who try to sell you the idea
that you can â€˜flipâ€™ your property in the immediate term and make money. The US market is soft, so there are few buyers.
Not purchasing property with the end in mind... We do not disagree with anyone who believes that there are opportunities to buy good real estate in any city. Having said that, different cities better lend themselves to good investment opportunities. The key is matching a city with the investment goals of an investor. This means there is no point buying a property with low yield prospects if the goal is to generate a strong income stream. Know your investment goals, or work with someone to work out what they are.
Not taking enough time to find a good property manager... The biggest challenge I have heard about when it comes to foreign investment in the US is on the issue of property management. It is not uncommon that the standard of service given by property managers in the US is far lower that what investors expect here in Australia. The choice of property managers should be done with great care. Many checks and questions should be asked to ensure that communication will be good and tenants be managed well.
Not performing enough good due diligence... Many Australians are being burnt in the US because they are so excited by the price of the properties that they neglect to understand whether the property itself actually makes sense as an investment. The process of appropriately researching a property is critical. There are numerous sources of information and checks that need to be performed before an investor commits to a property. It is important to understand the local market, economy, demographics, and other variables before committing.
Not setting up the right structures... Many investors are acquiring properties in their own names, rather than using structures to hold their US properties. There are two main reasons this should be avoided: 1. If something goes wrong with a tenant, an investor would not want to put their other Australian investments and income at risk. Proper structures can offer asset protection.
Being disorganised... Many investors are acquiring property, taking their time to put together a team to perform a rehabilitation of the property, not quickly getting a good property manager in place, not working with an Attorney to set up their appropriate local paperwork and then wondering why their properties are still vacant 6-8 months later. Be organised. get your team in place first. Understand the obstacles and then act quickly once you have found a property. Time is money.
Not checking the numbers... Many investors are purchasing real estate without understanding all the numbers involved in the year to year running of a property. That is, they are not running a feasibility study to understand the true income of a property. Because assets are often being purchased at a fraction of their current market value, a small expense that is overlooked can have a big impact on the overall annual income.
2. Setting up the right structures can often result in a lower rate of taxation being paid.
Committed to Helping Australianâ€™s Invest in the US With Confidence - Consultations Available 1300 039 662
Who is Splash Property Group? Splash Property Group was founded by three key members who have all had direct experience with the US Property market. Each of these people brings a strong skill set to the company and have been instrumental in developing the unique offering which is receiving a lot of attention from investors around Australia, as well as many professional services organizations.
Albert Clayton Albert is a true entrepreneur and passionate property investor. He arrived in Australia from the UK in 1975 and began work for a large Sydney based public company, rising through the ranks to the position of divisional general manager within 6 years. He was at this time an active member of the Australian institute of Management and the Logistics management association of Australia. An avid believer in property development and investments, he had acquired a sizable property portfolio by the time he started his own Property development company in 1989. In 1991 he purchased a majority shareholding in a Sydney based building and renovations company. This company went on to win many awards for quality constructions in the small to medium sized development segment of the building industry,
Although a relatively young organization, Splash was really the merging of experienced independent businesses that seeks to provide service excellence around the provision of support to Australian investors into the US market.
In 1999 he formed a Mortgage broking business, becoming a fully endorsed mortgage management company in 2001. This company today is a leading service provider in the western suburbs of Sydney with a large base of clients in that area, as well as having clients all over Australia. This company is a member of the FBAA, the MIAA and is a holder of an Australian credit license. Over the past 20 years, Albert has personally been involved in the real estate industry in several countries including the UK , Spain, Thailand, Indonesia, Philippines, USA and of course Australia.
Salena Kulkarni, CA Salena has been a Chartered Accountant for over 15 years now. She began her career at Deloitte, before taking her career to Europe and the UK. During this time she worked for a number of international companies before returning to Australia in 2000. Over the last 10 years she has worked for a number of large multi-national organizations, as well as a number of Consulting firms. She has had a very diversified career including being involved in large scale outsourcing of Government services, major organizational reviews, large-scale change management programs, small business startups & sale and a number of ad hoc consulting assignments. Throughout her career she has actively been involved in real estate investing and development. Her interest in the US residential real estate market began in 2008, and shortly after this she began investing in this market herself. Her structured approach to investing in this market led her to become a national speaker and a leading authority on US property investing in the current climate. During 2009 & 2010, Salena supported many Australian investors in purchasing US real estate. Interactions with investors over the last two years highlighted a number of problems in the way that current US buyers advocates were operating, and this led to Salena formulating Splash Property Group and supporting investors to access this market.
Brent Williams Brent Williams is one of Australia’s top professional speakers having spoken to collective audiences of over 100,000 people. He is a leading authority on peak performance strategies. He has been regularly featured in the media on programs such as: the Today Show, Sunrise, Mornings with Kerri-Anne, Channel 10 News, on radio such as: 2UE, NOVA 969, in the press such as: The Sun Herald, The Daily Telegraph, My Business Magazine, New Idea, Woman’s Day, and countless other radio shows and dozens of newspapers. At just 19, he wrote his first book titled, “The World At Your Feet” - a national and international best-seller. He later co-founded an organization called Tomorrow’s Youth International, which has run personal development and life skills seminars for teenagers in Australia, New Zealand, Singapore, Malaysia, Hong Kong and Indonesia. In 2003 he founded Kapow Media. A successful publicity company which specialized in assisting both individuals and medium sized enterprises to increase their media exposure, as well as manage all their ongoing media requirements. In 2005 Brent was awarded the Gen Y leader of the year for his phenomenal work with young people. He has gone on to run many major events for the adult market which has led him to be regarded as one of the top professional speakers in the country today. Brent has had an interest in the US property market since late 2009. His capacity to build strong relationships and understand the intricacies of US property purchasing, has led him to take an active role in sourcing US properties. He also plays an leading role in supporting clients throughout the purchase process and beyond.
Splash Property Group
“...Once in a lifetime opportunity” It’s a once in a lifetime opportunity, and in the big scheme of things it’s not a huge amount of money required, and the way its laid out for us I can’t see how it can fail. - Sophie, NSW
“...Makes me feel confident” This incredible amount of information that just makes me feel confident that I can go into this market and just make an absolute fortune! Using these strategies is definitely going to improve my portfolio out of site.” - Andy, SA
Is The US The Right Wealth Building Strategy For You?
Property Matching Service... ★ Identify your financial goals and
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Call 1300 039 662 www.USPropertySplash.com/action
Picking Your Team The team you put in place to support your investment decisions in the US can literally make or break your success.
In the same way that you hear people saying that they leverage their time and money, you also want to leverage your knowledge.
The types of professionals you might need as a minimum include Attorney’s, Insurance brokers, Accountants, Property Managers and Trades people. Choose very carefully.
Don’t try to be the expert in all areas of property. Is it useful to try to be the building inspector, the handyman, the real-estate agent, the solicitor, the electrician, the plumber? No.
For example if you select an Attorney who doesn’t know their stuff as well as they should, or if they aren’t able to act on your behalf with urgency if something comes up, then they could cost you a lot of money.
Should You Visit an Area Before Buying? There are many schools of thought about investing overseas or even interstate. Some people insist that you have to "eyeball the property" for yourself.
Figure out who are the people you need to help you make an informed decision and then leverage their knowledge. Your job as an investor is to be able to look at an opportunity and figure out if it works. Figure out what the risks are. Figure out if it is going to give you then return you want. You are the "opportunity evaluator".
What you need are the skills and knowledge to make good decisions.
Surround yourself with people who are masters of their area of expertise. Who are going to help you make your decisions? Not who will tell you what to do, but who will give you advice on what to look out for. The benefits of working with someone who can offer a full turnkey service for buying US Real Estate means that the number of people you needs to build as part of you team is reduced massively. A true turn-key operator will have in place the full team for you, which again increases your probability for success.
I also know there are people who have literally built millions of dollars in real estate without ever seeing any of the properties they buy. So I have heard arguments both ways. In my mind it boils down to knowledge and experience. Committed to Helping Australian’s Invest in the US With Confidence - Consultations Available 1300 039 662
investing I am a great advocate of learning to fish for yourself rather than having someone hand you the fish. Having said that, it is always a fine balance between getting help from people who can support you to achieve great things and learning things the hard way. Sadly (and my family can testify to this), I have a strong independent tendency to do things the hard way. I definitely feel that my initial foray into the US market meant I was doing everything the hard way. I had poor recommendations to property managers, buying agents, trades people and Attorneys.
“My journey taught me a lot. I gathered a few cuts and bruises.” When I started running seminars to teach people how to invest in this market the response was overwhelming. People loved the knowledge. What also became apparent is that many people liked the idea of understanding the investment but were time poor. Many people wanted the extra help of actually finding properties. I had received a lot of feedback about companies who were acting as buyers advocates for Australian investors in the US market. There were many people who had suffered some kind of bad experience. All of this led to us thinking about how could we help people access this great opportunity, but with more confidence in the process. We decided to develop a turn-key approach.
✓ We find the properties according to our strict criteria ✓ We perform all due diligence ✓ We carry out all the inspections required ✓ We acquire the properties ✓ We arrange for trades people to quote for all repairs and improvements ✓ We pay to have repairs and improvements done ✓ We work with our property manager advertise and screen prospective tenants ✓ We ensure tenant is secured, generally on a 12 month lease
Turn-key property is ready! Then...
✓ We match properties to
Australian investors ✓ We put them in touch with a US Attorney ✓ Help them set up their US bank account ✓ Recommend Accountants ✓ Recommend Insurance
Welcome to headache free investment...
Committed to Helping Australianâ€™s Invest in the US With Confidence - Consultations Available 1300 039 662
AL I C PE
S T I RO
s n o s a e R 7
t i o r t e D n I t s e To Inv Affordable Housing
Good, affordable properties in highly sought after areas are in short supply. Detroit has a number of areas which fit this profile.
Strong Yields Prices in this real estate market have been hit hard, while rental rates remain strong. The result is that this market offers high yields and opportunities for growth
Emerging Industries There have been a number of emerging industries over the last 3 years, including Film studios, Green renewable energy and marketing companies. The State Government is also creating strong tax incentives to encourage National businesses to relocate to Detroit.
The Government is working towards a redevelopment plan to revitalise central Detroit and rebuild selected urban areas.
Community Rebuilding Purchasing Detroit properties is helping to restore neighbourhoods and foster local community. Prior to the GFC there were many areas that were thriving community centres, but where many families lost their homes. The sale and rehabilitation of properties in these sought after areas, is allowing people to return to their old neighbourhoods.
Detroit local government is working to regenerate the city and large sums of money are being invested both by Federal and local Governments.
Housing Scheme Strong Government Housing Scheme to support families attempting to re-enter the market. This scheme subsidises families who may be experiencing financial difficulties, which supports the rental rates being demanded by landlords.
Detroit is the largest city in the state of Michigan and is a major port city on the Detroit River. It was founded in 1701, and is best known for its two familiar nicknames “Motor City” and “Motown”. The city sits just a few miles from the Canadian border. The last 20 years has seen massive redevelopment with luxury high rises, casino resorts and sport club stadiums springing up, while the city’s riverfront is fast becoming a tourist hub. Detroit and south-eastern Michigan have a humid continental climate which is largest influenced by its proximity to the Great Lakes. The four major sports in North America are all well represented within Detroit, while sailing is a major sport and recreational activity due to its proximity to beautiful lakes. The city is an important centre for global trade and home to large international law firms, with an overall workforce over 2.1 million. Detroit is an important transportation hub due to the ports, major highways, rail connections and international airports.
Splash Property Group has worked hard to develop strong relationships in the US that enable our clients to take an ‘arm-chair’ approach to investing with us. There are so many US cities that offer great investment opportunities in property. One of the forerunners is Detroit, Michigan.
This property was purchased in one of the most upmarket suburbs on the outskirts of Detroit City. Many homes in this area were trading well above the $150k mark prior to the GFC, while neighbouring suburbs hold multi-million dollar homes. The current market value of properties in this area exceed $90k. This neighbourhood has a high rate of home owner occupancy, and when we came to inspect this property, a concerned neighbour came out to see what we were doing. The level of house pride in the area is also high as evidenced by the immaculate lawns and gardens. This property had been vacant when we purchased it. It needed some cosmetic repairs including painting, carpet replacement, kitchen & bathroom upgrade and some minor electrical work done.
What happened :
★ After acquiring this property, we had independent building inspections performed. ★ Our team assessed the expected rental. ★ Our renovations team estimated the rehabilitation cost. ★ We acquired the property and arranged insurance. ★ Once finalised, we commenced renovation. ★ Prior to completion we alerted our Property Management team to inspect the property and assess the rental rate they could achieve. ★ The Management company began to market this property on completion. ★ Prospective tenants applied and were screened. ★ The rate to be paid was confirmed and rental agreements were put in place. ★ Property was shown to a suitable client. ★ Client proceeded with purchase and support was provided to arrange insurance, appropriate structures, tax identification numbers and bank accounts. ★ Client settles on property and begins earning income!!
Features of this property: ★ Beautiful hardwood floors - they don’t make them like this anymore. ★ Solid American Oak kitchen cupboards. ★ High quality fireplace. ★ Detail in the hand rails on the Hardwood staircase. Just a few of the many features of this house...hard to believe we are talking of a $48,000 house, with a fantastic long term investment strategy already in place for the purchaser. This property achieved a higher than expected rent and is offering a gross yield of 23.45%. We obtain a Compliance Occupation Certificate prior to offering these properties for rentals. This is why we consistently achieve an above average rental amount per property. We have established ourselves as quality rental property suppliers.
Purchase Process 1.0.1 Splash Property Group is constantly acquiring properties to keep pace with the demands of investors. As properties are acquired, they arrive on the workflow ‘conveyor belt’, where Splash...
Pay a deposit to secure a property
Finalise documentation for sale with Third Party Title company
Ensure proper insurances are in place
Finalise documentation for sale with Third Party Title company
Nominate an Attorney to set up your bank account and appropriate legal structure
Settle on Property
Sign Property Management Agreement with appointed management company
Communicate with property manager as needed.
★ Arrange appropriate independent building inspections, ★ Arrange our construction team to commence renovations, ★ Work with our property management team to commence screening for a tenant. This process can take anywhere from 4 weeks to 3 months depending on: ★ The demand for properties. ★ The method through which we acquired the property. ★ How quickly Splash can find properties that meet our strict criteria. To alleviate any delays, Splash Property Group offer clients the opportunity to access the returns in this market immediately by settling on a property prior to completion, so that they can begin to earn revenue immediately. Splash will enter a contractual arrangement with clients to pay rent immediately upon receipt of funds regardless of where the property is on our conveyor belt. The process described on the right hand side, describes the broad steps associated with the purchase
with a leading Financial Planner Brendan Rodwell is a Financial planner based in the Newcastle and Sydney markets. He has been involved with the Real Estate and Financial industries for over 20 years.
Why are you interested in the US property market as an opportunity for your clients?
“As a financial adviser I am constantly looking for opportunities for my clients. The fall out from the Global Financial Crisis obviously presented some great opportunities but none better I believe than the American Property market.”
What specifically has attracted you?
“The two basic necessities of a working economy are food and shelter, so the demand for housing will always be around. The very fact that the US property market presented properties at around 80% discount to market value obviously demanded a closer look. When you combine this with the gross yields of over 18% it then becomes a good investment.”
What is your feeling about the timing of this opportunity?
“Another key element and probably the key with the Australian dollar at an all time post float high is the hedge factor. Once this mining boom is over then the Australian dollar should trade at its long term average of 75-82 cents. This makes it the perfect investment!”
What are your concerns about investing in this market?
“The hard part for me unfortunately was how do I get in, what are the legal structures, tax issues and basically the logistics of it all appeared a nightmare and who can I trust to look after it once I invested.. And what are the key areas and the risks?”
Why do you want to work with Splash Property Group?
“I met Salena at a function and was straight away impressed with her knowledge and the amount of time and energy she has spent in this market. Also more importantly was her honesty and integrity. The Splash teams use of thorough due diligence and work ethics won me over straight away and I have invested personally in this very exciting market. The attention to detail and absolute desire for their clients to succeed is paramount to their success as a company. I am looking forward to working with Splash and especially in the opportunities that will present themselves in the future.”
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“We’ve Got Everything...” What I came here to get was exactly what we received and that was how do we get into the US market? What’s required? And the people that we need to be able to do it…we’ve got everything, its fantastic!
www.USPropertySplash.com/action - Carl Stella, VIC
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YES I Am Ready To Experience The Benefits Of A Comprehensive Consultation Process... process used to ✓ Structured identify your goals in the US
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market Highly sought after positive cash-flow properties are hand selected to best match your investment goals Comprehensive turn-key approach to supporting clients from start to finish Transparent and simplified sales process Rehabilitation process undertaken for you, required to prepare properties for high calibre tenants Access to ongoing support beyond the settlement period to ensure customer satisfaction Access to our full team in the US, including Attorneys, Accountants, and Property Managers
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AUSTRALIA’S FIRST MAGAZINE DEDICATED TO INVESTING IN US REAL ESTATE
Published on Jun 25, 2011
Find out how to take advantage of the US property market from Australia's leading experts, in Australia's first magazine dedicated to invest...