So Cut The Crzp Whats Really Going On In The USA

Posted on Sunday, March 17 2013

We hear the success stories from the marketers and the horror stories from the naysayers but what is really going on in the USA market?

Why are investors globally going there and what can really go wrong?

Well answering that definitively is like having a 1 sentence solution to world wars but let me tell you my own and my clients investing experiences over the last 3 years.

First the bad stuff about USA Investing:

Vacancy:
Sometime US rentals are a pig to tenant. Even with the best property managers some houses just stay empty too long. This is not an ongoing terrible problem. Out of around 200 clients and our own properties I know of 7 cases where we had real vacancy issues. The only relatively common factor was that these were smaller homes and/or in lower socio economic areas. Having said that we were involved in a transaction where the property was stunning, in a great “white” area and it took 5 months to tenant. The reason was that the back yard was steep and unusable. This was much more of an issue than we understood as non US investors. But we do now!!
So this is a real issue that you will face sometimes. We allow 7.5% vacancy when we quote properties but occasionally you will have an issue.

Bankruptcy:
We only invest in states that are landlord friendly so evicting tenants is relatively painless. However if a tenant goes bankrupt it can be more expensive and a much longer process to evict them. Instead of being 30 days it can take ten weeks.
There is no way of really anticipating this. It has happened to 3 of our clients out of 200.

Banks: This is not so much bad stuff but because we are operating US bank accounts and companies as non US residents you will be driven a little crazy in the early stages by the way US banks operate and interact. They are both 50 years behind New Zealand technologically and completely incompetent when it comes to customer service. We hold your hand in this process but it is frustrating at times emailing a bank ten times with no reply over something we deem to be urgent.

And that’s it for our bad experiences. At the end of the day we are talking about rental properties so there isn’t much else to go wrong, if you don’t pay too much and you have a tenant and they are paying then life is bearable at least ☺
Banks etc.
We insulate our clients form most of this but our biggest single issue is dealing with the US authorities and banks. The level of fraud they have in the ir banking system and their paranoia over terrorism has caused them to lock the country down making it extraordinarily hard to interact with them. I have a person full time just managing the bank relationship now. Transferring funds, paying bills, getting credit cards, all the things that should be easy are a nightmare. Our professionalism and personal relationships enable us to overcome every issue but it is a time consuming difficult process. If people were going it alone this would drive them crazy because the banks simply say no to everything until you beat them up enough ☺

The good stuff.
99% of our clients are enjoying good cashflow from their purchases and a significant number are now investing further having tested the system
Equity:
We are buying at around 1/3rd replacement build cost and the markets we are in are seeing rental and value increases. We picked certain cities for many reasons and our research is bearing fruit.
Whilst it may not be simple to onsell at a quick profit in the USA right now we are seeing values climb and as the market genuinely recovers we believe oour clients portfolios will double and even treble in value just by a return to the normal floor.
Cash Flow:
In the meantime rents are increasing. Rentals that were $625 are now $690 in under 18 months and as millions more Americans become renters this is likely to increase further.
Currency.
Whilst the dollar bounces around we have enjoyed 2 to 3 years of high NZ dollar and this is even better right now so every client will realize an untaxed gain when the NZD/USD goes through its inevitable cycle.
Banks.
We now have bank finance available and access after qualifying period to mainstream banks so the piece de resistance is that you can repatriate all your cash after 36 months and keep the cashflow with 100% US borrowing ☺.

In Summary we now have “proof” if you will that this market is safe, sustainable and we know the pitfalls and how to minimize them.
Repeat clients tells us the market is solid, we are not telling any lies and this is THE cash flow solution so many are looking for.
I have invested in NZ for close to a decade, Australia, Fiji and now the USA. I have never seen anything this good for cash flow ever.
Dean.
PS: I am running a webinar series currently explaining the how to’s of the US strategy, more info at http://www.ushouses.co.nz

Email me anytime, team@turnkeypropertyinvestment.com

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Expert's Bio

Dean Letfus

Dean spends his time between the USA, Fiji and New Zealand helping hedge funds and individual investors buy cash flowing real estate in the Memphis market. He works with top professionals in those cities and is considered better at finding deals than most of the locals. Turnkey has clients in 9 countries and specialises in providing end to end solutions regardless of your budget.

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