Don't invest blindfolded in the USA property market

[mattinvestor]

yeah im a bit overwhelemd and intimidated by using those US sales agencies. I prefer doing research myself. Just got a hold of a US property info pack, and going to go through it soon to build my own confidence to understand the investing in US process

[Alex SC]

I have to say I agree and I am one of the USA turnkey guys.. who has been Selling to Australian and international clients. Rather people go to the USA and check out the markets they so desire.


Alex

[muppet]

http://www.youtube.com/watch?v=NuAMFE6yBnA&feature=relmfu

[muppet]

http://www.youtube.com/watch?v=DXI0aveacio&feature=relmfu

[muppet]

http://www.youtube.com/watch?v=PlGvA2mqUsA&feature=relmfu

A pity about the sound.

[New Day]

Hi Nicked2
I am a New Zealander living in Hong Kong. We are active property investors in NZ and would like to get involved in the US. I have seen by your posts that you are investing in the US and was wondering if you would be open to a 15-30 minute chat on skype about the types of properties you are buying? (I tried messaging but your inbox is full :-)
could you please PM me to let me know?
many thanks

[ben9465]

I am a kiwi living in Auckland. 21/2 years ago I went to the USA to invest in residential property. I went to las vegas for 3 months and bought two houses. One built in 1998 3beds double garage, large lounge in a good part of town probably equivalent to good botany in auckland. The other is in an area similar to papatoetoe cheaper area but not bad by any means, it was built in 2001 3 beds double int garage 1254 sq ft. They are both concrete floor plaster houses-no need to worry about leaky homes las vegas is in the desert. They cost $90000us + 15000 for repairs on one and $69000 in good nick for the other. I bought both at trustee sales which is equivalent to mortgagee sales here hence one had been trashed. They took a while to rent out but both net me 10% return after mgmt, vacancy, repairs, insurance, rates. This is probably 4%more net return than is achievable in auckland. The money was borrowed on one of my auckland houses at 6% currently so i make about 4% on the money I borrowed. The exchange rate was 73c so not too bad. I have paper losses on currency and possible slight capital decline but these will turn to gain over time . They are a great investment. End of storey

[mwds120]

Good advice, for the most part. New investors should always know the market, or at least know someone who does.

[Austrokiwi]

Good advice, for the most part. New investors should always know the market, or at least know someone who does.

Doesn't take much hunting to find predictions that the Las Vegas property market values are likely to continue dropping over the next 3 years.

http://www.forecast-chart.com/estate-real-las-vegas.html

[speedy gonzales]

You know I have this argument all the time with other investors. My history is that I used to work in the Phoenix real estate market 11 years ago. We built, marketed, sold & financed property investors so I have some background knowledge of the US market. I bought, held and sold a few PHX homes and came back home to Australia before 2007 and before prices crashed. I currently invest in Dallas TX for the last couple of years. After much research & due diligence it seemed to me that TX had better prospects then others. I felt that states like AZ, NV, FL, GA had experienced a price bubble and simply overbuilt well above demand so past appreciation was not a guide for future appreciation. To me it just didn't make sense as an investor to sink my money into a market that was STILL declining even if the cashflow was above average. TX didn't experience the price bubble and this was mainly due to the fact that state law required a minimum 20% equity in homes so there was no such things as 120% loans etc that helped support the price bubble in other states. It's easy to see the states with the lax lending laws suffered the most. These are the same markets that have huge unemployment problems and still haven't recovered the jobs lost since the GFC. As a newbie to the forum I can't post links but if you use the same source as Austrokiwi used...for Dallas it shows the past and predicted appreciation rates.....nice and slow 3-4% each year. On top of this Texas leads the nation in jobs growth and has recovered all the jobs lost plus hundreds of thousands more gained since the GFC. It is the fastest growing state in population numbers from the 2010 Census and has more Fortune 500 companies in Dallas then NYC. I was able to get a loan as a foreign national with 30% down and the cashflow supports the loan repayments, taxes & insurances etc so I know for a fact I can own a home outright with a small downpayment and if the planets align I will also get growth. For the downpayment amount I know I could go to cities like Vegas etc and buy a home outright but I am in a C Class neighbourhood in Vegas versus a A Class neighbourhood in Dallas with better prospects in my opinion.

[Austrokiwi]

Speedy Gonzales I love the sales pitch you use. Great Lines and technique. People wouldn't realise that you actually agree with me that Las Vegas is a risky PI proposition. Yep doing some basic research suggests Texas is a better proposition. However What a about Germany and Austria? Like texas neither country experienced a housing bubble. Floating interest rates are around 1.65% Pa while house price inflation is predicted to hit 10% this year( but this is the first positive appreciation in value over several years). Even better for Kiwi investors the euro is likely to continue dropping against the kiwi. However there is always the flip side: To get all your costs back you normally have to hold a property for a minimum of 10 years. Worse Austria at least is looking at bringing in a capital gains tax. On top of that if you let tenants stay in a property for more than 3 years they gain permanent tenancy rights and rent control. Now these posts(above) tend to paint a very rosey picture about PI in the US..........but whats the Flip side?....I guess Capital gains tax for one.......And tell us about the applicable state and federal taxes a kiwi PI would have to pay. If you want to sell to kiwis you need to tell both sides of the story, canny PIS will run a mile when all they see is sales hype.

[speedy gonzales]

Austrokiwi,

Sorry you have me figured out wrong and your way off base. I have NOTHING to sell to anybody...particularly US real estate. To be clear yes I was agreeing with you that in my personal opinion Vegas is a risky proposition....even tried the "reply with quote" from your post but as a newbie I can't post anything with a link !! I have personally only invested in OZ, NZ and the US so can't comment on other countries like Germany & Austria. Yes CGT will apply just like it does to me here in OZ but at a much lower rate. I invest in Texas which has no state taxes and at this stage my positive cashflow has been a negative on paper due to depreciation and travel costs. Once I do start to pay federal taxes I claim these on my personal tax returns in OZ as a foreign tax credit. I don't go in with my eyes shut. I count on vacancy and maintenance happening like it will in any country on earth. Touch wood the worst that has happened so far is a got a HOA violation for a tree that had died in my front yard and was against the HOA rules for the community I am in. I replaced it in 24 hours and my PM told my tenant to water the shrubs !!
Again...nothing to sell....just filling in some time on the forum on my 10 days off work trying to offer some thoughts that may help investors. Thought that's what forums are all about.

[Austrokiwi]

Thats more like it IMHO. All I know is when you invest in an area outside of your own country you have to know the market extremely well. I have seen one kiwi make what I consider a poor choice in buying in Vienna, they committed to a jumbo loan ( in excess of NZ1 million) in buying and renovating an apartment, they used the sellers lawyer( not uncommon here: the seller of our property used our lawyer thankfully) and with in months found themselves embroiled in a law suit from another apartment owner for flooding that had occurred long before they had purchased. I saw another expat UK person buy a small apartment again didn't get independent legal advice only to find when they went to sell the apartment that it had to be sold as an office ( therefore at a loose)because they hadn't realized to be counted as residential accommodation they needed to have a parking space in the building. worse things have happened in Spain and Greece. I know when we purchased in Vienna I was terrified of the unknowns... it was only our lawyer who checked everything out who gave me confidence that we were not making a terrible mistake.

[ben9465]

Is 10% net return , modern houses, fastest growing city in the usa , house prices at 1/3 of replacement value , house prices most affordable in 80years versus income as is in Las Vegas risky??????

Or... 4% nett return, 30 yr old houses, house prices near highest in world relative to income as in Auckland not risky??????????

And by the way don't put your faith in lawyers for confidence in buying property not good practice, they are OK for the transaction but thats all

[Austrokiwi]

And by the way don't put your faith in lawyers for confidence in buying property not good practice, they are OK for the transaction but thats all

Wow that one surprises me. The lawyer in our case searched the title investigated to see if there was going to be any development that would effect the prospective purchase and ensured the Property complied with all building regulations. Of course we had other experts check the property out. The case I mentioned where a purchaser soon found himself being sued would have found out about the problem as his lawyer would have been to investigate all legal matters before buying. The Law suit had already been submitted prior to the purchase. Same with the lady with the absent garage her lawyer would have searched the title and found the apartment could only been used legally as an office. And it is absolutely crazy to use the sellers lawyer IMHO likewise I was very surprised at the seller of our property using our lawyer( in Austria its done to save money). I would be very shy of entering any substantial legal contract involving huge ammounts of money and debt without a lawyer advising me. Especially so in a foreign country.