Hello All,
This is my 1st post on these forums and I have found all replies I have read to be very generous & helpful.
I am looking to dip my toe into the USA property investment game in 2011, but have one fundamental question that is bugging me.
If we (in Australia) can buy properties cheap (under $50 000) in the USA due to mortgage holders not being able make repayments , how is it possible to find reliable tenants to afford the weekly rent?
Is it due to the lower cost of purchase of the property therefore means lower rents charged back on the market? or
Is there some sort of rental assistance scheme in the USA at the moment?
Any relevant information would be most appreciated.
thanks
Plastiques
The location has a lot to do with the quality of tenant. I don't care where you are at, landlords are exposed to risky tenants everywhere. If you are in an area dominated by Section 8 tenants, you will see higher rents, but higher exposure to tenant issues.
But the market rental rates are what they are. It's all about demand. For instance, in SW Florida, the demand for rental is record-breaking high due to the number of homeowners that had to transition into renters. It is no coincidence as to why local, domestic, and international money is buying. They buy where the economics make the most sense and are able to quantify everything else included in the investment.
I have experience investing in the midwest. I will not specify a location because there are posters here who have bought there, but I did end up buying in a "war zone". I bought for $25,000 and I went in with a partner assuming the $25k would be low risk. I bought cheap and collected high rents. At the end of the year for me which was in July, my Net Operating Income which was supposed to be roughly $6,400 was non-existent. I didn't make a dime because of the filth I had to clean up during the lease turnover.
That is why it is important to research the markets and look at demographics, trends, and experiences.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeTennants will always be a nessessary evil in this game.
The properties i am soon to settle on all have tennent in place and local (long standing) property managers
in place as well.
As with all investment / rentals having a good reliable property manager can make or break your stratagies
and income.
I would get some background on local property managers in your area and then decide from there. Cheap isnt
always the best way to go.It comes down to doing your research. Apart from knowing the areas, we employ a system which grades an area on its tenancy risk factor. We take into account localized demographics, employment trending, vacancy rates and quite a few other metrics. This gives us a “good feeling” for the area. We also have key relationships with local reputable property mangers who are instrumental in sourcing “quality” tenants.
There will always be some risks when bring tenants into the equation. However there are strategies you can employ to reduce the chance of problems.
When it comes to USA property investing, its about reducing the risks whilst not giving up too much of the benefit. At the end of the day, 300 million people need to live somewhere!
Hi,
In answer to your question of why a tenant can afford to buy it when a mortgage holder cannot I think it comes down to as you say the lower cost, it also is a fact that many erstwhile homeowners can afford to pay the rent but cannot afford the other aspects of home ownership such as Tax, Association dues, maintenance, insurance which in the US traditionally fall n the landlord. I find as a general rule that occupiers who have lost their houses to foreclosure make great tenants. Also many many homeowners simply walked away from their houses with say a $199 k mortgage which today has a value of US $30k for obvious reasons.
Most areas have Section 8 which is the government housing assistance, they generally get higher than market rents but come with their own set of problems, I think its down to personal preference but I avoid section 8 where possible.
Hope this helps-
Regards,
Mark
SpyglassltdI have a lot of experience with Section 8. I have properties in New Jersey that I have Section 8 tenants and my Florida properties I have rented to Section 8. In my opinion, the stygma of Section 8 being problematic has been alleviated a bit. Maybe its the economy. But Section 8 is basically a privelege. Most Section 8 tenants know that if they are reported, the housing authority will take their voucher privelege away forever. If you let them know that upfront, problems are eliminated. My tenants take care of my property as if it was their own. However we do careful screening. Filling out applications is one thing. Looking them in the eye is another.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeHi Cheeves,
I really believe its down to personal preference and there are no black and white, clear cut, right and wrong. For many people it seems to work, I dont like it for few reasons firstly the fact that in some communities in South Florida, Im thinking in particular west palm beach which have good stock the amount of section 8 tenants is such that the areas have become more rundown which will impact on the long term capital recovery of the units which is probably my most important factor when I look at a development.
But again, you have more experience than me with section 8 and for sure it works for some people and there are advantages such as higher rents and as you say the act of reporting will have on the tenants.
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