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  1. #1
    Join Date
    Sep 2003
    High up above and deep down under

    Default Buyers warned of risks in 'bargain' US homes

    Buyers warned of risks in 'bargain' US homes

    Richard Webb and Rachel Browne

    January 2, 2011
    AUSTRALIAN property investors risk losing hundreds of millions of dollars after snapping up thousands of US housing bargains at forced-sale prices, experts have warned.
    Emboldened by the soaring local dollar, Australians invested about $600 million in US residential property last year, according to the Washington-based National Association of Realtors, as overseas buying of US housing doubled.
    But consumer advocate Neil Jenman predicts thousands of Australians will lose their money after unwittingly buying undesirable property.
    ''It's going to be a calamity, for sure and certain,'' he says.
    Many investors are being lured by agents promising unrealistic rental returns of up to 20 per cent.
    Investment experts who spoke to The Sun-Herald, warn that swaths of properties for sale are in bad neighbourhoods where it would be almost impossible to get a tenant, and even harder to get your money back if you later decided to sell. In the past six months, Australian companies that help investors buy US residential property have reported a surge in interest.
    Vincent Selleck of Byron Bay-based buyers' agent 888 US Real Estate says his business has grown five-fold since June.
    The robust local dollar means Australians' purchasing power in the US has not been this strong since the Australian dollar floated in 1983. Last week the dollar hit a high of 101.98 US cents.
    At the same time, bank-forced house sales after the global financial crisis have flooded the US residential property market with millions of homes at bargain-basement prices.
    With a strong local market offering relatively low rental returns, frustrated Australian investors are looking overseas for opportunities.
    Property experts point to a number of potential pitfalls including buying over the internet sight unseen, finding a trustworthy property manager, ensuring the property is in a location that potential renters like, local tax laws, and a tough market which might make it impossible to recoup your money if you need to sell.
    ''Some of the properties being offered are in ghettos and you need a bullet-proof vest and an armoured Humvee to collect the rent in there,'' Mr Jenman says.
    ''Tenants also have more rights in the US and if they don't clear the garbage up, it can be the landlord that gets fined - there are a lot more legal issues.''
    Sydney woman Kathy Graffiti bought three properties in upstate New York in 2005 and estimates she has lost between $300,000 and $400,000 on her investment.
    She bought two properties in Rochester and one in Buffalo for a total of $250,000, expecting rental yields of between 22-23 per cent.
    The rental income stopped in 2007 and Ms Graffiti was forced to sell two of the properties at a significant loss. She has been offered $10,000 for the third property.
    She regrets not having done her research into the areas before going ahead with the purchase.
    ''The areas I bought in were depressed and the quality of tenants was not very high,'' she said.
    Property Planning Australia's Mark Armstrong advises potential buyers to do their own ''on-the-ground'' research.
    Mr Selleck warned of a further 3 million foreclosures during 2011.
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  2. #2
    Join Date
    Sep 2003
    High up above and deep down under


    Property homework pays rich rewards

    January 2, 2011
    Fantastic opportunity ... Sydney accountant Rubens Locaputo has invested in US property. Photo: Simon Alekna

    FOR Sydney accountant Rubens Locaputo, the US property market is a golden investment opportunity - as long as buyers do their homework.
    Mr Locaputo, who specialises in property and business finance accounting, bought a property in Miami, Florida, a year ago and is about to settle on a block of apartments in Toledo, Ohio.
    The comparatively low price of housing, high rental yields and the strong Australian dollar made it an attractive bet.
    ''I was looking for a cash flow- positive property which you just can't get in Australia,'' he said.
    ''The value of the property may not go up that much but it doesn't really matter because you're still doing well on the rental return.
    ''My experience has been terrific, overall. I think US property is a fantastic opportunity.'' But he said investors needed to research the market and understand the area where they were buying.
    ''People do have concerns because it's so far away but America's consumer protection laws are just as tough as ours and we have a tax agreement with the US,'' he said. ''It's no different to buying a property in Perth.''
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  3. #3


    I have purchased in the USA as well and agree, doing the homework, going there in person and having a specific game plan are the first steps. Organising people you can trust and systems on the ground are equally important.

    There are so many spruikers in the US and here that are not transparent in their dealings and the unsuspecting investor will pay.

    Yesterday I was asked to do some figures and due diligence on properties in Georgia, near Atlanta, for a friend who was thinking seriously of buying through a US outfit. The houses, although circa 2001, were priced at 100% of their current value and passed off as 50%. The business in question was making $20-$30k per house and then another 10% on management.

    Personally I havent had a problem, but I buy very cheap and then sell for 100% and more profit. Maybe this year I'll look at some buy and holds. For resources on USA investing you can go to a site called TheBlockBlog.com There's alot of investing stuff there.

    The biggest problem Aussie and Kiwi investors have is falling into the trap of thinking that the US is similar to our market. It's not and the differences, if you aren't aware of them will ruin you. If you are aware of them, then you can do very well investing a part of your portfolio in America at present.

  4. #4
    Join Date
    Apr 2011


    I agree,if you do not do your home work you will certainly loose a lot of money.My company work with a lot of non us investors and we only sell properties that at already rented and in the best areas.We have property management in place so you do not even have to worry about managing the property.We have webinars ever Wednesday that explains the whole process.
    Go check us out and make your own decision masonhill.com/partner/sites/sp/thehouseguru/investorlanding.html

  5. #5
    Join Date
    Dec 2004


    Take Sapphire101's first sentence in the post above.
    Do It. You will have no regrets.
    Have good time in a great country while you're at it.


  6. #6
    Join Date
    Nov 2011


    I agree. Before investing, especially in a foreign property, you have to do a throughout research. I am thinking about investing in some apartments in the South (Texas), but still researching, so I would not end up losing money. Furthermore, Texas is a landlord friendly state, so it makes me happy as well:-)
    Last edited by muppet; 20-10-2012 at 09:20 AM. Reason: moderated

  7. #7


    I agree,if you do not do your home work you will certainly loose a lot of money

  8. #8


    I agree,if you do not do your home work you will certainly loose a lot of money !


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