Saturday, 28 April 2012

How to Buy US Dollars to Purchase a US Property

To purchase our property in the US, we needed to convert Australian Dollars into US Dollars. This was a gamble in itself, making sure we got the best exchange rate and taking on all of the risks that come with forex investing. We had to make sure we got a good exchange rate when we did get our US dollars.

Our method in trading foreign currency was fairly simple, we knew there was always going to be ups and downs in the value of the dollar. We looked at the historical figures of the USD/AUD conversion rates and if the current rate was above the average then we figured it would be a good deal. This AUD/USD Comparison has the figures from 1990 to today.

The average over the last 22 years is 1.00AUD = 0.74USD. We purchased US dollars over the period of a few months ago to average out the exchange rate and managed to get an average rate of 1.00 AUD = 1.03USD which is quite high compared to the last 2 decades.

The Aussie dollar will drift back towards the 90 cents mark as the current exchange rate is having a very negative impact on the mining and the export industry as a whole. When this occurs, not only will we make money from our US property investing, we will also make money from foreign currency exchange.

Thursday, 26 April 2012

How to Finalise the Paperwork When Purchasing a US Property

When signing any official document in America, you need it to be witness by a Notary Public. A Notary Public in the US is similar to a Justice of Peace in Australia and is just as common over there. In Australia, a Notary Public is much less common (they are generally a practising solicitor with around 10 years experience) and MUCH more expensive.
When we had the offer on our first property approved, we needed to get the closing documents witnessed by a Notary Public with both of us present. As both of us work full-time as Civil Engineers and on the opposite sides of Sydney, this posed a problem. Finding a Notary Public that worked outside regular business hours and didn't cost an arm and a leg proved very difficult. A Notary usually charges on a per hour or per document fee and you will be hard pressed to find anyone to witness a set of documents for under $200.

To find a Notary Public, use this link in Australia -

The Notary Public we chose works at Chatswood and was very easy to work with. He was very interested in our US Investing and was actually working on investing over there himself. He did not have much experience with the whole purchase of a US property and the forms involved, so it was a bit of a learning process for all of us. One thing that we were very impressed with was his professionalism and thoroughness. This is crutial when selecting a good Notary Public.

When we contacted our Notary for a quote, he asked us to send him the documents via email so that he knew exactly what he had to do. Others simply gave us a figure (sometimes much less and sometimes much more than our Notary) without really giving this too much thought. Our Notary ended up quoting us for $380 for his services.

You need to be well prepared when visiting a Notary and have the following documents ready:

  • Two types of photo identification (preferably with your signatures on them like a Passport and Driver's License)
  • Proof of ownership of the company or entity that you are purchasing under
  • Evidence that your company is in good standing and is active at the time of the purchase
The whole process took around an hour (we had around 12 forms in total that we had to sign and about 6 or so that the Notary had to witness). In the end he decided to charge us only $350 for his work, a bit less than the initial quote, but still a fairly expensive exercise. When we deposited the money into his bank account, we decided to split the difference and sent over $365.

It seemed that both parties were happy with how all this turned out, he asked us interesting questions about our US investing so it was good to get some more critical information from a different perspective. It was a win-win situation that we created, which we believe is important because we intend to purchase several more properties over the next year or so.

If you are from Sydney or are visiting and would like to have an appointment with our Notary, then feel free to email us and we can pass on his information. He is very helpful and we are more than happy to use hime again.

Tuesday, 17 April 2012

Making Extra Loan Repayments

It may seem obvious to some, but I still do not think people realise the importance of making extra repayments when they do have a loan. I guess they do not see the real benefits of doing this, I guess they are just satisfied with making the minimum repayments.

Take my brother for example, we purchase a house together a couple years ago, and while we are still paying off the loan, he does not see a problem with us just making the minimum repayments. It is frustrating for me because I am able to see the true benefit of making the extra repayments. Not only can you save tens of thousands of dollars, but by owning the home sooner, a huge weight can be lifted off your shoulder by not being indebted to the bank any longer. Personally I do not like the feeling of owing money to anyone, let alone the bank, so the sooner that debt is cleared the better.

The most important thing to take into account is realising that you do not need to make significantly higher repayments to save significant amounts of money. I will use the property I purchased with my brother as an example.

Principal of $280,000.00
Loan Interest rate of 6.50% (it is variable but we will assume this for now)
Loan Term of 30 years

Minimum repayments would be $1,770 per month. So an overall cost of $637,000 for the life of the loan

Now let's assume we can put an extra $10 per week towards the mortgage, only $10, does not sound like much, just maybe go out for dinner one less night a week, have one less drink while you are at the pub, not much at all.

So now with repayments of $1,810 per month, the overall cost would be $609,750. Loan period of 28 years

So with just $10 extra per week, we have been able to save over $27,000 and 2 years off the life of the loan.

It is numbers like this that really want me to make sure I put as much as I can towards the loan.

If you would like a free copy of this spreadsheet, please click this link Spreadsheets 

If you have any other questions or comments, feel free to email us at

Disclosure: The article is not to be taken as investment advice and the views expressed are opinions only.  Readers should seek advice from someone who claims to be qualified before considering allocating capital in any investment.

Thursday, 12 April 2012

The Importance of Keeping a Budget

One of the most important steps to becoming a successful investor is the ability to save, stick to a budget and invest wisely. It may seem like common sense but the ability to know where your money is coming from and where it is going will allow you to streamline your personal finances. A budget is not just about the simple matter of working out the cash inflow and outflow. You also need to decide which of your expenses are 'needs' and which are 'wants'. It's important to note that it is much easier to cut your costs on the 'wants' rather than the 'needs'.

The first step to analysing your finances is to get a clear picture of where you are out laying your money on a month-to-month basis. Tracking your outflow does not have to be a cumbersome process and can be done any number of ways, such as:

  • writing down any purchases greater than $10 (there are a number of mobile phone apps that can help you with this process)
  • making a simple spreadsheet to track expenses (NOTE: Send us an email if you would like to receive a free budget tracking spreadsheet)
  • checking your credit card and bank account statements
The best way to get a good idea of all of your expenses is to pay for everything with your credit card and then just checking the statement at the end of the month. Another important aspect of setting and keeping a budget is to make it flexible for when your circumstances change. We recommend that you review your budget every 6 months or after you make a major purchase such as a car, house or take a holiday.

There are many free tools online that help you set and keep a budget. We recommend that you try a few of these and don't feel that you have to follow them without exception. You a budget should be tailored to your individual circumstance and be made as complex or simple as you are comfortable with.

Having created your budget, you will be able to see exactly where your money is going and, more importantly, where you can invest it. Here are our top 5 tips for creating, tracking and keeping a budget:

  1. Start simple and add more details to your budget once you have a better understanding of your finances.
  2. Use the free tools available online
  3. Split your budget into categories such as; entertainment, food, insurance etc.
  4. Allocate 10% of your monthly income to an investment.
  5. Set some financial goals (monthly and yearly) so that you can have something to strive for.

If you would like a free copy of this spreadsheet, please click this link Spreadsheets 

If you have any other questions or comments, feel free to email us at 

Disclosure: The article is not to be taken as investment advice and the views expressed are opinions only.  Readers should seek advice from someone who claims to be qualified before considering allocating capital in any investment.

Wednesday, 11 April 2012

US Banking Fiasco - Learn From Our Mistakes

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.