How to invest in real estate (even without cash)

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Investing in residential property can come at a steep price. Having reserves of cash might be easy for millionaires but for most of us, it’s difficult to save for real estate and meet your daily expenses at the same time. This can also be true of foreign investment opportunities. As well as ready cash, there is the physical distance and red tape to navigate. People are “fear-frozen” about the idea of investing in property abroad because they believe there are too many challenges involved.

 

Many people who look to invest in U.S. property are ultimately too afraid to take the risk because they believe they don’t have the finances to do it and because it’s halfway across the world. 

 

But the reality is that there are different methods to invest without cash, even in the U.S.A. Overcoming that fear-frozen state will open your eyes to the various means you can try. Lending, joint ventures, and making land contracts with the owner of the property are just some of the methods that you can consider to avoid having to empty your bank account. 

 

Savvy investors utilise these opportunities and often rarely ever use their own cash to invest. 

Why the U.S.A residential property market?

 

The U.S.A residential property market is white-hot right now, causing foreign investors to flock to these untapped properties. Record low interest rates, increased activity, and the reassurance that the market is unlikely to crash any time soon (unlike the 2006 housing bubble) is luring more people to learn how to invest and create another stream of income.

 

Your chances of landing a great residential property at a low price is higher than ever. Properties in Australia and New Zealand can sell at ridiculously high prices, but the U.S is a different story. A down payment in Australia can be the entire property’s price (or even more) in the U.S.A with a staggering range of properties to choose from across all states.

 

Banks and lenders have learned from the mistakes of the past and have rigid practices in place to ensure the malpractices that crippled the economy in the past will never occur again, giving investors peace of mind.

 

Since the Covid-19 pandemic hit, people have become more active in seeking out homes in less populated areas to escape COVID hotspots. Working remotely also had people purchasing homes in quieter locations in order to better focus. This caused a spike in the market that investors abroad are now taking advantage of. 

 

The exchange rate between Australian and New Zealand dollars with the American dollar has recently improved, potentially making your investment even more powerful.

5 ways to get funding in the U.S.A market 

There’s no need to empty your pockets in order to make financial investments in the U.S.A. market. You can get savvy about using other people’s money. If you’re looking for ways to invest in real estate, these five methods are all feasible and often used by more seasoned investors.

1. Option to buy

 

Option to buy is a funding strategy that allows you to have the right to purchase the residential property without technically owning it. It means that if you find a property you want to invest in, you can buy an ‘option to buy’ contract that allows you to be the only person the property is sold to. That gives you breathing space to do some hard research on the property’s current and future value as well as get funds together for payment within that buying period. 

 

Because you have a legal contract you can even sell the house to another party for a higher price if you like. It’s a no-obligation, risk-free strategy that gives you full control over a property without putting down a lot of money.

 

While this sounds like an investor’s dream come true, it comes with a deadline, you won’t have exclusive rights to purchase the residential property forever. There will be an agreed time period for the buyer to make the required payments.

 

Typically an agreement period will range from 30 to 90 days, however, there are instances where it has taken months or even years for the seller to gather enough resources to buy the property. It all comes down to the terms of the individual agreement.

2. Private equity

 

Private equity (also known as hard money lending) is financed through private lenders outside of traditional lending institutions like banks. Private equity is the quickest way to get funding and secure ownership over a residential property, which makes it a favourable choice.

 

Keep in mind that loan terms are short compared to banks and traditional lenders. While most standard loans last five to 10 years, hard money lending can be completed in timeframes as short as six to 15 months. 

 

There are also private equity mortgages that can be an exception to the shorter timeframe. It spans anywhere from five years to 30 years, depending on the agreement. Private equity just generally has higher rates than conventional funding. 

 

Private equity is more lenient and loose with its terms as you’re not dealing with the rigid guidelines of banks or big lending institutions. In a matter of days you can receive the money for your investment, carry out renovations and make quick fixes to flip the residential property for a higher price. House flippers are a fan of this type of lending as it’s fast and easy. 

3. Joint ventures

 

Entering into a partnership with another investor (be it family, friends, or a willing third party) can be a great way to make a big investment and keep your personal finances stable. Even if your funds are low, your partner in this venture will contribute, making it easier to land the property.

 

The danger of this funding strategy is that not everyone involved in the joint venture will be on the same page. For this strategy to work, all parties need to be clear on what direction you want to be taking. Steer clear of joint ventures with strangers and discuss the outcomes well ahead of time. As always when money is split, there can often be arguments about who gets what. It’s essential you have good communication and completely trust everyone invested with you.

Joint ventures require every party to be satisfied with the agreement and how they’re working together to avoid a falling out. Make sure you cover yourself with the right documents so everything can be traced back to written agreements. 

 

Pooling resources is a great way to keep from overspending and secure the residential property you jointly want. At the end of the day, everyone is responsible for the property and the profit they receive from it. 

4. Borrowing against current properties

 

While not all of them do, some lenders may be open to lend against overseas properties. Usually, you need to borrow the funds in the country/ies where the property is, then use those funds to purchase the property in the country of choice. 

 

For example, if you have a property in Australia, you can get a line of credit loan and take those funds to buy a U.S. property. This is the common approach when it comes to using your current properties already.

 

But if you have the chance to loan against property/ies, you use your home or a secondary property as collateral. Instead of using money or credit, you use the difference between the total value of your property/ies and the loanable amount. 

 

This funding strategy can be a little more personal because a seller might look into your credit score and financial history in order to determine whether or not you’re a good candidate for their property, however, it’s a great way to invest without having to dole out cash.

 

Interest rates worldwide are generally lower, so borrowing against current property/ies can be a great way to rekindle an investor’s interest in their investments and see what equity they’ve built up. 

 

Of course, this method has its own drawbacks. If you borrow the money against your current properties and fail to make repayment schedules, your property/ies can potentially be put at risk. 

5. Land contract

 

Land contracts require you to make an agreement with the property owner where you pay an agreed-upon percentage upfront and then pay the remaining balance with an interest component.

 

The period of time this takes can be negotiated depending on how much time you need to do renovations and re-sell the property. When you sell it, you can pay the owner the rest of what you owe. 

 

This strategy can be a complex one. In a seller’s market, a seller has the flexibility to choose the most favourable buyer for their property. Buyers who can make payments in full might be the preferred choice. In spite of this, it’s still a viable option.

 

Investing in real estate doesn’t have to drain your pockets and leave you high and dry. There are plenty of options you can choose from that will have you spending just a bit of cash or even none at all. By being diligent, careful, and mindful of your repayment ability, timeframes and agreements with others, you can invest in real estate in the U.S.A and get a premium choice of properties at an affordable price to start bringing in additional income. 

 

If you want more information on how to invest in the U.S. market and what options are available, check out this video Masterclass I recorded recently.

Customer story: “Significant returns—without having to lift a finger”

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A lot of people who want to get into investing tend to hesitate when faced with the opportunity to do so abroad, but investing in the U.S.A as an Australian is definitely a great option, even if it can seem daunting. Investment in itself can already feel like a game of chance, even more so when you can’t see the property in person.

 

Plenty of Australians don’t consider investing in the U.S.A property market because it’s so foreign and they think that a property that far away will cost them more time, money, and energy. But what they don’t know is that plenty of foreign investors find the U.S.A property market immensely rewarding (especially right now) and a great place to get significant returns. While the investment process will be different, our team at Star Dynamic can make investment easy and fruitful for anyone willing to try.

 

Pharmacist David Tran seized the opportunity to invest in U.S.A residential property through the recommendation of a friend who already experienced the benefits and ease of using Star Dynamic for their own investment. David had revenue to invest and had already tried his hand at investing locally so he thought to look beyond Australian borders and wanted to try something new. 

 

“If you want different returns, you’ve got to look somewhere different,” said David. “It’s low risk, with potentially even greater reward. So it is daunting because it is in the U.S.A and you’re not just going to fly over there… But at the end of the day, it’s all about the numbers to me.”

 

Many Australians, like David, have taken the chance and found success in the U.S.A residential real estate market. Today we’re sharing David’s story of how he leveraged international property investment to build the future he wants for himself and his family. 

Investing in the ‘great Australian dream’ first

 

When it comes to residential property investment, most people look to their local community or neighbouring areas first, and it makes sense to have that extra control, to be close by and hands-on with the purchase and have the ability to check-in and keep an eye on things. 

 

David felt the same initially and took on a number of different Australian-based investments to get different returns from local real estate, buying and flipping properties, but he came to realise that the local market was small and it was becoming harder to secure property investments. 

 

“It’s all about finding the deals. If you invest locally, your market is going to be very small, especially where I’m from where our population is a lot smaller,” David explained. 

 

He came to the conclusion that there were better opportunities elsewhere. It wasn’t as if the numbers were dismal, but he acknowledged that, in comparison to what he could be getting, his effort, money, and time could be rewarded when invested elsewhere. 

 

“The numbers worked but they weren’t that great compared (to the U.S.A). It’s effort and reward at the end of the day,” said David.

 

This led him to investigate how he could potentially flip properties and have higher passive income. “When COVID-19 hit and everything was locked down, I started googling and talked to my mates a bit more to figure it out. I’m at that stage where I’m in my late 30s, I figured that I’ve got to start doing something a bit different.”

Why David thought “abroad” for his next property investment 

 

At 38 years old and with two young kids, David wanted to put himself into different scenarios that brought about greater returns, luckily he was “okay with being uncomfortable” in terms of investing. After hearing about Star Dynamic and our CEO Lindsay, he decided to take the leap and gave us a call. 

 

“I looked at the U.S.A market before randomly but not seriously. But if I was going to do it seriously, I wanted to engage with somebody who knew what they’re doing. So when I had a quick phone call with Lindsay, the feeling I got was he was a quite honest person to deal with so that gave me the confidence to try it out,” said David. 

 

The U.S.A market, being much bigger, had more potential in David’s eyes. Because the U.S.A market has little to no stamp duty, longer-term mortgage rates, and fewer market restrictions, it easily became a priority choice even amidst good local property options. 

 

The potential returns were just greater compared to local numbers, especially when you can buy a house in the U.S.A for the same price as a deposit on an Australian property, making it low risk because the money down is so little compared to Australian investments. 

 

While you can profit from both (as David has), the U.S.A has brought about higher cash flow for many investors because of the stronger rental yields. That’s not to say that it’s perfect and easy, you still have to do your due diligence and research the area and its properties and then make the required renovations, but it’s definitely worth the effort you put in, especially since it’s a foreign market.

 

And the numbers can’t be argued, there really are more properties in the U.S.A compared to Australia. David knew that if he were to invest and flip again, he would look to the U.S.A.

 

“I probably wouldn’t look too much into residential real estate in Australia again, to be honest. Just because there are only so many properties here that you can invest in whereas in the U.S.A there’s just so many properties and opportunities.”

A done for you service to suit a time-poor investor 

 

This still doesn’t eliminate the fact that a foreign market may bring foreign practices or paperwork, some that you might not have the expertise or time to learn about and execute. 

 

But, just as we’ve helped our customers in the past, we helped David with our “done for you” service where we take care of everything from start to finish, making it the perfect add-on for anyone who’s got a lot on their plate but still wants to reap the benefits of a good investment. 

 

“I decided to sign up to the Done For You service where the Star Dynamic team manages it all for you. It took me a couple of months to get the property. Lindsay finds the deal, presents it to you, you look at the numbers and see if you’re fine with it, and then you go with it,” said David. “It’s a bit nerve-wracking in the sense that you’re literally just handing over money, you don’t know if it’ll work or if you’ll ever see this money again, but it came down to that honesty, that trust, and how genuine I found him so I thought that I’d give it a go.”

 

As a business owner and father, David didn’t have the time to check in with a team in the U.S.A or look through properties on his own, so he left it in our hands to take care of his investment and put the money into a good property.

 

“I’ve got two young kids, I’m quite time-poor, so for me it was that I had a bit of spare cash and I wanted to see what sort of a return I could get out of that,” said David.

 

Like with all investments, we approached David’s using the STARR method (strategy, team, acquisition, renovation, realisation). By implementing a good plan and hiring a team on the ground in the U.S.A, we acquire the property, renovate it to our client’s liking, and then our client is rewarded with their hard-earned profit after they sell or rent out the property. 

 

After buying a home in Detroit we found for $50,000 and flipping it (renovations added up to be just under $20,000), David sold it for $119,000. 

 

“The process is actually quite easy, considering. It’s a lot of paperwork but when you look at your potential returns and what you’ve actually got to do, I mean, where else are you going to get those returns in that short timeframe? It may not always be the case, but the potential returns, without having to lift too much of a finger, are pretty good,” said David. 

 

David speaks highly of working with Lindsay and found him to be a very honest and genuine person. David said that he was “easy to get a hold of” whether it was through emails or phone calls and that Lindsay eased any and all of his worries about investing abroad, so much so that if money comes through again, he said he would “definitely give it another go”.

 

Investing abroad isn’t as scary as many think it is. David’s property investment success can be replicated by anyone looking at investing in U.S.A residential property, so long as they have the help and support from a reliable and skilled team who know what they are doing in a foreign market. For people like David, and all our other clients at Star Dynamic Property Investment, investing in the U.S.A was low risk and resulted in significant returns. 

 

If you want to find a bigger market with bigger returns and have someone else do the hard work, give us a call. 

Linz’s Musings – Finding your true centre

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Spring is certainly upon us, and with the days here starting to really warm up, more sunshine and footy finals upon us, it gives us that small ray of hope in a relatively grim view from lockdowns on the East coast.

And while I am certainly not going to sit here and tell you whether you should or shouldn’t be getting a J A B, I am going to suggest to make sure you listen to your heart…

I mean REALLY listen…

There is so much noise, so much conflict and fear being thrust on us at the moment (media, news, environment etc) that it can be almost impossible to actual hear yourself think through all this.

Fear, anxiety and stress all comes from a place of weakness.  When you are not aligning with your core values, anxiety and stress are the indicators your body gives you, the ‘signs’ if you will that something is off.

I spent all last week with my coaches struggling with this exact issue.  With so much going on, it is so easy for us to be knocked off course and end up wandering around the wilderness, not on our true path at all.

So my wish for you, is stop… take stock of where you have found yourself and get centred again.

Whether it may be mediation, reflection, prayer, exercise, reading… whatever form it takes for you to clear your mind of the rubbish and be back in a place that you can really listen to your heart.

Your core beliefs.

Suddenly you will start to hear them again, and once you are back on that path, there is a peace, a calmness…

Even though the storm is raging outside, it is like you are now in the eye of the storm.  It is here you will truly hear what you need to do, what you are being called to do.  Then do that, whichever choice it is, that is your ‘right’ one.

Its not my right choice, or your partner’s right choice, or even your children’s or parent’s ‘right’ choice… but yours.

As Rudyard Kipling wrote in his poem IF –

“If you can keep you head when all around you are losing theirs, and blaming it on you…”

This is the true meaning of power, of strength.

But first, we must really listen to our core beliefs, it all starts at our centre.

7 best U.S. states and cities to invest in

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With 50 states to choose from, it can be overwhelming to decide where to invest in the U.S.A. Narrowing down your property search can also be challenging (in a good way) since there are so many promising residential properties in each state and city. 

Having numerous options across the country has only encouraged more investors to look into residential properties in the United States to boost their income and create financial stability.  

According to the Bureau of Economic Analysis (BEA), the cumulative level of investment in the U.S.A. from abroad increased from $158.6 billion to $5.96 trillion at the end of 2019, proving that there’s a strong return on investment in U.S.A. for foreign investors and that the market is only going to get hotter in the foreseeable future.

Why investing in the U.S.A. is a good idea

It’s understandable to feel apprehensive about investing in residential properties in the United States given that it’s half a world away from Australia. But this is easily remedied by hiring a dedicated, trustworthy team in the U.S.A. who can take care of your property so you don’t have to worry about the distance. 

The investment is definitely worth it once you consider how much cheaper residential property in the U.S.A. can be. To compare, a down payment of $100,000 for a property in Australia is already an entire real estate investment in some states of the U.S.A. 

Plus, the U.S. housing market is booming, with prices appreciating and the residential property trends pointing upwards. The uncertainties brought about by the COVID-19 pandemic has caused people to worry that this white-hot market will have a similar pattern to the housing bubble (and subsequent crash) in 2006, when lenders were more lax about background checks when approving loans for homebuyers and investors.

But the residential property market is unlikely to crash anytime soon, with stricter lending policies in place and hardset compliance enforced. Just keep in mind that it’s unrealistic for the market to maintain its upward trajectory forever, so it’s best to strike now while it’s hot.

7 states in the U.S.A. to consider investing in

Deciding where to invest in the U.S.A. requires careful consideration so that you get the most out of your investment. Fortunately, we’ve narrowed down the seven most ideal states and cities to investing in residential properties in terms of prices, taxes, and location. 

1. Michigan

 

Michigan is one of the best states in the Midwest to invest in because of its affordability. It’s one of the top ten states with the lowest cost of living and cheapest prices to purchase a house. It’s also a profitable location to invest in a residential property as the majority of people prefer to rent out a house than buy one themselves.

Recorded as the most populous city in Michigan, Detroit has been experiencing a skyrocketing demand for family rentals because the median price for a single family home is still below $100,000. This ensures that the rental market in the city leads to profit and positive cash flow for property owners.

The affordability of housing in Detroit allows you to purchase a great residential property for a low price in exchange for high returns and great market appreciation, especially if you rent it out. 

We’ve seen this city’s potential firsthand as we’ve helped our clients find low-cost properties in the best Detroit neighbourhoods so that they can get significant return on investment. 

Detroit had fallen back since the decline of the auto industry and the Great Recession in 2009, but the Motor City is definitely making a comeback now with new infrastructure, new electric vehicle plants opening, and even a large Amazon distribution centre! 

Further, Ann Arbor, Grand Rapids, and even Lansing, with it’s ‘medical mile’ of medical equipment manufacturing market booming, are all excellent cities to look to invest in.

2. Texas

 

Investing in Texas real estate is a “no-brainer”, given that almost two million people in the country moved there since 2010 because of the affordable housing and the work opportunities it had to offer.

Because it has so many options, Texas has varying levels of growth in terms of the housing market. Dallas, Houston, San Antonio and Austin are all considered high-growth markets because of economic growth and demand for housing.

Dallas offers plenty of choices for residential properties, making the housing market accessible for investors and potential renters alike. It also has a diverse economy, allowing people from different income levels to thrive in the city. San Antonio and Austin are also booming, offering similar growth and possibly even lower costs than Dallas or Houston.

It has the lowest rate of home ownership in the country as it’s more cost-effective to rent than to buy. The rising demand for rental properties is another enticing reason for investors to consider San Antonio or Austin as their city of choice.

3. Nevada

 

Nevada gained its moniker as the “Silver State” because of its silver rush days during the 1800s and, even now, mining is a crucial component to its economy. The state is the world’s fourth largest producer of gold and over 2,000 businesses are connected to mining in one way or another, which results in more work opportunities in mining companies and more people looking for housing.

As Nevada’s world-famous city, Las Vegas is still one of the premier real estate investment locations in the U.S.A. Aside from its booming tourism and entertainment industry, the city is also home to a thriving industrial sector including technology and finance. 

Locals and tourists alike reside and visit Las Vegas for a host of reasons: Work opportunities, housing market, incredible attractions, business conventions and trade shows. The pandemic hasn’t slowed this down one bit. Because it’s an international destination, Las Vegas has implemented safety measures against COVID-19.

People go to Las Vegas year-round, which is a good sign for investors who want to enter the renter’s market since people are consistently looking to rent in the city for short-term or long-term stays. 

4. Georgia

 

According to a recent report by the  U.S. News and World Report, Georgia ranks as one of the best states to live and work in and it received high ratings for its infrastructure, fiscal stability, and steadily growing economy. U.S. News also ranked Georgia as the 18th most affordable state for housing in the country, contributing to the upward trend of the local real estate market.

In fact, Atlanta is one of the fastest growing cities in the country, ranking fourth with the most residents in 2019. It’s also home to headquarters of Fortune 500 companies like Coca-Cola, The Home Depot, and UPS. The cost of living in Georgia’s capital is less than half as in cities like Manhattan, proving now is the best time to invest in Atlanta. 

There’s also a growth of capital as homes in Atlanta have increased in value by 5% while maintaining low interest rates for investors.

5. Florida

 

Florida is a renowned tourist destination with year-round sunshine, diverse and dynamic economy, and a thriving global business sector.  It’s unsurprising that people continue to flock to the Sunshine State and its population is expected to grow beyond 22 million by 2022 giving a serious housing shortage. 

Orlando is a great city to invest in Florida as its economy is booming because of its international tourism attractions like Walt Disney World, Universal Studios, and countless others. Investors can choose to target either long-term residential or holiday markets with their properties as both offer great returns. The market is also diverse because every neighbourhood has something to offer to everyone, whether you’re a single, family or first-time investor.

The city is also on its way to recovering from the COVID-19 pandemic with safety precautions in place while vaccines continue to be easily accessible to residents, making it a smart city to invest in.

Further, if the Orlando market is a touch pricey for your budget, Tampa and Fort Myers, on the West Coast, are seeing an amazing influx of people, great booms in values, and certainly more affordable.

 6. Idaho

 

Idaho has a growing job market and it’s become the state with the largest employment gain in the country, making it an attractive location for both potential residents and investors. A large percentage of people moving to Idaho are young entrepreneurs and technology-focused employees, which has resulted in an increase of business startups and a tech-centred economy.

Boise in particular has experienced an increase in population of 2.9% from 2017 to 2018, with the majority of newcomers prefering to rent rather than buy. This makes it a great opportunity for investors to snap up a bargain.

Boise may seem unassuming but it’s been recognised as the best place to buy a home in 2019. It offers diverse neighbourhoods for different kinds of people including the trendy Boise Bench area for millennials, the community-oriented North End for young professionals, and the prestigious Harrison Boulevard for well-to-do residents.

7. Illinois

 

Illinois is a geographically diverse state that’s home to agricultural regions, urban and industrial cities, and even natural resources like coal and lumber. More than 30 of the Fortune 500 companies call this state home including Boeing, Walgreens, McDonald’s, and Kraft Foods. It also has a diverse economy fueled by different industries like finance, livestock, manufacturing, agriculture, medicine, and biofuels.

This economic stability makes Illinois an attractive location to invest in. Although you’ll find different real estate options across the state, many of the best residential properties are found in Chicago.

Demand for housing in suburban and city neighbourhoods in Chicago are steadily rising, pushing home prices to rise exponentially in 2021. The Windy City is also known as the business and financial center of the Midwest, and its growing economy and overall affordability contribute to the great quality of life that residents experience. 

 

It’s also home to a great arts and culture scene, with more than 400 theatres and art galleries and 552 parks. 

Narrowing down your investment options isn’t easy when there are so many great locations to choose from, but reviewing these seven states and cities is a great place to start when it comes to investing in the U.S.A., given that they promise high returns to your potential residential property investment. 

If you need help choosing which state (and city) to invest in, book a call with us. 

Linz’s Friday Musings – Don’t lose focus

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As another Friday comes to a close (well here in Oz anyway) we close the chapter on another week in our lives.

It’s a great story we are all creating – unique, jam packed with action, drama, and suspense (oh, and lockdowns!), and I am sure it would certainly make for interesting reading in time; sitting on our front veranda at age 85 reading to our grandkids or great grandkids the story of our lives – them sitting in awe at the twists and turns…

But how will YOU like the story?

Think about how you will FEEL when reading to them? Will you notice the missed opportunities you should have taken? Will you regret the decisions you didn’t make at crucial crossroads? Mourn for the missed time you had with family and friends at times we were “too busy” living and ignored life?

It’s hard when we are up to our neck in crocodiles and viruses, to really see when we are at a crossroads, and often how important is that next decision. In hindsight, we can look back and say “Wow, if only I had taken that step to do <insert thing here> how different might my life have been!” But at the time, is just another thing, that in our busy day to day lives, we just dismiss… I don’t have time… oh, sounds good, but I will do it later…yes I would like to, but not right now…

Then, soon turns into later, and later, and we keep missing these chances.

Particularly right now, with most of the country in some form of restrictions, the pressure on us is almost at breaking point.  It is very easy to miss opportunities as they present, or even just miss living…

And I don’t mean existing, I mean really being in the present, noticing all life around us.  Do you see how the wind rustles the leaves of the trees?  Maybe notice what your pet is doing, right now.  Don’t let the pressure force you to miss life, and to live to the fullest.

Even if we can’t get out and travel, forge that story of life; those next chapters in the book – with excitement, experiences, growth and learnings…don’t just rewrite the last chapter again..