Forums / Property Investing / Overseas Deals / US Property – good idea if America goes broke?

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  • Profile photo of Adam2011Adam2011
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    @adam2011
    Join Date: 2011
    Post Count: 14

    Hey all,

    I have been considering US property investment but just can't be convinced it's a good idea long term.

    Mainly because as most will know the US is broke.  And with all the money printing going on over there, this could potentially lead to a currency crisis.

    What are everyone's thoughts on this?  When/if America goes broke, how will you make any money/wealth from properties over there if the US currency continues to be devalued?

    I'm really interested to hear what people think on this and hopefully the discussion will help to dampen my and others concerns.

    Cheers Adam

    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    I spend a lot of time in the United States and I do not think the country is still falling. In fact just yesterday I was offered finance for either 80 or 90% for commercial properties one million plus. There are better and better finance options being offered. In fact if you look at the economy the biggest problem is that finance has not been available.

    If finance had been widely available the US economy would be doing well. Small business would be able to employ more people and half the problem would be solved. Experience should tell us never write off the United States. 

    Nigel Kibel | Property Know How
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    Profile photo of KimberlyKimberly
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    @kimberly
    Join Date: 2010
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    I'm not one of the technical persons on here, but in the process of buying in USA at present.

    I agree with Nigel that the market is not falling.

    In fact it is getting so hard to buy because the market is moving upwards so fast.

    We've had to settle for lower returns compared to what we were aiming for in 2011 because it has changed that much. =(

    I have been looking since May 2012 and to be honest, thought I'd never get into the market at all!

    I took a visit there in May 2012 and it's such a different place to A'lia.

    Their type of recession is so different to our type of recession. There's just so many ppl there. So much business activity.  A sense of entrepreneurship. A "no give up" philosophy to life.  Strong sense of community and strive.

    I don't really know how else to describe it. I think you just have to head to USA yourself to get a real sense of what things are really like.

    Sometimes it's just your gut feeling.

    But like I said, I'm not technical on this, would be good to hear from others too.

    Profile photo of biggaz13biggaz13
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    @biggaz13
    Join Date: 2011
    Post Count: 62

    Sounds like a half glass empty approach to me.

    USA – going broke

    Greece – broke/harsh austerity measures/defaulting

    Spain – 25% unemployment

    UK- double dip recession on the way

    France – massive debt problems

    China – hard landing

    Germany – weak

    Euro – collapsing

    Australia – "Massive property bubble" Harry Dent

    Ireland – in strife and part of the P.I.G.S alliance

    Portugal and Italy – see above

    Fiji…………..Can't go wrong there can you??? Unless Emperor Bainimarama decides he doesn't like foreign ownership and takes away all foreign owned property.

    etc etc

    What's your risk profile???

    You can buy a mediocre investment property in mediocre Adelaide in a mediocre suburb for $400,000 with $15,000 stamp duty. Or you can buy a mediocre house in a mediocre US city in a mediocre neighborhood for $50,000 with a couple thousand in buying costs. 

    The indicators I am getting is that the US economy is improving.

    – Fracking  will have the US energy issues self reliant in about 10 years. No more reliance on the Middle East.

    – Unemployment is coming down.

    – More importantly, jobs are being created.

    – Some companies who went offshore are now coming back. "We were losing control and a big increase in corporate espionage"

    – China will do everything in its power to keep the US afloat!!!! Because they are massive consumers of Chinese products.

    – Foreclosures are decreasing

    – Historically the US has been a very resilient and innovative country.

    – Silicon Valley continues to lead the world in electronics

    – Home to many of the best Universities/Colleges in the world.

    This is all off the top of my head.

    Again what's your risk profile???

    Tip to anyone. If your conservative. Pay off your Visa card. Pay off your house. And pump excess cash into Super. Your unlikely to  go wrong.

    Unless GFC 2 comes along. In which case: Buy gold.

    Profile photo of xdrewxdrew
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    @xdrew
    Join Date: 2010
    Post Count: 479

    Isnt there only one problem everyone seems to have forgotten in the USA goes broke saga?

    The US has been the most consistant provider of ongoing capital in the world for the past sixty years. Reliable .. ongoing capital. And that just doesnt disappear overnight.

    The US has been the financing source for a great deal of the world's activities. And however you like to think about it .. the debt structure its facing is not the burden people make it out to be.

    What happens when a competant and strong country goes broke to its debtors? It either restructures its debts or invalidates them depending on ongoing terms. Cant happen you say? Ask Argentina how that works in recent times. Nestor Kirchner waved a hammer and the World Bank settled for what it got.

    A rethinking of the rules and conditions of states probably needs to be enforced. The working environment in the United States is being made too difficult .. and thats just legalese. That sort of stuff can be straightened out by the wave of a pen.

    Do you think in the longer term America will be broke? Hardly. The more likely scenario is it will invalidate the debt holding with the creditor concerned .. or change the relationship of the debt payment structure.

    Until it totally rules itself out as a superpower by devaluing its own weath creation structures .. the US will continue to be a major influence .. both in consumption of consumer goods, creation of consumer goods and export of intellectual and scientific solutions.

    The wealth of its property market is still quite valid and based on solid foundations. But again .. referring to what i've written above .. the 'fairness' concept needs to be ironed out of its property market. Rents should be indexed and market driven not rated by government agencies. Rental Controls have bankrupted many a landlord and will do so again if not kept under appropriate measures.

    America still has the best possible structure in place for ongoing property wealth. It just has to change its legal structures relating to property to make that effort worthwhile to renter, investor and builder.

    Profile photo of AlasdairAlasdair
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    @alasdair
    Join Date: 2005
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    To quote Warren Buffett: America's Best Days Lie Ahead

    Profile photo of Alistair PerryAlistair Perry
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    @aperry
    Join Date: 2004
    Post Count: 891
    Adam2011 wrote:
    Hey all,

    I have been considering US property investment but just can't be convinced it's a good idea long term.

    Mainly because as most will know the US is broke.  And with all the money printing going on over there, this could potentially lead to a currency crisis.

    What are everyone's thoughts on this?  When/if America goes broke, how will you make any money/wealth from properties over there if the US currency continues to be devalued?

    I'm really interested to hear what people think on this and hopefully the discussion will help to dampen my and others concerns.

    Cheers Adam

    Hi Adam,

    It's not possible for a country which has its own currency to go broke, particularly when its debt is denominated in its own currency as there is always the option of simply issuing more currency. The danger is inflation, i..e. its own citizens and the rest of the world losing confidence in its currency. You are already seeing this in the comparative rise of the A$. In an inflationary environment you want to either be holding assets, be a borrower or both.

    I remain neutral on whether people investing in US real estate at the moment will make money, but I would tend to think that those buying quality assets and leveraging into the market will do OK. The biggest issue is the risk on the initial capital sent over there being whittled away by further falls in the value of the $US.. 

    Profile photo of Antonio SantoloAntonio Santolo
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    @antonio-santolo
    Join Date: 2013
    Post Count: 24

    I have written an article on this, in my opinion the jobless figures are critical, keep in mind there will be a large lag between the economy showing growth and the property market improving.

    There is way way too much stock, held as bad assets, it will take a couple of years once the US economy turns upwards before that stock in back in the system.

    Anything US has to be long term  hold in my opinion,

    Profile photo of Antonio SantoloAntonio Santolo
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    Even if for some unforseen reason the currency did go broke. land will always be there and there will always be a demand for shelter.

    This is one occasion where I really really push, get good advice first, and make sure it is in no way linked to the transaction.

    <moderator: delete advertising>

    Profile photo of Nigel KibelNigel Kibel
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    I believe that as the US comes out of the GFC it will create great opportunities. However it is still important as to what you buy. A $40,000 property in a slum will remain a $40,000 in a slum. Many Australians will have lost millions in the US real Estate market the problem is that most of them just don't know it yet.

    Personally I am looking at multi family and some blue chip commercial and possibly some development opportunities. However it is a matter of doing your due diligence carefully, if it seems to good to be true then in probably is.

    In terms of the debt as the economy recover there position will become stronger. I am sure that the Americans are responsible for pushing their currency down, because it make imports more expensive and its better for their exports. I think anyone who writes America off is making a big mistake. Rupert Murdoch in a recent email said that he would to a large degree be pulling out of Europe and reducing his operations to focus more in the United States where he felt that growth would be much strong.

    Maybe a little wounded but still the land of opportunity

    Nigel Kibel | Property Know How
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    Profile photo of tlm1987tlm1987
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    @tlm1987
    Join Date: 2013
    Post Count: 31

    Just a wondering from my end.

    In Australia we hear so much said about investors from China and Japan coming in and buying up Australia. When you think Australians are quite happy to pop abroad and do the same thing, it kind of puts it in perspective with the various standards being applied.

    BigGaz, i very much enjoyed your post on risk. +1

    Profile photo of Antonio SantoloAntonio Santolo
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    Join Date: 2013
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    It is defiantly becoming a global economy with the advent of technology making it so easy to transact, your are correct though it does place it in a different perspective.

    Maybe as Australian's , we should be taking advantage of the cheap opportunities outside our borders as the Chinese etc are

    Will raise interesting debate about sovereignty I imagine.

    Profile photo of Antonio SantoloAntonio Santolo
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    Exactly why you need to have someone make sure you do not invest in these areas, pretty easy problem to overcome

    Profile photo of Antonio SantoloAntonio Santolo
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    @antonio-santolo
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    I would be especially careful of apartments based outside business districts, potential slum cities

    Profile photo of Antonio SantoloAntonio Santolo
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    @antonio-santolo
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    The thing to remember here it is not as hard as some will make you think, by keeping it complicated they are able to charge fees and services and direct people where they want them to guy, not looking after their clients best interest.

    Investing in US property is easy and not a hard or high risk  thing to do as long as you get the right independent advice from a person not related to the transaction.

    A reputable Property Coach or mentor who has reliable professional contacts in the area will be able to look after those risk factors like buying in slums etc. If you think about it, it is really no different than investing in Australia, just follow a proven investment strategy, keep to the rules and it will be fine.

    There is a lot of hype and hysteria about buying in the US whether it is founded or not time will tell, if you go back to commentary just after the GFC there was the same type of hysteria here, saying our property market is a bubble expecting to drop by at least 25% etc.

    5 Years later, whilst things are no where near perfect, we survived it pretty well to date.

    My personal opinion is if your looking to invest to take advantage of the potential high growth involved in a rebound forget it, there are enough opportunities here to do that with a much more stable economy behind you.

    For a long term hold investment it is defiantly the time to do it, this could be a once in a life time to purchase at these types of properties at such low prices, seriously how much lower than $40k can  a 15 square home on 600m2 go

     Even if it drops by another 50% your unrealised loss is only $20k, over a 10 -15 year period this small amount will be made up at least 10 fold

    Whilst there are hints that the US currency may crash, one thing is for certain the USA will always be there and nearly 1 billion people need a place to live and i don't know of anyone who can make more land (apart from maybe in Dubai lol)

    I personally know many savvy sophisticated investors who are buying multiple properties in the US, they are very happy on the purchases.

    I am yet to hear or read of any major horror stories from people who have been burnt in the US, which kind of confirms my original comment.

    <moderator: delete advertising>

    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
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    Hi Antonio

    Firstly the population of the United States is around 315 Million not a billion and secondly most of the $40,000 properties will have little or no capital growth.

    Investing in the United States is a specialized area and requires a lot of research and careful planning and more importantly whether you are successful or not will often be determined by the quality of the partners you have on the ground. I find that most so called experts have never been to America and have not met the people they are referring business to

    Nigel Kibel | Property Know How
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    Profile photo of FreckleFreckle
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    @freckle
    Join Date: 2012
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    It's good to see the blind helping the blind here. 

    Profile photo of DWolfeDWolfe
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    @dwolfe
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    Funny.

    Oh and didn't Antonio get kicked off the other night for advertising and making offensive comments? Oh that's right he did.

    Considering how much spruiking is going on on this site at the moment it's not the blind leading the blind it's the spruikers leading the blind.

    Try to keep the advertising in your signatures guys and post to help, not to build your brand.

    Cheers

    DWolfe | www.homestagers.com.au
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    Profile photo of FreckleFreckle
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    @freckle
    Join Date: 2012
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    DWolfe wrote:

    Try to keep the advertising in your signatures guys and post to help, not to build your brand.

    I don't really have a problem with it provided it doesn't become a blatant spruikfest. Tony went off the cliff big time so I wouldn't want to tar the other pro's here (who even though they indirectly and occasionally directly self promote or allow proxies) because he lost the plot. 

    I tend to think the pro's here, including yourself, add far more to the sites value than they ever take away.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    Freckle !  That looked very much like a compliment to me !  Do you have a crush on the lovely DWolfe ?  wink

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

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