Here are a few tips to consider when buying property in the USA. We have been in the business of selling properties and see cases where overseas investors make common mistakes and do not get maximum value for their investments.
– Purchase already rehabbed and/or tenanted properties
– Look for companies that cater for remote buyers and provide all the services to make investing easy and profitable
– Purchase from companies that provide management services in house
– Consider vendor financing option to minimize risk and take advantage of leveraging
– Look for section 8 tenanted properties (government pays the rent)
– Never buy fixer upper homes and attempt to hire contractors remotely ( YOU WILL GET BURNED!)
– Make sure the seller is the actual owner of the property and not a wholesaler. Wholesalers mark up prices so they are able to make a spread. It usually means that you are not getting the best deal plus they are not motivated to make sure things flow smoothly for you after the sale. The have already made their commissions and move on to the next deal.
Hi Joshua
I would generally agree with most of your comments and know that there are a few people on this site who do run good businesses in the United States and there are many other who are just wholesalers and not even based in the cities that they are buying in.
Then in Australia there are people selling property who have never been to the states let alone met the suppliers thy are dealing with.
Although I can see the benefit of section 8 tenants I have also experienced the downside if you get a bad one. Often this comes down to where you are buying. If you are dealing in States like Texas and Florida both states tend to favor landlords where in states like New York and California they tend to be pro tenant. Clearly as an investor you would prefer pro Landlord.
I agree with Property Management. We own our own property management firm that has been going for over 20 years. If the company is unsure about management don't deal with them
Nigel Kibel | Property Know How
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I would also agree with some of your comments, however, there are some points you make that I think are open to discussion.
I think that firstly, if buying through a local company over here, unless they have actually brought the properties they sell in the US, which can easily be checked if they have taken title to the property, ultimately, you will be dealing with companies in the US that are the ones selling the actual property, so the first thing is knowing that you are NOT dealing with an agent in the US acting as a third party, but you are dealing directly with the actual company that owns the property.
How long have they been established? Do they actually live and conduct business in the same area/s they they sell in? Are they local neighborhood experts and not based in one State yet selling in a dozen different states, as it's impossible to be a local expert in that case, down to the very street and even which part of the street.
NEVER go by just a zipcode, as it can cover a multitude of good and bad areas.
Are the owners of the company investors themselves in the areas that they sell in?
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Section 8's, again, you get many freeloaders, who couldn't care less about the property, and even under the section 8 program, can still cause many problems, on the other hand, you can get some very good section 8 tenants, who have great jobs and want to stay for a long time. Section 8 is no guarantee of having a better long term problem free tenant, they still have to be checked out just like any other tenant.
Using a title company that works with a lot of both local and overseas investors is also a great help.
Bottom Line, ask lot's of questions, do your research to actually know what questions to ask, there are many excellent and credible companies in the US that care for their buyers and provide a top quality product and who will stand by their product well after the sale has been made, but there are also probably far more shonks that are out to fleece unwary buyers.
This also applies whether buying a single home, a 1-4 Multi Unit Block, or a much larger commercial block.
I agree with Nigel that having good property management is vital. On Section 8 tenants, frankly, I prefer to have them as they smooth out cash flow for me and there is less risk of delinquency – ie non payment of rent.
Josh, I don't completely agree with you from my experience in the market in the past five years
– Purchase already rehabbed and/or tenanted properties
Depends how much extra you are prepared to pay over the value of the home. Vendors will always charge more for this service. If you want to get in at rock bottom prices, then you will need to go the foreclosure route, with a trusted vendor.
– Look for companies that cater for remote buyers and provide all the services to make investing easy and profitable
Agree. Back end support is sometimes more valuable than the purchase at the time. Things go wrong and you need a team who you trust to act swiftly.
– Purchase from companies that provide management services in house
Don't agree with this. This does not guarantee the management service is currently performing for clients. We had a manager who dropped the ball over time and we had to move fast to find a new management firm. Sometimes these guys were victims of their own success and we sent them too many properties over what their set up could handle. You need to ask the question, how many managers are looking after how many properties and speak to someone who has a property under mgmt of this company.
– Consider vendor financing option to minimize risk and take advantage of leveraging
This financing can be dressed up to hide an inflated purchase price. I would be wary of this.
A US bank independently has the property valued so you know if you are getting a good deal or not.
We had a buyer purchase 50k under makret value, and the bank confirmed that. This was a good US bank loan, 70% LVR and 5.5% interest
– Look for section 8 tenanted properties (government pays the rent)
Completely disagree. Section 8 is good while the tenant is living in there. But it can quickly turn sour, and then repairing the property and re renting can be a long process. So your annual returns are not much better than sacrificing $50 less per month on a more consistent basis.
I have had this happen to one of my properties before. Take the good with the bad on section 8 tenants and it can work really well, or a slight slip up by your manager and it can reflect poorly on your ROI
– Never buy fixer upper homes and attempt to hire contractors remotely ( YOU WILL GET BURNED!)
This is where the good deals are in Texas and Atlanta at the moment. Hedge funds are making it harder to buy foreclosures with little to no need of rehab.
Just need a good company referral for this from people who have done it before.
I have had contractors in AZ take for ever to do a simple rehab. Need someone on the ground managing it for you that is external to the construction team
– Make sure the seller is the actual owner of the property and not a wholesaler. Wholesalers mark up prices so they are able
Agree. Some people are happy to pay a bit more for less headache in the buying process and have it cashflowing from day 1. Other want a killer foreclosure deal. We can offer both services depending on an investor's criteria.
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