A popular strategy now is to use your SMSF to purchase property in the USA. You can do this with your SMSF.
Why would you purchase property in the USA?
The two main reasons are the properties’ costs are lower than those in Australian, typically between $40k – $150k, and the rental yield are typically between 13 – 22%, being higher than Australia.
The steps are to identify a property in the USA, and you can use an advocate to do this, then set up an LLC, open up a bank account and transfer funds from Australia to the USA bank account.
A property manager will receive rental income and deduct their fee and maintenance costs. The net rental will be deposited into your USA bank account.
An LLC is a flow-through vehicle for tax purposes. Some of the US’s states have taxes levied on a state level to the LLC. Any taxes paid in the US can be claimed back as a credit in Australia as per the double tax agreement between the US and Australia.
There are several examples of property promoters for US properties. Do a Google search to identify properties. Popular areas to purchase property are:
Dallas, Texas; Memphis, Tennessee; Miami, Florida and Atlanta, Georgia.
You’ll firstly need a registered agent in the US.
Here is the website to file for Articles of Organisation in the state of Florida online.
To set up an EIN (free)
1. An LLC must be incorporated, and you must have the Articles of Organisation.
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 instance). Explain circumstances of the situation.
5. They will ask you to fax the completed SS-4 form to 0011-1-267-941-1345 and will stay on the line.
6. Fax the form and wait for them to issue the EIN on the phone.
7. They will also send you a letter which confirms the EIN by mail and needs to be copied several times.
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 is this area has 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.
For information on investing in local Australian properties, please see here.