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Hi MJCantrell
Thanks for the advice. It's always good to broaden one's horizon's by listening to advice from people who have first-hand experience.
I hadn't considered Kansas City, probably because I'm not that familiar with the US (although I did live there 20+ years ago when I attended the University of South Florida).
I tried to do some research on Kansas using the Case-Shiller data, but they do not cover it because it isn't one of the US's top 20 real estate markets. If you want to see the 20 they do cover, check out the following interactive map showing the latest Case-Shiller date: http://www.reuters.com/article/interactive/idUSTRE68R2M720100928?view=small&type=smallBusinessNews
So to continue my research I checked Kansas city on trulia.com, and was very surprised at what I found. You can see the charts for yourself:
http://www.trulia.com/real_estate/Kansas_City-Kansas/market-trends/The average house price is $75K, which is fairly cheap (Trulia.com states the average Miami house is $125K). But more interesting is the fact that over the past 10 years Kansas house prices have steadily increased. There was no exceptional rise during the bubble time, and no perceivable dip during the Global F C, just a constant upward trend.
Kansas certainly has something going for it (as MJCantrell mentioned above). Also I recall reading on a different forum that it's easier to get a bank loan in Kansas than in places suffering high foreclosures.
So I'd highly recommend Kansas to anyone wanting a solid investment.
I, however, will stick with Miami, since I believe that prices will eventually reach their old peak, which means Miami prices have room to rise 2.8 times.
To Alex
thanks for your post and encouragement. Please follow this blog to see if I succeed in turning a dream from afar into reality.
To TOAM
I'm not in Australia, but China, which is equally as far from Miami.
My intention is to do all I can from this side before departing(hopefully set up a bank account, deposit funds, find an estate agent in Miami, plus a lawyer to assist with LLC, or I may just apply for one online) and then go over and begin to make offers on Short Sales and REOs (bank owned properties). If it seems viable I may even try to purchase at public auctions, although probably not on this trip. I should add at this point that I intend to move my family to Miami for a period of time, once I've bought a few properties. I've already retired, so whether I live in China or the US is all the same to me.
I haven't decided yet whether I'll buy condos or houses: condos appeal to me because they will require less maintenance, but their high Home Owner Association fees will cut deeply into future rental returns. Single family homes are very attractive because they come with their own private land (an ever-decreasing commodity on this planet), but will require much higher maintenance, not to mention insurance (which is quite high in Miami due to the danger of flooding caused by hurricanes, as well as wind damage).
My main goal of this first trip is to buy at least one property, and to do my utmost to get financing, even if that just means getting a credit card. The reason financing is a crucial part of my long-term strategy is because once prices start increasing I want to have a lender that trusts me. I intend to buy dozens of properties when the tide has turned. The only way to make big money in property investing is to go in big, which means you must be leveraging by getting bank loans.
You probably understand this simple fact, but I'll give an example anyway: if you only pay a $100K deposit on a $500K house, but the house increases by 20% in a year, you've made $100K. In other words, you've doubled your money.
You asked who I will be using to assist me to purchase properties in Miami. I'll be using an estate agent, whom I shall select from responses to posts I've been making on Trulia.com
I have no intention of using any other purchasing service, since I'm an entrepeneur by nature, and always rely on my own wits to get things done.
WHERE IN THE US SHOULD ONE BUY?
I have done hundreds of hours of research (ie. all online), and whittled the possible choices down to Miami, Florida. That's not to say that other places don't offer great upside potential or high rental returns. I have selected Miami because I believe it will offer the highest price increases once things turn around.
I have based my analysis on stats from many sites (trulia.com, zillow.com, city-data.com, realtytrac.com, among others) but the stats I put most of my trust in come from Case-Shiller (if you want to know more about why their info is so highly regarded, and their indexes are traded on Wall Street, do a Wiki search on them).
Their latest stats came out 2 days ago (28 Sept), and have been beautifully compressed into a very simple interactive map which will show you all top 20 cities you should be considering.
Here's the link: http://www.reuters.com/article/interactive/idUSTRE68R2M720100928?view=small&type=smallBusinessNews
If you want to see their graphs in much greater detail you can check out: http://www.blytic.com/DashboardView.aspx?dashboardid=451E0FC5633D4009BE304FA5FCF24920
From the Case-shiller charts one can see the following: Miami rose nearly 3-fold in the past decade, and has crashed by roughly half. Of all the other cities, only Los Angeles went up as high, but didn't crash quite so much, and is currently already on its way up, meaning it is no longer as great a buyer's market as Miami is (which is only trending up very slightly at present).
I also favor Miami because it has such a high number of foreclosures, which the following map illustrates well:
http://www.realtytrac.com/trendcenter/Note that the above map is interactive: click on a state and you'll see the counties' foreclosure map.
And finally my Miami prefernce comes from demographics: the population is expanding very quickly, and will no doubt continue to do so. Why live in depressed and depressing Chicago when you could be in tropical Florida?
Unlike Miami and LA, Los Vegas is still on its way down (which may be a good thing for investors wanting to buy a little later). I prefer Miami to LV simply because its near the sea, and is a much bigger and more famous city with greater inner demand for housing. However, LV probably also has huge upside potential, considering that it's fallen even more than Miami has.
The Phoenix graphs are almost identical to LV's, so my opinions are the same for those two cities.
As to Atlanta: it never went up during the boomtimes like the south eastern and south western coastal cities, which makes me wonder just how much room there is for price rises in the next recovery.
Detroit is a fascinating market, and is the wild card in the pack. It hardly profited in the boom, yet crashed more than most in the bust (due to the car industry getting hit for a six in the Global Financial Crisis). Detroit has houses (beautiful well-constructed ones from the 1920's) selling for a fraction of replacement cost. I have seriously considered Detroit, and done much research on a zip code by zip code basis.
But despite Detroit's unbelievable prices, the demographics are a concern. The population of Detroit City is in decline, and unless the local government can attract new industries, the trend will continue. And don't forget the role that weather has been playing in the flight away from America's north.
Another worry is the danger of neighbourhoods permanently declining, resulting in little chance of price increases. Having said that, though, the Case Shiller graphs are already showing a bounce off the bottom for Detroit, so it's anyone's guess what's going to happen there.
Apart from the fear of a general decrepitude setting in to all of Detroit City's suburbs due to unemployment and emigration, I was also very put off by the way they tax property there. They're taxing (annually) at 3% of the assessed property price. Granted, they usually only assess the price at half of its "true value", but here's the catch: the assessors are claiming the "true value" to be the 2005/2006 prices, which are often many times higher than the current price.
I'll give you an example: if a house is listed for $20K, the country assessor will look at it's highest value ever (eg. the 2006 price of 200K) then issue an assessed price of half of that (100K), and you will be taxed 3% of the 100K each year, namely $3,000 a year. If you're intending to rent out the house for only $800 that's quite a big chunk gone. That's not my main concern though, since similarly high property taxes are being charged everywhere in the States (due to local governments being bankrupt and trying to make up the difference from property owners). What worries me is that more and more owners who find themselves unemployed will dump their properties because they can't afford to pay the monthly tax. I worry about this situation in Detroit more than in other cities simply because Detroit has such consistently high unemployment. And if more and more people dump their properties, it'll be hard for prices to recover.
The above are all my own opinions, and I would like to hear other people's. Let me repeat, wherever you choose to buy in the US at present is probably a good bet. Nobody knows which place is better than others. We'll only know in 2020. Where you choose to buy will ultimately come down to your own gut feeling.
Sorry about the break in transmission there. My son has been put on the kindergarten bus and I can pick up where I left off.
WHY THE US?
To many readers, some of whom are already living in the States and doing daily property transactions, the answer to this question is obvious. But I'll just quickly cover this topic for those who haven't given it too much thought yet.
Since the Chinese real estate market is so high I don't want to invest my monthly disposable income here any longer. I've posted my views on the Chinese property market in another forum: https://www.propertyinvesting.com/forums/property-investing/overseas-deals/4331252
So for the past 6 months I've been looking at potential overseas markets, namely South Africa (but the rand is too strong, and property has not come down at all after its 450% increase this decade), Philippines (lawlessness), Thailand (political uncertainty), Colombia (language problem), Cambodia (too many unknowns).
All this time my wife has been asking me why I don't consider the US. My primary reason has been that the prices still seemed to be going down. They had a little upward momentum between March and June, but that was largely due to Obama's tax credit stimulus package. But I'm now beginning to think we're getting nearer to the bottom. Perhaps a better way to state it is: we're getting closer to the time prices start to increase (my estimate is about 2 years from now, and they will rise at an ever and ever faster pace for the subsequent 5 years). And when that magical moment happens, you need to be sure that you:
1. have already gained an understanding of how to operate in that market, plus the ability to do so (eg. have a US bank account, an LLC, an accountant, a trusted estate agent, and a broker to organise financing for future deals).
2. have a foot in the door, meaning you own at least one property there (so that you can sell it, lock in your profit and buy more)
But why the US and not a fast-growing Southeast Asian country? While many of these countries may do extremely well over the next decade, they just don't have the proven track record the US has. Admittedly, the US really has cocked things up this time, trying not to pay the price of the Nasdaq bubble by inflating a property bubble. But my take on the world situation is that the "property bubbles" seen in the past decade over much of the world (specifically English-speaking countries, plus any countries near to or doing business with China) are not "bubbles" per say. If a country's lenders monitor their property markets and take adequate and timely steps to reign in lending when "froth" appears, then property prices will be driven sustainably higher by real demand, not just by people hoping to make a quick buck.
And this is the crucial difference between the US and other countries who saw their property prices rocket this decade. Back in 2004, if US lenders had tightened their requirements, or increased the downpayments (eg. to 30%, like they demand here in China) US prices would have levelled off for a year or two, and then gradually crept up (sustainably) to prices higher than they are even now (like in Australia, South Africa and China).
But that's not what Bush and Greenspan had in mind. They wanted every Tom, Dick and Harry to own a house, even though about 20% of all human adults should probably not be property owners in a laissez faire economy. It's probably just built into the human condition that a percentage of people, even in this modern world, have a hunter-gatherer day-to-day philosophy, which makes it difficult for them to hold on to property for the long term. These people tend to be renters (in countries like the US) or live in government housing (for example in European countries).
But back in 2004 in the US, these people were actively sought out by commission-hungry mortgage brokers and estate agents, offered $500K properties with no downpayments required and no interest payments for the first two years. Where did the agents get all this Easy Money to throw at such risky investments? The money came from Wall Street, who in turn got it from innocent Mom and Pop investors, and in some cases even overseas governments (hence the bankruptcy of Iceland).
Conclusion: the US has dug itself into the biggest balls-up since the Great Depression. But it will come roaring back. And while it will make lots more mistakes in the future, it will have learnt it's real estate lessons from this current disaster. So when the US finds its feet again, and figures out how to make big bucks in some other area of the coming China-dominated global economy, property prices in the US will sustainably reach previous highs.
We need to ride that wave all the way up!
Hi all
I live in China, and made 80% of my money on the Chinese real estate market (and retired young as a result).
Anyone can buy property in China, although there are 2 laws governing foreigners:
1. you can only buy 1 property in total
2. you can only buy if you're in the country on a working visa, and have been in the country for at least one year on that visaThe first of these laws is not enforced (ie. it's possible to buy 1 apartment in each of China's largest cities), but the second is strictly enforced.
So unless you've been in the country for more than a year on a Z-visa, forget about China.
If you have though, then you may want to forget about China as well, simply because prices are so high. They've gone up 5 times in Shanghai since I arrived in 2003: my apartment building where I first bought cost RMB8,000 a square metre in 2003, and now it's RMB40,000 (don't believe the government stats, because they want to dampen down the numbers).
If I HAD to invest more in China, I'd consider either the south (small cities like Beihai, Wanning or Qionghai), or the west (Lijiang, Xiaguan, Shangrila).
I'm not sure what the future of the Chinese market has in store. One thing's for sure though: it isn't going to drop. In 20 years time Chinese real estate will be worth more than every other piece of real estate on the planet added together. Why do I say this? Because there are some very powerful forces pushing up real estate, and I'm not just talking about the Communist Party, which owns all land and therefore has it in its interests to have high prices. It's also cultural (men can't get married if they don't have a city house and a luxury car), and political (everyone only has one kid, so all those kiddies are going to inherit a lot and be very wealthy investors one day.
Despite being so optimistic about the future of China though, I still like the idea of buying low and selling high, which is why I'm now looking seriously at the US of A.
If I were to buy in Detroit I'd wait until mid-winter (if you can stand the cold) or early spring. Property markets in the US (like they are here in China) are seasonal: they go cold in the winter (except for the southern sunbelt).
The Case-Shiller graphs of the Detroit market are enough to make bargain-hunters drool: prices hardly went up in the boom times yet crashed enormously during the GFC.The only reason I'm not jumping on the plane to Detroit is because I don't know if prices are going to turn around soon, and I'm put off by the hassle of owning rental properties for the long-term on another continent.
I liked the title of this topic, so I figure I may as well add my two cents worth of input.
I know nothing about World Changer, but what he wrote in the opening post is spot on. I only hope that he isn't anything like many of the subsequent posters, who are clearly trying to drum up support for their own business concerns.
It is rather ironic that in a thread intended to warn people against their desire to believe all they hear (namely that it's possible to make 20% annual rental returns), a number of agents trying to sell you just such a "product" would post self-promoting propoganda.
Here's my take on the US market at present:
1. It's a once in a lifetime opportunity. It's the biggest property balls-up since the Great Depression. In the last decade property has rocketed in every country I can think of (except a few in Africa, although even there there are some amazing success stories). Yet in the same time-frame, the US managed to lead the world up then fizzle all the way back down, luckily without sucking the rest of the world into the abyss. Mark my words, we will NEVER again see US$50,000 houses in well-known US cities in our lifetimes!
2. Everyone using this website is way too obsessed about making a decent rental return. In my property investing experience, the real money is made when the price doubles (or preferably triples). People who should be worrying about rental returns are aged 50 and above, and are looking for a way to finance their retirement. If you're young and have the balls, go for the property appreciation rather than the rental return. Heck, if you're young you'll soon get bored with renting the place out, and as soon as you see the price inflate you'll want to flip it so as to cash out your profits and BUY MORE.
3. I have no wish to pick any fights with any person using this site who has had what it takes to go to the States and set up "people on the ground" as you Aussies all like to state. They are courageous, and they deserve respect and profits. However, here's my only advice to them:
Believe in your service. Become more professional. Dont' hide anything. State everything clearly, including whatever problems you've encountered, and how much you're making. You're assisting all those people stuck in their jobs back home who'd never be able to buy a property without you. So be proud, be open, and be honest. And don't waste your time in pointless bickering or negative posts on the internet. I reckon there is at best 2 years left of buying Short Sales and REO's. TIme is of the essence.
4. In conclusion: just buy something in the US without procrastinating so much that you never get round to doing it. If you can go over yourself and buy yourself, do so. And don't worry so much about the rental returns. If you do end up getting more than 10%, that's great. If you are barely able to pay your monthly property taxes and HOA fees (if it's a condo) even after renting it out, so be it. Because nobody knows which horse will win the race at this point: the property in Detroit with good rental returns but questionable future, or the one in New York which already costs an arm and a leg, doesn't earn you much rent, yet may well double due to its location. But if you can't go over yourself, then enlist the help of one of those recently-opened "teams on the ground", so long as you feel that they're exhibiting sufficient integrity.
Over and out
Steve from ChinaHi Bek and Dean and anyone else out there with similar interests
Yep, I'm about ready. I've been reading nonstop for about a month now, and my head is spinning from all the data, and the constant self-questioning: should I or shouldn't I? If I should, then now or later? If now, then where?
I originally got the idea from my wife (she's Chinese). She mentioned to me about a year ago that we should invest in the US market. I took one look at the falling prices and said "No way". However, about 2 months ago I started to reconsider, especially when remembering that my wife, back in 2000 on a holiday to South Africa, recommended we buy a beachfront property selling for just US$50,000. I stupidly talked her out of it ("SA property prices have been stagnant for 20 years, and everyone's emigrating to Aus"). That same beachfront property is now selling for US$500,000!!!!!
OK, back to the topic. Buy where? I spent about 2 weeks researching Detroit, to the point where I'd pinpointed some good possible areas (I particularly liked the University District, a few zip codes straight north of downtown). But for some reason, as I mulled over the idea, it just didn't sit well with me.
For a number of reasons I've now changed my focus to Miami. The properties are obviously much more expensive there, but my bet is that prices will rise faster there when things pick up (and my wife agrees: due to the famous name, and the effects of tourism and immigration by "snowbirds").
I am a part-time property investor in China. I have a lot of condos in my portfolio here (all rented out), but sadly only 4 are in Shanghai. I bought the rest in smaller cities, because the rental returns were much higher. But guess what happened, Shanghai prices have rocketed much much faster than the smaller cities, so the amount of profit made on the Shanghai properties dwarfs the rental differential I would have gained in a smaller city.
This is my (totally personal and possibly wrong) prediction for Miami: you may suffer lower monthly rental incomes than in Detroit, Atlanta, Phoenix, Texas, but when prices turn around Miami will double far quicker than the others, if they do at all.
My current estimated departure date is November 1.
I'm interested to hear back from all people with similar or contrarian views to my own, and/or travel plans.
Steve
