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)

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

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.

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