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Invest in NZ - not in US properties is my mantra

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  • Invest in NZ - not in US properties is my mantra

    Hi All,

    I am more convinced by the day that investing in USA properties is a dead duck. Check out this news item titled:

    Decline and fall of the American Empire -

    and here is an extract....

    America clocked up a record last week. The latest drop in house prices meant that the cost of real estate has fallen by 33% since the peak – even bigger than the 31% slide seen when John Steinbeck was writing The Grapes of Wrath.

    Unemployment has not returned to Great Depression levels but at 9.1% of the workforce it is still at levels that will have nerves jangling in the White House. The last president to be re-elected with unemployment above 7.2% was Franklin Delano Roosevelt.

    The US is a country with serious problems. Getting on for one in six depend on government food stamps to ensure they have enough to eat. The budget, which was in surplus little more than a decade ago, now has a deficit of Greek-style proportions. There is policy paralysis in Washington.
    Do you really want to be lumbered with a US property.......

    America has more homes than it knows what to do with, and that state of affairs is not going to change for years.
    Source

    Andrews Waite told me that Dean Letfus and co - have acquired (access to)* 200 odd US properties to flog off to anyone who will have them. Personally I wouldn't touch them with a barge pole.

    There are oodles of great properties here in NZ to invest in - I say don't get sucked into investing in US properties. This is not financial advice - just my own personal opinion having read a lot about the 3 E's - economy, energy and environment and in particular the USA economy.

    Just my 10 cents worth.

    cheers,

    Donna

    * I have put in the wording 'access to' to clear up any misunderstanding as to what I meant by 'acquire'. Further on in this discussion I have asked Dean what Andrew said - he'd told me but Dean declined to do say - hence I added the words 'access to' to my statement.
    Last edited by donna; 13-06-2011, 07:23 PM.
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  • #2
    I think US unemployment is a lot higher than 9.1% too. They keep fiddling the numbers for it like they do here.
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    • #3
      Donna,

      As a high yielding investment play, you can't beat USA property. Net yields (after expenses deducted) of over 10% possible. But like any investment you need to know your market VERY VERY well to avoid pitfalls. The real estate market in the USA is HUUUUUUUUGE, there are so many markets, within markets, within markets that that kind of reporting in the story above is too general.

      That being said, I am still waiting on the sidelines as I think we have not seen prices in USA bottom quite yet as there is still way too many foreclosed house being dumped on the market by the US banks. Plus if you had invested in USA this year with NZ$ you would have missed the BIG run up in the $NZ - US$ exchange rate.

      I am planning a trip to California and Altanta Georgia in September this year to check out the market first hand. These are the 2 markets I have earmarked to focus on.

      The PROs and CONs as I see them of investing in the USA

      PROs
      - excellent yeilds of 10+ % NET after expenses
      - long term (5+ years) I see room for excellent capital growth
      - $50,000 buys a nice 3bd, 2 bathroom, 5 to 10 year old free standing house
      - $30,000 - $35,000 buys a ok older 3bd, 2 bathroom free standing house (20 - 30 yrs old)

      CONs
      - Must pay 100% cash for all deals (VERY difficult to get finance as a foreign national) Thus you don't get the advantages of leverage
      - Market may not be at bottom as foreclosed homes are abundent
      - US$ exchange rate continues to hit new lows against $NZ and other major currencies (thus losing any real gains through US$ currency depeciation when transferring the rent gain out of USA).

      Anyway I am happy to report back after my trip to USA in September. Note, I am NOT going on one of those organised investor tours.

      Shane
      Last edited by Shane D; 13-06-2011, 12:05 PM.

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      • #4
        It would pay to look a little more holistically Shane by doing a PEST analysis. The future does not look bright for USA from any angle.

        Here's a good report - death by debt

        Cheers,

        Donna
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        • #5
          Andrews Waite told me that Dean Letfus and co - have acquired 200 odd US properties to flog off to anyone who will have them. Personally I wouldn't touch them with a barge pole.
          Absolute nonsense by the way Donna. Andrew never said any such thing and I haven't bought a single property ever to sell to anybody.

          I can say the USA market provides incredible cash flow and if there was ever a time to invest here it is now. In the right cities with the right management 10 to 20% net, net returns can be had and properties are at 50 to 70% below replacement cost.

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          • #6
            Dean

            As you are actively marketing these investments; are you able and willing to share your own commitment to these properties.

            I have often found that people who invest in their own products offer a far better overall service than someone who is just trying to make a sale.

            Thanks
            SB
            Last edited by speights boy; 13-06-2011, 04:55 PM.

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            • #7
              Originally posted by donna View Post
              It would pay to look a little more holistically Shane by doing a PEST analysis. The future does not look bright for USA from any angle.

              Here's a good report - death by debt

              Cheers,

              Donna
              Donna,

              Thanks for the links. I do agree that short term the USA faces lots of challenges and they haven't even started to address the major financial issues facing the country. I saw this in 2006 and was buying gold bullien with any spare money I had in 2006 - 2008 to protect against a US$ implosion. The 2008 global financial crisis should have been the wake up call that the USA is on the path to distruction but instead the US government just kicked the can further down the road.

              I think it is going to take one more even BIGGER financial crisis than we saw in 2008 for the US government and US citizens to finally address the core issues and for the people to really feel the pain needed to get the financial house in order. I think it could happen as early as 2012 or 2013. But I think the USA can get back on track eventually.

              Getting back to the original post about USA property. You just need to look at the job income to house price ratio to see that the USA is becoming an attractive market to buy for long term holds. The ratio is around 3 in a lot of places.This means it would take 3 years of averge wages to buy and average house. NZ is around 5 something.

              Also another good mearure is a country's debt to GDP ratio. The USA's ratio is actually better than NZ's in some measures. See link. http://en.wikipedia.org/wiki/List_of..._external_debt

              Total public/private debt against GDP
              USA - 95% - $8,771 per capita
              NZ - 125% - $33,400 per capita

              By the above measure, NZ is in the crappa compared to the USA.

              All that said, I still LOVE NZ and will continue to invest in Auckland. Just looking at branching out and exploring investigating opportunites in USA.

              Shane

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              • #8
                Originally posted by speights boy View Post
                Dean

                How many do you own?
                SB,

                Are you willing to tell us all the details of your property and other investments around the world? If not then I might suggest it is impolite to ask others this question.

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                • #9
                  Quite happy to share that information Shane.

                  Property and investments I own worldwide, that I am also marketing to other people.....Nil.

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                  • #10
                    Great reply Shane - I respect your point of view I don't share your optimism for the US - mainly due to other challenges externally that essentially will (IMHO) curtail any short - medium term recovery - my guess is within 10 years the world will not be as we know it and a better investment would be in land to grow your own vegetables.

                    Absolute nonsense by the way Donna. Andrew never said any such thing and I haven't bought a single property ever to sell to anybody.
                    Dean, what did Andrew say to me?

                    Cheers,

                    Donna
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                    • #11
                      Shane, I'd personally not get off telling all and sundry about what I own, but a lot of these marketers are the complete opposite. The $10 million dollar man springs immediately to mind (or whatever value it is he currently holds).

                      If they use these facts to sell their speeches and events, it makes not a lot of sense to go all coy all of a sudden.

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                      • #12
                        TLL and SB,

                        Ok I can see your pionts. But in my opinion it comes across a little crude to start a post with "how many??...how much? ...

                        Maybe I am old fashioned.

                        Shane
                        Last edited by Perry; 18-06-2011, 09:35 PM.

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                        • #13
                          And Shane, your point is also taken.

                          I have edited my post.

                          Such a wise and civil head, on such young shoulders.

                          regards

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                          • #14
                            Originally posted by speights boy View Post
                            And Shane, your point is also taken.

                            I have edited my post.

                            Such a wise and civil head, on such young shoulders.

                            regards
                            That revised post is a nice one :-). It passes this old fashioned guy's politness test. BTW ..I hit 44 yrs old this year...so unfortunately not such young shoulders anymore.

                            But I regress...back to the topic of investing in the USA. I would like to follow up with my USA investment property buying criteria guidelines...next.

                            Shane

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                            • #15
                              Property and investments I own worldwide, that I am also marketing to other people.....Nil.
                              Same with me :-)

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