Hi everyone,
Im new to this forum and have been reading through many threads. Im interested in investing in the U.S. and understand there is a lot of work to be done to make this a good venture. I have never owned or invested in property before.
My partner and I have been saving hard and we earn very good money. We have only just started saving in the last couple of months but have managed to save $10,000 and we plan to continue as we have started.
So, where do I start, Ideally I would like to buy a cheaper property to begin with. Maybe around $30,000? Im more interested in Capital growth than rental return, but, positive rental return would obviously be an advantage. How likely is it that I would be able to finance the extra $20,000 with a U.S. bank?
I see there are many companies advertising their services with turnkey properties which is very attractive, Im always very cautious using these types of companies and worry there will be hidden charges and taxes.
Is the safest and most simple option to go for a foreclosed property? I know management companies can be a nightmare but even if I was to get it wrong first time with my selection of managing agent, with the loan il have outstanding and monthly payments im not too worried as we can easily make the repayments.
One attraction of the companies offering turnkey services is renovation work complete and Id know exactly where Id stand.
I could of course save up the extra $20,000 but we would be looking at a good few months saving before I could be in a position to buy. Im wondering it it might be a good idea to get the ball rolling with an LLC and bank account now. Does anyone know how difficult it is to lodge tax returns with the IRS from overseas? and if i started an LLC and had not bought a property by tax return time so the company had no activity would I still need to lodge?
I have lots of things going around in my head at the moment so sorry if my post is a little all over the place.
Thank you
Nathan
P.S. Im originally from the UK, but emigrated to Australia 18 months ago if this has any impact?).
Hi Nathan
Hate to be negative on your first post but you have NO chance in getting any US Bank finance such a deal.
I am currently in the UK sourcing property deals here in England and in France for my investor clients and you would have more chance in financing a deal here than in the US.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Nathan I am no expert but most financing that we can provide for foreign nations is 50 % down for USA properties . The properties you are speaking will get a return. Just those priced properties are usually in rough areas and will provide more of a head ache then a return. I would wait and put together an investment plan after saving some more funds. Not sure about The France or Uk and our loans are done through a private lender..
Feel free to ask away any questions..
Sincerely
Alex Franks
Thanks for the replies. I think you are right and it would be better to get more funds together over the next few months and try to put 50% down on a property. I may try to get between 30-40k for the deposit. Im a little worried about buying a property with taxes of some form owing against it without even realising. Id also need to do some serious work with working out how good the area in which a prospective investment is located. Im planning a trip to Las Vegas around may next year. Does anyone have any hot tips of which area to buy and which to avoid in las vegas?
Nathan
agree with the above post's.
Your far to undercapitalized to be entering the business of owning rental real estate in the US.
we have finally gotten some realistic and honest US post's in the last month on the site, from US companies.
Investing in 30k properties in the US is very very risky and pretty much a guarantee that you will over time end up spending double that just keeping it rented. and or will tire of feeding it and will literally walk away and let the property go.
All these foreclosures you see are from the first wave of US investors trying to do what the OZ investor wants to do now, they tried it a few years back and it did not work so well ERGO mass foreclosures.
The Gentlemen in KC and Alex from SC will give you some reality check and straight answers.
I use the analogy of one trying to pick single stocks as oppossed to investing in a mutual fund…
Your out their trying to pick a single property, the time and effort to do so the cost etc. you would be far better off with the funds you have to use your time investingating good US REIT's and invest your 10K into one of those they will return 7 to 10% maybe and some equity upside.
The greatest disservice I see going on with the selling of single family rentals is the promise's of huge gross and net returns. These by people and companies that are working on projections not actually running numbers huge diffference. So when you get cross eyed thinking your going to make 18% net guaranteed return because it has a sec. 8 tenant your just buying into someone's sales pitch. Yes this can happen for 6 months but its year 2 or 3 or 5. after you have had turn over vacancies maybe a complete rehab in between that you will see that 7 to 10% is more realistic,
And I am sure Alex and Mr. KC will agree with me 30k all in homes in the US are not what folks should be buying for capital growth. There could be pockets I am not saying this is 100%, however if your buying in any large metro area on the eastern seaboard or south east these are rental neighborhoods.
Just like Mr. KC ( and I mean that kindly) admitted to he gets excited if less than 20% of the houses on a block are boarded up.
This is just not were Mr. and Mrs. Jones is going to buy a house to live in and raise their family no matter how cheap. These homes are cash flow commodities and folks like us in the business treat them as such.For capital growth in my mind you need to be investing North of 50k for your houses. In certain markets I do beleive these are nice enough houses and neighborhoods that you could see substantial captial growth over the next 5 to 10 years.
Nathan,
Unfotunately, even in the depressed US market, 30K is just not going to get you very far, other than maybe buying in Detroit! And even if you could purchase something halfway decent there, there are factors such as higher maintenance (winter) and SUBSTANTIALLY higher property taxes – around 8-10x what we are paying in Nevada.
We have bought in Vegas and are very happy so far. We put in offers for homes that are 2 bed/2 bath and around the $42-46K mark. Homes in that price range will need between 2-5K of repairs and also allow for approx $1500 to close. Propertay taxes and insurance are fairly cheap in Nevada. These homes are returning approx $850-$880 per month, so excellent yield.
My point is that even in a market like Vegas you will be hard pressed to find a semi decent property for under 42K. I would budget for 50-55K total, which would include your purchase price, reno and fees/legals.
Getting finance in the US very hard. We are using a combination of home equity and cash. We are currently living in Canada where the mortgage rate is pretty good – we pay 2.3% and the equity loan rate is good too – we pay 3.6%.
Hello Nathan,
I am an active investor in US rental properties and I can tell you that there are some markets where you can purchase properties for under $30,000, but these wouldn’t be properties in the best of neighborhood. Mind you, these won’t be bad neighborhoods either, just average. I am not talking Detroit.
But honestly, the thing about US market is that you get the best deals when you purchase a foreclosure that needs some work done to it and then you add value. This way you get the best price and also you have some equity in the property.
For instance, I purchased a property last year for $25,000 and spent $7,000 on the repair cost. After the property was rented out, I went to a bank for appraisal and the property appraised for $44,000. I had equity of $12,000 in the property. That’s the best route to go if you want to get great deals.
Another thing to be careful about is with these companies offering turnkey properties is that they inflate the net return. What they usually do is they calculate net rental return by subtracting taxes, insurance and property management from gross rental to arrive at net rental return. This is not accurate. There are a LOT of other expenses that you need to be aware of.
1) It is safe to assume that you will have at least one month of vacancy for each year of rental income, so include 11 months of rental income in your calculation.
2) Another thing to include in your expenses is that once the property is vacant, there will be expenses to repair some of the damage caused by the previous tenant.
3) There are also other ongoing expenses while the property is rented. Clogged toilet, hot air furance not working, etc.
4) Another expense that a lot of people miss is accounting expense. At the end of the year, you will need to file your tax returns with US government, which is going to cost some money.
5) Also, don’t forget about capital expenses. Capital expenses include a new roof, new heating system, new water heater, etc. These expenses are long term expenses, but it’s always good to have a reserve fund for these expenses.Currently, I am assisting some Australian clients with purchasing investment properties in US and my main goal is to educate them with what the true cost of owning an investment property is.
I want to be clear that this is absolutely a GREAT time to buy investment properties in US. If purchased correctly, you can easily have 15%+ net returns, but you gotta be careful and perform DUE DILIGENCE.
Good luck! Please let me know if there is anything I can help you with.
jayhinrichs wrote:agree with the above post's.Your far to undercapitalized to be entering the business of owning rental real estate in the US.
we have finally gotten some realistic and honest US post's in the last month on the site, from US companies.
Investing in 30k properties in the US is very very risky and pretty much a guarantee that you will over time end up spending double that just keeping it rented. and or will tire of feeding it and will literally walk away and let the property go.
All these foreclosures you see are from the first wave of US investors trying to do what the OZ investor wants to do now, they tried it a few years back and it did not work so well ERGO mass foreclosures.
The Gentlemen in KC and Alex from SC will give you some reality check and straight answers.
I use the analogy of one trying to pick single stocks as oppossed to investing in a mutual fund…
Your out their trying to pick a single property, the time and effort to do so the cost etc. you would be far better off with the funds you have to use your time investingating good US REIT's and invest your 10K into one of those they will return 7 to 10% maybe and some equity upside.
The greatest disservice I see going on with the selling of single family rentals is the promise's of huge gross and net returns. These by people and companies that are working on projections not actually running numbers huge diffference. So when you get cross eyed thinking your going to make 18% net guaranteed return because it has a sec. 8 tenant your just buying into someone's sales pitch. Yes this can happen for 6 months but its year 2 or 3 or 5. after you have had turn over vacancies maybe a complete rehab in between that you will see that 7 to 10% is more realistic,
And I am sure Alex and Mr. KC will agree with me 30k all in homes in the US are not what folks should be buying for capital growth. There could be pockets I am not saying this is 100%, however if your buying in any large metro area on the eastern seaboard or south east these are rental neighborhoods.
Just like Mr. KC ( and I mean that kindly) admitted to he gets excited if less than 20% of the houses on a block are boarded up.
This is just not were Mr. and Mrs. Jones is going to buy a house to live in and raise their family no matter how cheap. These homes are cash flow commodities and folks like us in the business treat them as such.For capital growth in my mind you need to be investing North of 50k for your houses. In certain markets I do beleive these are nice enough houses and neighborhoods that you could see substantial captial growth over the next 5 to 10 years.
Jay,
I agree with you 100%. My turn-key program is designed around cash flow, and identifying the best property for that role. For those clients interested in buy/sell strategy, I search for different properties in different locations, that will best fit this model. In Kansas City, it's very easy to locate buy/sell homes, as our city is well defined on where those area's are located, and the pricing model is dependent on that area. In a few areas, we can keep the costs under 45K, on a home valued around 65-75K. When we move into the suburbs, the numbers can change pretty drastically, and it requires a very detailed evaluation of that property.
Both strategies perform very well, when there is proper research into each property.
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