Property Investing In Melbourne, Australia
A Recovering Market With Upside You Want To Pay Attention To
Aug. 27, 2009
New York, New York
PLUS:
- Real Scoop On Panama Property Markets...
- "If Your Plan Is To Diversify Globally...Frankly, Right Now Is The Time To Do It"...
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Your detailed, complete, and current guide to the best choices right now for health insurance as an expat or retiree overseas.
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Dear Live and Invest Overseas Reader,
"Real estate developer friend Jeff Finney," writes resident global real estate investing expert Lief Simon, "has moved back to Australia after spending years developing property in various Asian markets. The reason? Jeff's an Aussie, and he's recognized that his home market offers some of the best opportunity worldwide right now for the would-be investor. Australia hasn't been hit as hard as many other global markets, and it's already showing signs of recovery from its downturn.
"House prices in Australia increased 3.73% in the second quarter of this year. All regional capital cities in the country registered quarterly house price increases, ranging from 2% to 5%.
"In fact, Melbourne, where Jeff is focusing his attention, is experiencing a housing shortage right now due to continued growth despite the current global crisis.
"The current demand in Melbourne is organic, rather than speculative, and both continued new development and further price appreciation are expected for the next several years.
"Jeff is working on a couple of new housing developments where the projected returns are 20% to 27% a year over the three-year lives of the projects. While that's not the 'double your money in 12 months' projection people were clamoring for just a few years ago, this level of return is within my target range. I want to double my money every three to five years. There aren't a lot of markets holding out this potential right now, but there are some. And Melbourne, Australia, is one of them.
"Non-resident foreigners can borrow to buy locally. This potential for leverage makes the market even more interesting. The play I see is rental apartments. You could borrow up to 70% to buy one and begin renting it out immediately. Current mortgage rates are as low as 5.75%.
"One potential downside for U.S. dollar investors in this market is the currency risk. Australia's dollar is fairly strong right now. But, remember, real estate is a long-term investment. If you invest in a rental apartment today, you should plan to hold on to it for at least five years. It's impossible today to say where the U.S. dollar versus the Aussie dollar exchange rate might sit five years from now.
On the other hand, as you can leverage locally, you aren't exchanging greenbacks for the entire purchase price. Both your mortgage repayment and your rental income would be in the local currency, so you'd have no month-by-month exchange rate concerns.
"Average rental yields in Australia today are 4% to 10%, depending on the market. Melbourne is at the low end of that range. The best deals, of course, are found on the ground.
"Which is why Jeff has moved back to his home country. He's on the ground scouting as I write. And he'll be joining me and attendees at my Third Annual Global Real Estate Profits Summit in Panama in October, when he'll share specific details and recommendations. Jeff promises two investment deals in particular that won't be available to the full Live and Invest Overseas readership. These will be private opportunities in one of the most appealing property markets in the world right now."
Here's how you can be in the room to participate.
Kathleen Peddicord
P.S. My daughter Kaitlin, who's taken up residence in New York this week as she prepares to start her third year of university study in Manhattan, joined me last night for dinner with my book editor from Penguin. Meghan, my editor, five-year veteran of Manhattan living, offered tips and advice for Kaitlin to help her get settled, find her way around, and discover the real New York.
Meghan's insights reminded me of our experiences, a dozen years ago, feeling our way through our first living-overseas experience. The truth is, we lived in Waterford, Ireland, our first two or three years as tourists, not residents. Looking back now, I see clearly the mistakes we made. More tomorrow...
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The Best Advice in the Business
You can't invest in foreign real estate from your armchair. You can't research an opportunity online, act on it, and expect to come out on top. And you should never take advice on investing in any overseas market from someone who hasn't done it himself.
You have really only two options for making money in international real estate:
- Invest the time and money to check out every property opportunity personally, yourself...
- Or follow the lead of someone who has already done it himself...and made money at it.
Over three days in October, Lief Simon and 12 other international real estate investing pros are convening to discuss where and how to position yourself in world property markets for profit.
Take advantage of this opportunity to save a whole lot of time and an enormous amount of your own money while gaining access to the best global real estate investment minds and deals in the world today.
More Details Here
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"Last Thursday's 'State of the Panama Property Market' Teleconference was spot on. What was presented was what was claimed. Good presentations. Confirmed what I had felt or sensed by my own May visit.
"For some, the flags presenting themselves could become a deeper hue of red; for others, a lighter shade, provided they have the fortitude to deal with the realities of this market."
-- Rich G., United States
Panama Circle Member
If you missed this important and timely conversation among the three savviest Panama investors we know last week, you can catch up here.
"Can rental properties in Texas be exchanged for property overseas through a tax-deferred 1031 exchange?"
-- Joan S., United States
Resident global real estate investing expert Lief Simon replies:
"A 1031 like-kind exchange must be U.S. for U.S. property or foreign for foreign. You can't exchange a rental in Texas for land in Argentina, but once you make your first investment purchase overseas, you can exchange it for another overseas investment property. For example, you could exchange a rental house in New Zealand for a tree farm in Panama.
"Depending on the capital gains tax situation in the country where you're selling, you may not want to do a 1031 like-kind exchange for U.S. tax purposes. If you have a capital gains liability in the country where the property is located, you could be better off applying whatever you have to pay in local taxes against your U.S. capital gains tax. Defer the U.S. capital gain through a 1031 like-kind exchange, and you effectively lose the ability to take the tax credit for the foreign taxes you paid on the gain.
"It's a country-by-country decision, as many countries don't charge capital gains taxes--including New Zealand, the U.K. for non-residents, and Argentina if you hold the property as an individual (as opposed to in a corporation). In addition, in several countries, capital gains tax is not due if you've held the property for a certain number of years or longer.
"As it is generally expected that the U.S. capital gains tax rate will increase under the current administration, it might not be a bad idea to sell U.S. investment property now, pay the current 15% capital gains tax, and reinvest the money overseas. If your ultimate plan is to diversify your real estate investment portfolio globally, now, frankly, is the time to do it.
"I'll address this and other structure, holding, and tax issues in depth during my Global Real Estate Profits Summit in October. These are critical questions to consider as you position yourself to take advantage of the current opportunities worldwide for real estate investing profits."
Editor's Note: The Early Bird Registration Discount for Lief's Third Annual Global Real Estate Profits Summit expires Midnight, Aug. 31. The clock is ticking. Register now to save US$250. Other important discounts also available. Full details here. |
