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Thank you for the Aussie info. Another question or two if you don't mind. (I happen to be sitting in a jury room waiting to be dismissed so I have nothing better to do..LOL).
What is your Tax situation should you sell a U.S. property for a profit?? Are you allowed to invest the same amount you sold the property for (Less misc deductible costs) in other property without having to pay taxes on the gain?? Especially interesting if you are taxed at 50%. Is this the same tax bracket on passive income or capitol gain or do you have a separate section of your tax code?? Conversely are you allowed to write off a loss you incur on a selling a U.S. property?? Will that write off be the same as your last dollar tax bracket or is there a separate section of Aussie tax law relating to passive loss or loss on sales on out of country real estate??
The reason for the passive loss question is should you purchase a property in the last quarter of the year you may have a total net loss for the year ending. You will be able to write off all the costs you noted. I do not know if you can write off at one time or amortize any capitol improvements you do to the property. None the less just curious how a passive loss works in Aus.
In order to make this pertinent to this web site I am of course referring to you purchasing property here in Las Vegas.....LOL
Just curious to learn more about Australia.
Unfortunately not. We would have the same situation on selling. Any US taxes would be payable and a credit would be given here in OZ. We would have to pay the full Capital Gains Tax (CGT), less what ever taxes were paid in the US. The way the CGT works is that if you hold an investment for less than 1 year, you pay CGT on all of the profit. If you hold an asset for more than 1 year, you get a discount, and only half of the profit is taxable (and added to you taxable income). This is a big part of why quick flipping of property is not common in Australia. Well that, and the Stamp Duty that I mentioned in the other post.
CGT in Australia - Straight from the Australian Taxation Office website.... Capital gains tax (CGT) is the tax you pay on any capital gain you make and include on your annual income tax return. There is no separate tax on capital gains, it is merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate.
Regarding Capital losses they work a little differently in so much that you can only write them off if you also have a capital gain in the same year you have a capital loss. If you don't have a capital gain in the same year, you have to wear the loss and don't get any tax breaks for it.
Ahhh sorry. West Summerlin is one segment of Summerlin. At the moment less than 15%. Not generally true in the rest of it. That was the point...which you and Tony apparently missed.
It has been v.popular attracting over 1,000 replies in approx 9 mths.
Synopsis is that it is focused on the strategy of buying LV REO's for cash/or cash from LOC against aus property, approx $60k, rehabbing if necessary, renting out to section 8 tenants for approx $900-1100pcm, aiming to achieve mid teen net yields. Its viewed as a 5yr +growth play, with yields padded enough that if they fall is still cash flow positive, and a currency play as described by Sanix.
Thoughts anyone?
Fishordie - would value your input on this.
Section 8 housing in certain areas with certain larger apartment type properties can and do work in most cases especially if you purchased the property at the right price. Rental amounts are dictated usually by an area specific chart and verified by an Section 8 inspector. Therefore, those who have purchased at these low rates are getting the possible benefits of higher rents being historically charged by those who paid more for their properties. However there are a ton of down sides to Section 8. I will try and give the pluses and minuses.
Pluses:
Owners renter insurance can provide some protection from damage but there will still be a deductible
The gov't guarantees a certain percentage of an approved rent will be paid by the taxpayers (The Section 8 program) thus making it easier for a tenant to pay a higher rent
Generally folks qualifying for section 8 do not want to lose their status so most, not all, try to keep some level of renter integrity. This is not to say they will keep your place in tip top shape rather they will do what ever is necessary to keep you from evicting them, reporting them to the Section 8 group and permanently removing them from the section 8 registry. Section 8 homes are generally very coveted and there is usually a waiting list to get in thus those who have already qualified and have Section 8 homes want to keep them.
You are potentially in a win - win situation in that you are hopefully helping folks who need help and you are getting a financial benefit in return.
should you have a bad tenant eviction procedures in Vegas are fairly quick unless you get a very savvy section 8 renter. There are some folks who know how to extend the process such as declaring bankruptcy or ??. I personally do not know all the ways extensions can be had without the renter paying but it can happen.
Generally section 8 folks have seen a ton of bad times and may or may not give a damn. You become the rich landlord with all the pitfalls which come with that scenario.
A good and knowledgeable manager can keep the bad eggs and loss of rents down in most cases but not all.
section 8 areas and especially complexes which have a good history of good renters can help maintain the value of the property strictly based on annual returns on investment.
Now the downside and there are more than I can list. Please note my information is based on a general and majority case scenario. Not all section 8 residents or section 8 neighborhoods apply to the following statements:
Section 8 does not pay for security payments nor will they pay for any damage the section 8 renter creates. The only 2 ways you can recover at least some of the repair monies is either from insurance if it is a big enough claim to cover the deductible or, if you are very lucky, the renter somehow stays on the Section 8 approval list and the board mandates this renter pays you monthly for the cost of the damage or they will take the renter off the approved list. In the later scenario you have to report the damage immediately to the board and probably provide repair payed bills.
In general, newly formed area's catering to section 8 housing tend to go down in value fairly quickly.
Older section 8 areas tend to be in not so nice areas or areas which have seen the erosion of value so you may not be at risk for loss of equity.
In many parts of the country section 8 can be very nice residences but I have not seen that in Vegas. In truth I have not investigated it in Vegas very far as I feel Section 8 housing is a crap shoot in Vegas on a good day and a green bet in roulette on a bad day.
Your property will have to qualify as being in good shape, meet the board requirements and possibly have some kind of regular inspection schedule to make sure you are keeping it up. The Section 8 board can require you to do all sorts of improvements or changes should your unit not meet their standards. The board will actually do a test for lead in paint and may do a test for asbestos in ceilings or insulation prior to approving your facility. If you fail any of these tests you may have to repair the issue using approved sources rather than just removing these potential hazards by cheap labor.
You are dealing with the government here. That means normally nothing is on time so although you are supposed to receive a check every month there is no guarantees the checks will not be late. The same applies to the renters portion of the rent. No guarantees for on time delivery.
Section 8 areas tend not to be the best neighborhoods. Not always but generally. Vegas has a ton of bad areas with more seeming to pop up every month. Section 8 in Vegas can be a real risky play.
Though rents rarely go down under section 8 and in truth have an escalation clause for upping rents
we may now see the possibility of the rental value of your neighborhood being re evaluated and the rents could go down. This is based on certain economic truths and a potential for losing some funding to the Section 8 programs. Should this occur you could really lose your shirt.
One or two unit complexes are at high risk for loss of income as one bad egg could be half of your rental income. Two bad eggs in a duplex is a nightmare. It would not take much bad stuff to occur to wipe out any excess income you have derived from your property and turn it into a money burner.
you will have to pay any legal or other costs for evicting a section 8 renter. I would want to know the statistics in Vegas for evictions of Section 8 renters and in particular the area you are choosing for purchase if that info is even available.
I would go on the internet and look up results of other folks renting section 8 housing in the area you are considering for purchase. I would also talk with Section 8 managers both with the government and those who simply manage residences for other owners in the area.
Without getting nasty the truth is many section 8 renters just don't care that much or have mental or physical issues. They could push the envelope and have several families stay with them in violation of the lease. They could have dogs in violation of the lease. They push you to the limit out of fear the tenant will destroy your property and then just leave not caring those renters will be removed from the pool of section 8 approved renters.
How will you feel should you evict a nice family who simply could no longer pay their portion of the monthly rent?? Not fun but again much of this can be buffered by a good property manager who does not need to report to you who and why was evicted.
Me personally I do not need section 8 as it presents too many hassles for me as I am a hands on kind of guy even though I have property managers.
Anyway that is my input for now. This investor is not touching section 8 rentals for love or money in Las Vegas or anywhere else for that matter. Best of luck in your decision but be very careful if this plan is being implemented by a money guy you are not intimately familiar with. There are scams out there of all sorts where the management makes money and the financiers (You the owner) are left holding an empty ball should those trusted money managers go south with your monies. Don't laugh this is really happening more often than folks realize.
Thanks fishordie
Lots of good info on section8.
Not that it makes much difference to most of your points - pros and cons, I should have pointed out that the strategy being proposed would be focusing on sfrs.
Is that gleam in your eye for a brand-new dream home? There's a chance you might not get it. The high number of foreclosures and short sales in Las Vegas have driven down appraised values to the...
Source: Las Vegas Review Journal
Is that gleam in your eye for a brand-new dream home? There's a chance you might not get it. The high number of foreclosures and short sales in Las Vegas have driven down appraised values to the...
Source: Las Vegas Review Journal
But but but....were at the bottom!!!!!
I gotta tell you this quote from the article just killed me:
Quote:
Real estate appraiser Ronald James of James & Associates said the market dictates new home values, not appraisals. He was assessing a foreclosure in northwest Las Vegas that looked like it had been lived in less than a year, and he could hear construction of a new home just down the street.
That would be fine and well with me...if realtors didn't push buyers emotional buttons and IF people buying were not playing with funny money. Somehow the implication of this statement within the context of the article is that the appraisers are horrible for appraising so low that people can't qualify for funny money loans.
I gotta tell you this quote from the article just killed me:
That would be fine and well with me...if realtors didn't push buyers emotional buttons and IF people buying were not playing with funny money. Somehow the implication of this statement within the context of the article is that the appraisers are horrible for appraising so low that people can't qualify for funny money loans.
The appraisal issue is pretty complex. The price differential between a classic and a REO is about $25 per SF. Even in a tract it may get to $20 psf.
The criteria on an appraisal is what a ratonal and unconstrained buyer would pay a rational and unconstrained seller. What does that imply when dealing with loan servicers?
So do you appraise to the classical or the REO or a mix?
There have been some truly remarkable appraisals in the last months. They are in fact reversible but practically it is not doable. The appeal process takes way too long.
Note that it is a very good buyers market and the pricing is generally below the rational comps...but they are still bouncing. Some appraisals are coming in well below the REO line.
The HUD stuff looks better and better as the appraisal is fixed up front. It is however still a procedural challenge. Nothing is ever simple on a HUD.
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Another damn Aussie
