The Aussie dollar sell off: time to rethink your US purchase?

 The financial stress in Europe, extreme stock market volatility and the ending of Quantative Easing (QE2) in the US has caused a huge strain on the Aussie dollar in the past few months. Now sitting at just 95.12 cents in the  dollar (click here for latest price), Australian investors are beginning to rethink their US property purchase.

 

What should you do?
Depending on your circumstances, this can be quite a difficult question for you to answer.  If you think the Australian dollar will drop further, then you should buy now and benefit from a falling dollar in the future.  If you are not ready to buy now but worry about a further drop why not leverage your exchange rate concerns by transferring money to the US dollar now?

Of course, if you think this sudden drop in the Aussie is just a ‘short term’ inconvienice, hold out a few months and look at purchasing when the dollar strengthens. Be sure to take in to account the potential loss of income from keeping money here rather than earning a higher return from your investment in the US.

 

My advice…
My strategy (which suits only my circumstances) is simple.  I will continue to purchase US property with a leeway of 10 cents to the dollar. That is, I will continue to save, research & purchase US property unless the dollar drops below 90 US cents.  My strategy is to hold for the long term (~10 years), and ignoring  daily currency fluctuations is fine with this strategy.  Of course, if your strategy is for the short term (3-5 years or less) I would; a) consider even the smallest currency exchange change or b) just not purchase US property at all – why risk it when you can earn a guarenteed 6.5% in the bank!

 

I already own US property, should I sell?
Assuming you put your house on the market tomorrow, you would still be looking at (the very least) a 6-12 month time frame between the final sale, contract exchange & monetary settlement.  Who knows where the dollar will be in 12 months time – you need to be careful.  In the meantime, you are still earning rent each month, why not simply send the money back to Australia when the dollar is weak?

As a site note, perhaps spend some time researching the historical Australia dollar averages – The historical exchange rate for the previous 5 years (Oct 5th 2006 – Oct 5th 2011) saw one Aussie dollar buy, on average, 87.57 US cents (link).

Property update & photos (finally!)

It has been a while since I have posted, and I apologise. Life and work caught up with me! I finally managed to transfer a few files so I could upload some photos of the property – let me know what you think! Purchase details are below.

Property is going well – a slight problem with the tenant (paying his monthly rent two days late) but other than that I haven’t heard a thing – I hope that this is a good sign! As long as the money is there each month I am happy.

I’ll be back to regular posting soon with more information, buyer agent reviews and hopefully more details of my financing and second property purchase (*fingers crossed*).

Until then,

🙂