USA Property Investment

Property Investment in the USA

A strategy that is currently gaining popularity is to use your SMSF to purchase property in the USA. The typical structure for USA property investment is set out below:


Note: The SMSF owns 100% of the LLC. The LLC has 100% ownership of the USA investment property and the USA bank account.

Why would you purchase property in the USA?

There are two main reasons: properties in the USA cost less than in Australia (typically between $40k and $150); and the rental yield is higher (between 7% and 22%).

Steps involved

First, you need to locate a suitable property in the USA. You can use a buyer’s advocate to do this. Next, you set up an LLC, open a US bank account, and transfer your funds from Australia.

A property manager will receive the rental income for an arranged fee plus maintenance costs. The net rental will be deposited into your US bank account.

An LLC is a flow-through vehicle for tax purposes. In some US states, LLC Taxes are levied at state level. Any taxes levied in the USA can be claimed back as a credit in Australia thanks to the double tax agreement between the two countries.

A number of companies promote US property. Do a Google search to identify properties. Popular areas to purchase property include:

Dallas, Texas; Memphis, Tennessee; Miami, Florida, and Atlanta, Georgia

Steps involved in setting up an LLC in Florida, USA

First, you’ll need a registered agent in the USA. These guys provide their services for free:
www.freeregisteredagent.com

Here is the website where you can file online for the Articles of Organization that you’ll need to start an LLC in the state of Florida:
https://efile.sunbiz.org/llc_file.html

To set up an EIN (free)

  1. Your LLC must be incorporated and you must have the Articles of Organization
  2. Complete an SS-4 Form
  3. Call the IRS on 0011-1-267-941-1099 (not toll free).
  4. Explain that you need an EIN for an LLC in Florida (for example) and tell them why.
  5. They’ll ask you to fax the completed SS-4 form to 0011-1-267-941-1345 (and they’ll stay on the line while you’re doing this).
  6. Fax the form and wait for them to issue the EIN over the phone.
  7. They’ll also send you a letter by regular mail to confirm the EIN. Be sure to make several copies of the letter; you’ll need them in the future.

USA Property Assistance

There are companies specialising in assisting SMSF’s in investing in the USA. One such company is International Property Services (IPS) (contact person is Benjamin Armstrong 0411315318). They have an office in Melbourne and focus on Phoenix, Arizona. The reason for this area is good historical and projected growth rates and rental yields. Combined with a low rate of natural disasters, this is seen as a good area to invest in.

Here are 3 examples of recently sold properties by the company above:

 

  • Jay Bhattacharjee

    In regards to investing in US, I have following questions:

    1. Do you have any clients investing in US properties?
    2. Do I need corporate or individual trustee setup or can I change this at any time?

    3. I understand LLC owner
    should be SMSF . Who will sign the LLC application document ? or can we
    set up LLC in individual names who are member of smsf fund?
    4. Will you also create the Australian bank account when you set up the fund?

    5.Who should be the owner of US bank account ? LLC or SMSF??

    6. At the end of the year, do you only need the following docs

    – US bank account statenment
    -Aus bank account statement
    – Anything else??

    7. Can I be able to sale the property and keep the money in US bank account for few months to purchase a new property.

    8.
    Last but not least my rent will be deposited into US bank account. Do I
    need to transfer the cash flow amount back to AUS account or can I keep
    it in US to invest in future props

  • Rattano3

    The above setup is in breach of the smsf in-house assets rule!
    Seek legal advice before falling into the trap.

    • superannuationwarehouse

      There are different views on the required structure for overseas property investment.
      We have obtained specific advice on a Fund before, with the ATO indicating the structure noted above is acceptable. To make sure a structure is acceptable taking into account the specifics for a Fund, it is advisable to obtain a private ruling from the ATO. There’s no fee involved for obtaining ATO specific advice, so it might be a sensible step.

  • Didier Guo

    how could we investing overseas (non-us) property?

    • Hein Preller

      Didier,

      On the basis the Trust Deed and Investment Strategy of the Fund allows for this type of investment, the Fund purchase the asset from the SMSF bank account with the SMSF as the legal owner of the asset.

      Its a similar process to purchasing a local asset. We have a web page in overseas property – see here:
      http://www.smsfwarehouse.com.au/smsf-investments/property/overseas-property/

      Thanks

  • kempvet

    Just wondering whether you can use the LLC as the holder of a US managed fund instead of property and have the SMSF own the LLC (US managed fund and US bank account).

    • Hein Preller

      The objective is for the SMSF to have legal title to the asset.

      The structure as noted would serve the purpose.

  • Sgbizguru@gmail.com

    Hi, us the set up of LLC the same if you are buying property in Detroit, Atlanta or Houston?

    Can you help with the set up and what are your fees to do this

    Are you sure that we get all the tax back due to DTA?

    Thank you

    • superannuationwarehouse

      You need to set up the LLC in the state where the property is located. So you cannot use the same LLC for properties located in different states.
      If you have access to a fax and credit card, you can set it up from Australia. You phone them, they send you a fax and you send it back with payment.
      Alternatively, you can contact an USA accountant. I give the contact details of an USA CPA, Bobby, on the page above. Please feel free to contact him directly if you want him to set up the LLC.
      Lastly, to get tax back via the DTA, you have to oblige to tax and regulatory law in both countries to get it back.
      Thanks

      • Sgbizguru@gmail.com

        Thanks.

        How would any capital gains be treated once properties are sold. The laws can change with time but what is the current status
        *what federal rates do you pay there, if any
        *what states have favour able tax environment overall for properties

    • superannuationwarehouse

      As we are an Australian based accountant, we do not set up the LLC’s. There’s generally 3 ways to set it up which are:
      1. Ask the real estate agent to do this when you purchase the property, make sure the LLC is registered in the same state as the property;
      2. Register yourself if you have a fax machine and credit card, see steps on the page above; or
      3. Us an accountant in the USA, we give contact details for an accountant on the page above you can contact directly.
      Trust this helps.

  • Chantelle Brown

    Hi, I’m a client of yours and just wondering if you could buy a property anywhere in the world, not just the US? We are looking at New Zealand.

    • superannuationwarehouse

      Chantelle, as long as the Fund’s Investment Strategy and Deed allows for overseas investment (yours does) you can invest in overseas property.
      Just make sure the SMSF has legal title over the asset. A bare trust might be required and we explain the steps on this page:
      http://www.smsfwarehouse.com.au/smsf-investments/property/overseas-property/
      Thanks

  • http://www.incomepropertyshowcase.com Income Property Showcase

    This is the best info about the buy investment Property in USA with full guidelines.

  • kevin kruger

    we also seek to offer financial

    assistance to companies and firms with serious business plans and well worked out structures

    we also seek to assist entrepreneurs and personal loan seekers ,

    contact us if interested so we work on the documentations and necessary directories

    Regards

    Kevin Kruger

    info@krugerfncs.com

    kiv.kruger@outlook.com

    BBM: 5BFCDA18

    (216) 200 5044

  • https://www.amp.com.au/personal/super-and-retirement/products/superannuation Matt

    Some great information in here, was just doing a search of Google to find more information about came across https://www.amp.com.au/personal/news-education/education/your-questions-answered/can-i-buy-an-overseas-property-through-my-smsf

  • Raj Saba

    We have a SMSF and have borrowed money to invest in a property in Sydney, We also have some shares. We would like to purchase a property in USA and would like your help in Trust deed, overseas bank etc.
    When we bought the property in Sydney, we set up a company, so not sure whether we can use the same company to buy the US property

  • Raj Saba

    We have a SMSF and have borrowed money to invest in a property in Sydney, We also have some shares. We would like to purchase a property in USA and would like your help in Trust deed, overseas bank etc.
    When we bought the property in Sydney, we set up a company, so not sure whether we can use the same company to buy the US property

    • Hein Preller

      Raj,
      An SMSF will usually own the interest in an LLC which in turn owns the property 100%. Best is if the SMSF owns this interest in the LLC directly.
      If the shares in the LLC is held by you, then we can set up a Declaration of Custody Trust noting you hold the shares for the benefit of the SMSF.
      There is no need for a company to be the Trustee of this Declaration of Custody Trust, but if you prefer to use an existing company you have in the SMSF already, we can use the same Custodian Trustee company as the Trustee of a Bare Trust holding the benefit in the LLC.
      This is a mouthful of info – but I trust it makes sense.

  • Shetu Corporation

    Dear SMSF warehouse,

    I read your online article regarding overseas property
    investment through SMSF.

    I need your advice. If you could give me advice for the
    following that will be greatly appreciated.

    I am going to buy an overseas apartment outright with my
    self managed super fund without any loan.

    1. Can I use my 100% of the SMSF balance?
    2. The purchase contract will be under my superfund name. I have set up a
    special purpose Example PTY.LTD as trustee for Example
    Superfund.

    First two questions are, in the purchase contract do the
    purchaser field need to be “Example PTY LTD (ACN *********) as trustee
    for Example Superfund”? Or “Example Superfund”?

    3. I am setting up an account in the same country with the account name “Example PTY LTD (ACN *********) as trustee for ExampleSuperfund”

    To get the apartment rental money deposit and maintenance
    expenditure record and all dealings for the investment. I will get the Bank
    statement from the account whenever required.

    If I transfer the money once or twice every year to my SMSF
    account before Audit time will that be sufficient? as transferring money every
    month to SMSF will be costly with the international money transfer fee and
    currency conversion.

    4. I am temporarily going overseas for 20 months but it might need to be extended.

    Example PTY.LTD is currently owned 100% to me. Can
    I give 50% to my brother who will live in Australia? I want to do that so that my
    superfund comply the ATO rules.

    Will that be enough? My brother can own 60% of the company
    share is required.

    Thanks in advance.

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Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.

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