Sunday 24 June 2012

OzForex

OzForex Foreign Exchange Transfers 

Sending money overseas can be expensive if you are using the major banks or money exchange companies like Travelex. Thankfully, Streamline Investing have partnered with currency specialist OzForex, Now you can transfer money overseas faster, with minimal to no fees and at a great rate. Their fee is only AUD15.00 for transactions of under AUD10,000, free for above AUD10,000 and their exchange rates are much better than banks and other providers. Best of all you can do it anytime you like online or by phone as they are open 24-hours a day, every business day!

By using OzForex you will enjoy:
-       No receiving bank fees in most countries
-       Extremely competitive foreign exchange rates across 18 currencies
-       Online access 24/7
-       Access to a dedicated Dealer by phone 24-hours a day, 5 days a week
-       Complete exchange rate transparency
-       No transaction fees for amounts over AUD10,000
-       Risk management tools through Limit Orders and Forward Exchange Contracts
-       Exchange rate alerts via email
-       Access to our highly regarded daily and weekly Market Commentary

To speak to one of their accredited dealers about your foreign exchange requirements call 1300 300 424 in Australia (0845 686 1950 in the UK; 1800 680 0750 in Canada or 0800 161 868 in NZ) or register online. Registering with them is FREE and you can view their live dealing rates immediately.

By subscribing via the link below, you will receive your first two transactions fee FREE: OzForex Registration   

Wednesday 13 June 2012

Difficulties with Time Difference



Obviously one of the biggest issues with investing in US Property is the fact that you are on the other side of the world, so ultimately, the power of control is taken out of your hands. At the end of the day, being so far away really forces you to be hands off with your investment. This means your total investment is in the hands of your property managers over there, one of the reasons why it is so important to have a solid team working for you in the US.

One of the biggest issues which I did not realise would become so relevant, was simply the time difference. In the internet age, it is so much easier to communicate with the other side of the world, allowing you to invest your money wherever you want. However there is one problem with communicating with people in the US. When I am awake and ready to communicate, they are asleep, and vice versa. 

The last week of so I have been in constant touch with our insurance broker, every day I have been firing off emails to her. But by the time I wake up and send it, she has gone home from the day, and when she sends her emails to us, I am already fast asleep. Looking at a typical work day in Florida (where our investment property is), 9.00am - 5.00pm, that converts to 11.00pm - 7.00am Sydney time. It has made it very difficult as I am not typically available between 11.00pm and 7.00am, so our email conversations typically consist of just one email each day. Meaning a decent exchange of emails can take up to a week just to get through. The timezone difference just makes everything so much slower than it would if you were investing in Australia, where you could quite easily just talk on the phone with much more appealing time zones.

We are lucky our property agent is more dedicated than a typical 9am - 5pm worker, where she seems to be able to be contacted almost any time of the day, and quite often get a reply fairly quickly. Without this dedication to her job, I can't imagine how much more difficult it would have made the whole process.

I know it may not sound like a big thing, but it has definitely added to the difficulties with investing over in the US. It is something that needs to be taken into consideration, possibly investing on the Western coast of the US might make things a bit easier

Sunday 10 June 2012

Is it worth spending the money?



With our first property in the US. We had to carry out some small renovations to get it up to scratch in order to find a good tenants. Most of the renovations were only small, such as painting walls, repair some minor damage and clean up the property as it had been left vacant for a few months.

On the quote from the contractor was replacing the carpet with tiles. There is obviously a benefit with tiles compared to carpet with regards for an investment property, as tiles are typically more lasting and can be cleaned a lot easier. The existing carpet was slightly worn and had a few stains, but overall it was not in too bad a condition. The quote to replace with tiles was $2,900, we opted not to spend the extra money and just hired a good carpet cleaner for $200 to give all the carpet a thorough clean.

After the carpet cleaner did their work, the carpet was a lot cleaner, but there was still an issue of smell, aparently the old owner had animals, and the smell of dog was almost ingrown into the carpet. Having not being able to visit the property we only heard the issue from our agent, and we were told that although it was not great, it should not stop us getting a tenant.

When we started looking for a tenant, we received a positive response on the property generally, apart from the smell of the carpet. That was the deal breaker with the first few groups who were looking at the property. Due to this, we had to reduce our advertised rent from $800 per month to $700 per month. There was also the delay of approximately 1 month due to the vacant property which we had to deal with. I cannot say for certain that the property would have rented right away for $800 per month if we did replace the carpet with tiles, but I am confident that this would have been the case.

So if we did initially spend the money to replace the carpet, then we would have made back our money in a couple years. Not to mention, replacing the tiles would have also added value to the property, so any money spent on renovations for the property would have been instantly rewarded in a capital gain.

So although we still receive a decent return, it seems it may have been worthwhile replacing the carpet with tiles while we were renovating the property. I guess it is just important to know if improvements you plan on doing to the property, will really be worth it in the long term. Down the line we may plan on approaching our tenant about replacing the carpet with tiles, and perhaps negotiating a higher rent from them, so all may not be lost.

If you want more information from our experience, or any other comments. Feel free to email us at streamlineinvesting@gmail.com

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.


Tuesday 5 June 2012

Huntdale Street - Lehigh Acres PHOTOS

Our property on Huntdale Street in Lehigh Acres, Florida was our first property. 

Click here for a map to the location - LINK

See below for some photos of the property so you can get an idea of what $44,000 can buy you in this area. 







We had to spend approximately $4,000 on renovations to get it up to rentable condition. Not much was required however, just some general cleaning, a new door was required for one room and painting of most of the rooms was needed. Please see below for some photos after the renovations were complete.







Saturday 2 June 2012

First US House Expectations



There is no point investing without a plan. If you simply choose to invest and do not have a goal, then most likely you will not succeed. Of course you may get lucky, but investing and just hoping to get lucky, is not really a strategy. Definitely not a successful one. 

That being said, with our US property investing, we were not 100% sure how well it would work, our plan was to purchase one property, if it worked out well, then we could continue this and keep purchasing more and build our portfolio in the US. If we found that the US did not work well for us, then we could cut our losses and get onto a different investment strategy.

Because we were only hoping to invest $50,000 for our first US property, it would not break the bank if we failed, whereas if we invested in Australia, we would still have a significant mortgage lying over our heads. This is why we felt that investing in the US, although it may seem a lot riskier, we actually think due to the lesser investment amount, it is almost a safer bet than investing in Australian property.

Below I have outlined what we initially predicted our investment to be like in the US, we were hoping to be conservative so that there was more chance of us surpassing our expectations, rather than not meeting them.

Initial Information
House Price + Renovations = $50,000
Monthly Rent = $750
Gross Yield = 16.8% (not the highest that we have seen in the US, but we were comfortable with this amount)

Deductions
Property Tax = $1,000
Maintenance = $800
Insurance = $850 per annum
Vacanct Rate = 5% (750 x 12 x 0.95 = $8,550)
Property Management Fees = 10% of gross rent  ($8,550 x 0.1 = $855)
Tax = 30% ($8,550 x 0.3 = $2,565)

Net Return
This gives our net return of $8,550 - $855 - $1,000 - $800 - $850 - $2,565 = $2,480
Net Yield = 4.96% 

The return does not look that impressive and it seems like you could invest in a high interest term deposit and receive a similar return, however it is important to look at the capital gains aspect of it. If the property value increases by 5%, then the net return will go up to almost $5,000 or near a 10% yield return.

Now that we have our first property, I will be keeping track of all expenses for the property and can see if our initial assumptions were accurate. Hopefully by learning more information we can refine our assumptions for future investments and be able to make more accurate information.

If you would like more information about our US Investments or anything, please send us an email at streamlineinvesting@gmail.com

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.






Friday 1 June 2012

Insurances for our US Property



With our property in Florida recently being purchased, and the renovations just about complete. The next step was to ensure we were insured properly. One of our biggest fears was that a tenant would slip over in the shower and then sue us for everything we had, probably a bit dramatic but was still a real concern for us. Even though we have the property owned in our LLC, we thought that this meant the total liability we could be facing was everything the LLC owned, i.e the property. I mean this is what Limited Liability Companys are used for right? To limit the liability, at least that is what I initially believed. Although it is true in most cases, in the situation where the owner of the house has been extremely neglient and there is a serious injury or death due to this neglience, then the law system may have the power to go after the personal assets of my business partner and I. 

To be honest, I have not looked into the potential to be sued as an individual too much, I have only been told that is is a possibility, especially in America where anything seems possible. Due to this, we have to make sure we protect ourselves as best as possible with all the necessary insurances. Our property agent set us up with a contact who is able to sort out insurances for us, she recommended that we procure three different insurances for our property

Flood Protection - although in a 'low risk' flood zone, it is still recommended
Personal Liability - otherwise known as Umbrella insurance to protect the landlord for being sued as above
Property Insurance - self explanatory, building insurance should the property sustain significant damage

We initially received quotes for the insurances and below were the premiums (received on 24/5/2012):

Flood Protection - $343 per annum
Personal Liability - $410 per annum for $300,000 cover
Property Insurance - $1,826 per annum

The property insurance quote definitely raised my eyebrows, it was a fair bit higher than I initially was hoping for. Also along with this, due to the age of the property (it was built in 1966) we were required to have a roof stability report carried out, as well as a wind mitigation report conducted. To be honest I don't even know what a wind mitigation report is, I assume it just analyses the capacity of the property to withstand strong gusts of winds? Anyway, each report is only about $100 each so I have no problem getting them both carried out to satisfy the insurance company.

Back to the $1,826 quote for property insurance, looking through the quote, I noticed the property is being insured for $192,000. This seems a bit ridiculous seeing as only paid $44,000 for the property and spent $5,000 on renovations. So I would expect we only require it to be insured for around $75,000 to fully cover our investment on the property. Flood protection was similar, the property was being covered for $200,000, well over its actual value. Also there was contents insurance associated with the flood protection to the sum of $80,000, which again is not realistic as we not be renting out this property furnished, so we would only provide the bare minimum to the tenant, assume only $10,000 cover would be required for contents.

To be honest I am curious how this works, seeing as my home insurance for my house in Sydney is only $640 per year, and I paid $350,000 for this property a couple years ago. And yet, a property over there worth $44,000 requires $1,800 in insurance a year? Three times the cost of insurance for a property worth an eighth of what mine is in Sydney, it really does not make sense. I do understand that they are looking at replacement cost of the property, rather than the actual property value. So it very well may be that it would cost $192,000 to rebuild the property. But still, when I put the same property details into a quote generator with AAMI Home Insurance, the home insurance premiums were still only $750 a year, so I really do not understand where the extra $1,000 or so comes from.

After emailing the insurance broker, we found out that $1,200 of the cover for the home insurance was for wind cover. This seemed very excessive seeing as the property is relatively inland (approximately 20 miles) so most of the damage from a hurricane would subside, and also the property has been around since 1966 and never had wind damage previously. Due to this we opted to remove and wind cover for the property, bringing the property insurance level to $586. We were also able to reduce the flood protection cover from $200,000 to $100,000, which reduced our premium by half down to $174.

The final amounts we ended up paying for our property insurance were -

Flood Protection - $174 per annum
Personal Liability - $410 per annum
Property Insurance - $586 per annum
TOTAL - $1,170.00


To be honest it was still a bit higher than we initially were hoping for, but I guess it seems like a standard rate for the area so not much we can do about that. Removing the wind cover makes the total cost a lot more accessible for our budgets. It should also be noted that the personal liability insurance should be able to cover us under all of our properties, not just the individual property.

I was also talking to another investor who opted to not provide any property insurance, their argument was that they would most likely not bother claiming on the insurance for anything minor, and anything major is such an unlikely event that it was not worth worrying about. Their typical property value was around $40,000 and by saving the $17,000 a month in insurance fees (they had hundreds of properties), as long as a large fire or similar didn't occur more frequently than every 3 months, they would come out on top. I believe they are happy with their situation and have come out on top without using insurance at all. This is definitely one approach that can be taken, however for our first investment, we have chosen to have some security for us, if our port folio substantially increases and insurance starts eating significantly into our profits, our line of thought may change.

Anyway that was our experience with insurance for the properties, I guess at the end of the day it is important to question the costs of everything, it is easy to just assume it is the going rate over there, seeing as we do not know much about it. But by simply asking questions and realising what cover we need and what we can do without, we were able to reduce our premiums by half. And my business partner and I are more than comfortable with the amount of insurance we have. If we feel it is not enough, there is nothing stopping us increasing the cover next time when we renew our insurance.

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.