If you want to invest in the US property market then one of your first challenges will be to set up a US bank account. This step is not 100% required to purchase your first property as you can use an Escrow account to deposit the purchase price of your property. This is not something that you can use for rent collection and is simply a way to transfer money from the buyer to the seller. In theory (and this is what we did), you can hold off opening a bank account till you have the first property secured and tenanted out. It will then be required to either visit the US or get a lawyer to open a bank account for you.
To collect rent, you can use your property manager to collect this money in the short-term. You’d want to have build up a very good relationship with your property manager before taking this step. However, the preference is to be in full control of your money and being being able to look at your bank balance whenever you want. If you’re thinking about opening a bank account without actually visiting America then forget about it! Here is our story:
Without actually visiting the US we knew it would be difficult to set up a bank account from overseas, what we found was that it was near impossible (well sort of). You can set up a bank account with HSBC from Australia, however there is a $200 fee associated with this and you need to have at least $200,000 in your bank account. There are ways around this which we will cover in another blog post. Every other bank requires you to be present in a branch to open a bank account. This is due to the Patriot Act which came into effect shortly after the September 11 terrorist attacks in 2001.
Our US property manager provided a contact at Fifth Third Bank. The contact (let’s call him Bill) said that it did not matter that we were not able to visit a branch and that we would be able to open a US bank account from overseas. It was all looking very positive, we were finally going to have a bank account in our company’s name and it would take us one step closer to being able to purchase a property in the US. We corresponded with Bill numerous times via email, provided him with certified copies of our passports, mother’s maiden names etc., only to be told, only hours after sending him all the information, that he is no longer able to open up bank accounts for people based overseas. We were afraid that we may have become victims of identity theft but as it turns out, nothing bad happened. It was definitely a frustrating experience to be so close to something only to have it all fall away at the end.
A couple months later, we were talking with a property manager from Century 21 who also said she had a contact for us to set up a bank account (let’s call her Sue). Initially we thought it would be the same as what happened with every other bank, that we would simply not be allowed to since we were based overseas. This time we were dealing with BB&T Bank. This experience was beginning to be a lot more positive than the other banks we had asked, we were actually able to start up an account! We even received a Debit Card with the company’s name on it! (I still have it in my wallet, even though it is useless, as a memento).
It did not cost us anything to set up the account (apart from stamps to post information to the US) and we had everything ready to go. We had our US bank account set up in our company’s name, had internet access so we were able to log in and look at our balance and everything was going well. To avoid the minimum monthly fee, we had to maintain $1,500 US in the account, which was not a problem as we were intending to hold all of our money from the property in the bank account.
Then out of the blue, we received a letter from BB&T (dated 3 weeks from the date we received it). It was to inform us that our bank account would be closed and that we had 14 days from the issue of the letter to remove our money from the account or they would send us a cheque of the remaining balance. Immediately after receiving the letter we tried to log in to the account and realised it had been closed. We received no email, phone call or text from the bank prior to this 3 week old letter. It took over another 4 weeks to get the cheque for the $1,500 balance of the closed account.
Unfortunately this story doesn’t end here, we then had to try and cash the cheque. The cheque was made out in the bank account’s name, ‘Streamline Investing LLC’, but we didn’t have an Australian bank account in that name. So here we had a cheque which was basically just a piece of paper, worthless to us. Our banks in Australia would not cash the cheque into our personal accounts despite being able to provide evidence that we were the owners/directors of the company. Eventually we realised we had to open up a business account in Australia for the sole purpose of being able to cash this cheque. Just about all of the banks required us to set up a business in Australia with the same name, we were not able to set up a business bank account for a US company.
So we went through the process of getting an ABN and TFN (we set up a partnership, filled out the form online, both numbers were free to receive, ABN was received instantly and the TFN took a couple weeks to arrive). Unfortunately that was still not enough and we had to register our business name with the Department of Fair Trading, this costs $160 for 3 years registration in NSW. Before registering our business name, we managed to find a bank that would open a business account for us in our US company’s name. Westpac provided us this service, and we were finally able to open an account to cash the cheque!
Overall, this was a very frustrating experience but one that taught us a number of lessons. This is the benefit of doing things yourself and not getting one of those ‘ready-made deals’ that are becoming so popular nowadays.