Rentvesting in the USA

Rentvesting in the USA

The Australian dream of owning and living in your own home is increasingly moving out of reach, as house prices in Australia’s major cities have soared to become some of the least affordable in the world.

More and more Australians are choosing to rent, because the cost of renting is much lower than the cost of servicing a mortgage on an equivalent home. Renting also delivers increased flexibility, the ability to move to a new location at will, and there are no pesky repairs, maintenance issues, council rates, or strata fees to deal with.

Some people claim rent money is dead money, but the reality is the lower cost of renting versus paying off a mortgage often allows you to live in a vastly superior home and location. You can choose where you want to reside, and for how long. This approach also allows you to try out many new suburbs, before you decide to settle down permanently.

Nevertheless, there are significant benefits to owning real estate, even if you don’t live in it yourself. An investment property can offer a steady and reliable rental income stream and potential for capital growth, as well as acting as a hedge against inflation and a retirement nest egg.

In fact, there are many advantages to assuming the role of both landlord and renter – i.e. renting the home you live in, while also owning a separate investment property that you lease to other tenants. This is known as ‘rentvesting’. It delivers the best of both worlds, since you can enjoy the flexibility and low cost of renting yourself, while also benefiting from capital growth in the housing market.

Tax laws also favour the rentvesting approach. Repayments on a principal place of residence (PPOR) are not tax deductible. But if you own an investment property, then the interest repayments and other holding costs are fully tax deductible, meaning you can end up with substantial savings when it comes time to complete your tax return.

Furthermore, rentvestors can say goodbye to repeated entry and exit costs. Each time a traditional homeowner moves house, they incur considerable fees in the form of stamp duty, legal costs, and agent’s commission. This is not the case with renting, where the only major cost is removalist charges.

And as a rentvestor, you can carefully choose the optimum country and suburb in which to invest for superior returns. This won’t always be the same suburb and country that you prefer to live in yourself, which is why rentvestors can enjoy better property investment returns than those who simply rely on capital growth in their own principal place of residence (which may not be situated in an investment-grade location).

However, given the fact that Australian house prices have never been so expensive, and economists are warning of the risk of Australia’s property bubble bursting, it really doesn’t make sense to buy any property, investment or otherwise, in Australia right now.

The Australian economy and housing sector face strong headwinds as the mining boom ends and wages growth falls to the slowest pace on record. Global investment banks have warned that a crash in Australia’s property market may trigger a recession this year (2016).

That’s why more and more Australians are beginning to rentvest overseas, and in particular in the USA. The US housing market is currently at the beginning of a new growth cycle, after having fallen in value by 40% during the Global Financial Crisis. US house prices are presently much lower than those in Australia, and rental returns are substantially higher. There has never been a better time for Australians to consider rentvesting in the USA.

At American Properties, we’re experts in the field of US property investment, with a proven track record and dozens of delighted clients.

Investing in American property can be complex. There are certain mandatory actions that must be undertaken to correctly structure your investments and integrate yourself into the US tax and legal system. These processes would be unfamiliar to most Australian investors, and include:

  • Incorporating a Limited Liability Company (LLC)
  • Obtaining an Employer Identification Number (EIN)
  • Obtaining an Individual Taxpayer Identification Number (ITIN)
  • Establishing a foreign exchange service to transfer funds between Australia and the USA
  • Connecting with a reputable US accountant appropriate to your personal situation
  • Miscellaneous filing and paperwork

But relax. As an American Properties member we do the hard work for you. While it’s important that you understand and comply with these requirements, we handle everything on your behalf, quickly and cost-effectively.

And as an American Properties member, you’ll enjoy exclusive access to premier properties that pass our rigorous 45-Point Investment Analysis System. These properties are an ideal entry point for anyone considering rentvesting in the USA.

Another benefit of rentvesting overseas is that it diversifies and protects your assets from any deterioration in the Australian economy. Like most Australian renters, you probably have most of your wealth tied up in superannuation, which is heavily exposed to the Australian equities market.

This leaves your retirement portfolio vulnerable to a local economic downturn. By investing in US property, you mitigate this risk by ensuring a portion of your wealth is secured in a protected overseas market.

But the opportunity to purchase high-quality US property at these current low prices won’t last forever. Cash buyers are already snapping up US housing inventory at breakneck pace, and investment-grade properties are becoming harder to source.

As US banks relax their lending policies, the number of qualified buyers is rising dramatically, and Wall Street, institutional funds, and other ‘big money’ players are accelerating their investment property acquisitions. Time is running out to take advantage of the best deals, and the window of opportunity is closing with each day that passes.

The big players don’t sit by and let great opportunities like this slip through their fingers, and neither should you. So if you’d like to learn more about diversifying and securing your wealth by rentvesting in the USA, then contact us today for more information, and to gain complimentary access to our exclusive six-part video series.

We take the hard work and risk out of investing in the USA.

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