• 2nd US Property Purchase

    During my recent trip to Fort Myers I was fortunate enough to be able to acquire a new property while I was over there. Given I was only in Fort Myers for 8 days, I did not really expect to get lucky enough to get a property in such a short time frame. My main goal was to just get a first hand feel for the area and a bit more knowledge about the town so that down the line I would have more of an idea of what areas to look for properties and hopefully gain a bit more of an understanding as a whole of the town of Fort Myers.

    While I was there I would have looked at approximately 12 properties, and countless others online through the listings, all of them had some sort of flaw, either they were too far away from town, too much damage had been done to the property, the area was not reliable, property was over priced, and the list seemed to go on. It was very difficult to find a property that I was comfortable with. I am always careful to make sure I do not get desperate in this sort of situation, it is easy to lose patience waiting for the right property and in the end just take any property that is available for fear of missing out. Unfortunately this is a bad trap to fall into, it is important to wait for the right property to come along.

    I may have rushed into this recent property purchase a bit too much, but I just had a good feel about the property, it already had an existing tenant and they were desperate to be able to stay there, they were paying good rent (I will get into the figures later) and the area I was comfortable with. I went with my property manager Judith and she could first hand say she was happy with the area given she used to live within a stone’s throw away from this place. I met the tenant (at least one of them) and she seemed very nice, I could tell she had been taking good care of the property while she has been there (over 12 months). All in all I only looked at the property for about 20 minutes while walking through the place, I talked to the lady for about another 15 minutes and that was enough to sell me on the property, I soon became the new owner of 1115 Lovely Lane, North Fort Myers.

    Details on the property –

    2 Bedroom and 2 Bathroom (initially it was 3 bedroom, but a wall had been removed between two to make 1 larger bedroom)

    Price I paid was $79,900 (to be honest it was a bit higher than I was looking for, but if the value is there then no point missing out)

    Monthly rent is currently $800 per month.

    The property also had a pool out the back with a deck for an entertaining area (did not see this on any other property, was surprised given how common it is in Australia).

     

    There were some slight complications with the closing of the sale, basically the banks were screwing me around (more on that in another post) but in the end it all worked out well. I was a bit lucky that the listing agent worked for the same company as my property agent, so they were able to hold on to the property a bit easier for our benefit.

    All in all I was very happy, the whole deal seemed to go a lot smoother than our first property. From offer to closing I believe it was about 2 weeks in total, and it would have been a lot less had the banks not messed us around.


  • My First Visit to Fort Myers

    I recently finally went over to the US. It was hard to explain to everyone that we owned a house there, and yet neither of us had actually even visited the area. At least one of us had been to the country before! But I myself had never been to the great USA, and what an experience it was. It really was amazing to actually see it first hand, the town of Fort Myers was nothing like I really expected it to be, even though I had been reading about it, looking at photos and everything over the past couple of years, it still looked completely different to what I had imagined.

    Overall it was a great trip, at first I thought it was a great success, I was able to set up a bank account for my LLC, meet with a mortgage broker who was very positive about getting finance for our next property, and of course got to actually see our property for the first time in Huntdale! Oh and I also had an offer that was accepted on a property I saw while I was over there, so all in all it seemed like a great trip.

    Unfortunately soon after I landed I found out the bank had made a mistake setting up my bank account and it had to be closed. I will not go into too many details and will cover it in another article. But it is one of the most frustrating experiences I have had trying to set up a bank account in the US.

    Anyway, back to the first visit in Fort Myers. What were my first impressions of the city. Well, everything was big, except houses. Roads were all big, seemed to have 4 lane highways everywhere, everyone seemed to drive big trucks, big blocks of land, large shopping centres, everything was big! But then the houses were not as big as what I had expected. During the housing boom in Sydney everyone seemed to build mansions, and I figured something similar happened in the US during the boom, but all the houses were similar. They all seemed to have an open plan living, dining and kitchen area with a small hallway that lead to 2 or 3 bedrooms.

    The big eye opener was just the state some people leave their houses in when they leave, I had heard stories about people trashing their houses when they are forced to leave, but it was not so much that, it was just lots of small things, like people taking shower curtains, door knobs, toilet seats, and just general dirtiness throughout the house. Also the workmanship of a lot of the construction left a lot to be desired, saw a lot of poorly laid carpet, mix matching tiles and just generally poor construction.

    It was also a big eye opener to see first hand the differences between the good areas and bad areas. I remember looking for our first house we must have queried our property manager about 100 properties at least, and she would have rejected about 90 of them! Claiming they were in poor areas, and yet they did not look too far away, but now I can see for myself that you can go from good area to bad area when you go from one street to the next. But if you are in the know and you can find the good areas, you can definitely find good properties are good value. I can see how a lot of people have been fooled into paying too much for a property. I rember one property which looked amazing, it was very well looked after and seemed very nice, but it was at the Northern end in Cape Coral, a long way from Fort Myers, so it was selling for $150,000, but there were similar quality prices in North Fort Myers (much closer to the city) for only $80,000. For some reason Cape Coral has high prices, simply because it is in Cape Coral, Lehigh Acres is a lot cheaper and is a similar distance away from the city.

    I will write a few more articles on my adventures in USA and will also divulge more about the property I did end up purchasing while I was over there. And also more about how frustrating the US Banking system is!


  • Tips and Tricks For Doing Your Own Tax Returns

    With the 30th June date well behind us it is time to consider that dreaded task…doing your tax return. In this post I’d like to focus on income tax benefits for real estate investors. For Australians, doing your own tax return is now simplar than ever with the governments e-tax online system. Doing your own tax is not difficult but it is time cosuming. However, the benefits that you will get out of doing your own tax return far outway any time constraints that you may have. Not only will you get a much better understanding of the tax system but you will also get a better understanding of your own financial situation. You may even find that with all of this new knowledge that you find ways to make your money work harder for you from a tax perspective. You may see ways to improve your financial position that you had not seen before. By preparing your own taxes you will develop a better tracking system of your income and expenses. Below are some tips for someone who is thinking of preparing their tax return by themselves for the first time:

    • Make sure you read through as much information as you can. There are thousands of great articles on the internet that are free to read (just like this one!). I find articles to be much more helpful as they’re easier to read, usually focus on one or two points at a time and are generally more up to date than books. It is not uncommon for tax rules to change from year to year so make sure that you’re reading the most applicable information to your situation.

    • Be honest whne preparing your tax return as making too many wild assumptions will make it impossible for you to keep track of why you claimed one item over another. It could also get you in trouble with the tax departmentand.

    • Doing your own tax is not for everyone. It is always a good idea to be on top of your taxes but if you have quite a few properties and your tax returns are quite lengthy then it will make more sense to hire a chartered accountant. As they get more complex, you may actually cost yourself money by doing them yourself. However, think of how much ahead of the game you will be with your accounting systems and knowledge.

    Let us know some of your tips and tricks when doing your tax return by adding a comment below. Do you do your own taxes or hand them over to an accountant? Did you find doing them beneficial?


  • Inflated Property Returns

    I was talking to someone recently about our property in Florida, and was saying how the expenses were higher than we first imagined, and in turn our return is a bit less than what we were hoping for. Initially I was hoping for a net yield of around 8.00%, I thought this might be a bit optimistic but going through the numbers before purchasing a property, it seemed like a realistic value.

    But after obtaining our property in Florida and seeing first hand the expenses, it seems that despite being fairly conservative in our initial assumptions, the return is still less than what we initially hoped for. However, if you rearrange the numbers a little, the investment looks better and perhaps even a bit more realistic as well. See below for the initial and subsequent calculations which show net yield returns.

    Initial Calculations

    The Net Yield of 0.56% is less than desirable, and if we were told we would be getting this return then I don’t know if we would have taken the leap to invest in the US as the hassle would just not be worth it. Although I did not include any capital gains on the property (as our plan is for cash flow) this can be  disregarded as the cash flow target simply has not been met.

    But by making some adjustments to the calculations, like shifting some of the expenses to the capital (moving the cost of the A/C unit and the whitegoods under capital expenditure), the numbers start to look much better. This is realistic as these expenses are not a yearly expense and you would hope that a new A/C unit would last a few years at least, the same with the white goods. Further, you can remove the cost of PI  insurance (as this expense is not dedicated to this single property and will cover all properties under the LLC) and include it as part of the LLC’s general overheads.

    Adjusted Calculations

    As you can see by adjusting the calculations to perhaps more realistic figures, we have now obtained our 8.00% Net Yield that we were hoping. It is important to note that both situations are essentially identical with all expenses included in both examples (with the exception of PI Insurance), yet it is simply a different way of
    calculating that gives you a very different result.

    I think this is a good sign to be careful when seeing advertisements purporting unbelievable returns. You should always look through the numbers yourself and satisfy yourself that what is being advertised is achievable. You should also always check whether the returns are ‘gross’ or ‘net’ yield and what expenses have been considered.