For those looking at USA

Hi All

Not sure if anyone has read this a few months ago, but this lady sums up the situation in the US regarding managing your investment, espec, re dealing with antiquated banking systems and bad prop managers.

CASE STUDY

The crash in housing prices in the US has Erin Jones on the lookout for another property there. "The deals are fantastic and the numbers are amazing for cash flow," says Jones, a consultant who has four investment properties as well as some land in Australia.

She paid just $US18,000 for her first house in the US four years ago — a total of $40,000 after taking into account all the repairs it needed. "It's cash flow positive and is let for $US600 ($696) a month," Jones says.

"My rule of thumb for a property is that for every $100,000 you pay you need $200 a week rent." That puts her well ahead but she says she was surprised how different the two markets operate. "Maybe LA or New York are different but I bought in a regional area and it's almost prehistoric the way they do things," she says.

For a start, the settlement period was twice as long as in Australia. Rents are collected by door knocking, as Jones says agents don't seem to have heard of direct debiting. Payment for repairs cannot be made online if the tradesman happens to have his account with another bank.

Whenever Jones phones her US bank asking it to transfer funds, she's told to drop into her local branch, which is obviously rather difficult. But for Jones the most frustrating thing of all has been finding a suitable property manager.

While the house has proved easy to let, she has gone through three agents and is convinced there's a business opportunity there for an enterprising Australian. "Tenants are paying rent and I'm not seeing it," Jones says, not because they're running away with it but because they "need prompting" to put it into her bank account.

"Finding an agent that does management is an issue," she says. "They have more generous sales commissions so aren't interested in a rent roll. There's a huge opportunity for an Australian to run management." Interestingly, the exchange rate isn't an issue.

"I opened a bank account and have kept the money there," Jones says. Because she paid cash for her property "it was no harder to buy than here". But she says she might look at borrowing next time. "You can lock in very low interest rates for 30 years," she says. Jones has started researching different areas in the US where prices have crashed in the fallout from the global financial crisis.

But she says "there are things you wouldn't consider here in terms of getting people you can trust. [Investing in the US] is something you don't go into lightly."


Cheers, MTR
 
That's interesting - I'd completely forgotten that tenants can't pay rent by direct debit.

However, there are good property management companies in the USA - just not in the areas that most Aussie bargain hunters seem to be looking.

As you see from these sites of PM companies in my old haunt, they do exist and they do a pretty good job. It's just that you have to have a property that makes it worthwhile for them to bother with. The lower down the ladder you go in the housing prices, the lower the PM services go, until you are grovelling on a floor full of crap wondering why it's so hard to be a LL in the USA.
http://www.dwmproperties.com/
http://www.wakpropmgmt.com/
 
partial info

There are good property managers in the US, just that the real estate agents don't necessarily do property management.

There is also "online bill pay" in the US, although not as popular as BPAY here. Transfer money between banks is a trouble, fax is the usual way, but you will have to call to confirm the fax...
 
Probably been answered elsewhere, but if houses are so cheap to buy, and end up CF+ if there is a tenant in there, then why don't American people buy these houses themselves and get their own house for cheaper than rent? In the US, they can always give the key back and walk away if they cant afford the repayments, right?

Has the GFC blown out lending prospects that much in the US that no one can borrow money to buy their own house?

Or am I missing something here?
 
Probably been answered elsewhere, but if houses are so cheap to buy, and end up CF+ if there is a tenant in there, then why don't American people buy these houses themselves and get their own house for cheaper than rent? In the US, they can always give the key back and walk away if they cant afford the repayments, right?

Has the GFC blown out lending prospects that much in the US that no one can borrow money to buy their own house?

Or am I missing something here?

American renters don't/can't save money.

Key predictors of whether you'll be wealthy in America are 1. ownership of own business, 2. owner occupier, 3. Education and 4. Race.

From http://www.investmentu.com/IUEL/2003/20030127.html

"Another interesting wealth statistic: all the wealth in America is concentrated among homeowners (two-thirds of Americans own their own homes). The difference is stunning. The average homeowner’s net worth is $171,700, while the average renter’s net worth is a measly $4,800. "

Here's some other stats. Numbers are different but message is the same: http://www.bargaineering.com/articles/average-net-worth-of-an-american-family.html
 
Thanks for that Spectre, especially the second link.

This echos my own thinking. I have been think of heading off the the USA to buy a place, probably as a holiday home, (I love Las Vegas) or maybe to rent out.

However several months ago I decided to wait.

All my reading and my knowledge of Economics leads me to believe that things will get worse over there.

Unemployment is way higher than the official rate, probably close to 20%, not the 10% they spout .. when you give up looking for work you come off the ranks of the unemployed.

Plus I believe that the US dollar will melt down and our dollar will just get stonger (I kknow it has dipped at the moment) .. But every 1 cent rise is akin to an increase in capital value.

Also, if the $US tanks, it will erode the value of the capital I take over and reduce my return on equity

FWIW.. the UK is possibly headed in the same direction.. as is Greece, Spain, Italy and Portugal .. all decent places to have a holiday home.

cheers

RightValue
 
There is a Government program called "section 8" that is our version of rent-a ssist. It means the US Govt direct credit up to approx 80% of the tenants rent into your account every month.
You can renovate homes to "section 8" standard and then list them to attract those tenants. There is a lot more to it but it is do-able.
Personally, i'm just buying, renovating and selling. I have a CGT issue but I also have instant gratification.
 
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