All Forum Posts by: Jean Paul Rousseau

Thank you for all those answers.

I bought using the following scheme. I created two c-corp, one in georgia and one in Florida. The stockholders of those C-corp are my children and I lent the money to the C-corp to buy the houses. The C-corp are supposed to reimburse me in 20 years (5% a year). Those corp pay US taxes and have nothing to pay in France as long as they don't distribute dividends. I am not taxed either because I only get repaid of what I lent.

It's a way to increase my children assets without being taxed in France.

I will be glad to give you more informations tomorrow if needed, because I have to leave now (it's later here..) 

@Thomas Franklin

 Thank you,

Sorry for asking basic questions, but 10% of fair market value as reserve seems very high to me. I am a foreign investor and I have only around 3% of FMV as reserve in my US bank account. I will think about it

Hi, everyone,

I bought SFH using two different C-corp ; one in Georgia and the other one in Florida. I wonder if there is a way (not too costly) to close one C-corp and but all the assets in the same C-corp ?

@Thomas Franklin 

Hi Thomas I am also an investor in Atlanta and Jacksonville Fl. For my information, you mentioned a capital reserve equal to 10% or the property FMV. What means FMV ? is it the property value ?

@Brianna H

@Gino Barbaro,

Thank you for your good advices,

Gino, I know the C-corp is double taxed but I don't plan to serve dividends for several year ; I will just try to develop

@Brianna H.,

Hi Brianna,

Thank you for the information but the question is what cover this policy ? Roof for example, I assume it depends if it is or not in good shape. Once you are insured, I assume the cost won't increase when the equipements get older. What companies are proposing such an insurance ?

@Cynthia Calhoun,

Thank you for your recommandations

Hi Gino,

I appreciate your answer and I would be glad if I could use a similar approach.

For a better understanding, let be try to sum up my situation.

I am a 73 years old french citizen living in France. In order to be decoupled from the french tax system, I created to US C-corp ; one in Georgia, the other in Florida. I am president of those corp., but the stockholders are my five children (20% each). I lend money to the corp. to buy houses and the corp. are supposed to repay me in 20 years (5%) per year with a small 1% interest only due in fine (after 20 years)

I started in october 2013 buying two houses for 80 k$ each (one in stone ountain Ga, the other in Riverdale Ga); it was not a great move. It was proposed by Templestone asset which sell to several french citizen. The houses were supposed to be rehabilitated but I had several repair cost and after that, the tenant didn’t pay on both locations. I took another property manager and things are now on track but it cost me about 8 k$ in expenses after they left.

This year my property manager proposed me a 62 k$ house in Cartersville Ga with a 708 $ rent (50 $ HOA). The other houses are rented 850 $ each.

The net of it is that today I am still in the red on those properties. The other point is that, without taking Capex into account my NOI outlook is aroun 5,2 % very short to meet my 5% refund requirement.

Lat year using the same scheme I bought two house in Jacksonville through a turnkey company to be safer (100 k$ and 110 k$). This year I bought a third one for 115 k$ (build in 2014). So far it's OK but my NOI outlook is around 5,5% (taking only 7% for repair and capex). This looks still a bit short, but as time goes things may go better as rent are supposed to increase and yearly installments to me stay the same. Furthermore to be safer on the houses bought this year I will ask for a 25 years repaid (4%) per year. The only problem is when I die my children instead of me will get the refund and they will have to pay tax on it.

Being not in the States things are more difficult to me (I plan to go once a year).

First as you said, the objective should be to buy properties at discount, which is not what I did so far. Making renovation being abroad seems risky.

Second I could not borrow money. I think that even as a foreigner, if I have some assets I will be able to borrow in the future. I hope the loan to me will not be a problem because it is an unsecured loan. The only requirement will be to have a cash on cash return above 5%

Now in 2016 I may be able to invest around 150 k$ to 200 k$ if a find some good opportunities. In the outyears, I will not be able to inject additionnal money, so the companies will have to develop by themselves and using some lending scheme necessary.

Sorry for being so long, but I would appreciate if you have some suggestions for the future.

Have a good day

@Gino Barbaro

Hi Gino,

Thank you for your helpful inputs. 

Now if I buy a brand new house, I will have to put large reserves only if I intend to keep it long term. If I plan to exit after 10 year I could allow to put aside smaller capex provision.

Independant of the market conditions, is it not more profitable to sell the house after 10 years instead of keeping it and having to face the repair cost ? Of course I am aware that the resell price will depend of the house condition.

I am just trying to find what the best strategy 

For buy and hold investors, to analyze your return, you have to take into account the capex expenses. I really don't know how to handle it.

In a recent post, Brandon Turner estimated that 182 $ per month have to be put aside for a typical SFH with a 1000 $ monthly rent. That represent a 18% cost which is pretty high and not sustainable in my case.

In another blog for a similar property he takes a 5% estimate for capex expenditure, which is not compatible with the first number at a first glance.

I understand that capex increase when the house get older. So if both those numbers are valid guidelines that means that you start with very few capex expense when the house is fully rehabilitated and you finish with more than 30% after 20 years, which seems not bearable.

The conclusion I make from those numbers is that the buy and hold long term strategy is not valid, it seems better to buy rehabilitated houses and sell them after 10 years.

Does I am wrong somewhere ? I will be glad to hear what more experimented members think of it.

Hope to hear from you.

@Jason Bott,

Thank you for this answer.

I wander if somebody can propose to insure a property owned by a Georgia C corp. without having to give a social security number that do not exist.