As realty bites, Australians taste the American dream

[Ali G. 37]

As realty bites, Australians taste the American dream

MARIKA DOBBIN

March 6, 2010

This house, bought for $39,900 yesterday, last sold for $155,500 in 2006. (#### houses look like ###### there)

CLEANERS Ana and Miguel Canepa never imagined when they fled to Australia as refugees they would one day be landlords of four rental homes.

But the residents of St Albans in Melbourne's outer north west are living the Australian dream, having last week signed contracts to buy their latest investment property. And it only cost them $A44,117.

That is because the three-bedroom house is in the US city of Phoenix in Arizona.

The couple, originally from El Salvador, have never been to Phoenix. But they already own two other homes purchased there this year for $A41,000 and $A52,100, as well as a fourth rental asset in Melbourne.

They are part of a small wave of Australian investors picking over the ruins of the US property market crash, many of whom have been frustrated by Australia's surging house prices.

However, experts have warned that US property prices are depressed for sound economic reasons and international bargain-hunters risk losing all in a market they do not understand.

They say the dangers of being ripped off or hit with unexpected taxes and costs are high.

But for Mrs Canepa, a mother of two teenagers, it is the sharemarket and superannuation that are dubious since the financial crisis. She instead put her faith in US property to fund her retirement.

''Here in Australia, people on basic salaries can't even afford to think of buying an investment house because it's too much,'' she says. ''But in America it's affordable and there are great opportunities.''

Real estate specialist Kevin Walters, who arranged the Canepa's purchases, will next month lead a shopping tour for 10 Australians and a tax firm that advises self- managed superannuation holders. They will visit Phoenix and Las Vegas, the foreclosure capital of the US.

''You can buy a house in the US for the cost of a deposit here,'' he says. ''Clients can purchase property in just two days, it's that easy. The only exception is that we don't have a lender for them at the moment, so they buy in cash.''

Mr Walters, who hails from Phoenix but is working in Melbourne, operates one of several companies selling US property to Australians.

While he says he would never advise buying bargain-basement property in cities such as Detroit, where homes can go for as little as $US1, he says all his clients have bought cheaply from bulk lots of property on which the banks have foreclosed.

''We've been able to get properties at 70 per cent off the height of the market,'' he says. ''We buy it, refurbish it and on-sell it to Australian investors at below the foreclosed price.''

Among Mr Walters' clients is the chief executive of Australian real estate franchise Stockdale & Leggo, Peter Thomas, who bought two US houses this year and has plans for several more.

Mr Walters does contract work for Stockdale & Leggo, but his business selling US property is a separate entity.

Mr Thomas says he gets rental returns of 16 per cent on his US assets, compared to about 3 per cent for his Australian properties.

''It doesn't seem a risk at all to me,'' he says. ''It's just as difficult to keep an eye on my property in Queensland as it is in America. You just make sure you've got a bloody good agent working for you.''

One US-based agent who is courting Australian investors is Florida's Mike Faris of Frontgate Realty.

He is currently dealing with four Australians buying property and this year hosted a group of executives from Australian real estate group Oliver Hume.

He says property values in Florida are low after the crash and that buyers can pick up a three-bedroom home with a pool from $A166,000.

However, the US does not have the same rental squeeze as many Australian capitals.

Mr Faris says an American property can sometimes stay unlet for a long time, especially if it is badly located, while still incurring rates and taxes.

Rates in the US are also often higher because of education levies for state-run colleges and high schools.

''It is critical to have the right marketing to have your home occupied,'' he says. ''The Australian trend is a new one, but foreign investors from such places as Great Britain, Brazil, Germany and Russia is not new at all because there is no barrier to foreigners owning US property.''

While the US does not have stamp duty, there is a tax on sellers similar to capital gains tax paid before money leaves the country.

Landlords in most US cities are also subject to three sets of land taxes from county, state and federal authorities.

Australians still have to pay tax on their "worldwide" income at home, with some US taxes counted as credit under a tax treaty between the countries.

Property adviser Monique Sasson Wakelin says the unfamiliar tax arrangements are just one of many snags that could trip up Australian buyers, including a higher risk of lawsuits from aggrieved tenants or neighbours.

She says a strategy based on the idea that ''what goes down, must come up'' is also a dangerous gamble.

''Cheap US property is the result of price falls of around 30 per cent in three years,'' she says. ''This should be a powerful warning to Australian investors to stay well clear of this precarious market.''

Ms Sasson Wakelin says Australian investors feel optimistic because of the property rebound in Australia, but they should not project that on to the US market.

''Buoyant property markets are usually a product of strong demand, constrained supply and no surplus of new houses sitting unsold on the market,'' she says. ''Exactly the opposite situation is the case in many US cities.''

While the US property market is showing signs of life in places such as San Francisco, Boston, Denver in Colorado and Charlotte in North Carolina, prices declined overall last year and speculative building has caused an oversupply of homes in places such as Las Vegas.

The rate of foreclosure is still alarmingly high, partly because of non-recourse lending, and it rose again in January, according to Bloomberg.

Then, of course, there is the dire US economic predicament, with unemployment at 10 per cent and a federal debt approaching 100 per cent of gross domestic product.

However, none of that has deterred the Canepa family, who have scraped together money from anywhere they could to buy in.

''You don't want to look back in five or 10 years and say, 'I should have done it,' '' Mrs Canepa says. ''Sometimes in life you have to take risks and trust people.''

Of the three Phoenix properties the couple now own, two have tenants paying $A778 and $A920 a month. The other is on the market to rent.

''I have worked really hard with my husband just to own my own house in St Albans,'' Mrs Canepa says.

''So just imagining that I have all these extra houses is like a dream. I'm so happy.''

Edited March 5, 2010 by Booyah

[w¡n9Nµ7 §£@¥€r 123]

buy property you havent even seen? is this common?

[Ali G. 37]

I am keen on hearing Matt's opinion..

[Ali G. 37]

buy property you havent even seen? is this common?

Forget about that. Tell me this, how many cleaners have you heard of that could possibly earn enough to purchase four houses here? As I have always said, if illegal immigrants here had half a clue, they would get their azzes to AUS; where they can earn easily over $60K for even cleaning. Not going to bother suggesting this to millions of unemployed yanks here, as they still believe this country is the land of opportunity, even from the 'comfort' of their trailer.

I love articles like this as it's a slap in the face of anyone who prefers corporations and the free market set wages. Australia is living proof that wealth is best trickled up rather than down.

Edited March 5, 2010 by Booyah

[w¡n9Nµ7 §£@¥€r 123]

Forget about that. Tell me this, how many cleaners have you heard of that could possibly earn enough to purchase four houses here? As I have always said, if illegal immigrants here had half a clue, they would get their azzes to AUS; where they can earn easily over $60K for even cleaning.

I love articles like this as it's a slap in the face of anyone who prefers corporations and the free market set wages. Australia is living proof that wealth is best trickled up rather than down.

I don't disagree with anything you've said there.

I'm still stuck on the fact that they're buying homes they haven't seen. Would you?

[Ali G. 37]

I don't disagree with anything you've said there.

I'm still stuck on the fact that they're buying homes they haven't seen. Would you?

Nah, I wouldn't.

[mRx 16]

I am keen on hearing Matt's opinion..

Regarding what?

That the housing bubble is popping in the US, but hasn't yet in Oz?

[luckytxn 2,264]

Been to Aussie and wasn't impressed. The guys were pathetic but the babes were awesome. They loved me there and all I heard from them was how sorry the men were. The prices were ridiculous for everything but of course that was why the wages were higher as the pay was eaten up by the taxes and just living expenses. Not too much to do it seemed except to go out and drink and I am not a big drinker. The food was OK and was able to find any food I liked to eat there.

They were at that time on a big immigration binge to get others to move there to ensure that there were future wage earners to keep paying in to the system but they have found out since then that the ecology was getting over strained and are now trying to limit immigration to more sensible ways. I remember hearing their fears about Asia and India and others like that over running them but to a person they knew the U.S. would be there for them so they were happy to keep the military side down. Nice land to visit but not too many would want to live there.

[spookyturtle 9,466]

Practice what you preach. You live here.

[scandal 951]

Of the three Phoenix properties the couple now own, two have tenants paying $A778 and $A920 a month. The other is on the market to rent.

That's pretty cool. I didn't realize you could get American tenants to fork over the monthly rate in AUD currency. Nice trick.

[mawilson 2,133]

That's pretty cool. I didn't realize you could get American tenants to fork over the monthly rate in AUD currency. Nice trick.

[Ali G. 37]

Been to Aussie and wasn't impressed. The guys were pathetic but the babes were awesome. They loved me there and all I heard from them was how sorry the men were. The prices were ridiculous for everything but of course that was why the wages were higher as the pay was eaten up by the taxes and just living expenses. Not too much to do it seemed except to go out and drink and I am not a big drinker. The food was OK and was able to find any food I liked to eat there.

They were at that time on a big immigration binge to get others to move there to ensure that there were future wage earners to keep paying in to the system but they have found out since then that the ecology was getting over strained and are now trying to limit immigration to more sensible ways. I remember hearing their fears about Asia and India and others like that over running them but to a person they knew the U.S. would be there for them so they were happy to keep the military side down. Nice land to visit but not too many would want to live there.

Nice try Texan, time to wake up now.

[Ali G. 37]

That's pretty cool. I didn't realize you could get American tenants to fork over the monthly rate in AUD currency. Nice trick.

Cool man, you are on the ball. Too bad the article was written in an Australian newspaper, hence the conversion to Australian currency. They're originally from South America, so maybe they called their cousins over here and asked them about the rates. Not too many cleaners in America buying four homes from scratch now is there. Evidently, these SA immigrated wisely and have since reaped the rewards. Or maybe they are liying too.. Better yet, maybe Spook can tell me 'well their cousins here are happier.. just because...'

Link: http://www.theage.com.au/victoria/as-realt...00305-powo.html

Next Pwn please..

Edited March 6, 2010 by Booyah

[mRx 16]

originally from El Salvador

They're originally from South America

Where'd you learn geography?

[Ali G. 37]

Where'd you learn geography?

Probably the same place you learned economics from.

North America tends to be figuratively speaking, e.g. Canada + USA