Forum Replies Created
- sundirtwater wrote:Steve,
By way of comparison with your 3 houses what are your thoughts on investing in apartments on Miami Beach? I imagine you can get them pretty cheap. How many would you get for $300k and what would be the comparable rental returns on them after tax? Also since your strategy is capital growth would you not achieve the same thing with buying multiple units? Or are the body corporate rates too excessive?
StefSome very good questions there, Stef
Why am I not buying 300K apartments, since there'd be less maintenance (ie. no roof repair, pool repair, fence repair…)?
Because in that prices range you'll be buying luxury apartments. Once you're in this market, you're competing with rich overseas investors (from Canada, Russia, Brazil etc.) who are buying largely for their own use. They don't take into consideration things like Rent Return. They tend to buy in cash, and don't care if they make any monthly income. So the HOA's (building maintenance) companies running these buildings rip the owners off. For example, they will have up to 20 security guards in just one building, each earning at least 2K a month. For this pointless service you will be paying at least 1K a month, plus your $500 property tax, so from your rental income of 2.5K you're already down to just 1K.
The BEST way to make money in the rental market is by buying small units (30K to 50K) in places away from the beach. In these buildings the HOA is run by the homeowners themselves, and there isn't a single security guard. Your HOA will be about $150 a month. In these kinds of investments I've calculated your rent return will be between 10 and 20%. If you buy near universities you may make even more. Some good buildings to buy in are on Sans Souci Boulevard (near Biscayne and 123rd St), or if you continue west just over 123rd street for about half a mile, just before the railway line. This area is very close to a university.
The reason I don't do this kind of investing myself is because I don't want the headache of dealing with so many small apartments.
Hope that answers your question.
I have come to know many Miami-based realtors, and they are all professional and take their work very seriously.
They would never cheat a client, if not for moral reasons then at least out of fear of losing their reatly licenses.
They also always know people to assist with repairs, killing termites, getting your garden looked after, etc. etc. In additon to knowing all the laws pertaining to real estate and having access to very tight contracts, they also know lawyers to assist with setting up LLCs or evictions, and title companies to do the closings on puchases.
And here's my greatest surprise: if you find a good realtor you won't need a property manager. I don't have a manager: I just paid a realtor 5% of the yearly rental income. For small things (like fumigations, organizing plumbers/electricians) my realtor and/or tenants will assist in getting the job done, thus saving me getting ripped off by a property manager.
I'd also like to add that I've worked with about 20 people in the contracting business (roofers, plumbers, electricians, pool repair, doors/windows, tilers…) and have found all to be honest. Having said that, they are ALL South Americans, where bargaining is the norm, so if someone tells you the job will cost $2000 you counter with $800 and then reach a final figure of $1000.
I can see no reason why it would not be possible to look after your properties by yourself from overseas. I'd even be willing to use contractors I haven't met in person, so long as there's a contract written up. But let me clarify I'm talking about doing repairs to a habitable property. If you are not on-site to oversee things, I don't think it's feasible to buy a delapidated single-family home and try to renovate it. I've bought one such property, and even being present each day for almost three months still meant there were constant problems that needed solving, and major decisions to be made, such as: should I replace the whole roof, or just the part that's leaking, should I paint the pool or have it completely replastered, should I change all the bathroom fixtures, which would mean needing to retile, or just try to replace the broken pieces, should I replace the entire A/C, or just the extermal unit…
Being interested in surfing, I often visited the Taiwanese east coast in the late 1990’s, and during those visits I got to know a tall, good-looking young American guy. He was teaching English to kids in Ilan, and when there weren’t any waves to surf he spent his time learning to speak Chinese.
Then I bumped into him in Taipei (the capital of Taiwan) and over a cup of coffee he explained that he’d quit teaching, and was using his newly-learnt language skills to flog Nasdaq stocks (specifically in start-ups) to mom and pop Taiwanese investors. It was 1999. He was making a lot of money. He wasn’t an amoral person, but he couldn’t resist riding the wave to prosperity. I wonder if he felt guilty when all those moms and dads lost their investments when the bubble popped the following year. Perhaps he didn’t, telling himself that he was just selling them what they’d already decided they wanted. He didn’t create the greed, he just fed off it. It was the Taiwanese investor’s stupidity for not doing due diligence, ie. for not realizing that he knew zilch about stocks, and that the company he was working for was a fly-by-night bunch of ex-English teacher fraudsters.
And THAT is why anyone who hasn’t gone to the US (just a week will do) but thinks they’ll buy properties through these young “companies” flogging their wares on forums, actually DESERVES to lose their money.
If you are looking to buy for 50K, and willing to donate another 10K to a scam-artist to get the deal done, why not just spend 5K of the 10K on plane tickets, hotels and a rental car, and then use a real US realtor to help you close on a property you’ve actually seen, or at least in a building or suburb you’ve actually seen? You’d save yourself 5K of the 10K, and save yourself the nightmare of being duped into buying a lemon!
So why don’t people just fly there themselves? No doubt they make excuses: it’s too far, what can I achieve in only a week or two, etc. etc.
But the truth is, these people don’t go because they’re either too scared or too lazy.
If you’re too scared to visit a country, you DEFINITELY ought to be too scared to invest in it. If you can’t get 10 days off work, you should change jobs, cos you don’t have a good one. If you think it’ll be too stressful, have faith. Do some preparation. I did none, and the first 6 hrs after leaving Miami airport was very stressful, but by lunchtime I’d set up a cell phone, rented a car, and found a house to rent. You won’t have these issues if you just sort it out on the internet before you fly.
You think 10 days won’t be long enough? Even in a city the size of Miami 3 days in your rental car is enough to know what areas you’d like to buy in. I now own a house that happened to be the first one I ever looked at in the US. Believe me, 10 days is enough. You won’t close on a deal in that time, but you WILL come to trust your realtor, and you will get a chance to choose which buildings you want to buy in, or which suburbs (if you choose a realtor before you go they will have a few properties lined up for you, so you may get to purchase one that you’ve actually seen).
Anything can be done over the internet these days. Florida law doesn’t even demand that you sign documents in person or even have them notarized. Just signing, scanning and e-mailing is enough, which means you can buy properties from afar.
So come on, guys and girls, stop filling the coffers of middle-men. Do it yourselves, because in the end what is money anyway. It certainly doesn’t make us happier. It’s the journey that counts. So go have one in Phoenix, Las Vegas, Miami, or even Detroit!
A lot of people e-mail me, either to ask for my advice on when and where to invest in the US, or to ask for help (to invest in Miami). When I first started posting on this forum I had some scamsters contact me (whom I ignored, because they were most likely sitting in Nigerian internet cafes posing as millionaire Aussie investors). From that moment I decided to stop responding to e-mails altogether.
But here are the answers to the questions of when and where to invest:
Where: I honestly think you can't go wrong investing in Miami, Phoenix, or Las Vegas. Miami suits me perfectly, because I now live there most of the year (it has 9 months of absolutely perfect weather),. The Miami Beach area is a fantastic place to raise my kids, the crime is low, and the tourist aspect (plus the influx of rich South Americans and Russians) provide an excellent floor to the market. Miami is also very conveniently situated for British (or other European) buyers, since it's about an 8 hr direct flight away.
But if I were an Australian with about 50K to invest I'd probaly choose Phoenix. Disclaimer: I've never been there. Just from looking at the stats, geographic location, size and economic and political importance, I'm sure its real estate has great potential. Also noteworthy is the fact that it fared the best (of the 20 most NB cities in the US) in the Case-Shiller Year-on-year price change, coming in at a very impressive 3.3% growth (Detroit was second, at 1.5%, and Miami 3rd at 0.8%, with nearly all the other cities falling in price).
Another great plus about Phoenix is that it's less travel time from Australia than the east coast.
Although Detroit probably also has incredible opportunities, it's a city you would need to know VERY well before jumping in (crime being a major consideration, plus neighborhood deterioration).
Las Vegas has surprised me over the past year, crashing 8.5% in price. I'd never have predicted this, considering how prices had already fallen so low by 2011. I guess the explanation must be a mixture of over-building in the boom years, plus the fact that the gaming industry struggles during recessions.
Therefore, I'd say Las Vegas is a bit of a wild card. But that 8.5% drop in house prices over the past year could spell some excellent buying opportunities for the brave and foolhardy.
When:
I honestly find it very difficult to predict the bottom, the start of the turnaround, and the amount of time to the next top. If it were China, I could make these predictions with certainty. No government wants a weak housing market, so the Chinese government would just announce a couple of measures and house prices would skyrocket (eg. they'd allow people to buy more than one house, or to get mortgages with just 30% downpayment). In the unlikely event that this didn't produce an immediate jump in demand, they could just announce that they are not going to release any more land (of which they own precisely 100%). Decrease in supply can only equal an increase in price. This is what Hong Kong has been doing over the past decades, and explains why a tiny apartment there will set you back much more than $1 million.
But when it comes to the US, with its debilitating democratic system and all-powerful military-industrial-media monopolies, nobody can foretell the future. A strong president with the backing of a strong senate could easily legislate the housing bust into non-existence. But why bother, since it's better for politicians to spend their time concentrating on the polls for the next election. If the president were to ignore the polls and do what's needed to be done, the economy would only really get healed by the time the next president takes the stage, and he or she will get all the credit.
That's why I run a number of scenarios in my head:
Perhaps the bottom of the housing market will be during the next 12 months. Plan of action: prepare finances to buy several more properties over that period.Perhaps the market will stay depressed for another 3 years (as a result of banks finally beginning to release the backlog of REOs). Plan of action: since this means the Fed will keep interest rates low for the same amount of time as the market is out-for-the-count, I shall concentrate my efforts on getting mortgages for my properties, so as to be able to buy more.
Perhaps the market will begin to rebound in 2013, and head steadily higher over the next few years until the increase begins to feed off itself and produces overheating. Plan of action: let greed take over. This is the exciting part of property investing, as you scramble to offload properties so as to lock in gains, which you then use to ride the roller-coaster to the top. Of course, you have to be very careful about getting out before the bubble bursts.
At present the market (at least in Miami) doesn't seem to be doing much. There has been a huge reduction in REOs ever since September 2010, but this hasn't affected prices much. It just slowed down the volume. What's happened is that all the bottom-feeders are finding new ways to do illegal deals (especially for short sales) which result in lower stated sales prices.
Here's the latest fad in how to profit from the housing bust: the buyer bribes the seller to sell him/her a distressed property (ie. a short sale). For example, Mr A owns a house worth 300K (if he were to sell it as a regular sale) but he owes the bank 500K for the property (either because he bought it at the top, or because he took out a second mortgage on it). Mr A has stopped paying the mortgage, and the bank would love to kick him out of the house, but they are too scared to because there are another 1 million Mr A's out there, and if they all get kicked out of their houses then the bank will have 1 million new REOs on their hands, which are a nightmare to deal with, what with having to pay their property taxes, get the lawn mowed (otherwise the city will fine the bank thousands of dollars) and deal with druggies breaking in and stripping all the wiring and piping.So the bank says to Mr A that he can sell the house as a short sale (ie. for 300K), give the entire amount to the bank, and then the bank will forget about the 200K Mr A still owes. Sounds too good to be true, especially when Mr A realises he can make a cool 50K profit on the deal. He finds a crooked realtor to list the house at 300K, but then the realtor must select from the buyers someone he feels will enjoy ripping off the bank. When he finds an unscrupulous buyer, he sets up the following deal: buyer will buy the property for 200K (stated price), but will buy the furniture in the house (under a different contract, that the bank will never see) for 50K. So the buyer ends up paying 250K (200 to the bank and 50 to the seller) for a 300K house. The only trick is to convince the bank to only accept 200K for a house they thought they'd get 300K for. But <moderator: delete language> this isn't that difficult to pull off. For reasons unbeknownst to anybody, houses in Miami are allocated to asset managers in branches at other ends of the US (for example, the two REOs I bought in Miami were under the control of Bank of America asset managers in California!) This means the asset managers have no idea of the neighborhoods their properties are in. Furthermore, the asset managers are swamped with properties, are incompetent, and/or don't give a damn. As long as they have an excuse for why they only got 200K for a 300K house, then the sale will go through. The way the crooked realtor comes up with this proof is by getting a crooked Inspection Company to write up a bunch of bogus problems with the house (eg. it has mold, Chinese Dry Wall, rusty plumbing, dangerous wiring, termite damage etc. etc.)
This is the situation happening in nearly all the short sales I pursued over the past 6 months (and it's why I ended up buying a regular sale as they third property). The winners in these scams are the buyers (getting 300K properties for 250K), the sellers (getting 50K under the table). The losers are the banks, and the other home-owners in the area, because prices in the entire neighborhood will drop, since the stated sales price doesn't include the under-the-table bribe, so it appears that the sale was at a much lower price than it really was, and then that sale becomes a Comparable Sale for other houses in the neighborhood.It amazes me that these kinds of shenanigans are going on. This problem didn't exist in 2010, when unscrupulous people were able to satisfy their greed by buying REOs after bribing the listing agent. Now that REOs have disappeared, they're all figuring out how to play the Short Sale game.
It shows how "Dynamic" the US economy is.
It amazes me that the US used to be No. 1 in the world. The guys at the top are all too busy getting rich (illegally, no doubt) to notice the damage done to the economy and society by bottom feeders. Perhaps Socialism is the better system!
So why would I want to keep investing there?
Simple: lets take a property I own here in Shanghai. I bought it 4 years ago for $150K (I got a mortgage for 100K of that). It's now worth about 400K after all taxes and costs. I rent it out for only $700 a month, which is exactly how much my monthly mortage payments are. In other words, I'm making exactly zero in monthly income on this property.
But if I sell it, after paying back my mortgage, I will have over $300K in cash. This money can buy a house in Miami (in a good neighborhood) that I can rent out for AT LEAST $2,500 a month for. After paying property taxes, I'll have a monthly income of $2,000.
So if I don't sell this apartment in Shanghai, I continue to earn zero dollars per month.
If I do sell it, I make a little over $2,000 a month. So what should I do? That's what the Yanks call a No-Brainer.
Added to this is the fact that Shanghai properties have increased about 8 times in value since 2002, whereas Miami properties are exactly the same price as they were at that time.
Eventually, something's gotta give. Like the Phoenix (pun intended) from the fire, Miami must rise again!
I've just been reading some of the disturbing news about ruthless (or just plain stupid) people who've set up companies to help foreigners invest in US property. Well, I can't say I'm surprised: where there's greed for exaggerated profits, someone is bound to at least try to separate those less smart or more honest than themselves from their money.
No doubt what I write now will seem nothing short of arrogant, but what the hell.
The only jobs I ever had were in my 18th year on this planet, one being a 3-month stint in a furniture factory in Newcastle (<moderator: delete language> UK), and the other as a porter in Harvey Nichols (a snobby department store in London). I then went on walkabout for much of the next decade, living off practically nothing and learning how far I could stretch a dollar. Then I started my first ever business, made a fair bit of money, and then lost almost all of it buying Nasdaq stocks.
That brought me to age 30, by which point I'd finally graduated from the commerce department of the university of life. I now knew that I needed to make money in a sustainable manner, then figure out how to make that money work for me without gambling it away on casino-like investments. My friend, however, who has a Masters degree in Economics, got a managerial position working for Merck (the pharmaceutical multinational) and then paid some idiot investment adviser to tell him where to put his savings. I'd be interested to know who has earned more over the past 10 years, him or I. Perhaps we're neck and neck. The difference is that I earned my own money from my own business, and thought long and hard how to invest it (90% on investment properties). He took all his holidays staying in 5-star hotels in various places around the world, whereas my wife and I spent ours overseeing the renovation and decoration of our properties. The result: I retired several years ago, whereas he owns one house in Sydney that he'll be paying off for at least the next ten years (I hope his stock portfolio has recovered somewhat, because back in 2009 he was lamenting that he’d lost half his net worth).
Now, I'm not so arrogant as to say I'm happier than him. But this forum is about property investment, with the bottom line being returns. And when it comes to overall wealth, my investment properties are worth many times more than his stock portfolio.
The secret is to understand the value of your own money. People who read financial websites and newspapers easily get the wrong impression about investing, because the media love to publish articles about the likes of Soros, Zuckerberg, Gates, and Slim. Even the negative news (eg. about Madoff) leaves the impression that it's very easy to make a killing investing your money, so long as you have the guts to take the leap. Well, what the media usually doesn't bother to cover is just how many millions and millions of small fry lose their life's savings each year. In fact, that's one thing that struck me when I first went to Miami: so many people's tales of the past 5 years are one's of Riches to Rags.
Lesson: you should take your money VERY seriously. It's only yours for as long as you have your eye on the ball. My own parents are far from wealthy during their retirement, although they did everything by the book. Sadly, my father allowed his pension to be invested by his university (he was a doctor) and they did a shoddy job of it.
So here’s why I think it’s unlikely you will find a company that can successfully assist people overseas to buy decent properties in the US: Most investors want to buy for around $50K. This means you’re either buying in poor cities, or in the poorer part of big cities. Either way, your tenants will be quite dodgy. Also, the houses will probably need a lot of work, which isn’t cheap in the US. The result is that the investments will have too many unknowns (such as the direction in which the city and/or the neighborhood are headed, and what the quality of your tenants will be).
People who’ve set themselves up as buyers in the US know that you will see about 10 so-so properties for every good deal. Logic dictates that they will probably palm off the so-so deals to their overseas clients, and snap up the good deals for themselves (which they’ll then flip to make a quick buck). You, the overseas client, will be left with an iffy investment. Perhaps it was worth the $50K that the company convinced you to buy it for, but after they’ve taken their $10K off the top (and believe me, they’ll think of ways to get it, either by truthfully calling it a finder’s fee, or by overstating the renovation costs), you now own a 50K property that you paid 60K for. And now begins the whole saga of renting it out for 7 years until the price rises enough for you to profit from it.
I don’t think I’m stating anything that the more discerning reader doesn’t already know. Besides, if property prices do double over the next decade, then you’ll have a 100K property you paid just 60K for. That’s why the most important thing is whether it was rented out for all of that time, which leads back to whether or not you lucked out when choosing your city and suburb.
I’ve been buying in Miami’s more upscale neighborhoods, hoping that I’ll be able to rent to higher quality people, and thus avoid nightmares such as evicting people, or finding my houses trashed. Even though, my friends and neighbors in Miami have all warned me to expect the worst from my tenants.
The US is a dog-eat-dog country. So if you’re a poodle that’s been pampered in a cushy and stable job all your life, don’t be so stupid as to cash in your pension to try to run with the wolves.
I'm back in Shanghai, as of two weeks ago. My reasons for returning were two-fold: my six-month US visa was up, and I want to sell some Chinese property and move the money into the Miami real estate market.
First some observations about Chinese property:
I can sell my small 2 bedroom Shanghai apartments in the Middle Ring for close to $500,000. Shanghai is divided into 3 zones: the Inner Ring (downtown), Middle Ring (somewhat removed), and Outer Ring (the far-flung suburbs). My friends in New York just sold their apartment (a spacious 3 bedroom, 2 bathroom) in a trendy neighborhood for $470,000. Conclusion: Shanghai property is way higher than its New York counterparts.
Prices of everything in China are shooting up. People are much much wealthier on average than just a few years ago. It seems that the reduction in the US middle class is the gain in the Chinese middle class.
I'm no longer of the opinion that the Renminbi is undervalued. It's not going to rise any further.
Expect some serious inflation across the globe in the next decade. The Chinese working class's average salary increased 22% last year. Soon nobody is going to do factory work at low wages. Everything that's Made In China must get more expensive.
Your average Shanghainese person is loaded with cash (as they are in Beijing, Tianjin, Guangzhou, Shenzhen, Fuzhou, Xiamen, Dalian, Wuhan, Chongqing, Changdu, and Nanning, to name just a few of China's monster cities). If you're living anywhere that Chinese like to visit, expect property prices to keep their value, if not rise further.Now on to Miami.
In the week before I left I was able to close on a third property (single-family home). That means I now own 3 houses in Miami, none with a mortgage, so I can't advise on the ability of foreigners to get loans.All three houses have been extremely easy to rent out. I probably didn't ask enough, because each house went under contract within the first 48 hours of going on the MLS.
Here are the stats:
House 1: bought for $331K (2 bed/2 bath). Spent about $50K to renovate. Rented out for for $2,600 a month.
House 2: bought for $120K (3/2). Spent about $30K to renovate. Rented out for $2K a month.House 3: bought for $320 K (4/3). Doesn't need any renovations. Rented out for $2,800.
The property tax for all of the above houses is the same: about $500 a month ($6,000 a year). I plan to get a lawyer to try to bring down the tax for House 2, because it's too high for the value.Here are the rent returns after property tax has been paid:
H 1: 6.6%
H 2: 12%
H 3: 8.6%The reason House 1 has a lower return is because it has a beautiful waterfront, which pushed up the buying price (the house is small and only has 2 bedrooms). Renters won't pay a much higher premium for looking at the bay, but once I've added a bedroom I intend to sell the property for much more than $1 million, because buyers will appreciate waterfrontage more than renters will.
House 2 has a fantastic rent return because I took a huge chance on the house. It had a lot of violations on it, which put off most buyers. I had to do the entire renovation project under the nose of the city building inspectors, which was very stressful. But in the end everything worked out perfectly, and the renovation costs and fines came in far under budget. During the process I bitched and moaned (and got both angry and depressed at times) but now I have only good things to say about the Miami Building Department. They aren't out to screw people. They just want to make sure houses are as safe as possible, lest another super-hurricane hits (there was one about 18 years ago).
House 3 is an average house in a good area (Miami Beach) near to great schools. It's the house that took the least effort (practically none). It isn't in my nature to make such boring purchases, but my time was running out and I wanted to have the money invested instead of sitting around until I return to Miami. Although House 3 is a solid investment and has a pretty good rent return, it is the house (in my opinion) that will increase in value the least. I'm sure I will not sell Houses 1 and 2 for anything less than 3 times what I paid (including the renovations), but I will be happy to just double my money on House 3.
I should add that Houses 1 and 2 were REOs (foreclosures) bought from Bank of America, whereas House 3 was just a regular sale, bought from a divorcee who wanted to move on. Another reason I went for the House 3 is because REOs were getting almost non-existent in the past year, at least in the few areas I was interested to buy in.
If you're in a rush, and don't have the time to wait for and renovate an REO, then you should consider that you will most likely end up buying a property with the same stats as House 3 (that's if you're buying in that price range).
My plans for the future: spend 2 months in Shanghai selling a few condos, then fly to Sichuan province and drive up into Tibet for 3 months, by which time the hideous summer heat in both Miami and China will have passed, and then I'll return to Miami (with wife and kids) to buy a few more houses. When the money has all been spent I might think about taking out mortgages on the Miami houses, so as to get cash to make further purchases. The problem with mortgages are that the banks will charge a premium when lending to foreigners, and they'll demand that you purchase 3 kinds of insurance: Homeowners, Flood, and Wind, which come to a total of about $600 a month if you buy near Miami Beach. After paying your property tax, your insurance and your mortgage (from the rent) you will be lucky to break even. But then again, you'll own a lot more properties, so if the price doubles you'll make a hell of a lot more profit in the long run.
Hi Fellow Readers
Sorry for not posting for so long. Have been wrapped up in my own life (ie. properties) here in Miami.
I've been living in Miami since January of last year. It's been quite an experience so far. We (myself, wife, and two toddlers) all have 6-month tourist visas, so we've had to leave the country twice so far (took short 2-week vacations). Coming back through US immigration was quite stressful, but surprisingly uneventful: both times we were asked our reason for coming and for how long we intended to stay, and both times I said six months because of wanting to buy distressed properties. The immigration officials thought that was a good idea, and stamped our passports accordingly.
Having been here for over a year now, I can say I've learnt a hell of a lot about this country, this city, its people, its problems, and even about myself. However, this is not a forum about philosophy or politics, so I shall stick to property.
I waited half a year to finally get my hands on My Dream Property: a small house with big waterfrontage on the northern end of the island where Miami Beach is. That long wait nearly drove us nuts, but it turned out the wait was worthwhile. I took possession of the house on August 1, and was extremely busy thereafter. I ploughed my way thru a hell of a long learning curve, incorporating foundations, sea walls, sewerage systems, roofing, landscaping, plumbing, tiling, flooring etc. etc. I soon learnt that this country is nothing like China (where I would never get involved in renovations beyond signing contracts with companies). Because of ridiculously high labor costs (compared to China), I had to buy a pick up truck, a hell of a lot of tools (including such electrical tools as a hammer drill, circular saw, cement mixer, pressure washer, tile cutter, makita, and jack hammer). Admittedly, I didn't HAVE to learn how to do things on my own, but I figured it would be best if I did, considering my long-term goal of buying more than a dozen single-family homes. Also, I surmised that only by getting personally involved in the renovations could I ascertain how hard a particular job was, and how much I ought to be paying should I decide to outsource.
I spent about 3 months making my Dream House habitable, while keeping an eye out for other properties. I made several bids on other REOs during that time, but wasn't prepared to go higher than the highest bidder (each time I used the listing agent, so I knew what the highest bid was). Finally I saw a property that I figured I could get for just 20% of its highest ever price ($700K), and just under half of its current value. The reason the property was so cheap was largely because it had been uninhabited for several years (just like my Dream House) and was therefore in serious need of repair.
I've now been working on this property all day for two months (along with my faithful assistant Victor, from Cuba, whom I pay $90 in cash at the end of each day), and only now am I starting to see the light at the end of the tunnel.
I have also got an offer pending for a large (but not waterfront) home in Miami Beach (I offered $320K). I expect to close next week.
Lessons:
1. Renovating in Miami is either very expensive (if you pay others) or very troublesome (if you do it yourself). For this reason I have only purchased two homes in the past 15 months.2. REOs are currently very scarce (they have been since October 2010). I'm no longer convinced that a tsunami of REOs is waiting out there, soon to hit the market. The best bargains were back in 2010 when the banks were panic selling. Right now they've already written off their losses (the REOs have been cleared off their books), so they're in no rush to offload cheap REOs. I believe the market has bottomed, though I'm not sure it will head up soon or just continue to scrape along the bottom.
3. Dealing with Miami building department inspectors is enough to give you a heart attack. Do NOT buy a house with any violations pending. The inspectors will be circling like vultures. This is the mistake I made on House No.2.
4. Building up a nice inventory of single-family homes takes a hell of a long time. This is why Warren Buffett said he'd love to buy several hundred thousand of them, if he just knew how to find them, and how to manage them.
5. Rental returns are very decent if you pay cash for your property (between 6% and 12%). However, if you get a mortgage your lender will force you to buy all sorts of insurance (flood, wind, fire etc.) which can cut down your rental return by several percentage points.
My current plan is to just buy with cash. This is probably a stupid idea, considering how low current prices are. But my motives are purely egotistical. I despise being at the mercy of US banks, which by extension puts me at the mercy of US insurance companies. Therefore, I shall be returning to China at the end of April to sell a few properties, and then come back to Miami after the sweltering summer heat (ie. October) to buy a few more houses (cash only).
Hope this helps
Stevesundirtwater wrote:Steve, Thanks very much for all the information in this thread – its fantastic! I'd very much appreciate if you were able to continue to update us with info on the houses you are currently looking at and your experiences. Also, could you give some idea of what a) a SFH needing reno work on Miami Beach that you could pick up for $250k would rent for and b) how easy/hard is it to get tenants? ThanksI'm looking at houses in the $120K to 350K range. If they're at the bottom of this range then I assume they'll need at least 100K to renovate, which means a real price of around 220K. There are two reasons I'm sticking with this range:
1. It's easier to get financing for houses in this range
2. You'll be renting the house out for about $2K to 3K a month, which means a much higher standard of tenant – someone who will hopefully pay on-time and not destroy the houseWhen I'm shopping for houses I always consider the rental income, and always use the 1% rule, meaning I make sure that the estimated monthly rental income is at least 1% of the total house price. So if I'm looking at a house for 200K that needs the bathrooms and kitchen remodeled (that'll set you back a total of 20K) then the total house price will be 220K. If I don't think it'll rent out for $2,200 a month, then it's a bad deal.
It's good to use zillow.com to get a rough estimate of the value of the house, and the estimated rental income.
When buying in certain suburbs (particularly Miami Shores and Biscayne Park) you must be careful not to buy a house that has any illegal additions. The most common illegal additions are when the garage has been converted into a bedroom plus bathroom. In the areas I just mentioned you need to get a permit from the government (called a Reoccupation Permit) after you buy the house. An inspector will come to the house to check it out, and if they see illegal additions (meaning changes made to the house without using an architenct, structural engineer, licensed electriction and plumber) then you'll need to bring the addition "up to code" or demolish it completely. I've come across many such houses, in great areas, selling for almost half their estimated value simply because people don't want the trouble that comes with illegal additions.
The rental market is very strong here in Miami. There is a shortage of rental houses, simply because so many people have lost their homes due to foreclosure and they now need to rent.
A lot of people on this site want to know more about financing. I haven't tried yet, but the info I've gleaned from lenders is this:
If your house is worth more than 100K you will most likely be able to get a mortgage (just ask any realtor to introduce you to a mortgage broker, who will then introduce you to a lender, but they'll charge up to 2% of the mortgage amount in commission, which they call an Origination Fee). If you want to get a pre-purchase mortgage (ie. apply for it during the buying process) then you can borrow up to 70% of the purchase price. If you want to get cash-out financing (which means paying in cash, and then applying for a mortgage after you purchase) then you can get up to 50% of the purchase price. However, if you apply for cash-out financing within 6 months of purchasing then they'll still treat it as a pre-purchase mortgage and still lend you 70%.Very important is to know that they won't necessarily lend you 70% of the price you've paid. They'll only lend you 70% of what they think the house is worth. They ascertain the value of the house by making you get (and pay for) an appraisal. This is simply some idiot working as an appraisor coming round to look at the house and telling the bank what he thinks the house is worth. The cost of the appraisal is about $400 to $500. Don't be surprised if he appraises your house a lot lower than what you've offered, especially if it needs renovation. Let's say you've bought a house for 300K but it needs a new kitchen, bathrooms, a paint job, and some landscaping work. These changes will cost you about 30K, which means you'll end up spending 330K. However, the appraiser will most likely take the cost of a similar home in perfect condition (let's say 350K) and then come up with an appraised value of 70% of that, namely 245K. He does this because he's an idiot and has no idea how much it really costs to fix up a house, so to cover his back he just multiplies the cost of a similar but perfect home by 0.7. The problem for you is that the bank will now only want to lend you 70% of the Appraised Price, which is 171K. So instead of being able to borrow 70% of what you've paid you'll only be allowed to borrow about 50% of what you've paid.
Hi Ajay
I've paid cash for both properties. The reason for paying cash is not because foreigners can't get financing, but because NOBODY can get financing when buying REOs. All banks have stringent criteria when granting mortgages, the most important being that the house is move-in ready. REOs never satisfy this criterion. This means the only way to purchase an REO is with cash, and then apply for cash-out financing after the purchase. I haven't done so yet on either property, but intend to do so as soon as they've been fully renovated.
Hi Readers
I've been in Miami since the end of January 2011. I stuck with my Dream House (a waterfront property in Surfside, on the northern end of Miami Beach), and after waiting a full 7 months while the property was dragged through court, we were finally able to purchase it at the end of July. It was an REO (foreclosure) and I paid way above the asking price. I'm convinced it's worth at least $100K more than I paid, even if I sell it without doing any work (actually, I think I could get $150K more, although I'm not even slightly tempted to sell). Since I intend to keep the property for many years, perhaps until I'm on my deathbed, I've begun serious renovation, which entails replacing both bathrooms (at a cost of $5K each) and the kitchen ($9K), and turning the garage into a 3rd bedroom/bathroom (20K). I'm also planning rebuilding the dock and seawall (20K and 5K respectively), and putting in a pool (20K). I intend to use this property as my base over the next 2 years while I make many more purchases.
I've also bought another property in Shore Crest for $133K. It has a pool, vaulted ceilings, 2500 square feet, and many other pluses. Minuses are that the area isn't as renowned as Surfside or Miami Shores, although it's not a bad area. It's just a one minute drive from one of the bridges heading over to Miami Beach, so if you're a water lover it's well situated.
To sum up my Miami Adventure since first flying here in October last year:
I still love this city. The weather from October to June is phenomenal. Warm and sunny every day. Right now it's hot, but if you're living near the beach it's not too bad.
Buying property has been far harder than I'd imagined, although perserverence has paid off.
There aren't a lot of REO's hitting the market. I've heard rumors that Obama has put pressure on Fannie Mae and Freddie Mac to keep REO's off the market until after the election next year. This would seem logical. I expect that he'll come out with another property stumulus policy (eg. a tax break) to push up prices over the coming year, thereby ensuring his re-election. As soon as he's re-elected, he'll allow Fannie and Freddie to dump the enormous backlog of REO's, which will bring down prices in 2013. But considering how hard it is to lock in a good deal, I still recommend investing in any property that speaks to your heart. But again, there's no need to rush things.
There are great deals out there, but one needs vigilance, patience, and presence (there's no way you're going to get amazing deals unless you're here).
Renovation costs are roughly 10 times the price of China. It's been quite a shock. However, if you buy sensibly you should easily recuperate your expenses.
The ONLY way to buy REO's is through the listing agent. Don't bother using an agent who isn't the one who will be submitting all the offers, since you won't know how high you'll need to bid to secure the property for yourself.
Short sales are becoming a much more feasible way of buying distressed properties than they were last year. Banks are agreeing to short sales much faster than before, and for much lower prices.
I've noticed some regular sales (Ie. not short sales or REO's) that went through at phenomenal prices. I house near mine in Surfside sold (as a regular sale) for $220K in June, and the following month the buyer flipped it for $280K! The lesson is that it doesn't matter if it's an REO, a short, or a regular. If you know the market and you make lowball offers regularly, sooner or later you'll hit the jackpot. I believe that I have, twice!
If I was considering using an individual or a company to do my US property purchasing for me, on top of researching as much about their history as possible using the internet (and if you find no history, then be very wary), the easiest way to be sure that they're not all just hot-air trying to separate you from your hard-earned cash, just ask them for a list of addresses of the properties that they've bought/sold in the past 5 years.
Once you have the addresses, you can easily varify the truth of their assertions by going to the local government website and checking on the house price history of the addresses they've given. You will be able to see whether these individuals have actually made the purchases/sales they claim to have, and see the dates and sales prices (and to/from whom the transactions were made).
Here's an example of a Miami address:
8818 Dickens AveGo to http://gisims2.miamidade.gov/MyHome/propmap.asp and under Search By choose Address.
Enter the address and you will see the property taxes on the property, the amount the property has been appraised at by the government, the current owner of the property, and if you scroll down you can see the most recent sale. Here you will find a link called View Additional Sales, and there you will find the complete price history.
So if you find somebody pushing their property services on this website, ask them to prove their abilities by supplying addresses they they or their LLC's have already bought and sold. This will also give you the ability to see how much money they generally make on each transaction, for example they might buy an REO from the bank for 30K and sell it to an overseas investor for 55K, so you'll know that they're making 25K less whatever it cost them to renovate (plus of course transaction fees).
Good luck weeding the honest from the conmen.
I've looked at a few properties priced under 50K, and although the houses were in OK condition, the neighbourhoods can only be described as "bad". Therefore, if you're looking to spend less than 50K in Miami I'm guessing you're going to be dealing with Section 8 tenants. This may be difficult to do from afar, so you'll probably need to use one of the many companies touting their services on this website.
Personally, I still prefer the idea of 150K houses, since you can go to a regular bank and get a 70% loan, and at low fixed-interest rates. Just make sure that you're buying a house that is in good enough condition to get a loan on. The reason my Dream Waterfront House doesn't fit this bill is because the house is in bad shape. Basically, I'm buying it for the land, and I intend to do major renovations on it and sell it for either half a million soon, or one million in a few years (since land along the intercoastal on Miami Beach is as rare as hen's teeth).
The advantage of buying one house for 150K, as opposed to 3 for 50K, is you will have much less hassle from tenants (3 times less, on average). Another advantage is that the more expensive houses are dropping in price faster, because not many Americans have enough money to pay cash, or good enough credit history to get a loan.
One more lesson I learnt in China: location, location, location. In the time it took for my properties in Wuhan and Nanning (both state capitals) to increase 2 times in value, my Shanghai properties went up nearly 4 times. That's why I prefer cities such as Miami over cities like Detroit, and it's also why I prefer to buy 150K houses, not 50K.
Of course, if you're really worried about getting funding, you could always buy from a regular seller. That way, you can first make sure the bank will give you financing, and if they give stipulations about the condition of the house, the seller will assist you in getting the house up to standard before the sale goes through.
There are so few decent REOs coming out at the moment you may find that buying a regular sale is more practical anyway.
I've no idea when the huge shadow inventory of foreclosed homes will hit, but when it does we all need to make sure we're ready for them.
I wish to clarify a few things.
Once again, all are just my own opinion, and I don't wish to get into any arguments with anyone about which place in the US is the best to invest (besides, I haven't looked at anywhere except Miami).
I shall summarize my main observations:
1. Property prices in Miami are very low compared to similar cities around the world (I'd compare Miami to Sydney, Sanya in China, and Cape Town in South Africa). You won't get much for 50K, but in the 100K to 150K you can find decent housing in good areas.
2. Miami is a stunning city with great weather and beaches. It is teeming with cashed up immigrants and tourists. These are just some of the reasons why prices shot up here by a higher margin than anywhere else in the US during the boom times (according to Case Shiller stats). Due to very lax lending standards, Miami has suffered one of the worst price crashes. Therefore I still feel that this city offers either the best, or one of the best, opportunities for price appreciation.
3. Despite the above, prices probably have room to fall further. Why? Not because they aren't already cheap, but simply because banks aren't giving loans very easily. Stats came out earlier this week showing that 32% of all property purchases in January across the US were made in cash. Since interest rates are so low that everyone would love to have a 30-year fixed interest loan, you can bet all those purchases were REO's that banks refused to give loans on. Considering the state of the economy, most people don't have any cash at all, and have bad credit histories, so there's only a tiny fraction of the population who are in a position to buy homes. Add to this the huge shadow inventory of REO's still to hit the market and you can see why the majority of the people who have the ability to buy houses are still waiting for prices to fall further.
4. However, if you already have a ticket to Miami, or anywhere else in the US, you might as well dip your toes in the water. Make a single purchase so that you can learn the ropes. Despite my experience with HSBC, I still believe it's possible for foreigners to get loans here, even on REO's. However, make sure you buy a home priced above 130K. Of the 3 banks I've spoken to who will loan to foreigners, HSBC was by far the strictest (in terms of wanting to see resumes, bank statements, reference letters etc.) Perhaps I was stupid to have tried HSBC in the first place. They're too big, and the decisions get made in New York. It's better to use local banks whose loan officers know the individual suburbs of Miami and will understand that you've made a decent purchase.
5. I think the bottom of the second leg of the double dip will be in the second half of this year. Prices probably won't rise much next year, but as soon as all the REO's are out of the system (perhaps early 2013) there'll be a sudden surge in prices (about 20%) due to pent-up demand, and because all sales will be by home-owners, not banks. Home owners keep their houses in good condition and refuse to sell too cheap, hence my prediction for a sudden jump in prices. After this surge, prices will rise continuously for several years (to at least double the prices of the lowest time) because there won't be enough inventory (builders have almost stopped building new homes over the past few years) and because of population growth. After about 5 years of price growth, things will slow down as more and more new homes come onto the market. If the banks have truly learnt their lesson this time they'll keep demanding 10% to 30% downpayments, which means prices won't crash next time. However, if they still give out loans with only 3% down, we'll see an exact repeat of this housing bubble pop.
Hi All
I'm not posting very often, so was surprised to see how many responses my last post received.
I thank you all for the time you've taken to read and respond.
Also, I hope my unfolding story is of educational value to all those considering coming to the US in the near future.
As Mojorising pointed out above, the trouble HSBC has given me is no train smash, since I will be paying in cash, and am not in any rush to get financing at present due to the continued negative trend of the housing market (ie. I won't be buying any more homes until my next trip here, from October 2011 to April 2012).
However, that does not detract from the fact that I feel slightly abused, simply because the HSBC mortgage officer I was dealing with misled me. I've since spoken to his supervisor (in New York) who has informed me that they almost never lend on REO purchases, simply because they require that the houses be in perfect living condition before they grant a loan (and obviously most REO's don't fit that bill). If the guy I've been dealing with at HSBC had just told me that in the beginning I wouldn't have wasted a minute of my time, a cent of my money, or an iota of my hope waiting on their loan approval.
And now I wish to explain some of my bigoted comments on the people of the US. I've already made statements such as "rude Yanks", and perhaps even worse, though I don't recall exactly how derogatory I've been.
I've lived in many countries in the past (UK, USA, South Africa, Mozambique, Taiwan, and China) and have come to the conclusion that people in the US are the meanest. (Interestingly enough, that's what my mother warned me of a few months back, because my parents emigrated to Florida in 1987, but hated it and gave up within a decade).
Americans may love to say "How R ya?" and "Have a great day" but it's just talk. The US is a country of iselfish mmigrants (whether you're talking about Europeans who moved here 100 years ago, or South Americans who arrived last year), who are by and large just out to help themselves. This does not mean that you're not going to be treated according to the rule of law, but it does mean that you should be prepared for the following: getting treated rudely by immigration, customs, air hostesses, policemen, sales assistants, and firemen (that list is comprised from personal experience). Also expect underhanded behaviour from landlords, mechanics, real estate agents, and second-hand car salesmen (also personal experience).
Although I have no experience as a landlord yet, I advise that all of us potential landlords expect the very worst from our future tenants (in the building I'm currently renting in, 3 out of 20 apartments are being occupied by people who stopped paying the rent over a month ago and are awaiting eviction).
None of what I've written above in any way changes my long-term goal of buying lots of houses and making a lot of money when property prices eventually rise. All I'm saying is:
1. I won't be growing old in the States (I'd much rather be in Europe, Australia, South Africa or New Zealand)
2. we must all be prepared for headaches during our five or ten year US-property adventures.But I guess proplems are par for the course whenever you're trying to make a buck. Buying property in China certainly wasn't a joyride.
Having written so many warnings and so much negative sentiment above I'd like to end on a high note: the winter weather in Miami is phenomenal. Warm and sunny every single day. Also, the parts of Miami that lie along the intercoastal, or on the islands just offshore, are safe, family-friendly, and offer a great lifestyle. You can't go wrong investing in places like these.
VERY IMPORTANT ADVICE
In my opinion, it is NOT a good time to invest in the US. If I had not already paid a non-refundable deposit on a waterfront REO single-family home, I'd change my ticket and get the hell out of this country and not bother coming back until there are very clear signs that the market is stabilising.
Two reasons for this negative assessment:
Reason 1:
As people following my posts know, I was the highest bidder on a waterfront single-family home in Surfside (a very upmarket neighbourhood on Miami Beach). Last year I bid over $280K, but was out-bid by some guy who offered $350K. However, the winning bidder backed out of his purchase during the inspection period, and so the home came back on the market in early January. At that time I got into direct contact with the listing agent, and offered $305K. A few days later she informed me I should make a better offer if I really wanted the property, so I offered 331K. I then heard nothing back for the next 3 weeks, so I assumed I hadn't bid high enough. Suddenly, out of the blue, I found out the seller (BAC bank) wanted to sell me the house. This was just a few days before I was due to return to Miami, so the timing was great. I arrived, paid the 10K deposit, and began the long waiting process (2 months) until the date the bank has written on the contract as Closing Date (March 23). During this waiting period I went to HSBC and opened a Premier Account, and applied for my mortgage (I had to pay them $485K to do an appraisal of the house). In the end, they only offered me a 70% mortgage of $238K (the amount they say the property is worth), which is $166K. This means they are only willing to loan me 50% of the total price. I told them that whatever they wanted to give me was OK by me. I then waited another week, at which time they gave me a long list of ridiculous (and expensive) further inspections I needed to pay for (a structural engineer's report on the sea wall, plus one for the foundation and house walls, plus a mould and termite inspection). These will come to well over $1,000. This is all fine by me, but the clause that blew me away is the one that states I must have the house completely renovated before they give me the loan. I told them there's no way I can renovate the house at the moment as it still belongs to BAC, and they certainly aren't going to renovate it on my behalf. <moderator: delete language and personal comment> I've spoken to SOOOOOOOOOOOOOOOO many other people here who've been given the exact same run-around by banks that I now have a very negative opinion of the short-term future of US property. If it's almost impossible to get a loan to buy an REO, then who is going to buy all these REOs? The only thing that can happen is that prices crash so low than everybody can affort them without needing loans. Anyway, I'm happy with the one purchase I've made (since I love the house and location) and will be paying cash and having no more dealings with imbecile banks in the US. As soon as I've bought the house and done some repairs I shall be saying goodbye to the land of rude Yanks and not be returning until house prices are so low they start treating foreigners with respect.Reason 2:
Read the Case Shiller statistics that came out today. Everywhere is still going down rapidly (except Washington, but I guess they're awash with crony money). The double dip is definitely here.Today I saw an article in the Miami Herald reporting on Trulia's latest research into the US housing market.
According to the report, Miami is the best big city to invest in.
The reason: the money you'd spend over 6 years of renting a 2 bedroom home could buy that same home.
Here's a quote from the article:
<moderator: delete 8 paragraph long quote. Please use link for that volume of information>
Read more: http://www.miamiherald.com/2011/01/25/2032762/miami-top-big-city-to-buy-home.html##ixzz1DZ047jKS
Hi All
Am a bit irritated that the long comment I just wrote didn't go up when I pressed POST.
Must remember to CTRL C everything next time.
I'm still in the process of buying my Dream Waterfront Home. Have opened my HSBC premier account, and applied for the mortgage. Must pay 30% down, and the interest rate is 5.2% now, much higher than last November's 4.6%.
I'm setting up an LLC using a local legal firm: only $154!
My family and I are loving Miami Beach (the long island that stretches from South Beach to Bal Harbour in the north). There's a wonderful holiday atmosphere here, great partying on the south end (where all the hostels and bars are) and great for young families on the north end. The beaches are great for the entire stretch of the island.
Now that I've got my kids with me, I'm meeting many families, all of whom love Miami, and particularly Miami Beach. None are Americans. They're all immigrants who're very happy to have landed in such a beautiful, safe, clean place. We're all amazed at the fantastic (and FREE) parks and public pools, which are great for kids.
Most people I meet are renting, some have bought. One young Serbian family, who have a son my son's age, bought an apartment last year when they discovered that it would only cost them $800 per month in mortgage payments, compared to the $1,200 a month they were paying in rent (for a 2-bedroom apartment that they've now bought for $95,000).
I haven't been looking at properties myself, since I want to get the Waterfront one finalized first.
I'm gonna post this before I lose it.
Steve
Hi everyone who's kept this thread alive during my absence from the site. I'm now back in Miami, staying in a small rented apartment near Miami Beach. I have my wife and two babies with me, which is quite a handful.
If any of you've followed my posts from the last time I was in Miami, you'll recall I became obsessed with a water front property (facing the intercoastal waterway, but just a few blocks from Miami Beach). It came on the market at the end of October 2010, and it was a hot REO, attracting so many bids that the bank closed the bidding after about a week. Even though I put in a bid 25% higher than the asking price, I didn't get it. Someone must have bid much higher than me.
It turns out that the person who won the bidding pulled out of the purchase during the inspection period (that's a period the banks give you to decide whether to go ahead with the purchase: if you pull out during this phase you get your full deposit back). I don't know why the buyer pulled out (either he couldn't come up with the amount he'd bid, or he just didn't like what he found out about the property during the full inspection). So the property came back on the market earlier this month. This time I bid nearly 50% above the asking price, and it seems like I have won the bidding. I say "seems like" because this bank is notoriously slow: it took them 2 weeks after they closed the bidding to let me know I'd won, and now it's been a week since I signed the final contract (and paid the deposit directly to them) and I still haven't received the signed contract back from them. The estate agent (who is the REO listing agent, as I made sure I tracked her down before putting in my bid) assures me they're always this sloppy, but I'm not getting my hopes up until I've bagged the property.
I know some readers will think I'm crazy to bid 50% above the asking price, and to be offering enough to buy at least 3 nice single family homes in Miami. But if you took a look at the neighbouring waterfront properties, all worth well over $1,000,000 even in this depressed market, you'll see why I want this property very badly.
I'm not sure how things will pan out over the following 3 months that I'm here. By this I mean that I don't know if prices have bottomed, or will fall further, and as a result I don't know if I'll make any more purchases.
The Case Shiller stats that came out last Tuesday (reflecting property prices in the September to November months of last year) show that prices in the US are still falling, and rather quickly at that. However, Miami only dropped 0.2% month on month, much less than most other big cities.
Many of you are probably wondering what my personal experience of the market it here "on the ground". Actually, I haven't been to see a single REO so far, partly because I've been so busy settling in, but also because very few REO's have come out in the last 3 months. If you ask me, the foreclosure moratorium is far from behind us. REO's are still just trickling onto the market, and those that come our are either in bad areas, or overpriced.
There is surely an enormous hidden inventory still sitting on all those banks' books, but I reckon they're not ready to release them yet. They're probably still going through their paperwork to make sure they're not going to be sued for selling houses that were foreclosed by robo-signers.
If you're thinking of coming to the US soon, perhaps delay a little longer until
A. the REOs are being released faster, and
B. the Case Shiller stats show a real bottoming in the marketAnd if you're thinking of going to Detroit or Atlanta, you really need to see the most recent Case Shiller graphs for those cities. They seem to be in free-fall….
James2118 wrote:Interesting opinions there Steve,Although they may sound fairly negative about the future of property in USA, I must say I am pretty excited to hear news like this. I am looking to start investing over in the USA in the next few months, hopefully get a property when I am over there in May/June this year. Nothing too major, maybe just a $40,000 condo or something like that.
My main desire is to have a good cash flow, and would rather not focus on capital gains. Also I am hoping that if we get started now, we can slowly build a solid credit rating over there so that in a years time or so we can start to obtain finance, the first property we are looking at purchasing with cash. So if prices do not rise or in fact fall over the next 12 months or so, then that is fine with me, as long as the properties I have are rented out I will be happy.
And hopefully once the credit rating is established, can start to significantly increase the portfolio right behind the prices start to rise, all sounds nice in theory at least.
Good luck on your return journey over there, I hope you find something you like.
Hi James
If you're there in May/June, you may time the "bottom" perfectly. Using the Case Shiller stats (the most recent came out on 27 December, for the combined months of Aug.,Sep., Oct, it seems that prices started declining in June or July. So if you buy in June this year, then there's already been a 12 month downward trend, perhaps of 10%. As I wrote yesterday, it probably won't shoot up after that (could be a small bounce though) but at least you might be buying at the lowest ever.
I shall be making my purchases in Feb, March and April, which may be a bit early. That's why I'm still planning on treading lightly, and buying only one house if things don't feel cheap enough, or if the number of REO's coming onto the market still seem too few.
cheers
SteveMosqui wrote:Hi Steve I joined the forum last year after reading your post, I'm located in Perth WA and I'm also very interested in USA and now Miami because I have a friend of a friend who lives there, so after a few months looking for some good connection I think I have found what I was looking for. I may be going over there in April/May as well and see what I can get. I have also some cash, so I want to buy one or two houses, create some history and then later on ask for some credit to buy more houses. Capital gains is not that critical for me, I need good cash flow at the moment and with the rents in USA I can get that. First I have to work on the LLC and the bank account, so I'll following your steps and all the other people buying overthere and posting the experience here. In order to use the money you make overseas, can you get a credit card in USA and use it in OZ? Good luck to you and to everyone else !!! MosquiHi Mosqui
On my first day in the US I opened an account with Bank of America, and they gave me a Visa Debit card, which I can use anywhere in the world. I didn't ask for a credit card. I have a hunch that once you own property you can apply for a credit card.
Just a word of warning: you MUST have a US address to open the account. There's no way around this. So either rent an apartment for a few weeks (as I did, using Craig's List), or apply for a PO Box. You can't just give some fake address and pretend you're living there, because they will mail your ATM and Debit Card to the address you gave.
good luck
Steve
