Investing In US Property Safely With Ben Turner from iPropertyInvestor.com.au (Ep103)


The American market is very different to the
Australian market. If I was to tell you that I could find you an investment property with
a 14% net return, you would laugh and walk away because it would sound too good to be
true. But in the American market, 14% net is actually something that is quite easily
achieved and there are investors who are achieving above that 20%, 30%, 39%, 40%. The American
market is very different from the Australian market and can offer great cash flow for investors
who know what they are doing. Today I sit down with Ben Turner from ipropertyinvestor.com.au
and I talked to him about his investments in the US.
So, we talk about the steps that he took to invest in the US market, why he went ahead
and did it and some tips for guys and people like you who may be considered investing in
the US market. Ryan: How many properties do you now own in
the US market and what success have you found in the US market?
Ben: At the moment, I own two properties with my business partner. So we have 50:50 at the
moment. We have got 1H. We have bought in the name of an LLC. It is bit like a __1:52____
Limited Company in Australia. That is the structure we are using to buy the properties
and where I will see just the company directors. So we purchased two in Kansas City in a working
class area. We are looking to purchase more there. I am shooting over there in April to
have another look around and cut some deals there.
Ryan: So what made you go into the US market and talk us through your decision process
from saying okay, well you have had some success in the Australian market, now you are going
to go look at the US. So talk us through your decision process and then after that we will
have a look at how you got set up with LLC. Why did you end up going after that and what
research did you do. Ben: I am sure lot of your viewers have this
_2:46_____when the US property had crashed and I started looking at _____ in the papers
and it was interesting and there was another investor friend of mine, who was interested.
But the earning stories, because we were not just going to start off buying things until
we wanted to meet someone who has done it successfully or at least heard of successful
story. A lot of the Australian investors I talked to online, I could not find a positive
story. It was all negative like got ripped off and I even found this __3:14____ some
woman wrote it. I thought _______ Buffalo, New York. I thought it must be a success story,
I read it and it was just a horror story and the end of it was that she had invested a
couple hundred grand and she was lucky to get 100 grand back and that was it. She was
glad, she was out of it. That was the actual book. So that put me off it a bit just because
of all the negative press with property managers ____3:37_____ but otherwise just kept an eye
on it and certain areas. I always had an interest in Kansas City just because of some of the
demographics there and some industries that are going on there. _____3:53____ and I read
around that time more ______ about how I should have started _____ go back to positive cash
flow. I relooked at it now. By that stage, a lot of Australian investors had paved the
way and were doing successfully like the Steve McKnight’s and Angelo Remora over there, running
around and a few others that you might have heard of and they have got the team on the
ground, they have got their reliable property management. So I thought these are the success
stories now because I figured in the early __4:25____ people getting ripped off ______,
but eventually someone will have to figure it out and I thought I am not going to be
a pioneer, I will just wait and sure enough there is a lot more ______ offering services
and sourcing properties there for Australian investors.
Ryan: So I think Australian investors need to know that the US property market, it is
not something you can just go into __4:51____ and invest and you are going to get rich quick.
You need to do your research just like you would in the Australian market and you need
to be on the ground or have people on the ground that know the area, know the market,
because it is a little bit different than the Australian market, the way properties
are managed and so forth. It is not the same __5:15____ and I think Australian investors
need to know that they need to approach it differently and they need to either work with
people over there or like you did find the success stories and mimic them yourself. How
did you then go from, did you flyover or did you have a team over there.
Ben: I got ___5:41____ Angelo Remora. He is on propertyinvesting.com forum sometimes but
I got to know him. He is an Australian investor who moved to the States to Kansas and he has
actually been living there about 18 months now and he has also got another business partner
called Macaroni who runs Invest in US Group. I am just letting to know this is the company
that I use and I had to sit down over a few emails, got to know Angelo a bit and they
have just seen what I was _______ the issues that we have spoken about. So I had to sit
down with them about 12 months ago. I had a really good chat, and then I met up with
Mark a few more times for a chat and just looking at the results I had and speaking
to some of the other set of clients that they had and everything seemed to be really good
that I had the Rock Solid Property Management on ground. They had their rehab team that
did everything was set up nicely and the thing is the fact that there was an Australian guy,
which is Angelo over there keeping ___6:51 Angelo could get. All you had to do is call
him or email him. He can jump up, go around and sort it out. That is what attracted me
to Kansas as well. A lot of Australians will talk about have you thought about Las Vegas,
have you thought about LA or Florida and my argument to them is I am not really interested
in a specific area because of crisis potential. For me, it is about I was slightly interested
in Kansas City by the fact that I actually met some Australians ____7:25_____, it was
the race in that I jumped on board with them and ______ if you know someone who is doing
it successfully in Florida, _____ try and reinvent the wheel.
Ryan: Especially coming from Australian and not knowing, most investors would not know
the US market at all. So to just go off the latest hot tip of this area is good or that
area is good. I just think it seems crazy about a person, like how good a friend who
has just moved to Silicon Valley because he started a text company with millions in funding
and so forth and the difference between one suburb to the next even within San Francisco,
living on one side of the track versus the other, someone could say San Francisco is
a great spot, but whereabouts some areas are really doggy and some are really good. So
I think what you said having a team on the ground to help you, someone who knows the
area or someone who can do management is going to be pretty vital to any Australian who wants
to go over there unless you are going to go and probably live there yourself.
Ben: Then I started just buying ____8:33_____properties which is just obviously ______ always tenanted,
I never buy one that is untenanted. There is always going to have a tenant ready to
go. I use the property management company there which I again got these contacts through
Angelo as well. I really have a vested interest in these guys and I make money of my _______
Property Management, which is a company that I use. But what they want to do is, _______
look after Australian investors, they have got _______ so I bought some rehab properties
through them and I did my diligence with that, evaluations, and everything all came in on
board, so it was not like a lot of the hard stories we heard five years ago, people buying
houses in Detroit that were worth 5 grand and paying 55 from some of those unscrupulous
companies. I did as much as I could on the ground. I know it is not ideal and a lot of
people would bulk at the idea of buying from ______ but when you think ______ and then
if you end up with _____property Management team, it just can be a set of wiser time,
so what I am doing is, ______ litmus test. I thought I will buy one or two through these
guys, I got into this network. I used the ______ and property management team and then
I have met all these other people through them. So now I can shoot over there and have
got their team as well now. Ryan: You have got this network over there
and I guess a team that help you accumulate and so when you go over there in April, you
have got at least people that you can connect up with and you can get a lot more done. So
you are not spending 2.5 grand to fly over there and land on the ground and have no idea
what you are doing and just going from ground zero. In terms of the cost of
property and whatever we are talking about
in terms of rental yield, just rough figures to give some idea.
Ben: It depends what you want to do. I have heard of some Australians even trying to rehab
from back here which I would not recommend at all. Because of the situation, I am working
back in Sydney, I do not want __12:02___ rehab properties there or anything like that. I
am happy to buy ______ properties that are tenanted and good to go. Essentially you are
looking at anywhere between minimum about $35,000 to 40,000, this was for an ______
obviously you can still buy 5 grand houses in _____ if you really want to, but I think
you are asking for trouble. That is more like lower middle working class sort of area and
_______ as well but typically even my business partner, Adrian and I, we tend to look for
properties sort of around that 35,000 to 40,000 US up to probably 50,000 or 60,000 and that
is what we are looking at the moment and we can purchase some more once we shoot over
there in April and the rental yields that we are getting at the moment. We have not
had a month’s missed rent yet and I bought my first one mid last year and I get my rent
check every month into the account. Then we bought a second one late last year and the
rental yields we are getting is about 4 to 8% net rental return. So I think it is like
about to 20% growth but you are going to your property management fees and your rights and
school taxes and things like that. The criteria is basically minimum 13.5% net rental yield,
that is the minimum that was high. Ryan: That is pretty significant and you would
be pretty hard pressed to find a property in Australia that is giving you a 20% gross
rental yield. Can I just ask why are these houses so cheap in the US. How can you get
a house for $40,000. Does not it cost more than that to actually build the house?
Ben: In these process ___13:51____ so during the peak, they were probably around 80,000
to 90,000 and as there was a credit crunch the US, where pretty much banks just stopped
loaning because they were loaning out too much money to _____ mortgages which is just
mortgages with little to no paperwork to back them up like pay slips and things like that
to prove that you could make the repayments and that is how this mess should have happened.
It is essentially to me artificially to flight it because the credit dried up. Because there
is a lot of repossessed homes and the banks holding them all and then the bank releases
them about every month or two I noticed on to ______.com which is like the realestate.com
in Kansas anyway. I watched the stock on market go down and I think this is a good thing,
supply on demand but then within a month or two they release another couple 100 properties
on the market. So the banks are holding large amounts of repossessed properties and my understanding
is that slowly just group feeding into the market every few months, large numbers, so
what that does is it keeps prices down and it is that sort of Australian mentality of
growth and there was winds to growth. _15:21_____ that because in Australia _____ what I call
a one-dimensional property market it is a growth market, that is how we make our money
in Australia and even when you call yourself a cash flow positive investor, you are not
making substantial amounts of money. You are making enough to cover the mortgage, repayments
and your rights and then if you like it, it is a little bit leftover, may be $20 to $80
a week if you are lucky and to me that is not enough to live on and when you have to
pay deposit for your house to get that property, is it worth _____ Australia is really a growth
focus market because that is the only way we can essentially make money here and even
people who are holding cash flow neutral, cash flow positive properties, what they are
holding out for in Australia is growth. That is how I see it anyway, other people might
see it differently. Whereas in the US, because the rental yields are so high, I do not even
worry about the growth because I am not going to try and predict it. If I am getting a 20%
gross rental yield, it means essentially I am getting my capital investment back within
about five years for the total of the property, 100% return of my money in five years which
is from cash flow. So to me the focus, I do not worry too much about growth. I do believe
it will come back, whether that is five years, 10 years but just a cash flow strategy in
Australia _16:50______. Ryan: To have the money back in five years
that is a pretty good achievement to have because you can then take that money, can
reinvest it either back into the US market or into the Australian market. Let us just
touch on if someone did want to go ahead and do it and ______ recommend that people have
teams and they do a lot more research than just listen to this podcast, but from my understanding
you would have to have the money in cash and then you would have to set up a company in
the US. Is that how it works? Ben: Essentially that works. You can buy things
in your own name and there are other structures, but the most preferred structure on the property
investment front is everyone will tell you to use the LLC, which is a limited liability
company _____17:37____ it is like a proprietary company in Australia and you are just buying
it in the name of the company and people do that for a number of reasons as a protection.
_____ if you want to joint a venture with someone because there is an operating agreement
that lays out everyone’s interests and roles within the company.
Ryan: I am guessing that a lot of Australian investors are borrowing money against the
equity in their Australian properties and then taking that money across to the US and
investing using that cash. Ben: Yes. I am starting to hear stories of
people getting finance on the property forums but typically if you are buying commercial
property, this is what I have heard on the property investment forum from guys who are
doing it. You can get up to 70% of ratios with commercial property with residential.
Angelo and Mark ______ off rating and out of their way. They can get what is called
half money lenders or I would call them second _____ lender. They are not banks or credit
unions. They are probably _____ lenders, but the interest rates are obviously much high
and they do 50% LVR, that is what I am told anyway from them. There is a company called
Peak Finance in Kansas City and that is what they are doing but they typically want about
10% interest. I am going to go see the bank and clarify some things when I am over there.
It is definitely starting to ease up a little bit. It is going to get better as we go along
in the next few years with credit for foreign investors.
Ryan: With the set up of the LLC, is that an expensive thing to do if people wanted
to go ahead and do that. Ben: You can actually do it yourself on the
line and I would not recommend that. I think it is only $150 or couple $100 dollars if
you do it yourself, but it is ___19:51____ forms you have not seen before and it is a
little bit confusing, so I use my attorney in Kansas State. You have to use an ______
set up the LLC, what you are going to buy. So you cannot set up an LLC in Florida and
buy a Kansas City property. You can try and you can, but you get some penalties _____
you essentially get fined. The have to have an LLC set up in the state that you are investing
in. Ryan: If you are going to buy in a certain
state, then set up your LLC in that state and get a US attorney to help you with the
forms because realistically they are probably going to look nothing like the forms we use
to in Australia. Ben: They are not as user friendly. In Australia,
lot of ___20:40____ government agencies, websites, everything is use friendly where as I noticed
in the US it is not the same. Some of their stuff is quite confusing. So I got my attorney
sit up and it was about $700 or $800 and did everything, he was filling out the forms and
he obviously sent them to us and then we had signed them and send them back.
Ryan: It is probably cheaper than setting up a proprietary limited company in Australia.
I am not sure exactly what the costs are of that. Are there any other tips that you would
give listeners who are thinking about investing in property in the US. I think it is too big
a topic to cover in one podcast episode, but I think just getting your experience and a
couple of tips will be really helpful. Is there anything else that you would say, this
is important, people need to know this. Ben: Read as much as you can. There are a
lot of books starting to come out now from Australians who are investing in the US. I
believe there is two at the moment and get on Amazon or Kindle. I downloaded them and
had to read. I do not know the guys or anything, but their books I found very helpful. Certainly
property investment forms get on there. That is the only advice I can give. I have got
links to my contacts in Kansas City on my blog which is free ___22:03____ interest in
it. It is on there, their phone numbers, their emails. You can do ______. If you want to
use them that is fine over. Ryan: That is at ipropertyinvestor.com.au
is that right? Ben: Yes. That is correct. Some of my US contacts
link. Ryan: So people looking, head over to ipropertyinvestor.com.au
and, as Ben said, you can click on the US property links and you will be able to find
out who Ben is working with over in the States and I guess that can help the lead for you
in terms of the contacts and if you want to look into this in more detail, we do suggest
reading books and talking to advisers before you go ahead.
Thank you so much Ben for your time today and for your story and your experience. I
think it is great for people to hear that. You have invested in using so many different
strategies, positive cash flow, then capital gains, US property market, before recording
you were saying that you have even doubled in stock markets and features like that. Even
though you started out one way, you can actually change investment strategies to achieve great
success. Ben: At the moment, ___23:25____ before I
am going to be purchasing a property to live in, in the next couple of months for my family.
I have got a young son now. At the moment I am living in a one-bedroom apartment, so
I will rent that out and move a bit further. I will get a bigger property and then I am
off to the US in late April, so should be there in late April and I will keep you posted
on what happens there Ryan when I get back. Ryan: Also we will stay in touch. Thank you
and again you guys can check Ben out at his blog, which is ipropertyinvestor.com.au. Thanks
for your time Ben and I will talk to you later. I hope you liked that interview with Ben.
As you can see, investing in the US property market is not something that we could fully
cover in one episode. It is very difficult to understand because it does operate very
differently to the Australian market. If you are on full show ___24:22_____ full transcription,
access to the video podcast. You can get that by going to onproperty.com.au/103, which would
take you directly to this episode. So until tomorrow, stay positive.

One comment on “Investing In US Property Safely With Ben Turner from iPropertyInvestor.com.au (Ep103)”

  1. MyLifeForAuir87 says:

    Question 1) if the market crashed for home values as a result of the SPM crisis, why didn't the rents for those homes decrease as well?

    Surely if there are enough people scrambling for accommodation and ending up as renters that the yield for those homes is high enough to cover mortgage repayments and then some, AND those rental payments are serviceable, this would push buyers into the market again?

    Lenders aren't going to knock back prospective buyers that can prove serviceability, what is the reason that rents went so high as a ratio of purchase prices?

    Question 2) what risk is there of the US govt re claiming those houses for their own citizens and not paying the foreign investor?

    Question 3) What's the catch? %15-20 ROI, but usually big returns don't come without big risks.

Leave a Reply

Your email address will not be published. Required fields are marked *