All Forum Posts by: Andrew O.

The funny thing with this "rule" is that so many people want to "break" it or ignore it and come up with a number that fits their formula for profit.

Do with it what you will, but it has been put forward by many sources who aggregate across a number of doors, that, over the life of a rental your costs will be around 50%, there are things a person can do to bring it down (self manage, maintaining and repairing the property yourself etc).

It's not a case of someone buying a property and people jumping up and down about "the 50% rule has been broken". It's more, be aware over the life of this rental 50% of rents will go to expenses, excluding debt service. Don't let that one "rule" make or break a deal, but use it as a part of your overall due diligence; and if your expenses over the life of the rental come in under 50%, that's just cream :)

We are a money partner with an experienced (20 year) flipper, syndicated management rights in Australia. Rental income is our only active income, the rest is passive. These opportunities have only come up from networking, although I wasn't actively thinking to network, it's more a hobby you like to talk about (REI) and doors open.

We were a bit cash heavy with the flipper and therefore profits didn't scale, we ended up seeing 13% ROI from him this year (down from 18%) but things are steadying again. The management rights will see about 20% ROI (paid monthly). Rental grosses 22%.

Make REI a hobby, find likeminded people and explore possibilities.

Rentals are one way, and yes you would need a few to replace the average wage.

The more you network, the more diverse opportunities you will find. Rental income is the least of our REI income.

So network! (and have capital if at all possible)

If it's with one of the larger home builders (DR Horton, Standard Pacific, KB etc) it sometimes takes some branch shaking to get their attention. However your 10 year warranty basically covers foundation, pipes within concrete etc, roof (pretty sure). The big builders are battling lawsuits everyday by lawyers who form class actions declaring multiple defects, in my opinion don't join one of these, but make sure the builder knows you will do as you need to get any issue resolved.

Worth doing IMO, but do remember if it is a tract home, they were thrown up pretty quickly, and may not be to the same standard as a custom builder.

Andrew

Thanks again Bill,

My father's attorney's have him hold his assets in the structure I am looking at in Australia, both legally and tax wise it is the strongest option. The international aspect of this deal has me doing some extra homework. Fortunately the yield should be worth the extra legwork.

The taxation of foreign income may become a slightly sore point with me, but I guess we have to pay someone to ignore the potholes in the roads!

Andrew

Thanks for the reply @Bill Gulley

I didn't really explain to well, I guess this is more a business/legal structure question, rather than a real estate one. I will be buying a percentage of the management rights to a resort in Australia. The entire management rights will be bought in a unit trust, my share of the unit trust will be held in a family trust, which will have a company named as trustee.

So I will basically be earning business profit, and have the appropriate legal/financial structure setup in Australia, and was wondering

1. If for whatever reason someone came after my assets, would they have to chase this asset through AU courts etc?

2. Would I simply file this under our personal tax return, or is there a more appropriate/favorable structure to receive these funds in? At the moment income stream, along with the rest of my income will be passive.

I may be outside the scope of these forums, being semi-new to the US I don't know if these are attorney or accountant questions, or if it's simply a non-issue.

Thanks again,

Andrew

Hi all, especially tax boffins,

We are buying into property management in Australia, our share will be bought and held by a family (discretionary trust) of which the trustee will be a company. My wife and I will then be beneficiaries of that trust. This is the best setup in AU for this kind of investment.

My question is, since we will be receiving money here in the US from this investment, do we need to setup an LLC to receive the funds as an extra "layer"? Is there any legal structure that should be thought about? Or since it's already setup properly in AU things will be protected from any unfortunate occurrences where our assets may be targeted?

This may be a swing and a miss because most people on here don't have anything to do with investing within Australia. Second question, is there an ideal structure for taxation reasons? we will be paying tax in AU, and filing form 1116 for credit on tax paid, should that just be done personally?

Andrew

I just wanted to quickly run this by some of the more tax-adept members.

I am looking at investing in a property management partnership in Australia, while living in the US. What structure would be best to conduct this business in (holding a foreign investment as a US resident)? How straight forward is avoiding the double taxation of income?

I am not 100% on what form the monthly income would be paid in (probably some kind of dividend...?) but there would be a monthly income, and a capital gain portion to be considered. I am a citizen of Australia, but a resident of the US, if that has bearing on the issue. Is there a level of income that the rules change?

Thanks for your time!

Andrew

Voice of reason, I like it Jim. I'll see how I go, I am basically paying off the mortgage for this owner, so to convince her that she will need to either have some of the private debt forgiven or that she will need to make up the short fall might be a little challenging...but a challenge I will be happy to discuss; the deal is worth it.

Andrew

Patrick, I would have no legal right to try and evict them.

I'm hoping the current owner has a good relationship with them, if they offered the money the tenant may be inclined to help them out, especially if the current lease lowers the selling price, or sinks the deal all together. The owner wants enough $ to cover the private note on the house.

Andrew