USA investing stories

Hi,
Great question, and I think is one that needs to be asked!

Browse the posts here and on some US sites.  I have learnt more from the time on http://www.biggerpockets.com (a US property investing site) than any other source.  Although I must say Real Estate Investing for Dummies (US version) was a good primer.  Ive been investing in real estate locally for a while but that site and book taught me alot about how the market runs over there.  Theres a great sticky on somersoft too.  http://www.somersoft.com/forums/showthread.php?t=18101

If you are serious about this, you should really decide how you want to approach it.   You can either go it alone (like I did), or you can use one of the many agents/facilitators that act as an intermediary to assist you in purchasing.  From my research (on this site and in general!), I know of about 6-7 companies that assist foreign buyers with acquiring property in the US.  Some of them run a great operation, and some seem less salubrious so due diligence is important.  You are right that there is a real lack of people on here talking about their experiences with investing over there.  There are far more people actually selling there services.  I dont have an issue with that but it would be good to hear from those who have experienced it over the long term?

If going out on your own, you'll need to commit some solid hours of reaearch to understand tax structures, type of property (SFH vs MFH), building contacts with agents, solicitors in the US etc.   The hardest decision is deciding where to buy.  This is the part that I agonised over the most as it is tough to decide where to start.  Midwest is quiet strong as far as cash flow goes, but some parts of the mid west are really struggling.  You need to thoroughly research local vacancy rates, quality of schools, crime rates.  I spent a few mths researching before I actually went over.  You cant buy unseen.  If going on your own, strongly recommend going over, unless you have developed some good contacts (through agents or someone you trust) first. 

One of the main bits of advice I can offer is, dont invest over there thinking your going to clean up from day 1 on your investment.  The positive cash flow that we all seek is achievable, but you are going to need patience.  I'll give you an example:

Price       $60k
Avg monthly rent $1k  =12k yr

Net after expenses  $7.5k (exps 4k = prop taxes + insurance 1k, prop mgmt 1k, repairs 1k,  vacancies 1k, annual accg/admin fees 0.5k)

Princ and interest of $5k

Net of $2.5k p/a if all goes well and you are only at 10% vacancies, which seems quiet low compared to some of the areas of the midwest.  Like yourself, Im also having difficulty getting an idea of peoples experience with finding and keeping tenants in their properties so share your concern.  Obviosly its great if you can pick up a property over there for next to nothing, but its worth nothing if it cant be rented for whatever reason  (eg because you wont feel safe in the area without a german shepard and a 9mm, oversupply of rental property, bad schools and transport links etc).

I have completed my first purchase in the US and am happy with it so far, but im sorry i cannot offer you too much advice on my long term success as ive only owned my place for a few months.  My place is a triplex and mfh (with 5 units) in upstate NY (not Buffalo).  Avg prices were around 12k per unit.  Hard to believe they can be that cheap but this is quiet reasonable for units in the midwest of the US.    Yields are alot higher than single family homes but generally the costs are higher, and not to mention that that your tenants wont always be the best with multi's.  As a foregin investor, you need to earn an even higher yield than a local does to make it profitable as we have property mgmt fees, travel costs, tax returns in both countries etc.   Overall I am quiet happy with how it has gone so far.  I found the property mgr's friendly and have not had any issues with the tenants yet (although my PM deals with any issues).  As far as the units go they are old so I am expecting higher maintenance costs.  The higher yield helps with this though. 

I'll be interested to hear the opinions of some others on this topic.   

Josh

Hello
I must commend Josh on being totally spot on with his advice!  The old adage "you get what you pay for" still is very true even with foreclosure prices across the US. Personally, I cannot see how anyone can GUARANTEE a return of over 10%.We live here and work here, so have the ability to be our own managers as such, and still would not rely 100% on making a return of over 10% as being the gospel truth.A month or more of no tenants will reduce any income, and as Josh pointed out with "patience" yes you can make good profits, but this also comes after you have done your homework and really understand how losses may affect your investment. We have gone in to our real estate investing venture with the goal of building our equity as quickly as possible in a financed property, or for ones we have bought outright with the goal of being able to invest up to 5% of the purchase price in improvements, in order to be able to raise our rental income  and to offset being overly taxed on income, IE: trying to keep the balance between ingoing and outgoing monies to achieve the lowest possible figure that the IRS will tax us on. This is based on a 5 year plan, and at the end of that 5 years, we expect to have 100% ownership of all our properties, with none needing any major repairs etc in order to be either sold or "owner financed" to potential new home owners. This is just our personal plan and how we are going about succeeding with it.  It takes planning and really deciding on how and what you want to achieve, then coming here and talking to folks as Josh has said he did etc. I hope this helps in any way , and is not intended to offend anyone, but we are here now and this is our experience.
Unlike Josh, I do have a problem with some companies charging my fellow countrymen ridiculous fees to just "join" their particular site, then make statements that you can make a guaranteed return of 40% or more? Unless you are buying a property that is already tenanted you cannot honestly say you will have it rented within 2 weeks. Its great if you do obviously but what happens if its not rented after a month?Who loses out? I ask any companies operating in the US right now that can show me their written policy that , if not rented within their advertised "your property will easily be rented in about 2-3 weeks after purchase" claims, the company would compensate the investor for their loss of income, for each week that the property remains vacant. Finally, a tenant can and will move out if they choose to regardless of what they have signed. Then you, the investor,are back to square one. I totally understand investing is a risk in any country and any market you choose. Just in my opinion it would be nice to see a page laying out all the major pros and cons for potential investors prior to them paying anything.
We base all of our purchases on 2 things right now, being close to any type of Military base and close to any of the state colleges.Plain and simple, these are 2 tenant pools that we felt were more consistent in needing rentals for at least 12 months.So far, it is paying off for us in both income and increasing our property sales values.
Thanks for reading this far,
Sincerely
J.
PS: There really is no need to limit your investing to foreclosures only.From experience in the last 6 months we have bought a few nice homes/small apartment blocks for great prices comparable to foreclosure prices, with the added advantage of the properties already tenanted, and the people were happy to stay even with a change of ownership. We did hear it a few times said that they were happier that we would be the ones to be the managers as some PMs could never be contacted etc., and this in turn made for a unpleasant relationship between tenant and owner, leading to folks moving out and properties remaining vacant.KS laws require PM companies/individuals to be licenced brokers, once again these rules differ from state to state.Suggestion would be to check out the BBB before contracting with anyone who has anything to do with YOUR investment. LLC companies can also be checked for free online through the Secretary of State Office in the state you have investments in. You will be able to read info about the LLC and who it is owned by etc and if they are current and compliant.  I dont mean to sound as if I know it all by any means, but this is what we did and it has worked for us. We started with a $20K cash purchase of a foreclosure, then had bank financing with 40% down, and in 1 year have 65% equity in the financed properties. Current county tax assessed values are a total of USD $1M, for 2 apartment blocks(6 x 2/3 bdr apts in each), 2 rental houses, and 3 duplexes we built on land we purchased for $4K for each block. It can be done, so good luck to all )

I agree with much of what has been said. It is important to keep in mind that currently the USA appears to be a great place to invest. However many of the operators and new companies are not really experienced and as such will give there clients bad advice.
The other trend is to target people that cannot afford to buy in Australia by promoting really cheap property with so called high returns. However it is important to look at the facts. Many of these cheap properties are being sold by the banks, they will not provide finance, so that tells you the confidence they have in there own properties. Many cities in the United States have high unemployment and vacancy rates of 15-20%. If you are going to buy in America you should only do so if you are wanting to build a separate income stream to what you have in Australia.

If you really want to invest in the states you have two choices do it yourself, in which case you will need to spend at least 3-4 weeks on the ground just to get an idea of what you are doing. Or use a professional like me who has been doing this for quite a while. I ran a real estate business in San Antonio in 2006.

In terms of charging for what I do, I provide a mentoring program where I will teach people how to invest in the United States. Keep in mind that for me to go to the United States and spend 2-3 weeks on the ground costs me around $5000. I can also assist clients to acquire property there.

What is important is for you to do your own research and that means questioning anyone who offers you advise.

Hi again
We have properties in Manhattan and Junction city right now, about 1 and a half hours West from KC, Missouri. Manhattan  is home to the Kansas State Uni, currently has about 23000 students (www.k-state.edu). Not a lot of factories/industrial type businesses, but being a hour or closer to Topeka (more industrial), less than 2 to KC,and less than 6 hours to Denver,CO made it a good place for us to start buying IP. (Zip code is 66502) sometimes using the zip code to search by is quicker I found, as here in the US..you can have the same town/city name in several different states! They are scheduled to begin construction on a BioChemical Research Centre in Manhattan this year, completed within 6-9 months at a cost of a few billion.The planners are estimating that at least 15000 jobs minimum will be created, with some estimating up to 25000, just in support staff to the researchers.
Junction City(zip code 66441) is mainly a Army town.Fort Riley is home to the largest number of Cavalry soldiers in the US, as well as being the place of the first Kansas State Capital. It has changed and continues to do so, from a rather old, run down town, to having more and more houses either totally renovated or torn down and nice new apartment building put up.We were fortunate enough to get some good deals on vacant blocks of land, big enough to build duplexes (3br/2ba) on for between $3 to $4K about  a year ago now.There are still blocks going for around $15K but these are becoming few and far between. Still, the houses being older & smaller are keeping prices from rising too quickly, at the moment! One of our main cost savings is being able to manage our properties ourselves coupled with the good fortune to own a siding/roofing company as well as a drywall company. So our remodel/repair and new construction goes really easily as we have good contacts with the other trades people out here we need ) 
Just my opinion about KC<Missouri, property is cheap there..BUT crime,unemployment and welfare is not a good recipe for success.There are some really nice suburbs out from there,with higher priced houses,so maybe that might be a better option.I have just concentrated on the above areas as they are within 10-35 miles from our home.
I  apologise if this post is way too long etc,but if anyone is interested to look at what is for sale I can send you links to the realtor we use, and several others who are reputable.We charge rent from $700 up to $950 per month,on houses that were bought at $25K and $35K, and the apartment blocks were around $90K a year or so ago for 6 X 2/ 3 bdr flats that were and still are 100% tenanted.

Hi doublekfarm,

It was great to read the posts from Nigel, Josh & yourself.

In response to your posting …

" … but if anyone is interested to look at what is for sale I can send you links to the realtor we use, and several others who are reputable.We charge rent from $700 up to $950 per month,on houses that were bought at $25K and $35K, and the apartment blocks were around $90K a year or so ago for 6 X 2/ 3 bdr flats that were and still are 100% tenanted … "

Can you please send me the links … We are considering the USA as members of my family have moved to the USA as well as other close family friends who are in the property game over there who have a contact base.  However … Early days yet in our research, we are doing well here in Australia in the renovation game.  You can get me on the email below.

Thanks in advance.