Own a slice of the US

OCT 2010

The head of an Australian company that has helped more than 200 investors buy properties in the US says a phenomenal, once in a lifetime window of opportunity has been presented in the wake of the US housing collapse.

According to My USA Property founder and CEO Andrew Allan, the US property market matched with a decade-high Australian dollar has created ‘exceptional’ conditions for Australian investors.

“It’s as if the financial conditions, the moon and planets have aligned. Australian investors have this huge opportunity to purchase positively geared, high yielding properties in the United States for less than the replacement cost,” he says.

“We won’t even buy into speculation about when the US property market will recover; right now the opportunity is about income-producing properties and any capital growth that may occur in the future should be considered a bonus.”

The burst of the US housing bubble is largely attributed as a major cause of the liquidity shortfall in the US banking system that led to the GFC after the Freddie Mac and Fannie Mae fiasco.

As a result real estate prices in the United States remain exceptionally low with the average three bedroom home hovering around the US$ 50,000 mark. Net rental returns generally range from 9 to 20 per cent.

My USA Property has sold real estate ranging from a free-standing home for US$12,000 to a 100-unit apartment building for US$900,000.

Allan says house prices satrt at US$500 but without undertaking proper due diligence a major risk is unwittingly inheriting huge tax debts owed on properties.

“I always say to people that we can find you three million headaches but within those are a handful of good investment products,” he says.

“Without consulting experts in the US property sector, investors face many dangers including long-term vacancies, buying in an area with a high rate of unemployment and not having the correct management, tax and insurance structures in place.

“That’s what companies like us specialise in. I don’t sit in my office surfing the net for properties.

We visit the US regularly, see the properties and conduct all the appropriate due diligence to make sure Australian investors aren’t buying a headache.”

Allan owns eight properties in the US and plans to increase his portfolio to 30 within a decade.

“There has been an exceptional response from the Australian market,” he says.

“A common investment strategy in Australia is to have three or four investment properties, then come retirement, sell one or two of them and live off the income from those remaining in your portfolio.

“The cost of doing this in Australia just doesn’t match up. In the current conditions you can buy ten properties in the US, all with a 10 per cent net rental return, for the price of one Australian house. It all comes down to the maths.