HI NEWINVESTOR

The first thing you need to do is get a US bank account.  The easiest way to do this is through HSBC.  Find the nearest branch, pay them a visit, and fill out the forms for opening a US-based HSBC account.  They will send the forms to the US for you.  The whole process should take about 2 weeks.

Once your US bank account is open, send all the money to it (either wire it, or use internet banking). 

YESTERDAY I LEARNT SOME STUNNING NEWS REGARDING THE MONEY YOU DEPOSIT IN YOUR US BANK ACCOUNT.  EVERYBODY NEEDS TO READ THIS:

Firstly, I was told this news during a phone conversation with an employee of a mortgage bank in Miami.  She sounded like she was very experienced in this field, since (according to her) her bank is one of only two offering mortgages to foreigners in Miami. 

Here's what she told me:

If all the money you wire to your US account is all your own, and has been sitting in any of your own own bank accounts (or even in stocks purchased in your own name)  for the last 3 months, then you won't have any problems.  Just send it directly from your account to your new US account, and you can start making offers on properties immediately.

BUT
If you are borrowing money, or can't prove you've been the owner of the money for 3 months, then after you wire it to your US account it must sit untouched in the US for 3 MONTHS before you can purchase a home (this process is known as "seasoning").  The reason for this (in my opinion) idiotic law is because the government wants a clear paper trail to make sure you didn't get that money from Al Qaeda so as to try blowing up the Pentagon again.

This revelation is going to affect my plans for flying to Miami next week, because although I have all my money ($250,000)prepared in my Chinese bank account, I'm unable to send it to my US bank account personally.  Here in China they have a crazy law that one person may only convert US$50,000 worth of Chinese RMB into US$ per year.  My only way around this impediment is to have 5 different Chinese workers of mine each send $50,000 (of my money) to my US account. 

But since that money will not be sent from myself in China to myself in the US, it seems I will forced to wait the 3 month "seasoning" period before I can buy anything.

I only heard this information last night, and it is thus still heresay.  My plan today is to try to call other US banks and see if they are of the same opinion.

So what does this Foreclosure Fiasco mean for property prices in Miami?

That's the million dollar question.  I've posted this question on the Trulia.com forum, and a number of Miami agents have answered it.

Here's a summary of their answers:

1. there are currently very few foreclosed (REO) homes on the market at present.  All the big banks have taken them off "temporarily" while they "review the related documents to make sure there aren't any irregularities".

2. buyers are curently having to purchase Short Sales, or by-the-owner sales, both of which sell at prices much closer to the market value (Realtytrac claims it's stats show that REO's usually sell for more than 30% below market value).  Therefore, according to most agents, prices will rise in the short term.

3. prices will decrease further in the longer term because:

A. there will suddenly be a glut of foreclosed homes when all the "paperwork" has been cleaned up and banks release several months' backlog of homes all at once (some agents are saying this will happen in the 1st quarter of 2011)

B. many buyers of foreclosed homes will be scared away from the market altogether, due to the fear of buying a home that later goes into litigation

A number of articles have appeared on Bloomberg and Reuters stating that the Foreclosure Fiasco is definitely going to hurt prices "next year".  Even Obama is scared, and he is promising to speed the review process up so as to get business back to normal ASAP, for fear that this new scandal pushes the US back into recession.

Last week, US bank stocks all took a beating.  For example, Bank of America stocks lost 9%, showing just how seriously investors are taking this new crisis.

Hi James

About your spreadsheet project, are you able to convert it to an image (eg. a jpg or bmp file)?  If so, you can upload it onto any of your posts on this website by using the Insert/Edit Image (the tree) you see on the header when you're writing a new post.

If not, you may be able to google-search for a free site that allows you to upload spreadsheets for general viewing, and then provide a link to it.

Thanks for your kind words, but I'm not always a "genuinely nice" person.  I always try to be fair and honest, but when I want something (in business) I always but my own interests first.  The reason I'm writing on this forum is because I enjoy sharing information with others so long as it isn't in my interests to withhold information. 

I'm the kind of guy whom, if you met me in a Traveler's Hostel on your first day in Madagascar, and I was just leaving after touring the country for a month, would spend hours poring over maps while giving you advice and ideas.

I'm currently working on trying to secure financing (in the form of pre-approval) and will let you know how that turns out.

Ciao
Steven

TO JAMES

Thanks for bringing up this worrying issue of property taxes.  I also find US property taxes to be extortionate, especially considering that here in China there are NO property taxes and NO rates!

But I doubt that property taxes will ultimately affect the upward potential of property prices, simply because everybody is equally subjected to them.  It's a bit like HOA fees for condos and townhouses.  People don't shun these kinds of properties just because of HOA fees.

One way that property taxes might affect home prices is if one region or city is taxing more highly than others.  I found this to be the case in Detroit, and that's why I stopped considering buying property there.

I think one needs to always keep property prices in mind when buying.  For example, my instinct tells me to buy older, badly cared for properties that are in nice areas.  The lower purchasing price should mean lower property taxes.  Then fix up the property, rent it out, and when it eventually sells for a high price the buyer will be the one paying high property taxes.

TO GIBBO

I'm not an Aussie, but sure wish I was one, since your currency and economy are powering along.

I'm using Chinese RMB to buy property, which is an undervalued currency (by about 40%), and is linked to the US$.  So when the dollar goes down, our already undervalued RMB goes down as well.  Very annoying.

If I were to leave all my RMB in China, I'll definitely earn at least 40% return over the coming 10 years as the currency rises.  However, I believe that 40% return isn't anything like what I could get in the US property market.

Here's an example of what US$100K would do if left in China invested in the already very expensive property market:

$100K buys $300K of property (33% downpayment), which might increase 20% over the next 5 years = $360K
Your monthly mortgage payments will be $1,300 but you'll only get $570 in rent, so you'll lose $730 every month
Which is a total loss of $44,000 over 5 years
If you sell for $360K, then pay back the $200K you borrowed, minus the $44K you lost, you're left with $116K
That's only a 16% return.
But if the RMB increases 20% (which is probably the maximum the government will allow) you'll have $139K
Ie. a total return of 39% in 5 years (not bad, but not stellar)

The same $100K invested in the US for 5 years would also buy you $300K of property (33% downpayment)
Which I believe will at least double in price in 5 years (I believe US property prices will more more than double in the next 10years, but anyone who buys discounted REO houses can definitely see a doubling of price in just 5 years)
So the $300K will increase to $600K
Your rental return will pay your mortgage, HEO fees and property taxes, and you might even have a bit of profit left over.
If you sell for $600K, then pay back the $200K you borrowed, you're left with $400K
That's a 400% return on your investment.

I KNOW ANYONE READING THIS IS THINKING THE ABOVE IS ALL JUST HYPOTHETICAL

And it may well be.
Anything could happen.  Al-Qaeda might take over Washington DC and impose Sharia Law.  The Chinese might invade and install a puppet communist government and outlaw private property ownership.  Global warming might cause sea levels to rise so high that Florida disappears.

But I'm banking on the status quo, that America pulls itself together and returns to the path that made it the richest country on the planet for the past century.

Also, I'd like to mention that the profit predictions I calculated above are exactly the same I made here in China 6 years ago when I saw my Shanghai apartment price begin to rise.

Unlike all my neighbours, who suddenly felt much richer and started taking more overseas vacations, I sold my apartment (just 8 months after buying it) and bought 2 more, and so on and so on and so on…

TO REINVESTOR

Thanks for your post, and for the warning.  The article was very interesting, pointing out that more than 57% of all households in Miami are spending more than 30% of monthly income on servicing their mortgages.  The warning is that a large percentage of these households will go into foreclosure as a result of having to spend too much of their income paying off their mortgages.

Although the article was written recently, it covers 2009 data, and therefore explains clearly why so many foreclosed properties hit the market this year, and will continue to do so.

However, I see such information not so much as a warning than as an invitation to buy.

If Miami were not suffering so many foreclosures, and if the economy was in a much healthier shape (as it is in Texas and Kansas) then I woudn't be considering going there.  I'm not even considering Los Angeles (despite high foreclosure rates) simply because the property prices there are already creeping up.

I want to choose a city that is in very dire straits, and will continue to be for at least another year, since that's how long it'll take me to get my portfolio going.

Also, my tactic is not to choose a city that's doing well, or already in recovery.  More important (I believe) is to find a city that was booming before, and is out for the count now.  If it boomed before, it should do so again.

Here is an interesting graph showing Miami's unemployment rate for the past 20 years:
http://www.deptofnumbers.com/unemployment/florida/miami/

You can see that before the recession, Miami's unemployment was 3%, a lot below the current 12.8%!

Compare this graph to that of Detroit's:
http://www.deptofnumbers.com/unemployment/michigan/detroit/

Detroit's unemployment before the Global F. C. was about 8%.

TO DICK YORK (AND JAMES AGAIN)

Nice to hear that both of you are as interested in Miami as I am. 

Dick, I will be sending you an e-mail. 

James, feel free to e-mail me (via this site) once I've got further down the Miami road.  I'm not looking to profit in any way from other investors, and therefore my findings will be your knowledge.  I will happily share all information I gain re. bank accounts, LLC's, estate agents, accountants, taxes, and most importantly, what I perceive the market mood to be like when I'm there.

I should add that I'm not going over to throw all my eggs into one basket, but instead to sniff around and get my foot in the door.

Let me re-iterate my Miami plan:
I will fly around the end of this month
I will be in Miami for about a month (on this first trip)
I will open the necessary accounts, LLC etc.
I will purchase at least one property
I will do my utmost to find current lending, or future lending

If I find the market to be very favorable (eg. it's possible to get REO's at much lower than the market price) or if I judge that the market is finally bottoming, I shall buy an expensive single-family home or condo (on the water).
 
If I fail to find great deals, or I think the market is still falling, I will just buy a cheap condo (ie. no water views) or single-family home, and I will use this property as my base for future forays.

I intend to live in Miami for several months of next year, so am happy to have a house/condo that is for personal use (ie. when I purchase it I won't  necessarily be considering it's rental returns).

Quite a few people posted above, so I'll address them in order of their postings.

TO JAMES

Thanks for raising some important points, namely that the unemployment situation is awful in Florida, Miami included.  Your comments have prompted me to look into the matter further.  It seems you are correct in stating that the unemployment situation is worsening.  The following graph shows as much:
http://hiring.monster.com/hr/hr-best-practices/market-intelligence/labor-statistics-trends/Miami-Florida-unemployment.aspx

I know of no infrastructure or other government projects to stimulate job-growth.

I can only guess that the reason unemployment is so high is because the Florida economy is so dependent on the property market.  According to Wikipedia, the population of the Miami metro area increased about 30% from 1990 to 2009, and I bet a lot of those people were either attracted to the area by construction jobs, or ended up working in the housing industry.  Now that the bottom has fallen out of the property market, all those people are out of work.  

But a recession is always a temporary phenomenon (in strongly capitalist countries), where periods of economic euphoria, overinvestment and quick gains are interrupted by severe doldrums.  During the downtowns, there is underinvestment, and thus an increase in pent-up demand.  I'm banking on Miami being catapulted out of the recession when the US economic situation finally turns, and all those people who haven't being buying houses for the past 4 years (not to mention all those who've been kicked out of their houses) suddenly rediscovering their interest in property.

There were two interesting articles on Bloomberg News Channel today.   The first was about foreclosures in the US.  I quote:

Homes in the foreclosure process sold at an average 26 percent discount in the second quarter as almost one-fourth of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.

“We’re still clearly building up more distressed inventory,” Rick Sharga, RealtyTrac’s senior vice president, said in a telephone interview. “That will either put downward pressure on prices or keep them from going up.”

Bank-owned properties sold for an average discount of almost 35 percent in the second quarter.

Short Sales sold for an average discount of almost 13 percent.  Short sales are when lenders accept less than the outstanding loan amount for the property.

From the above except it appears that it's better to buy properties from the bank (ie. REO's) than to buy them before the bank reposseses them (ie. Shorts).

The second interesting article was about opening a premier account with HSBC. Again I quote:

“HSBC lets premier customers open accounts at HSBC branches around the world and transfer their credit history when arriving in a new country to make them immediately eligible for loans or mortgages. Customers also receive better currency exchange rates. They are not charged fees for the services as long as they maintain the minimum balance of $100,000.

I'm currently working on setting up a Premier account with HSBC.  You have to maintain an average monthly balance of $100,000.  If your savings dip below that level then you are charged $50 per month to maintain the account.  My plan is to use the premier account long enough to transfer funds to the US, and also to see if it will assist me in applying for a mortgage in Miami.  Once I've bought property and my account no longer has over $100K then I'll close the account.

I think I should add some other lessons I gleaned from losing two-thirds of my savings back in 2000.

It made me a very careful investor, probably an over-careful one.  I became sceptical about everything I read, and even grew to overly question my own thoughts as to which way markets would head.  Had I not taken that fall in 2000 I would probably have dived into Chinese property at an earlier time and in an even bigger way than I did, and would have made greater returns. 

However, this is using hindsight.  Nobody knew how things were going to turn out, and the advantage of caution is that you'll at least end up comfortably cautious, as opposed to either broke or rolling in money, neither of which is ideal.  I've now come to the realisation that having too much money or too little to do will not necessarily lead to happiness, hence my current interest in finding something new to stimulate my mind (ie. the US property market).

Over the years I've also learnt the value of diversification.  My mistake of 2000 was putting all my eggs in one basket.

If you're reading this and have a sceptical mind like myself, you've no doubt asked yourself as to the wisdom of investing in US property when the future remains clouded.  After investing in the post-Nasdaq pop I learnt that not everything recovers.  So how do we know that US property now is not analogous to the Nasdaq in 2001?  Perhaps US property just went through a huge bubble and has now returned to the level it always should have been at?

These are questions I was asking myself 2 months ago, and did a fair bit of economic research into.  There are some very interesting debates online (involving some of the world's most famous economists), and there are two camps in the debate:

1. those that say that property prices should rise only as fast as inflation, which in the US has averaged 3% for the past few decades (if you fall into this camp, then according to the Case-Shiller studies going back to 1900 property in the US is still about 30% higher than it ought to be, and property in Australia would be much much much too high!!!!!!)

2. those that view property as a luxury item more than a basic commodity (like clothing and food).  If you fall into this camp, then you belong with the economists that believe property prices should follow people's increases in income, which have averaged about 1.5% higher than inflation in the US over the past few decades.  If you take the average property price in the US in 1950 and run it through a compound inflation program of 4.5% for 60 years you will find that current US prices are way too low.

Living in China, as I do, I believe that just simplifying the argument into the above two camps ignores some other fundamental issues.

1. Land is an ever decreasing finite resource (which puts further upward pressure on property values)

2. There are huge cultural issues at play.  For the past 300 years in Europe people could emigrate to the colonies where there was limitless land.  In the past 200 years in the US, people just headed westwards when they felt squashed.  This ability to up and leave has bled into Western culture whereby people feel that everyone can easily own an affordable home/ranch.  In China, however, people have understood the value of property for hundreds of years.  The excess Chinese population did not mass emigrate to Aus, NZ, South Africa, US, Canada, Brazil, Argentina like the Europeans did.  Instead, they stayed put (as did the huge population in India), and made do with the limited space available (which they came to value very highly). 

This, I believe, is one reason that Canada and Australia are seeing property prices heading ever higher: they are under the Asian influence. 

Longer term, I feel that the entire world is going to re-think it's attitude towards property, due to the up and coming middle classes of China and India.  Right now only segments of the world are viewing property through the Asian lens, but sooner or later everywhere will see the light, meaning the US, South America, Africa, and those overly socialist European countries will also have to board the global property train.