Buying in the USA Property market

Posted on Tuesday, December 2 2014

I Personally started in 2008 researching the US market seeking greater Cashflow than the NZ Market can offer; As a starting point I would recommend anyone who considers buying in the States to learn the lingo and cost involved with Buying and selling a property.

In some states a buyer is required to pay Transfer Tax that can add up to thousands of $$ on top of the Purchase price.

One more thing to consider is the closing cost 1%-3% of Purchase price.

It is also important to learn the ZIP codes of the area you wont to invest in as most Real Estate agents (Realtor in the US) and research tools use them, in some cities they don’t use neighbourhood names as much.

In The US there are Residential Investment properties which provide true Positive Cash Flow with gross yields of around 20% and Net yields of 10%+.

For an absentee vendor the key to successful investing in the US (or anywhere globally) is good reliable property management, trusted reliable market advice and conducting a thorough Due Diligence. Buying the right property for the right price in an area where there is strong tenant demand is a crucial factor, as in the last few years there are areas in the US where there is a massive oversupply of vacant properties which are Bank owned or just been foreclosed and standing vacant, this could significantly influence prices and rents growth and demand.

Investors should also stay away from areas and suburbs with high unemployment and crime respectively.

Currently In our Deal Room at propertygenie.co.nz there are a selection of US Investment properties which are returning 10%+ Net yield, These properties are sourced by one of our traders, James Munday. James has a finely tuned global network of both agents and developers, he works with an associate in Naples FL that holds contracts directly with the banks.

James sold internationally over 250 US investment properties in the last 3 years and 3 USA investment properties to NZdr’s in the last 4 month.

Initially Investors predominately wanted to source property for holiday homes, later realising the potential to capitalise through rental income in some of the tourist driven countries. Initially the focus was on property that offered personal usage combined with a rental guarantee, as the downturn hit, we are now finding some of the best deals to be had in the distressed markets but with good rental demand.

Contracts are drawn up by a solicitor; they also act as closing agent. The team source bulk deals from banks using consortium/fund groups, the banks that lent against these have taken a huge loss over the past few years so as you can imagine they want to offload as much as possible. With joint buying power, these prices driven down, keeping yields high for investors giving the banks the capital they want whilst securing apartments in bulk.

As far as financing the purchase, not having a credit Rating in the US could be issue when borrowing money in the US.

I know of some investors who through contacts have access for some private landing in the US and some Kiwi investors borrow the funds in NZ as the bank taking security over their existing NZ based portfolio.

The foreclosed market is predominantly a cash buyers market, if finance was available.

Everyone would have one. When banks begin to lend against them again, this will push house prices up alone.

Getting the money over to the US is the easy part as the Bank Transfer to US based Escrow Service Company.

There can be a few pit falls especially if you aren’t using an agent and trying your luck independently. In the US there is nothing like the N.Z Department of Building and Housing or Tenancy tribunals, every issue or dispute that can arias with the tenants should be resolve between solicitors which could be potentially more costly then the NZ system, that’s why good property management is key in the US.

The use of a solicitor is to act on the buyers behalf making sure that title is 100% clear from any past liens and debts. Property Taxes isn’t a pitfall, it’s something you have to pay in the US although it isn’t much, typically 1.5% of the property value. There are far more positives than negatives about the US market and an astute investors can build a cash flow based portfolio from day one.

Recently sold Deal:

Florida 11.6% net return.

Carrington Park – (3bed/2bath) – 65,000 USD – ORLANDO

Purchase Price: $65,000

Monthly Rent – $1000 (Tenanted for a full year)

Monthly HOA – $241 (Home Ownership Association is the equivalent to a body corp. )

Monthly Property Taxes – $50

Management – $80pm

Net Monthly Income APPROX – $629 / $7548 annually – 11.6% net return

One Response to “Buying in the USA Property market”

  1. jitesh71 says:

    I planning to buy property in USA but not sure if possible from NZ..where i will get more knowledge ?

    what about bank finance ?

    Pl advise
    Thanks
    Jitesh

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