All Topics / Overseas Deals / Why Invest in the US of A

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  • Profile photo of Mal111Mal111
    Member
    @mal111
    Join Date: 2007
    Post Count: 17

    I have been looking at the returns in the US in particular in Dallas TX, have also just returned from a trip there. It just doesn't make sense. The yields are high, really high, but this makes me ask the question is it too good to be true. I have seen numerous places that are yielding greater than 20% in Dallas.

    Why aren't Americans buying their own houses?? I know the market is crashing but it is more expensive to rent the house than buy it, why don't they buy it?
    If it is that good (or am I missing something), why aren't loads of Aussies buying as much as they can get their hands on?

    What is the deal???

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    One issue if they cant get finance these days.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of flashflash
    Member
    @flash
    Join Date: 2003
    Post Count: 140

    hi Mal,
    From what i'm trying to forget i'll mention a few.

    1. Property management in the states has little to be desired.
    most charge 10% plus fee for repairs.

    2.finance as Richard mentioned is harder to get now then ever before.
    2 years ago  you could go to 70 to 80% LVR at resonable int rates but now imagine would be much lower.

    3.exchange rates if you are paying a mortgage in between leases.
    This can gobble up any so called pos cashflow if you are paying in AUS dollars.

    4.Property taxes/rates  are high in Texas around the 3% mark from what  I recall

    5.Different tax laws from Australia

    6.Communicating by email/phone in the middle of the night trying to sort out problems

    7.Selling costs in Texas , realestate agents are 6% plus plenty of title charges from title company.

    There are many more but these are just my experieces.
    do a search on the forum and you will find more comments.
    Cheers

    Profile photo of flashflash
    Member
    @flash
    Join Date: 2003
    Post Count: 140

    I forgot to mention the shifting soil in Texas.
    Had to have 7 drilled piers at front of the house only 12 months  after buying due to shifting soil/temperature fluctuations.etc.
    these cost me $4000 which again can screw with your plans of extra cashflow left over.

    ………and no there is no insurance for foundation repair and Yes had a building inspection prior to settlement of property
    Also with home owners insurance check that you are covered for items like water damage as this not
    a standard item but an optional extra unlike Australian property which is standard.

    sorry to be so negative but again these are just my experiences.
    Cheers

    Profile photo of Luke TaylorLuke Taylor
    Participant
    @world-changer
    Join Date: 2005
    Post Count: 415

    Hey Guys,

    Mal the Usa is great but i reckon you need to be on the ground to manage it well and keep yr hands on it.
    If you are wondering why the returns are at 20% on paper ,some are ,but do a little calculation as an example,
    on say,(put in yr own prices)
    property cost-
    (incl settlement etc)
    mortgage cost
    3% gross taxes annually
    insurance ,
    then

    yr tenant leaves ,leaves house untidy ,
    property manager steps in charges $800 plus (to clean and do minor repairs)
    Then it takes say about 8 weeks to get new tenant in.
    then you owe yr property manager about $500 to $800 for finding the tenant,
    .Then yr tennant doesnt resign lease after 12 months and
    you have to start over.
    Just this cost alone is enough to take yr investment well into negative territory.
    Then add costs to a usa accountant etc etc etc,
    without being negative im just showing you how it can be ,setting aside the hype and emotion and excitement  that comes when we see mention of 20% returns on paper.

    The property management is different to aus too and its tough when you cant just duck over to sort out issues yr self and you have to stay up half the night to talk in their time zone.

    Luke Taylor | Hope Property Investing
    http://hopepropertyinvesting.com
    Email Me

    Property Support,Strategist and Buyers Agent

    Profile photo of Mal111Mal111
    Member
    @mal111
    Join Date: 2007
    Post Count: 17

    This is very interesting, a lot of people are saying that the property managers and tenants over there are a bit of a nightmare. Is everyone going for cheaps houses hence low socio economy groups living in the house therefore more risk of rent default??

    The area in Dallas I am looking into is probably the top 5 suburbs and in one of the high end suburbs close to the Airport and halfway between Fort Worth and Dallas. The purchase price is around $300k.

    Is there landlord insurance in the US and if so what does it cover??

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Mal

    Forgetting the management issue for a second how are you going to finance a 300K property.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Just an update on the finance thread for the US i have had FN loan just approved by one of my new US lenders to a level of 65% on a nodoc basis which is interesting given the State of the finance market over there.

    This property is yielding around 22% and is professionally managed so a 65% LVR is very very nicely cash flow positive.

    Needless to say a very happy client as the rate of interest is 4.45% variable

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of rdtexasrdtexas
    Member
    @rdtexas
    Join Date: 2008
    Post Count: 1

    My wife and I are investors who moved from Perth 2 years ago to Houston. The move was based on Housing affordability (average household income divided by the average house price) in Perth it was too high and Houston was so low.

    In Houston we invest in the cheap houses in the high income areas. Kingwood and The Woodlands are suburbs were the average income is around 100k average house prices 180k. I think they are the best suburbs in the world for investing and living. We are focusing on unrestricted properties (can be subdivided, commercial, industrial, apartments, housing, business, etc, etc) but anything makes money here. Residential demand is high, capital gains is low to high, positive gearing exists

    The last rental property we purchased was for 66k, we rent it out for 800 a month, very low for the area. It is on two lots so we can add another house (40k and 8 weeks later) we can double the rent. We have had OK tenants, but here you can get a home warrenty (about $300 per year), so when anything goes wrong the tenant calls up and we have to pay $60 excess, they have had to fix the A/C, heating and plumbing so far this year, all for $180+300.

    Profile photo of cool samcool sam
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    @cool-sam
    Join Date: 2008
    Post Count: 23

    Despite misgivings by some investors due to increased interest rates and stagnant or dropping property prices, the real estate market is in fact buoyant in certain key tourist locations of the USA. Today investors benefit from an easy buying process, meanwhile enjoying the outstanding variety and quality that their American lifestyle excels in.;

    ____________________________________________

    Cobo Condos

    Chicago Condos

    Profile photo of Great Aussie DreamGreat Aussie Dream
    Member
    @great-aussie-dream
    Join Date: 2008
    Post Count: 2

    Hi,

    My husband & I just got back from Phoenix Arizona last week where we instructed at an Investing Seminar for John Burley. In the past year property prices in Phoenix have dropped 38% and we inspected a property that sold in 2005 for $320,000 and it is now bank owned and on the market for $150,000. It will probably sell at around $110,000.

    Why the drop? The prices were over inflated in the first place and some parts of America (particularly Phoenix, Florida & Vegas) have an oversupply of housing unlike Australia. Credit policy was previously based on the ability to "fog a mirror" and lenders were lending 125% self ceritify loans (No/Low Docs).

    In Phoenix it is predicted that it will take 4 years to fill the vacant houses (primarily built on the outskirts of the City). House prices are dropping $1000 per week and in Phoneix the banks currently own 58,000 homes. While we were there the newspaper reported that in Phoenix another 50,000 homes commenced forcelosure proceedings in September! The more properties banks own (which are held vacant) the greater rental demand will become.

    People are walking away from their houses due to ARMs loans (adjustable rate Mortgages) which saw people in "Honey moon" rate loans which have now reset and renting a home down the road is a cheaper option. Unlike Australia, loans in the States were non recourse so people aren't liabile for the difference owed if their is a shortfall should they walk away (after posting the keys to the bank). Their credit is impaired but they don't care.

    There are real bargains starting from US$5,000 in some states and you can now pick up properties in Phoneix starting from US$25,000. But like any investing whether here or OS you need to do you research, build your team (property managers, realtors, accountants) and be aware of the risks – plus have your exit strategies on the properties and how to get the money back into Australia.

    We intend to go back next year as we have US bank accounts and after discussions with Bank Of America we will hopefully be able to get 80% lends from April despite being a foreign alien.

    Regards
    Leonie

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Leonie

    That suprises me as BoA didnt offer FN lending even in the good old days.

    There are certainly still one or two US lenders left that will lend to FN's but you are back to the 65/70% LVR.

    My Auntie is credit manager of a B of A branch in CA so will ask here in a fortnight when i am there but would be suprised.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of sweetssweets
    Member
    @sweets
    Join Date: 2008
    Post Count: 9

    Just went to a Citibank/Keller Williams seminar. Informal yet informative. Subject matter was REO's and Short Sales.Contrary to what is being cited in the press banks are lending, well the more conservative ones that is. Citibank will lend to FN's with a min of 25% down. Contact Miriam Hendrick – [email protected] and contact Marlene Silva to get inventory lists of (apparently) 100's of REO properties in the South Bay (LA) area – [email protected] (Keller Williams Reaalty).
    Happy investing!

    Profile photo of trev1957trev1957
    Member
    @trev1957
    Join Date: 2008
    Post Count: 5

    Hi to all,

    It seems to me that everyone is/has fogotten the 3 Principles of real estate investing

     1.    Research,research.research

     2.   Location,location,location

     3.  Affordability,affordability,affordability

    And as I've said (trev1957)before the American real estate investing market is HOT

    Have we all forgotten Basic economics 101 of supply and demand

    At the moment USA or parts of, are over supplied………therefore demand is down…..if demand down…….. PRICES FALL

    Another real estate Principle is this where ever possible BUY LOW SELL HIGH ……or if supply is low and demand is high

    prices rise ……….Good time to sell .

    Another Rule Of thumb and its the same in USA property will always rebound

    Based on Historical data houses will Double every 7-10 years

    Real estate should always be seen as a Medium to long term investment And in My opinion you cant loose

    There are some methods of making a quick 10k-50k in amatter of days or weeks

    Check these sites out http://www.Moneyforyouandme.com/RealEstate

      http://www.leadsleap.com/go/15411

      http://trev1957.noriskrealestate.hop.clickbank.net

      http://trev1957.4closures.hop.clickbank.net

    Could give you more sites  with information you all seem to need but dont want to over do it

    Maybe someothers next time. See what resaerch can find out for you.

    You see this is why Research,research,research in my book comes before Location,location,location

    Because your research will lead you to the right Location

    Any how cop u later  Trev

    PS just one more thing which is realy IMPORTANT

    YOUR (USA) and mine(AUS) need investors,entreprenuers,people of vision to KICK START our economies again

    Remember a lot of people come out of the Great Depression very rich………How, they Knew it wasnt going to last for ever

    Invested when every one else around them were cryingg doom and gloom………sound like today!!!

    Profile photo of jcso99jcso99
    Participant
    @jcso99
    Join Date: 2005
    Post Count: 95

    Dear all,

    I am just curious to find out more re US residential real estate sector. From this thread, it appears that people are optimistic about Houston, Los Angeles but downbeat on Phoenix. Can somebody explain the optimism on Houston and LA when the entire US economy is in recession with national unemployment rate rising?

    Cheers
    John

    Profile photo of MartywmwMartywmw
    Member
    @martywmw
    Join Date: 2009
    Post Count: 3

    Texas is a great place to invest.  The state is still in positive growth and not in recession with good employment growth.  I have invested in 3 residetial and 2 commercial properties in Houston with great results, thanks more or less to Westan Johnson I must admit.  His expertise in this area is second to none.  I refer my clients to him all the time.  The best way to make money is to focus on areas that are in transition from old industrial slum  inner city areas to newer yuppie areas close in the city of Houston.  There you are going to get extra growth as these areas play catch up with the better areas surrounding them.

    Cheers

    Martin

    Profile photo of jcso99jcso99
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    @jcso99
    Join Date: 2005
    Post Count: 95

    Hi Martin,

    For residential apartment in an area that will attract quality tenant, does it yield close to 10% net (after all expenses) and what is the borrowing rate based on LVR of 70%? Thanks in advance for your help.

    Cheers
    John

    Profile photo of cool samcool sam
    Participant
    @cool-sam
    Join Date: 2008
    Post Count: 23

    Is it good time to invest in Asia? Where are you recently residing, John? Tell me something about real estate funds management.

    Any advice will be welcomed……..

    Internet Marketing Company l Online Marketing l SEO San Diego

    Search Engine Optimization SEO India | Web Design India

    Profile photo of jcso99jcso99
    Participant
    @jcso99
    Join Date: 2005
    Post Count: 95

    I am currently based in Hong Kong and the real estate funds that I am working for target institutional investors (minimum investment size is USD 10m). However for my personal RE investment, I am looking at KL (more of capital growth play with some marginal +ve cashflow) but more looking at US (Houston) for cashflow (net yield around 12%) with no or marginal capital growth. It will be a mix of capital growth and +ve cashflow.

    Where are you targeting for your portfolio in Asia and Rest of the World?

    Cheers
    John

    Profile photo of MartywmwMartywmw
    Member
    @martywmw
    Join Date: 2009
    Post Count: 3
    jcso99 wrote:
    Hi Martin,

    For residential apartment in an area that will attract quality tenant, does it yield close to 10% net (after all expenses) and what is the borrowing rate based on LVR of 70%? Thanks in advance for your help.

    Cheers
    John

    Yields can be low, about 9%  but if you furnish the property you can increase it to 12% or about USD $6000 in your pocket per annum.  I always do my numbers on 70% but sometimes we get 75% LVR.  Interest rates obtainable at settlement vary greatly from month to month. 6.8 up to 7.5%

    Cheers Martin
    [email protected]

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