- dhillon2 wrote:My husband and I are going to invest in property in Miami – We're planning our next US trip in early 2011, as we are still in the process of tying up lose ends and setting up our finances here. The plan is to purchase property outright with cash, build up our credit rating in the US for 1 year, then re-finance the properties after 1 year to borrow more money and leverage.
HI DHILLON
If you read my last 2 posts you'll know why I think your timing is perfect. I'd say around April 2011 there should be some clarity on this whole foreclosure mess, and hopefully there'll be tons of new properties hitting the market, at prices even lower than today's.
I also like your plan of buying with cash, then re-financing. I'm currently in two minds as to whether to do the same for my first purchase, or whether to get a mortgage.
The advantage of the former is that you will be able to get a better deal, and you won't be at the mercy of a lender.
The advantage of the latter is you'll be setting up credit history from the get go. The disadvantage of the latter, though, is that you'll need to buy an expensive home/condo, because the lenders I'm talking to all want you to make a large purchase. And as any property investor with experience knows, expensive properties have low rental returns.
Despite the foreclosure moratorium I'm still flying to Miami in 9 days time, at the very least to set up bank accounts and LLC, and to see what the situation "on the ground" looks like. I'll also be able to meet with some lenders. It's sure to be an education, although I'm no longer 100% certain I'll be buying on this trip.
HI Everybody,
Thanks for all the interesting reads that goes around here. I am in Sydney and am keen to know how to go about my 1st purchase in USA. Could someone guide me? How do we get the right solicitor, accountant, bank acc? It would be ideal if we could purchase those foreclosed properties without having to fork out hefty fees… Thanks once again… Wishing you guys success in this investment…..in usa
NewInvestor2 wrote:HI Everybody, Thanks for all the interesting reads that goes around here. I am in Sydney and am keen to know how to go about my 1st purchase in USA. Could someone guide me? How do we get the right solicitor, accountant, bank acc? It would be ideal if we could purchase those foreclosed properties without having to fork out hefty fees… Thanks once again… Wishing you guys success in this investment…..in usaHI 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.
If you've been reading my recent posts you'll know how worried I am about the Foreclosure Fiasco / Moratorium
There's something I've been reading a lot about recently, which might be very relevant to anyone considering buying an REO (assuming you can still find any REO's on the market now that most of the major banks have temporarily stopped selling them).
If you want to buy a property with a mortgage from a bank you will need TITLE INSURANCE.
This insurance is unique to the US. If you want to read up more on it, check Wikipedia. Basically, it exists in case a lawsuit should arise on a property you've just purchased, with a previous owner of the property coming out of the woodwork to say that he/she is still the rightful owner (eg. the person can claim the property was illegally sold without his/her knowledge via Identity Theft). Should such a lawsuit arise, you may lose the property or at least have huge legal expenses, which is why you need Title Insurance to cover any losses during such litigation.
Due to the Foreclosure Fiasco now unfolding, it's transpiring that the banks illegally foreclosed on thousands (maybe even hundreds of thousands) of properties in the past 4 years (through falsifying documents). There are now going to be innumerable court cases from all those people who lost their homes through bank fraud.
And this is why Title Insurance companies don't want to sell Title Insurance on REO homes. At the very least, they will demand to see very very tight paperwork to show the home was correctly foreclosed. So if you try to buy any REO properties, be very sure their histories are watertight.
I am a newbie here but have read and re read all of British Buyers recommendations – so interesting!
Like NEWINVESTOR2 – I am from Australia, and have some cash to invest in US market. I have set up the bank account, and have cash in it.
I have the same questions as NewINvestor2 – do we need a US solicitor to complete the deal/make sure the property checks out?
Also – what is the best and safest way to purchase property to make sure that we get the best deal, and most importantly – everything is legal? As I am a new overseas investor I am scared of getting caught up in any scams.
Is it better to purchase at auction ? or from a real estate ? or from a 3rd party real estate who has done the rehab, but of course the property will be more expensive no doubt. Really, what is the best way to go?
British Buyer – since you are travelling to check out properties, would you be interested in taking some commission or $$ for coming back with some shortlisted great value properties that you find?
WHY CASH IS KING
If you follow Trulia and Zillow forums you will hear the phrase "cash is king" over and over.
Here's a great explanation of why (quoted from a realtor's blog on Zillow)
Contrary to other opinions, CASH does talk, LOUDLY, with a distress sale. Banks (REO) especially do not want to have a house off the market for 30 days or more only to find out the buyer didn't qualify or the appraiser picked it apart and killed the deal. I have seen numerous deals where they took the lower cash offer over a financed full price offer.
Hi Steve,
Many thanks for your regular posts, they are very informative and interesting.
Re: "Seasoning"
I have purchased a few Properties in Florida and Atlanta, I have been transferring funds back and forth since 2004 and have never come across "seasoning" I bank with HSBC here in the UK, but with Wachovia in Florida. The last Property I purchased I sent funds directly from my UK HSBC account directly to the Title Companies client account.
I am a premier customer with HSBC in the UK, when I approached HSBC in the US for the same facility If I remember correctly they required me to maintain quite a considerable balance in the account, I decided against this as I would rather my money in a Property than in a bank account earning next to nothing. I have found Wachovia very easy to deal with. Whilst I was in Florida last month I opened a new checking account in the name of a new LLC I have registered and the whole process took less than 30 minutes, and all i put in the account to open it was $100.
Have a safe trip to Miami, the weather is normally just right this time of year.
Regards,
Gary
When looking at Property in Florida, if you are considering buying a property built between 2002 and 2007?? please inspect for "chinese drywall" which can cause serious problems if affected.
First of all thanks to everyone for all the useful advice, and I do not want to appear like an idiot asking this. But like a couple others on this board I am new to investing and am very keen on getting a place in America, and Miami seems like a good place to start.
I was hoping to get some advice from people who have done it before on more of a step by step procedure on how to go about purchasing a property. I realise there are probably many different ways of going about things, but if I could at least get a basic example of how to go about it, I am sure it would help me, and a couple others, out greatly.
Step 1) Set up a US bank account. I know this from the above posts from Steve. However also refer to Step 2 about whether I set it up in my own name or an LLC.
Also I do not have enough to do a cash sale, unless I acquired a personal loan from a bank in Australia, this is an option, however I already have a mortgage, and as such am not sure if I would be able to afford to add more debt. And the rental income received from the investment property, I was hoping to be able to leave in the US to avoid all the fees with currency transfer.
The following steps I am just assuming, please let me know if you know I have missed something or done something around the wrong way.
Step 2) Set up a LLC and a bank account in the LLC's name. I am not sure I am going into this alone or with a (trustworthy) friend. I believe an LLC would be best for this arrangement, so do I need to set up a bank account in my own name or just using the LLC?
Step 3a) Find a mortgage broke who can talk to banks about finding a mortgage over there, as well as a solictor and an accountant to help with tax and the like. We used a mortgage broker for our property in Australia, and it definitely made it alot easier as we did not have to find people ourselves with these expertise. And being on the other side of the world, hopefully that would be a great help. Also if we are able to find a good mortgage broker, that would eliminate Step 3b and Step 4.
Step 3b) Talk to banks over there who provide mortgages to overseas investors, or non-US residents and see how much we can borrow. I was talking to someone I work with and said they only did it if they had a 25% deposit, but this way they could set it up so they did not have to pay any tax in US, refer to Step 4 about this.
Step 4) Find a solictor and accountant to help with the legal forms and inspections and tax etc etc. As well as insurances.
Step 5) Talk to real estate agents and start looking at houses and find one you like and purchase it.
Step 6) Enlist a property manager to look after the property, sort out maintenance and repairs, and find tennants and whatnot.
This is all I can think of at the moment, like I said I know I have probably missed a lot and got things in the wrong order and a fair few things I have not taken into account. But like I said at the start, if I could just receive some guidance on how to generally go about things, that would be a great assistance.
Thanks
James
Hi all,
I just joined today and have found all the comments most interesting. I am in the process of setting up a business called invest USA, it is designed to advise locals on the ins and outs of property investment. I have spent many months looking at various markets and Florida was on of them, I was concerned at the vacancy rates and unemployment figures. I was in Orlando early this year and could see why so many people would be attracted to Florida. My research concludes that one should be very careful about investing in Florida, there are other area’s that have a better potential for positive cash low and capital gains.Also the HOA fee’s that are associated with apartment purchases can eat away at any investment. Single family homes to me are a better investment.
There is a glut of property available in Florida so be careful.
gmproperty wrote:Hi Steve,Many thanks for your regular posts, they are very informative and interesting.
Re: "Seasoning"
I have purchased a few Properties in Florida and Atlanta, I have been transferring funds back and forth since 2004 and have never come across "seasoning" I bank with HSBC here in the UK, but with Wachovia in Florida. The last Property I purchased I sent funds directly from my UK HSBC account directly to the Title Companies client account.
I am a premier customer with HSBC in the UK, when I approached HSBC in the US for the same facility If I remember correctly they required me to maintain quite a considerable balance in the account, I decided against this as I would rather my money in a Property than in a bank account earning next to nothing. I have found Wachovia very easy to deal with. Whilst I was in Florida last month I opened a new checking account in the name of a new LLC I have registered and the whole process took less than 30 minutes, and all i put in the account to open it was $100.
Have a safe trip to Miami, the weather is normally just right this time of year.
Regards,
Gary
Hi Gary
Thanks for joining our discussion, and for sharing your personal experience and hard-earned information.
SEASONING is currently my major concern, since it seems there's no way around it for me. I only came across this problem a few days ago, and wanted to double-check the information I received from a Miami lender, so I posted several questions on Trulia and Zillow forums and the information has been repeatedly confirmed.
Let me add that this problem is something that most other buyers won't experience. It is a problem for me because I'm using several people to assist me to get my money out of China (due to restrictive foreign currency controls here). If you send money from yourself (eg. from your UK or Australian bank account) to your US account, and as long as you've owned that money for 3 or more months, then you don't need to season it.
Also, if you're buying with cash you don't need to season it.
I'm now considering making my first purchase with cash, not only because I won't need to season the money but also because closing costs are far lower, and in addition it's easier to get a better deal on the purchase price.
But I don't like buying with cash simply because you don't get any leverage. Furthermore, from what I've heard you can't get refinancing (I borrow against your cash purchase) for a year after you bought it.
Have you heard the same?
jasperjonsson wrote:I am a newbie here but have read and re read all of British Buyers recommendations – so interesting! Like NEWINVESTOR2 – I am from Australia, and have some cash to invest in US market. I have set up the bank account, and have cash in it. I have the same questions as NewINvestor2 – do we need a US solicitor to complete the deal/make sure the property checks out? Also – what is the best and safest way to purchase property to make sure that we get the best deal, and most importantly – everything is legal? As I am a new overseas investor I am scared of getting caught up in any scams. Is it better to purchase at auction ? or from a real estate ? or from a 3rd party real estate who has done the rehab, but of course the property will be more expensive no doubt. Really, what is the best way to go? British Buyer – since you are travelling to check out properties, would you be interested in taking some commission or $$ for coming back with some shortlisted great value properties that you find?HI JASPER
So as not to be taken for a ride, I've decided to stick with buying Short Sales, REOs (you buy them direct from the bank, so they have been "cleaned up" ie. they've checked that there aren't any outstanding debts on the property) or from homeowners. I've decided to steer clear of auctions. I once purchased a car at an auction and I can tell you it's for the experienced buyer only.
I feel that as long as you go with a real estate agent, but keep your wits about you, you probably don't need a solicitor.
Also, so many mandatory checks are required at closing (especially if you're buying with a mortgage) that will serve to double-check that everything is in order (eg. checks on the title of the property, the flood-level, etc.)
I don't feel I am knowledgeable enough to accept any money for providing a service, but feel free to contact me regularly when I'm there and I'll keep an eye out for whatever it is you're looking for.
James2118 wrote:Step 1) Set up a US bank account. I know this from the above posts from Steve. However also refer to Step 2 about whether I set it up in my own name or an LLC.
Step 2) Set up a LLC and a bank account in the LLC's name. I am not sure I am going into this alone or with a (trustworthy) friend. I believe an LLC would be best for this arrangement, so do I need to set up a bank account in my own name or just using the LLC?
Step 3a) Find a mortgage broke who can talk to banks about finding a mortgage over there, as well as a solictor and an accountant to help with tax and the like.
Step 3b) Talk to banks over there who provide mortgages to overseas investors, or non-US residents and see how much we can borrow.
Step 4) Find a solictor and accountant to help with the legal forms and inspections and tax etc etc. As well as insurances.
Step 5) Talk to real estate agents and start looking at houses and find one you like and purchase it.
Step 6) Enlist a property manager to look after the property, sort out maintenance and repairs, and find tennants and whatnot.
Thanks
James
HI JAMES
I like the way your brain works. Step-by-step and logical. Mine does too, at the outset of a problem, but then I just focus on immediate problems and put off the others until they demand attention. For example, I've been told that LLC's are easy to set up (even over the internet) and that taxes are easy to do yourself (using turbotax). I've also been told something very interesting by a UK property investor in the US: he has never paid any tax on his rental income, mainly by claiming depreciation and expenses on his tax returns.
Thanks for reminding us all of the existence of steps 2 through 6. They have all received less attention from me up till now. But I guess time is getting tight, so I'll be working on them in the coming weeks, and will let you know what I find out.
The lenders I've spoken to will only lend between 60 and 70% of the total price, and will let you buy up to 2 properties in total in the US. They haven't yet mentioned a minimum amount (ie. lowest purchase price) they are willing to lend on, but I get the feeling it must definitely be over $100K.
cheers
Stevejeff2tract wrote:Hi all, I just joined today and have found all the comments most interesting. I am in the process of setting up a business called invest USA, it is designed to advise locals on the ins and outs of property investment. I have spent many months looking at various markets and Florida was on of them, I was concerned at the vacancy rates and unemployment figures. I was in Orlando early this year and could see why so many people would be attracted to Florida. My research concludes that one should be very careful about investing in Florida, there are other area's that have a better potential for positive cash low and capital gains.Also the HOA fee's that are associated with apartment purchases can eat away at any investment. Single family homes to me are a better investment. There is a glut of property available in Florida so be careful.Hi Jeff
What other areas of the country do you think may offer higher cash flow and price increases?
I will be very happy to get a 10% return on a rental investment in Miami (ie. after paying taxes and HOA fees if it's a condo). I think 10% is a phenomenal return to get in a developed country these days.
What kind of returns have you seen/heard of in the US?
cheers
SteveSteve,
Working with the banks to get financing as a non resident is very frustrating at the moment!!
In 2004 I purchased two Properties and obtained mortgages with Wachovia (now wells fargo) the process then could not be easier.I met with my Bank Manager several months ago and he said he could see no reason why I could not obtain more finance as I had good history with them, never missed a payment etc… to this day I still have not had the go ahead.
Since that meeting with my US bank manager I have purchased another three Properties cash by taking equity out of my UK Properties, I will continue to do this until I run out of opportunities to raise funds here.
When my Bank gets their act together I will have to do the following: Purchase a Property in my own name (Wachovia will not lend to an LLC) as soon as I have the loan I was told by my Manager I can then transfer title to an LLC ??? They will not lend me less than 50K per Property so I would have to purchase properties above 70K. In respect of any Property I have purchased cash, these would have to have been owned by me as an individual for 6 months before they would lend to me (e.g. an equity release loan)
I believe you can get a better deal as a cash buyer, however we will not be able to get the same interest rate on an equity release. The deals at the moment are incredible. My manager said once approved I could get 5.5% fixed for 30 years, which compared to UK buy to let rates is fantastic.
I am flying over again early November to close on a Property, when I am there I am going to speak with a couple of Mortgage Brokers and see what they can do for me, I would like to find a bank who will lend to an LLC for a start.
Kind regards
Gary
gmproperty wrote:Steve,Working with the banks to get financing as a non resident is very frustrating at the moment!!
I believe you can get a better deal as a cash buyer, however we will not be able to get the same interest rate on an equity release. The deals at the moment are incredible. My manager said once approved I could get 5.5% fixed for 30 years, which compared to UK buy to let rates is fantastic.I am flying over again early November to close on a Property, when I am there I am going to speak with a couple of Mortgage Brokers and see what they can do for me, I would like to find a bank who will lend to an LLC for a start.
Kind regards
Gary
Hi Gary
Thanks for sharing all that info. Great stuff.
Which bank has offered you an equity lease on property purchased with cash? Wachovia? And has that lender specified an interest rate? And what do you think the LTV ratio would be?
Where are you going in November?
cheers
It seems like REO's might start returning to the market earlier than I'd predicted.
Here's an article from Bloomberg News last night:
Oct 19 (Reuters Legal) – The White House warned banks on Tuesday it would pursue them for any mortgage practices that violated the law, piling pressure on the financial sector after two institutions lifted their freezes on home foreclosures.
Bank of America said on Monday it was partially lifting its foreclosure suspension, and GMAC Mortgage, one of the largest servicers of U.S. residential loans, followed suit.
The moves followed two weeks of damaging accusations that financial institutions' use of shoddy paperwork caused some borrowers to be illegally evicted from their homes
Hi everyone
Very interesting………………
i was wondering in Australia when we see house for 400k we probaly could buy for 370k…, if 280k we could buy for 260k ect……
But in USA for $100k what could they reduce it to ? can you give us some ideas…
cheer Zung
Does anyone know of a good mortgage broker in the Miami area? I was looking at the Flordia Association of Mortgage Brokers website, and I found a whole list (about 155 in total) of mortgage brokers in the Miami area, but there was no rating or anything, so I am not sure who is good or not, who would be useful for purchasing as a non-resident and things like that. So if any of you know anyone that you have had a good experience with (or even someone who you have had bad experience with so I can stay away) if you could let me know that would be great. Thanks
Also, I posted earlier about Property Tax not always being taken into consideration, and I was just looking at properties, I saw one, a $68,000 unit which listed its 2007 property tax as $683 a year or so, about 1% or so, quite a good rate. Then looking at another one, I saw a $60,000 townhouse which had $4,117 property tax in 2008, a whopping 6.87%. I am not sure but I believe property tax paid previously should be available to people, and definitely something you should be asking for as it can make a huge difference on the expected profits.
Hi all,
I just wanted to share this article with you , pay attention:
http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1960&language=english
Cheers
Alex
British Buyer wrote:gmproperty wrote:Steve,Working with the banks to get financing as a non resident is very frustrating at the moment!!
I believe you can get a better deal as a cash buyer, however we will not be able to get the same interest rate on an equity release. The deals at the moment are incredible. My manager said once approved I could get 5.5% fixed for 30 years, which compared to UK buy to let rates is fantastic.I am flying over again early November to close on a Property, when I am there I am going to speak with a couple of Mortgage Brokers and see what they can do for me, I would like to find a bank who will lend to an LLC for a start.
Kind regards
Gary
Hi Gary
Thanks for sharing all that info. Great stuff.
Which bank has offered you an equity lease on property purchased with cash? Wachovia? And has that lender specified an interest rate? And what do you think the LTV ratio would be?
Where are you going in November?
cheers
Hi Steve,
The bank was Wachovia, however I am not "banking" on it. I have since spoken to a Mortgage Broker in the US, he has said that Fannie Mae changed there lending criteria this year to exclude loans to foreign nationals who were not legally resident in the US. As a result banks are not lending to this group as they can't sell on the Mortgage to Fannie Mae.
He said that at this time he only knows of a couple of lenders in Florida who will offer non conforming portfolio loans (Portfolio loans are mortgages that are held as an investment by the lender. Usually they hold on to the loan because it doesn't fit the underwriting criteria) These lenders will offer facilities to buyers of second homes which are normally quite expensive homes in specific areas which would not be good cash flow investments.
As I already have a second home I could not use this facility if I wanted to.
I will continue to refinance UK assets, however I am am not going to give up on US finance as the rates are so good. If you have any luck let me know.
Kind regards
Gary
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