Navigating the Australian Property Market from the US: A Free Webinar for Aussie Expats

The webinar, aimed at Aussie expats in the US, covered the complexities of buying and investing in Australian property. Steven Lee from Odin Mortgage explained the mortgage process for expats, emphasizing the need for a 20% deposit and the impact of foreign income on borrowing power. Sky Hammer from Convergence Buyers Agents highlighted the current market trends, noting strong growth in Perth and regional Queensland, and the importance of strategic planning. Pau Lam from Odin Tax discussed the tax implications, including the lack of a 50% capital gains tax discount for non-residents and the need for proper tax planning.

The panel stressed the importance of early planning and professional advice.

Navigating the Australian Property Market Overview

Josh Pugh introduces the webinar, emphasizing the expertise of the panelists: Steven Lee from Odin Mortgage, Power Lamb from Odin Tax, and Sky Hammer from Convergence Buyers Agents.
Josh outlines the webinar's purpose: to provide general advice on buying and investing in Australian property from the US, with a focus on tax implications.
Josh explains the Q&A process, encouraging participants to submit questions and engage with the panelists.
Steven Lee introduces himself and Odin Mortgage, detailing their services for Australian expats and overseas investors.

Introduction to Convergence Buyers Agents

Sky Hammer from Convergence Buyers Agents introduces the agency, highlighting their role in helping Australian expats buy properties in Australia.
Sky discusses the current market conditions, noting that while some markets like Sydney and Melbourne are in a holding pattern, others like Perth and regional Queensland are showing significant growth.
Josh asks Sky to elaborate on the market conditions, prompting Sky to provide a brief market overview and mention the importance of regional markets.

Odin Tax: Australian Tax Implications for Expats

Power Lamb from Odin Tax discusses the focus of their services, which include Australian tax implications for expats.
Power explains the importance of understanding tax implications early in the property buying process and how Odin Tax can assist with tax planning and compliance.
Josh asks Power to elaborate on capital gains tax, and Power explains the differences between tax residents and non-residents, including the lack of a 50% capital gains tax discount for non-residents.
Power also discusses the importance of planning for future tax implications and the potential benefits of accumulated tax losses.

Mortgage Process for Expats

Steven Lee explains the mortgage process for expats, emphasizing the importance of understanding foreign income and borrowing power.
Steven highlights the need for expats to have a minimum deposit of 20% and the impact of foreign income on borrowing power.
Steven discusses the benefits of using multiple lenders to optimize borrowing options and the importance of getting pre-approved for a loan.
Sky Hammer adds that the biggest challenge for expats is being in a different time zone and not being on the ground in Australia, which can make the property buying process more difficult.

Tax Planning and Strategy

Power Lamb emphasizes the importance of starting the tax planning process early and understanding the tax implications of buying property as a non-resident.
Power discusses the potential penalties for not filing tax returns and the benefits of accumulating tax losses.
Josh asks about the impact of moving back to Australia, and Power explains that expats can regain the 50% capital gains tax discount if they move back and make the property their main residence.
Power also discusses the importance of planning for future tax implications and the potential benefits of different property structures.

Market Conditions and Investment Strategies

Sky Hammer discusses the current market conditions, highlighting the best performing markets and the importance of considering both investment and future living needs.
Sky explains the importance of distinguishing between investment and future living needs and the potential trade-offs involved.
Sky discusses the importance of data-driven decision-making and the potential benefits of regional markets.
Sky also highlights the importance of being prepared for interest rate cuts and the potential impact on the property market.

Mortgage and Tax Considerations for Expats

Steven Lee discusses the importance of understanding borrowing power and the impact of foreign income on mortgage eligibility.
Steven explains the benefits of getting pre-approved for a loan and the importance of reviewing interest rates regularly.
Steven highlights the importance of understanding the differences between principal and interest repayments and interest-only repayments.
Power Lamb discusses the importance of keeping tax records up to date and the potential benefits of different property structures.

Planning and Timing for Property Purchases

Sky Hammer emphasizes the importance of starting the planning process early and involving a team of experts, including tax and legal advisors.
Sky discusses the potential benefits of different property structures and the importance of planning for future tax implications.
Steven Lee highlights the importance of understanding borrowing power and the impact of foreign income on mortgage eligibility.
Power Lamb discusses the importance of keeping tax records up to date and the potential benefits of different property structures.

Common Mistakes and Pitfalls

Power Lamb discusses common mistakes expats make, including not filing tax returns and not understanding the tax implications of being a non-resident.
Sky Hammer highlights the importance of working with a buyer's agent and not relying solely on selling agents.
Steven Lee discusses the importance of getting pre-approved for a loan and reviewing interest rates regularly.
Josh Pugh emphasizes the importance of individualized planning and the benefits of engaging with experts early in the process.

Conclusion and Next Steps

Josh Pugh thanks the panelists and participants, emphasizing the importance of reaching out to the panelists for individualized advice.
Josh encourages participants to check their emails for follow-up information and to engage with the panelists for further questions.
The panelists reiterate the importance of early planning and the benefits of engaging with experts to navigate the property buying process.
The webinar concludes with a reminder to stay informed and engaged with the market conditions and tax implications.

Webinar Transcript

Josh Pugh 00:00

Fantastic. Alrighty. Hi everyone. I'm America Josh. And welcome to navigating the Australian property market from the US, a free webinar for Aussies expats, especially in the US. Today, we've got three experts in various fields when it comes to investing and buying property. Steven Lee from Oden mortgage, Pau Lam from Odin tax and sky Hammer of convergence buyers agents. Hello to you all. Thank you very much for joining me to start, I'm going to quickly run through how we're going to run tonight, and then we're going to jump right into the questions. We know that all of the people that have registered for today have submitted their own questions, so we'll be working our best to have a chat, all of the participants and all of the panelists today are going to jump in. If they've got particular things they want to talk about, they are going to jump in with those recommendations. So it's it's going to be a way for us to constantly sort of hear from each of the different involved parties. And we'll make sure that we include everything from the start of the process when you're actually getting setting up your finances to the actual buying of the places, and then the tax implications. It's the tax implications is one of the areas that we've we always have a lot of questions coming in about and this time, we're really trying to make sure that we can round out that circle and fill in some more information. So this webinar is meant to provide a surface level information of how to buy and invest in property in Australia from the US. So it's not going to necessarily answer all of your direct questions. It is meant to be general advice and not specific advice. The advice that all three of our panelists are going to recommend at some point is that you should seek professional advice individually if you do actually want to start down this process, which is something that we're going to talk about. But this should give you a good intro. It should give you a good understanding of how this whole process works, because it can be daunting buying a place, even if you're in Australia, let alone if you're not in Australia, and you want to buy something. So the only other bit of housekeeping is that there is a Q and A window that you can find down the bottom of the screen. I see that people are already asking questions, which is great. I'm going to keep an eye on that. If you do have questions, make sure you add them. You can add them. You can add comments for me as well, and I will ask the panelists as we go. So thank you again, all three of you for jumping on. Stephen Lee from Odin mortgage. I want to start with you, because I feel like you've got the first part of the process. Do you want to give us a quick intro into who is own mortgage? Who is Stephen Lee, and you know, where do people start in this process?

Steven Lee 02:25

Yeah, absolutely, Josh. Thanks for having us. Yeah. So, hey everyone, Stephen from Odin, mortgage and tax. So, so we've got our mortgage and tax, where my colleague Pau is here with me. So I look after the mortgage side of our business where Odin we help Australian expats and overseas investors looking to buy properties back in Australia or review their existing mortgages and a tax position for an optimization opportunity. So I personally have been in this Australian banking and mortgage industry just over a decade, and joined Odin late last year with a mission to better serve the expat community. So I'm from Sydney, but flew into Singapore to set up the office here about a six month ago. So I'm a newbie expert myself, so definitely have learning a lot of early lessons as a newbie. Yeah, so, and I'm sent the the expats, the Australians in their states. Now they're demanding the Australian properties are coming up. So I'm hoping to give a bit of rundown on how to navigate through your borrowing options, as well as some tips and considerations when you're looking to buy a property or applying for mortgage.

Josh Pugh 03:42

I love it. I love it. And so you would have some of you would have seen Stephen pulling beers at the big Aussie barbecue. So yeah, some of you may be familiar with his work, Sky hammer from convergence, like tell us. So that's the intro for the mortgage side of things. That's the framework. Can tell us a bit about convergence and what you do and sort of your background in this process. Perfect.

Sky Hammer 04:04

Yeah. Thanks, Josh. Hi everyone. Scott hammer from convergence buyers agents, as Josh mentioned, we are a buyer's agency that helps Australian expats buy property back in Australia, both for investment, but also for their potential future houses to living in the future. We're a boutique agency. We're still relatively small, and most of our team, not all, but most of our team, have actually been expats in the past as well. So again, understand those kind of unique situations that you might find yourself in. I love

Josh Pugh 04:30

it. I love it. Skye, I'm gonna ask one question straight out the gate, like, How's the market looking right now? Good, bad, ugly,

Sky Hammer 04:37

bit of everything. Markets in Australia like I think we'll touch on those markets, but later on, including markets we think are undervalued, I think are really good at the moment, but places like Sydney and Melbourne are in this kind of holding pattern. They're not really sure which way they want to go. Melbourne's pull back quite a bit. However, there's been some really good markets like Perth and also regional Queensland. Whether we've seen double digit or close to 30% growth over the last 12 months. So really different across Australia, but we can chat about that a bit later on, a bit. I

Josh Pugh 05:07

love it. This is like a teaser. This will keep everyone hooked right until the very end. Pau Lam from Odin tax. I know it's own mortgage and tax, but I'm gonna, I'm gonna break you guys up into owed mortgage and Ogden tax keep things easy, but Pau Lam thank you very much for joining us, because I know that we have whenever we talk about property, and we always put a flag up the top and we say, you know, tax is super complicated, so we appreciate you taking the time today. I do want to flag for everyone that and correct me if I'm wrong, Pau, but your expertise is really around the Australian tax implications. So we want to make sure that people understand there are going to be American, US tax implications and Australian tax implications. Today we're talking about the Australian tax implications. That's what we're going to focus on. So do you want to give a bit of an intro about yourself, Pau and Odin tax, and what people are sort of coming to you guys for, and then, yeah, a sort of surface level look at a tax let's, let's

Pau Lam 06:02

keep it exciting. Yeah, sure. Thanks, Josh. So let me quickly, just give, me give a bit of my background as well. So yeah, I work with Stephen. He's managing the mortgage department, and I run the tax team here. I'm a bit longer than Stephen being an expert. I've been back from Sydney for 10 years back to Hong Kong. So since then, I have been helping Australian expats living overseas, from all around the world to handle the tax in Australia. Again, we are only focusing in Australian market, so helping expats for the last decade doing their tax as a non resident for tax purpose. So that's where our specialties are, adulting, and I want it. The reason why we want to make it simple easy is it always comes to the tax questions. And if you think of buying property, the next question or the thing you should know beforehand is what is the text may look like. And this is the main reason why I want to combine into one house services that we can provide from beginning to the end when you're selling or sort of benefit costs, are you looking at? Yeah, cool. So it really does fold into sort of the whole process, right? It's not something you can think about as a separate part of it. It really has to be from the outset. So you get people coming to you, not only doing sort of around housing, but just tax in general, is that, right? If you're an expat, tax, that's sort of the brush, yeah, anything that related back in Australia, and that's where we assist. But for most expats, they would have the properties which they start to collect rents in Australia, and that's the main reason why they seem to submit a return in Australia. Got it because it is this having some sort of Nexus, some sort of activity in Australia, that triggers the need for joining this webinar tonight.

Josh Pugh 07:49

Awesome. Okay, Stephen, I want to start because I feel like as much as we just established that tax is incredibly important to the whole process, we're going to keep arcing back and keep having tax one into all of these things. But I want to start with the broad strokes of, you know, if I want to get a mortgage in Australia for an Australian property, and I'm living in the US, what's what's different, what's unique? What, what is the process when somebody comes to you?

Steven Lee 08:14

Yeah, sure. So I guess the, just to start off with, the general sort of process is somewhat similar, whether you're borrowing as an expat or as an onshore borrower. In Australia, it's more of a like knowing the product offerings and the eligibility criteria, especially when you earning the foreign income that is not in the Australian dollar currency, and that's where Odin comes in as an expert. So we work with like 20 plus Australian banks and lenders across major banks, regional banks, even some non bank lenders who have designated products for expats and overseas investors and and we with expert in the the the niche in the foreign income policy. So I guess knowing your numbers would be very important, because we actually had a lot of expat clients, especially in the States, who had a frustrating experience by talking to their own banks in Australia. And not many with no no disrespect, not many onshore sort of bankers or brokers have that day to day experience dealing with the foreign currency income. So a lot of our clients actually had a past sort of, yeah, a bit of a bad taste from their initial engagement. So I guess the first thing that you should do if you're thinking about buying a property is to talk to us and know your number. There's no paperwork or documents required, and you don't need to talk to like five different banks individually. You can use this as a platform to access 20 plus lender offerings in a single conversation and. But just to give you some context, I've just got a slide up, so let me just quickly bring it up and I'll share on some of the considerations. Can you see my slide? Yep, yeah. So, so when we're buying a property, there are two parts to the equation. So one is the deposit, which is based on your savings or liquid asset position, and the second part is the loan which is driven by your borrowing power. So one consideration as an expat is that unlike, say, first and buyers in Australia or those who are leaving work in Australia looking to buy their immediate family home, who could actually borrow up to 90% or even 95% generally, expats are required to have minimum deposit of 20% of the purchase value, plus the stamp duty and the legal cost. However, we do have some lenders and banks who have started offering more than 80% lending on an exception basis, so which sort of indicates that now lenders are becoming a bit more flexible in this high interest rate environment. And the other side, when it comes to your borrowing power, the equation is quite different, as if you're looking to borrow in Australia. So generally, the earning power in the States or will be higher than Australian on average, which is a positive impact to your borrowing power. And then also, typically. So this slide is for Singapore, but even for states, the income tax rate is generally slightly lower than the Australian income tax rate, which all positive impacts. However, Australian lenders do apply restrictions to foreign income. So let's say you're $100 most banks and lenders would actually discount that by 20 to 30% which means that out of $100 only $70 or $80 will be taken into account for your loan assessment, which negatively impacts your borrowing power. And then also additional sort of high, high sort of cost living expense items like school fees and rent in states, those would, of course, cause a negative impact to the borrowing power. So again, these are some of the Levers, but it's very important for you to have a just a complimentary chat with experts like us, so you know your numbers and you can manage your expectation as you get ready and start looking for your dream home. Yeah.

Josh Pugh 12:37

So it's not only like a It's not only a communication issue, sort of understanding how it it is as an expert, there's actually sort of different rules. I think it's sort of an understanding that it's actually different is important as sort of a baseline to understand that there are fundamental differences. Whether you're applying as someone a resident in Australia, whether a citizen or not, doesn't matter if you are living abroad, earning money abroad, that can really have an impact, absolutely. So Skye, from your angle, when it comes to somebody sort of starting off in this process, is there similar sort of restrictions, or is it more just sort of the fundamental, like the basics, of actually getting out there and finding a property and being present that is more of the difficulty? Yeah. So

Sky Hammer 13:21

I guess for most expats, the issue is just they're not on the ground in Australia. So there's obviously expecting the properties on their behalf part, but it's also just being in the same time zone, so being able to speak to Asians and obviously work through that process of identifying and sourcing property. So that's obviously the biggest constraint we find with their expat clients. But yeah, outside of that, it's obviously the relationships you need to have to get, I guess, good off market deals or kind of borrowing below market value as well.

Josh Pugh 13:47

Yeah, so, and that is, that is what you do, that is the reason that somebody engages you. You sort of become their advocate on the ground. That's right,

Sky Hammer 13:54

yeah, that's correct. So for us, it's a full end to end borrowing process. It's the identification, sourcing and negotiating a property if it's going to be rented, it's getting in property managers, trades, people, whoever else, we need to kind of really shape that fix up any, maybe small issues with the property. But the main part as well, that we do for our clients is actually the kind of strategy session you hold up front. So if it's for an investment, it's defining what your objectives are, not just for this property, but in, say, 510, 20 years, and make sure that property is actually going to get you to where you want to get to. And if it's a future house, it's working through those really meticulous requirements of how many bedrooms, does need? A pool, what's the land size, north facing, all of that kind of stuff. So we spend a lot of time upfront working through that. Yeah, okay,

Josh Pugh 14:34

so for like, Pau, when we when we fold in to that, we've sort of got the processes involved. There's boots on the ground this guy. There's the process of establishing credit and having a line of actual availability of money with Stephen. When it comes to the tax, I know we were talking about how it is something you need to prioritize. How early should people be thinking? Is it something that they come to you really early in the piece and say, I want to one day buy a. Else I need to start thinking about this years in advance. Or is it something like, how does that timeline work?

Pau Lam 15:06

So let me share my screen, or just, yeah, please go through. So we joined in at the beginning, and this is the main reason, again, we established the mortgage and tax as a household services we came we will come in at the beginning on the conversation, along with the mortgage from for you to help understanding what is the cost, mainly a three things, cost of buying a property, what sort of income, what sort of money you need to have in order purchase a property, and what are the causes involved to maintaining property on the selling the property? So we come in from beginning and hold your hand until the end, eventually, when you sell the property. So there are a few considerations that we will discuss during our mortgage and tax meetings. Coins we go through the same duty. What are you being an Australian? Expect living overseas. Are you being penalized or just being living aboard from Australia? The quick answer, the quick answer is not, you still you'll be seen like a normal Australian living in Australia. You pay the normal stamp duty like anyone else in Australia, and other stuff like legal and those the other three things, if I'll be in stamp duty surcharge. There is only applauded to foreigner, purely foreigner, with our passport or without PR Australia, but yes, generally, for Aussies living on board, a probably only thing you could consider just the stem duty and legal fee, maybe a fee of, like the other subsidiaries, report fees, etc. But what I want to focus maybe, I believe a lot of people will meet their loved ones while in the US or any part of the world being an expat. So another consideration would take into account is if you are thinking of buying with your partner who might not be an Australian or PR, and this is important topics, again, that we come in from mortgage and tax to discuss what sort of options and what is planning you should go with to avoid the stamp duty surcharge, the additional fees of buying a property, and in the long run, when you're looking to sell the property, what sort of benefits. So this is how we structure. And then the next is, really, once you settle your property, what is the steps to maintain the property? And we still have the negative gearing applies to expecting overseas so that one doesn't take it away the government didn't take it away from mine, so we can still apply the losses that you might have accumulate on the property and to the end, when you sell the property, when you when it comes to capital gains, we would then look at, right, what sort of capital gains you could pay. So we would do a projection during the whole process, like, you know, if you're buying this property, what is the cost, what is the running and what is the end result when you're looking for, if this is going to be an investment, what is the return on investment that you can expect on these properties as we make the property can be performing as expected?

Josh Pugh 18:09

Okay, so it really is about, and I think this is something that sky, pardon me, is you touch on as well? Is this idea that it's important to think about, not only sort of the what I want to buy, but also what it looks like in 10 years, and what it looks like in 20 years. Do you want to sell it at some point? Is that right from you? Scott, yeah,

Sky Hammer 18:28

that's correct. Like, there's obviously the upfront costs and tax considerations, but I guess, generally speaking, it's the ones in the future that are going to be the most costs if you get wrong, which is why it's really good to have someone like Pau upfront, because you really need to plan for that from the answer, yeah, cool.

Josh Pugh 18:42

So Pat. Do you want to extrapolate a little bit on? I know we get, we got a lot of questions around the capital gains tax side of things. I think it's probably just a good time to jump right in, because that is one sort of question that a lot of people asked about. So in terms of the differences between, yeah, someone a citizen living in Australia and buying a place, and then someone that lives overseas. What are the fundamental differences for those two groups?

Pau Lam 19:05

Yeah, so let me bring up another slice place. This one is about, eventually, when you sell the properties, what to expect when it comes to capital gains calculations. So the main difference, and for most of our attendance, or people come to this event? I believe they are. Expects living overseas. So to me, the wording I will be using instead is tax, non resident of Australia from a tax perspective. So we living overseas as a non resident for tax purposes. The rules are slightly different when it compared to people living in Australia, Australia in general. So we when it comes to a calculation of capital gains tax, the rule of thumb is pretty much more expensive you pay on the property is deductible, so you can claim the stamp duty, the legal fee on purchasing and selling agent fee or buy agents fee, commissions, although pretty much all. Expenses you incur during this purchasing and selling process is deductible against the capital gains. So we just need to work out what the number that may look like. But it's worth noting that there are two things that slightly change for us as an non resident for tax purpose, which is the 50% discount on capital gains tax. So generally, people, people in Australia, they will be able to enjoy the 50% discount on CGT if they hold the property for more than one year. However, the rule had changed for us as a non resident for tax purpose back in 2012 that the government had removed that benefit from us. So just be mindful that whatever you're making, the profit that you're making, isn't on resting. It is subject to tax 100% at your marginal tax rate at the end in Australia. Another thing I want to bring into attention is when you sell, you're probably in the future, and you'd be selling for more than $750,000 for example, there is another system or regime in place in Australia, with the tax office in Australia that they want to take reporting a 12.5 reporting of the salesperceit as settlement. They're going to see that one as your estimated capital gains. So unless you go back to them and do some work to reduce or vary the rates, otherwise you need to expect that some money will go to the tax office first. You can always claim it back. Eventually, when you submit your tax return on you can do a variation in advance. So this will be the main difference when it comes to the capital gains and what sort of expenses can be deducted, and nothing to add on is you might be this point here accumulated tax losses from previous years. So this is related to negative gearing. So if you are making a loss on the property because of the mortgage and all the expenses you have on the property, you are likely to accumulate some sort of tax losses, and those tax losses can now be applied here to offset the capital gains, so eventually it would help you to reduce your tax when you sell the property in Australia,

Josh Pugh 22:17

got it and so does that from that slide, does the 50% I know we just had a question, does the 50% the 50% discount only applies to tax residents? So does that come back when you become tax resident, like, how does that timeline work if you are someone that like, so I'm living overseas, and I'm thinking about buying if I move back. How does tax residency, like, get tested. And how does that? How does someone sort of regain that 50%

Pau Lam 22:44

Yeah, so it will come back eventually, when you return home for good, become a resident Australia again. And it could be two scenarios, while one is you move back into the property that becomes your main residence. If that's the case, you will be able to enjoy the main residence exemptions. So from that point onwards, when you move back to Australia and live into the property, the property will become CGD free. But it's only from that point onwards. So what has happened in the past could not be changed. So or if you choose not to leave it back into the property, you choose to rent somewhere else, keep the property as an investment, it will still enjoy the 50% discount. So it depends on what the end result that you want to do with the properties. Yeah.

Josh Pugh 23:27

So once again, we've got to have a bit of a crystal ball and plan years in advance and kind of know what you want to be doing. But it all comes into play and you might so do you build out a few different pathways? So you sort of say, like this, if, if this, then that, like, that's sort of how you work with people. Right up, before they even approach Stephen and start talking about mortgages,

Pau Lam 23:47

exactly. So I think first, first thing we always wanted to understand from our clients is, what are you trying to achieve? What is the goal they trying to do while planning for your future? So we we could work out a few scenarios depending on if this is something you're going to live into, or this is just pure for investments. What sort of returns at the end of the day is looking at the numbers? What sort of numbers are we looking at? Would it make financial sense to for you to invest in their properties? So yeah, our team for mortgage and tax would do the same thing to make sure, also, for some people, they are thinking of building a wealth in Australia, again, utilizing their time on a high package overseas. So this is what we do, to build a portfolio for our clients. It's a home or for earn plus investments portfolio in Australia. Okay,

Josh Pugh 24:40

okay, so Stephen, building that package, putting that all together. For some people, I imagine you've got some people that saying, I want to build, I want to buy my sort of primary residence. I'm moving back, and I want to do that. How does that differ from someone that might be investing? What are those differences from your perspective? If,

Steven Lee 24:59

yeah, so. Um, whether you're looking by a future family home or whether you're looking to just build out your investment property portfolio. I guess from a mortgage perspective, it's somewhat straightforward. So while you're still living and working overseas, Australian banks would still consider yourself as an investor, the immediate sort of needs and purpose. So what that means is that the product offerings that are eligible for our expat community are generally sort of limited to investment home loans, which are typically like point 2.3% more expensive than the owner occupied home loans. But that's fine, because once you get a once you buy a property, and let's say you rent it out for a couple of years, and then you decide to move into the property, even when you return to Australia, that's where our concierge service comes in because we manage our clients home loan accounts throughout the lifecycle of the property, and will help our clients to convert their investment home loan into owner occupied homeland, where our clients would realize the interest savings from the time or close to time when, when you actually moved into the property.

Josh Pugh 26:20

Okay. Okay, so Yeah, sort of comes into that planning again. So then in terms of leveraging properties, one against each other. So that's one question that we got a lot of. So if you are Dick going to this investment path, what are the implications that's different for someone who's living abroad from someone that, if you've been investing in Australia, for example, and you've had a few properties you've moved abroad, what changes for you?

Steven Lee 26:43

Yeah, so it comes again, it comes down to the borrowing power and then also the equity position that you may have. So accessing equity, so it's a very common strategy and smart strategy, to access equity from your existing property to support funding your next purchase, and then use that as a vehicle to grow your portfolio. It's very common strategy and and I guess it's essentially treated as you're borrowing more against your existing property. So let's say your property is worth $1 million in your outstanding mortgage is $300,000 that means that there are $700,000 equity available. And that's where the concept of loan to value ratio, or LVR, comes in, that generally in Australia, Australian borrowers will be able to borrow 80% or plus. That means that you could actually increase your borrowing against existing property to $800,000 or more. That means that $500,000 plus is available for you to draw down to support your next purchase, whether that's in a form of a deposit for your next purchase or buying your next investment outright without necessarily getting another mortgage. But the catch is that, and again, that's where I'm highlighting this point, that it's very important to know your numbers, especially when it comes to borrowing, even though the equity, even though you may have a very generous equity available in your property in Australia, that you need to have the sufficient borrowing capacity, which is driven by your income and expenses to be able to borrow more against your existing property. So that's where the particular restrictions around the foreign income policy, and then also banks and lenders their own limitations on expats and also particular countries. So it's very important for you to understand available product offerings to your circumstances and to your earning powers, and also pick and choose the the lenders that may offer the lending that will suit your need. And one, one, I guess, myth that I want to break is that you don't need to get borrowing through a single lender. So unfortunately, the concept of loyalty or a strong relation with a particular bank, it doesn't really make a positive impact to your borrowing power. And where we help our clients is that leverage available lender options or product offerings in the market, and pick and choose the right lenders, whether it's your first borrowing or second borrowing or third,

Josh Pugh 29:28

okay, right? Good to know. Because, yeah, I imagine there's a lot of I imagine you hear that a lot from people, if you Yeah, so, from sky for sky, like when it comes to sort of idea of investing, what changes for you? What changes for someone who might be looking at a primary residence? I know we sort of touched on this before, but compared to an investment, what sort of structurally has the conversation change? What should people be thinking about? What? What are the things that you sort of like to flag for, for those who might be selling this, this adventure? Yeah,

Sky Hammer 29:57

so good question, and one we probably get the most from our. Clients. And I think for expats, what we see the most is that when they're looking to purchase an investment property now, they also kind of want it to tick the potential house to live in in the future box as well, which can obviously, is a bit of a trade off. So some people want to do both, and that's fine. And we can say, Look, if you think you're going to move back to Melbourne in the future, we'll buy you the best possible investment in Melbourne right now, however, noting that we think maybe Brisbane or Perth offers a better actual investment potential. So it's really distinguishing that upfront. It's are we going purely investment? And if that's the case, then what can talk about a lot of different markets in Australia? Or if we're trying to do both, then we're kind of limited to one particular location. So let's use the first question from us, then it's identifying what that market is. So for us, that's when we do that back that strategy session, and we'll say, is capital growth what you're looking for? Are you looking to get equity quickly so you can buy a second, third, fourth property? And that really then identifies which markets we want to be buying in. It's a very data driven buyer's agency. We do spend a lot of money on data, so we're very good identifying where those markets are going to be, where we get that short term growth. So that's the requirement. We'll go down that path if it's for a place to live in in the future, though, that's when it's very specific on what we're looking for in the property. So we work through that process there kind of hand in hand. We do one or two, like, lengthy sessions. We actually give our clients a bit of homework. So we'll actually send through these four or five example properties, tell me what you like, tell me what you don't like, just so we're very clear with what those requirements are before we go out and source those properties. Okay,

Josh Pugh 31:32

Pau, I was gonna ask you if someone has one intention at one point, so they're buying, they're looking at buying their primary residence, and then that sort of changes and things, but they're still living abroad. Does that change the situation from a tax perspective, that they need to be again? Is this just sort of one of the pathways that you plan out with them?

Pau Lam 31:49

Yeah. So again, having property in Australia doesn't really change about a residency. Say, yep, if you're generally living in the US for good, then you again will remain as a non resident tax purpose, so buying a property, meaning just going to have more income coming from Australia and do something and letting ATO know about your situations. But it wouldn't but obviously there are some cases where we can discuss personally, if anyone has their questions. But in general, that wouldn't change anything. So again, the wording I'll be using is a non resident tax purpose, and the only thing it would matter is really about your relationship when it comes to the cause of buying the one that I mentioned, if you are surely and generally, you won't be penalized for anything further. But if you are buying with a partner who is not necessarily there could be a separate conversations and considerations when it comes to cost, but generally buying having a multiple properties, meaning you probably would be accumulating a much, much more of losses from the property, and potentially be selling the first one that could be completely free of tax when it when you take into account those losses that you have accumulated by the years. Yeah,

Josh Pugh 33:04

got it the Stephen, we had a question come in. Do we need to change existing property mortgages from P and I to interest only if we're moving to the US? Are there advantages, like the strategies of people that might be watching who are in Australia at the moment? Are there sort of considerations that they need to make if they might want to expand to investing in the future or things. What kind of things should they be considering?

Steven Lee 33:28

Yes, so it's a good question. So there are pros and cons when it comes to choosing your repayment type as principal and interest or interest earning. Maybe just to give you some context, so in the past, say, six, seven years ago, interest earning repayment was a very popular strategy for amongst investors, because a it lowers the the monthly repayments or cash outflow, and banks would actually take the face value of your monthly repayment outflow, which means that your existing liability commitment will be considered to be lower than principal interest when it comes to borrowing. But today, in this environment, and it's now the new norm that banks and lenses, regardless whether you're paying interest only or principal and interest, they would actually use their own assessment rates and then add a buffer to your existing mortgage repayment, so which, in shortly negatively sort of impact your borrowing power. So for future borrowing, it doesn't necessarily help keeping your loan repayment as an interest earning. However, the other consideration is that in the current interest rate environment, where the rates are at peak, and hopefully we get to see the interest rates dropping soon, the difference between. The interest rates on principal interest and interest earning. It's actually quite minor, and it could so interest only interest rates are typically higher than the principal interest rate by point two and up to point 4% so if you actually do math on an average, say, $600,000 mortgage, the difference between principal and interest monthly repayment and the interest only at interest only monthly repayment, it's only like $200 a month. So choosing, choosing the interest only repayment, you'd end up not paying down the principal with a slightly less monthly sort of cash outflow. But of course, it's, it's a Boris decision and the ploppy Honest decision, but there's not much difference. Yep, got

Josh Pugh 35:46

it. And one other question we had, Stephen just while I've got you the around, and I know this is not what Odin does, but it's worth talking about. Someone asked, Can we get a mortgage from the US to purchase in Australia? What's the advantage of like by taking a mortgage in Australia, like, is it so it's local, once you move back, is that sort of the real advantage, or are there other advantages to investing in and using finances from Australia?

Steven Lee 36:10

So just to clarify the question, so the question is whether it's prudent to get a mortgage from a US lender, comparing

Josh Pugh 36:17

a US lender, yeah, yes, compared to an Australian lender and buying in Australia, comparing that to getting from a US lender and buying in Australia?

Steven Lee 36:25

Yeah, so, so it's a good question, and there are pros and cons. So in general, getting a mortgage from a US Bank to purchase a property in Australia, I understand the right to rates and pricing will be a bit more competitive than the Australian lenders, and also the credit score system and the US sort of regulation will definitely apply. So a lot of expats who have been in the States for a certain period of time will be quite familiar with the banking system over there. But one thing that you need to consider is that a lot of the international banks are quite picky when it comes to the property type and the location of the properties. So in general, we do observe that international banks limit their lending to Australian properties that are located in the capital cities or within five to 10 kilometers, and the borrowing maximum amount of the loan is somewhat limited to 60 to 70% of the property value. So that means that you you're likely to get a better interest rate over lower loan amount, lower quantum, and then also potential restrictions to the the location. Whereas the Australian lenders, the interest rates might be slightly higher, but in general, that you're likely to get a finance as long as a property is on located on the Australian soil. And also the major difference is that Australia, most Australian lenders, do offer an offset feature to to the variable rate. That means that if you, if your mortgage is 100 $500,000 and you've got $100,000 sitting in the offset account, you won't actually pay the home and interest for the balance that's sitting in the offset account.

Josh Pugh 38:16

Yeah, it blows my mind. That's not a thing in the US, and I know a lot of people have reached out. I when I was having a look, I didn't realize that was a, is that an exclusively Australian thing, or it's just exclusively not a US thing? What like is that? Do you know?

Steven Lee 38:28

Yeah, I'm not sure about, I'm not sure about whether it's, it's an exclusive thing to Australia, but it's very common in Australia, and it's hugely advantageous if you've got the cash. Yeah, yeah, exactly. And then not many international banks, not known in the States, but also in the Asian market, actually offer that facilities, which means that people paying high interest and not leveraging on the savings that they may have.

Josh Pugh 38:54

Yeah, got it all right. Skye, I want to talk about particular like places, because I think there's a lot of people that really want to really want to talk about, sort of the nuts and bolts we've talked about conceptually, the, you know, how much and finances and setting up, but what about the, how's the market? I know I gave you that buzzword at the very top, but this is our a good chance to to segue to that. Yeah,

Sky Hammer 39:17

sure. I might just share, yeah. But yeah, as I spoke about earlier, there are a lot of different markets at the moment. Beauty, yeah, so sorry if you can't see those numbers, but for us, like a lot of the states across Australia right now, are really performing in different ways. So the main ones, if you're looking at best performing. So from a capital growth perspective, it's Perth, Adelaide and Brisbane. By some way, Perth in particular has done almost 25% growth over the last 20 last 12 months, which is why we've been buying there for a few years now. We've actually stopped buying there for our clients. So just because they don't, the potential value going forward is no longer there. That there's some really good growth that has occurred. The most interesting one, though, for us, is Melbourne. So we've done these webinars for a couple of years now. Josh, I would have said in some previous ones, Melbourne is not really the place to be buying right now. However, that's starting to change. So if any following the media coverage, it's all doom and gloom. Still about the Australian the property market in Melbourne, some specific government policy that was brought in increased land tax, very pro tenant. In terms of legislation, has seen a lot of investors get out of the market. So lots of new stock coming to the market, down on pressure on prices. But at the same time, because of this shortage of property, because investors are getting out of the market, rents have continued to improve from, I guess, an increased perspective. So rents have been rising, prices have been falling, and for the first time in Melbourne, we're actually seeing some rental yields around that kind of four to 5% which is basically unheard of for Melbourne in the past. The other thing to consider with Melbourne now is it's actually the third cheapest market in Australia. So property prices in Perth, Adelaide and Brisbane, the medians are now actually higher than Melbourne, which, again, is quite unique. So at the moment, we're seeing a really good buying window. Prices are flattening. They're still falling a little bit in Melbourne, but you can negotiate quite heavily on properties, as opposed to, say, Perth, Brisbane and Adelaide, where it's multiple offer, there's 1020, offers on a single property. So if your time horizons five to 10 years, or even that three to five year window. Melbourne represents a really good market at the moment, because you're buying in and you're going to maximize that capital growth because you're getting into the market early places like Adelaide, Perth and Brisbane, they're actually still going to continue to grow. So we're not saying, Oh, they're bad markets. It's more that opportunity cost now that you're buying in to markets that have already risen 60, 70% over the last few years. So we try and avoid that. We try and get into these markets out of their capital growth cycle. Love it. The other thing I was just going to comment on is, if you so we have to come to us and say, look, hey, I just want the best investment property. I don't care where it is in Australia, I just want the best capital growth with the good van to yield. We strongly consider to our expat clients to consider regional so we've talked about places like Townsville, Mackay, Bundaberg, some of the best performing property markets in Australia right now. Yes, they're kind of a bit kind of scary for people that have only ever maybe considered Melbourne or Sydney. However, there's just no data that says that capital cities grow better than regional markets. It just doesn't correlate in the data. So for us, it's looking at longer term but also, if you're looking for that short term growth, you really have to do consider regional markets as well. And as you can see here, the final point, I have just on interest rate cuts. So we obviously get a lot of volume of inquiries, so we can already tell that people are sitting on the sidelines waiting for those interest rate cuts to start. So again, what we're looking to do is get into that market before those interest rate cuts do occur, because we know there's a lot of demand just waiting on the sidelines. And when it does start to happen, you're going to see an increase of investment activity, but also people looking to upsize their homes as well. So it's this is really kind of calm before. This calm before the storm situation that we're seeing at the moment

Josh Pugh 43:01

makes it more fun, right, to compete with everyone that sees the same thing. So yeah, how early if someone's watching this and they're thinking, you know, I will one day move home, I don't really know when. I don't know, where is there an advantage to starting the conversation? And I'll direct this at you sky to start, but I'm sure, pound, Stephen, you can jump in as well. But sky, how early is kind of at least. And then what's ideal for the process of starting down this path? Yeah.

Sky Hammer 43:31

So for us, we'd like to be involved like phase one. So basically, those initial conversations and we have, we've been speaking to clients for six months before they've decided to purchase, and for us, that's again, determining their market, but it's also making sure they've got a team of experts around them. So obviously it includes tax and legal. But it may be that if you're looking particularly setting yourself up for retirement, that you may be better off buying under a different structure, whether it's a company or a trust structure, all that kind of stuff. So upfront, we like to get that clear, because you don't want to go down and get pre approval and say your personal name, and then maybe they it's your own commercial property, for example, and you might not have a different structure set up. So we like to have those conversations early. From there, then it's we have a pretty good understanding of what you're looking to do and how we're going to do it. So that's when we'd like to bring everyone else in as well. Okay,

Josh Pugh 44:19

Stephen, same question to you, what's, what's an ideal, like, amount of time, if somebody's starting to think down these paths?

Steven Lee 44:29

Yeah, thanks, Josh. So very similar to what sky just outlined. So I think it's, it's, it's, it's a it's best to talk to the experts, like, as soon as possible, like even six months prior to making a decision to purchase, and the reason being is so we're in an environment where interest rates are high and banks and lenders have made policy changes, probably like probably the most, most number of times over the last 12 months compared to the. The previous is. So it's very important to know your eligibility criteria and product offerings. So talk to us to know your borrowing options, and that profile could actually change three months later. So I think having that communication, a conversation starting early, and then keep yourself engaged to the latest market information so that you can avoid any surprises down the track.

Josh Pugh 45:27

Yeah. Love it. And Pao, I know for me, one of the difficulties early on was this idea that the tax years in Australia and the US are not aligned. How does that work for you in terms of timelines, and I want to ask some other tax questions as well. But the in terms of timelines and how long before people need to start planning? You know whether it's let's start with buying. So if they're thinking about buying, how long should people be sort of really structuring things before they they start down the process with Sky and Stephen, yeah. So

Pau Lam 46:01

texts are a bit easier straightforward, and once you realize the structure they would have go along with it wouldn't take too long to consider so much more smart about the properties first. But in some scenarios, there could be if you're thinking of using a different structure instead of buying on the personal names, like a trust, for example, that may then take you a few few months to start the setup process to get a trust set up, then look into the structure that is possible for a mortgage. But still, we will start the conversation when you are thinking of buying so tax and mortgage and the properties. What is the best structure you might want to look into. Because again, when it comes to mortgage even though, from a tax perspective, trust may be a better options, or any any other structure may be a better options, but when we come back to the mortgage options, it's still needing to consider what the bank is thinking. So the bank may not like the way you think you're thinking that you want to set up in, especially overseas. So there's a lot of constraints and requirements that you just need to go through at the planning stage. So they make sure you are definitely able to get a mortgage, and this is structured that the bank can accept and you can stay at the same time achieve some sort of tax savings. So we usually start the conversation again, like Stephen said, maybe 36 months before you actually thinking. And

Josh Pugh 47:28

is there a particular time of the year? I know that's one question we get asked every single time we do a webinar around tax structuring. Is there a time of the year that works better or worse? Or is it really just about planning and knowing what's coming.

Pau Lam 47:41

Yeah, from a tax perspective, the timing of buying in in a financial year doesn't really matter. It's really at the end is, when did you settle your property? When did you start the Collect rents? And only from that point onwards you will need to report that income in Australia. But like I said, likely if you're having a mortgage, like the European loss decision, so you probably not need to expect any tax payable. It's more a matter of what sort of expenses or losses they can accumulate from the properties.

Josh Pugh 48:12

Yeah, got it, Stephen, I know the question I'm sure you get asked is, you know, the crystal ball, interest rates, what's happening? Should I buy now? Is the conversation directed mostly by like, people saying, I want to move within two years? Or do you get people saying, like, Hey, I'm willing to sort of roll with the market and like, what do you think? Is it? I realize you don't have a crystal ball, and there's nowhere to say. But how do you weigh those two things up? Yeah, it's impossible. Josh, thanks for asking.

Steven Lee 48:45

I do not have the Chris of all, but I can definitely help you to manage expectations reflecting the current sort of circumstances. So we actually do get a mix, mix of sort of client groups, where those people who are looking to take a motion to Sky's point that those people are on the sideline, they're ready to go, versus those people who want to sort of watch the market and just ride on through the cycle. I guess now is a really a critical time where the interest rates in Australia have been high. It remained high, but there's this sentiment that it stabilized over the last six months. And what we notice in the mortgage industry is that you may have seen in the news article that Australian banks and lenders across major and non majors, they've actually started making changes to their interest rates, mainly dropping the interest rates out of cycle, which which indicates that the markets heating up, and also amongst the expat communities that we're serving, that we're now seeing more clients coming to us with a contract of sale or. Have the property that they decide to make an offer in their mind, which is a very different dynamic compared to six months ago. So that means that the banks are like getting ready to lower their margin and bit more flexible so that they can compete in the market and better serve the borrowers or future borrowers, and then also the property market itself, it's heating up, where those people who've been on the sideline, we actually observing a lot of people actually taking motion to compete and winning. So that's my long winded way of describing the crystal ball, where good news is that now it's no longer a question of if. Now it's a question of when the banks would actually start dropping the interest rates and and I don't need to future anymore, that it's present, as we have been observing the changes over the last couple of weeks.

Josh Pugh 50:56

Yeah. Sky, do you have from your sort of clientele, people sitting there, sort of waiting, like with bated breath, sort of, they've set up everything. They're ready to go. Do you have a lot of people that have sort of structured that whole thing? And then they're, they're ready to launch when something happens? So

Sky Hammer 51:13

they're kind of, so if they, if they are our clients, they're actually borrowing right now, because they know they've got a big amount of time, so they're not sitting and waiting. We have that discussion, and we run through the data and explain, hey, this is the buying window. Our actual favorite device coming up. It's actually December, because people still need to sell property, but a lot of people don't buy property because they said, Look, I'll just wait till January. Let's go on a holiday. Simply the selling agents go on holiday and we can revisit this in January. Get some of our best deals in December because, because of that kind of that process, particularly people that have to sell for whatever reason, maybe they bought another property. They kind of just take the best offer they can get. So that's what we're looking forward to visit. December is one of our busiest years, but for us, it's, again, it's it's not really. I guess most people are looking to buy now, if they're ready and comfortable. But we do see a lot of expats who, over the last few years, have a lot of money just sitting in a US bank account. They know they want to invest in property, or they know what they want to diversify outside the US, and it's really just taking that action. Um, some people that can take two weeks. For others, that's a one to two year decision to make that process happen.

Josh Pugh 52:18

Yeah. And I think we've sort of, this has been an underlying message for the whole thing is that it really is individual. It's not there is no best case scenario for any three of you. It is down to tailoring a solution to the individual. Hence why we've got professionals like yourselves, pal, do you see particular mistakes? Do you see people sort of fall into traps regularly when it comes to these sort of things? What what are the kind of mistakes and traps that people fall into?

Pau Lam 52:44

Yeah, the most common mistakes I've seen is, again, not not fully understanding being a non western tax purpose being received. What does it mean back at home, from a tax perspective, a lot of people, and I believe, most well, more than half, in general, that they they kind of forget they need to still tell the ATO about their stories. They may be left for a few years, but still having a fee outstanding returns that they haven't attended because they were thinking of have left Australia and have no income in Australia. Say, since I don't need to do anything that is kind of a wrong thinking. So still, you want to keep the ATO updated about for a few benefits. One, updating them the year, being non resident for tax purpose, so your US income has no connection with Shirley. Then to pay tax in Australia for that income from the US. Secondly is to avoid the penalties, because if you're not telling the at about your story, they wouldn't know what exactly happened to you, and they must be thinking, you need to watch return. And that could be a penalty every year, which is up to 1500 you'd be having lunch in time. And then third one is, again, you'd be having properties. For example, some people in the wrong mindset, they think, oh, no, I'm making a loss in the property. I don't really have a fiscal income coming from the properties I already have in Australia, but they haven't lost return. So it's wrong the way that, yes, you're right, either having income coming from the property because of the negligence, however, you might also miss the benefits of those losses you could have accumulate, and those can be help you to upsetting any incoming future. So I think it's important that you, even though you are still looking at buying by the same time, to look back on your history with the tax office, make sure your file is up to date, and then plan for your purchase, make sure everything's in line so you can sit again when you once you certainly can see the sign line and let people help you to figure out what is the best way.

Josh Pugh 54:50

Yeah, I think it's a really good point, because I hear a lot of people sort of saying, like, it'll be okay, but like you're potentially missing out on things, or your VI. Letting like laws, and it is important to not pretend like you can just sort of fudge your way through it. They're going to work it out in the long run. So be upfront. Get it clear sky from your perspective. Any major mistakes that people should watch out for, any traps the

Sky Hammer 55:16

one, the one we see a lot of expats fall into, obviously not our clients, but people that go at themselves. You got to remember that the selling agents don't work for you, but some of the best selling agents in Australia in terms of real estate make you feel like they work for you. So be calling up a agent saying, Hey, we really want to buy this property in Brisbane. And they say, Oh, this won't want to work, but we do have this other property coming up. And what we see time and time again is people overpaid for property working with maybe one agent who actually works for the seller. They don't work for you, so they won't make the process easy for you. That's probably because you're overpaying for property, and it's a really good for that selling agent. So that would be one that we probably flag up front. I

Josh Pugh 55:55

love it. Steven. Have you got a particular mistake or misstep that people take when they're planning their mortgage structure,

Steven Lee 56:02

yeah, so the two common mistakes, or top mistakes, that just came into my mind. So one is that there are a lot of motivated buyers with excitement that they make a purchase without talking to experts or even getting their loan pre approved. So which could cause a lot of trouble, and we're here to help you, but I'll suggest to it with if you have a plan to buy a place, yeah, please, please, even just understand your borrowing power, or, in a perfect world, get a pre approval arranged so that you have the certainty or confidence in the finance side and get the smooth settlement process. And the second mistake is it's more of a being being, I guess, less proactive. So we actually observe a lot of not only expats, but also overseas investors who have an existing property and have their mortgage but haven't had their interest rates reviewed for a certain period of time. Yeah, and as I flagged that we're actually seeing a lot of banks and lenders making changes to their product offerings and pricing, and that it now is a very good, timely opportunity for you to review how much you could potentially save and how you could potentially optimize your current mortgage and the property structure, and if you drag it because you're busy with other things, it's pretty much that You're missing out the opportunity to save hundreds and 1000s of dollars, where other people are enjoying their savings. So yeah, review between

Josh Pugh 57:50

the three of you, you know, save some money. Awesome. Sky Emma from convergence buyers agents, Stephen Lee from Odin mortgage, and palam from Odin tax. I want to thank you all very much. We are going to put out some information and share that to everyone who's watching. I want to thank everyone who's watching as well. We do send some feedback, and we send some forms that allow you to connect with our three panelists today, ask them, follow up questions, engage them individually. As I said at the outset, it is most important that if you want to start on this path, you get onto it early and you actually reach out to them and tell them and tell them your personal story, because it's going to make a huge difference. No matter how many webinars you watch, it's it comes down to an actual conversation. So thank you three for for chatting with me tonight, and I hope everybody learned something. And yeah, be sure to check your emails. You.