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A lot of people e-mail me, either to ask for my advice on when and where to invest in the US, or to ask for help (to invest in Miami).  When I first started posting on this forum I had some scamsters contact me (whom I ignored, because they were most likely sitting in Nigerian internet cafes posing as millionaire Aussie investors).  From that moment I decided to stop responding to e-mails altogether.

But here are the answers to the questions of when and where to invest:

Where: I honestly think you can't go wrong investing in Miami, Phoenix, or Las Vegas.  Miami suits me perfectly, because I now live there most of the year (it has 9 months of absolutely perfect weather),.  The Miami Beach area is a fantastic place to raise my kids, the crime is low, and the tourist aspect (plus the influx of rich South Americans and Russians) provide an excellent floor to the market.  Miami is also very conveniently situated for British (or other European) buyers, since it's about an 8 hr direct flight away.

But if I were an Australian with about 50K to invest I'd probaly choose Phoenix.  Disclaimer: I've never been there.  Just from looking at the stats, geographic location, size and economic and political importance, I'm sure its real estate has great potential.  Also noteworthy is the fact that it fared the best  (of the 20 most NB cities in the US) in the Case-Shiller Year-on-year price change, coming in at a very impressive 3.3% growth (Detroit was second, at 1.5%, and Miami 3rd at 0.8%, with nearly all the other cities falling in price). 

Another great plus about Phoenix is that it's less travel time from Australia than the east coast.

Although Detroit probably also has incredible opportunities, it's a city you would need to know VERY well before jumping in (crime being a major consideration, plus neighborhood deterioration).

Las Vegas has surprised me over the past year, crashing 8.5% in price.  I'd never have predicted this, considering how prices had already fallen so low by 2011.  I guess the explanation must be a mixture of over-building in the boom years, plus the fact that the gaming industry struggles during recessions.

Therefore, I'd say Las Vegas is a bit of a wild card.  But that 8.5% drop in house prices over the past year could spell some excellent buying opportunities for the brave and foolhardy.

When:

I honestly find it very difficult to predict the bottom, the start of the turnaround, and the amount of time to the next top.  If it were China, I could make these predictions with certainty.  No government wants a weak housing market, so the Chinese government would just announce a couple of measures and house prices would skyrocket (eg. they'd allow people to buy more than one house, or to get mortgages with just 30% downpayment).  In the unlikely event that this didn't produce an immediate jump in demand, they could just announce that they are not going to release any more land (of which they own precisely 100%).  Decrease in supply can only equal an increase in price.  This is what Hong Kong has been doing over the past decades, and explains why a tiny apartment there will set you back much more than $1 million.

But when it comes to the US, with its debilitating democratic system and all-powerful military-industrial-media monopolies, nobody can foretell the future.  A strong president with the backing of a strong senate could easily legislate the housing bust into non-existence.  But why bother, since it's better for politicians to spend their time concentrating on the polls for the next election.  If the president were to ignore the polls and do what's needed to be done, the economy would only really get healed by the time the next president takes the stage, and he or she will get all the credit.

That's why I run a number of scenarios in my head:
Perhaps the bottom of the housing market will be during the next 12 months.  Plan of action: prepare finances to buy several more properties over that period.

Perhaps the market will stay depressed for another 3 years (as a result of banks finally beginning to release the backlog of REOs).   Plan of action: since this means the Fed will keep interest rates low for the same amount of time as the market is out-for-the-count, I shall concentrate my efforts on getting mortgages for my properties, so as to be able to buy more.

Perhaps the market will begin to rebound in 2013, and head steadily higher over the next few years until the increase begins to feed off itself and produces overheating.  Plan of action: let greed take over.  This is the exciting part of property investing, as you scramble to offload properties so as to lock in gains, which you then use to ride the roller-coaster to the top.  Of course, you have to be very careful about getting out before the bubble bursts.

At present the market (at least in Miami) doesn't seem to be doing much.  There has been a huge reduction in REOs ever since September 2010, but this hasn't affected prices much.  It just slowed down the volume.  What's happened is that all the bottom-feeders are finding new ways to do illegal deals (especially for short sales) which result in lower stated sales prices.
 
Here's the latest fad in how to profit from the housing bust: the buyer bribes the seller to sell him/her a distressed property (ie. a short sale).  For example, Mr A owns a house worth 300K (if he were to sell it as a regular sale) but he owes the bank 500K  for the property (either because he bought it at the top, or because he took out a second mortgage on it).  Mr A has stopped paying the mortgage, and the bank would love to kick him out of the house, but they are too scared to because there are another 1 million Mr A's out there, and if they all get kicked out of their houses then the bank will have 1 million new REOs on their hands, which are a nightmare to deal with, what with having to pay their property taxes, get the lawn mowed (otherwise the city will fine the bank thousands of dollars) and deal with druggies breaking in and stripping all the wiring and piping.

So the bank says to Mr A that he can sell the house as a short sale (ie. for 300K), give the entire amount to the bank, and then the bank will forget about the 200K Mr A still owes.  Sounds too good to be true, especially when Mr A realises he can make a cool 50K profit on the deal.  He finds a crooked realtor to list the house at 300K, but then the realtor must select from the buyers someone he feels will enjoy ripping off the bank.  When he finds an unscrupulous buyer, he sets up the following deal: buyer will buy the property for 200K (stated price), but will buy the furniture in the house (under a different contract, that the bank will never see) for 50K.  So the buyer ends up paying 250K (200 to the bank and 50 to the seller) for a 300K house.  The only trick is to convince the bank to only accept 200K for a house they thought they'd get 300K for.  But <moderator: delete language> this isn't that difficult to pull off.  For reasons unbeknownst to anybody, houses in Miami are allocated to asset managers in branches at other ends of the US (for example, the two REOs I bought in Miami were under the control of Bank of America asset managers in California!)  This means the asset managers have no idea of the neighborhoods their properties are in. Furthermore, the asset managers are swamped with properties, are incompetent, and/or don't give a damn.  As long as they have an excuse for why they only got 200K for a 300K house, then the sale will go through.  The way the crooked realtor comes up with this proof is by getting a crooked Inspection Company to write up a bunch of bogus problems with the house (eg. it has mold, Chinese Dry Wall, rusty plumbing, dangerous wiring, termite damage etc. etc.)
 
This is the situation happening in nearly all the short sales I pursued over the past 6 months (and it's why I ended up buying a regular sale as they third property).   The winners in these scams are the buyers (getting 300K properties for 250K), the sellers (getting 50K under the table).  The losers are the banks, and the other home-owners in the area, because prices in the entire neighborhood will drop, since the stated sales price doesn't include the under-the-table bribe, so it appears that the sale was at a much lower price than it really was, and then that sale becomes a Comparable Sale for other houses in the neighborhood.

It amazes me that these kinds of shenanigans are going on.  This problem didn't exist in 2010, when unscrupulous people were able to satisfy their greed by buying REOs after bribing the listing agent.  Now that REOs have disappeared, they're all figuring out how to play the Short Sale game.

It shows how "Dynamic" the US economy is.

It amazes me that the US used to be No. 1 in the world.  The guys at the top are all too busy getting rich (illegally, no doubt) to notice the damage done to the economy and society by bottom feeders.  Perhaps Socialism is the better system!

So why would I want to keep investing there?

Simple: lets take a property I own here in Shanghai.  I bought it 4 years ago for $150K (I got a mortgage for 100K of that).  It's now worth about 400K after all taxes and costs.  I rent it out for only $700 a month, which is exactly how much my monthly mortage payments are.  In other words, I'm making exactly zero in monthly income on this property.

But if I sell it, after paying back my mortgage, I will have over $300K in cash.  This money can buy a house in Miami (in a good neighborhood) that I can rent out for AT LEAST $2,500 a month for.  After paying property taxes, I'll have a monthly income of $2,000.

So if I don't sell this apartment in Shanghai, I continue to earn zero dollars per month.

If I do sell it, I make a little over $2,000 a month.  So what should I do?  That's what the Yanks call a No-Brainer.

Added to this is the fact that Shanghai properties have increased about 8 times in value since 2002, whereas Miami properties are exactly the same price as they were at that time.  

Eventually, something's gotta give.  Like the Phoenix (pun intended) from the fire, Miami must rise again!

Being interested in surfing, I often visited the Taiwanese east coast in the late 1990’s, and during those visits I got to know a tall, good-looking young American guy.  He was teaching English to kids in Ilan, and when there weren’t any waves to surf he spent his time learning to speak Chinese. 

Then I bumped into him in Taipei (the capital of Taiwan) and over a cup of coffee he explained that he’d quit teaching, and was using his newly-learnt language skills to flog Nasdaq stocks (specifically in start-ups) to mom and pop Taiwanese investors.  It was 1999.  He was making a lot of money.  He wasn’t an amoral person, but he couldn’t resist riding the wave to prosperity.  I wonder if he felt guilty when all those moms and dads lost their investments when the bubble popped the following year.  Perhaps he didn’t, telling himself that he was just selling them what they’d already decided they wanted.  He didn’t create the greed, he just fed off it.  It was the Taiwanese investor’s stupidity for not doing due diligence, ie. for not realizing that he knew zilch about stocks, and that the company he was working for was a fly-by-night bunch of ex-English teacher fraudsters. 

And THAT is why anyone who hasn’t gone to the US (just a week will do) but thinks they’ll buy properties through these young “companies” flogging their wares on forums, actually DESERVES to lose their money. 

If you are looking to buy for 50K, and willing to donate another 10K to a scam-artist to get the deal done, why not just spend 5K of the 10K on plane tickets, hotels and a rental car, and then use a real US realtor to help you close on a property you’ve actually seen, or at least in a building or suburb you’ve actually seen?  You’d save yourself 5K of the 10K, and save yourself the nightmare of being duped into buying a lemon! 

So why don’t people just fly there themselves?  No doubt they make excuses: it’s too far, what can I achieve in only a week or two, etc. etc. 

But the truth is, these people don’t go because they’re either too scared or too lazy. 

If you’re too scared to visit a country, you DEFINITELY ought to be too scared to invest in it.  If you can’t get 10 days off work, you should change jobs, cos you don’t have a good one.  If you think it’ll be too stressful, have faith.  Do some preparation.  I did none, and the first 6 hrs after leaving Miami airport was very stressful, but by lunchtime I’d set up a cell phone, rented a car, and found a house to rent.  You won’t have these issues if you just sort it out on the internet before you fly. 

You think 10 days won’t be long enough?  Even in a city the size of Miami 3 days in your rental car is enough to know what areas you’d like to buy in.  I now own a house that happened to be the first one I ever looked at in the US.  Believe me, 10 days is enough.  You won’t close on a deal in that time, but you WILL come to trust your realtor, and you will get a chance to choose which buildings you want to buy in, or which suburbs (if you choose a realtor before you go they will have a few properties lined up for you, so you may get to purchase one that you’ve actually seen).   

Anything can be done over the internet these days.  Florida law doesn’t even demand that you sign documents in person or even have them notarized.  Just signing, scanning and e-mailing is enough, which means you can buy properties from afar. 

So come on, guys and girls, stop filling the coffers of middle-men.  Do it yourselves, because in the end what is money anyway.  It certainly doesn’t make us happier.  It’s the journey that counts.  So go have one in Phoenix, Las Vegas, Miami, or even Detroit!

I have come to know many Miami-based realtors, and they are all professional and take their work very seriously. 

They would never cheat a client, if not for moral reasons then at least out of fear of losing their reatly licenses.

They also always know people to assist with repairs, killing termites, getting your garden looked after, etc. etc.  In additon to knowing all the laws pertaining to real estate and having access to very tight contracts, they also know lawyers to assist with setting up LLCs or evictions, and title companies to do the closings on puchases.

And here's my greatest surprise: if you find a good realtor you won't need a property manager.  I don't have a manager: I just paid a realtor 5% of the yearly rental income.  For small things (like fumigations, organizing plumbers/electricians) my realtor and/or tenants will assist in getting the job done, thus saving me getting ripped off by a property manager.

I'd also like to add that I've worked with about 20 people in the contracting business (roofers, plumbers, electricians, pool repair, doors/windows, tilers…) and have found all to be honest.  Having said that, they are ALL South Americans, where bargaining is the norm, so if someone tells you the job will cost $2000 you counter with $800 and then reach a final figure of $1000. 

I can see no reason why it would not be possible to look after your properties by yourself from overseas.  I'd even be willing to use contractors I haven't met in person, so long as there's a contract written up.  But let me clarify I'm talking about doing repairs to a habitable property.  If you are not on-site to oversee things, I don't think it's feasible to buy a delapidated single-family home and try to renovate it.  I've bought one such property, and even being present each day for almost three months still meant there were constant problems that needed solving, and major decisions to be made, such as: should I replace the whole roof, or just the part that's leaking, should I paint the pool or have it completely replastered, should I change all the bathroom fixtures, which would mean needing to retile, or just try to replace the broken pieces, should I replace the entire A/C, or just the extermal unit…

Some very good questions there, Stef

Why am I not buying 300K apartments, since there'd be less maintenance (ie. no roof repair, pool repair, fence repair…)?

Because in that prices range you'll be buying luxury apartments.  Once you're in this market, you're competing with rich overseas investors (from Canada, Russia, Brazil etc.) who are buying largely for their own use.  They don't take into consideration things like Rent Return.  They tend to buy in cash, and don't care if they make any monthly income.  So the HOA's (building maintenance) companies running these buildings rip the owners off.  For example, they will have up to 20 security guards in just one building, each earning at least 2K a month.  For this pointless service you will be paying at least 1K a month, plus your $500 property tax, so from your rental income of 2.5K you're already down to just 1K.

The BEST way to make money in the rental market is by buying small units (30K to 50K) in places away from the beach.  In these buildings the HOA is run by the homeowners themselves, and there isn't a single security guard.  Your HOA will be about $150 a month.  In these kinds of investments I've calculated your rent return will be between 10 and 20%.  If you buy near universities you may make even more.  Some good buildings to buy in are on Sans Souci Boulevard (near Biscayne and 123rd St), or if you continue west just over 123rd street for about half a mile, just before the railway line.  This area is very close to a university.

The reason I don't do this kind of investing myself is because I don't want the headache of dealing with so many small apartments.

Hope that answers your question.