What I have leaned about investing in the United States

I have been involved in the United States property market since November 2005 when I flew to Texas to buy an apartment building on behalf of a group that I was involved in. That led to a consulting role providing marketing and training in a real estate firm in San Antonio for most of 2006.

Since that time I have been back to America around 4 times a year and have mainly been involved in smaller deals on behalf of clients. However the conclusion I have come to is revisit the first deals that I was involved in namely Commercial property which is made up of apartment complexes, shopping centers ect. The reason that I have done this is because I believe that commercial property represents better long term value.

Since the Global Financial Crisis in 2008, finance, especially to foreign nationals is not available for residential property. What that means is that if you want to buy a property in the United States you have to pay cash. There is a lot of rubbish being sold in the United States. Now if you think you can get a good property for $20,000 to $50,000, think again. In most cases these properties are located in slums or very low economic areas. So you go to the next level and buy a property between $70,000 and $100,000 what you have to consider is that if you are paying cash in most cases you are paying 6 to 7% interest on that money. The reality is that if you are going to pay $100,000 in cash you will make more money in Australia. In fact I partner with investors in Australia to build development projects where it produces a high profit on investment. So what are your returns? I often hear of high returns quoted but they are normally gross returns not net. For example in many parts of America there can be very high properties taxes, in Texas the taxes are around 3% annually, so on a $100,000 property that’s around $3000 property management runs at around 10% plus costs to maintain the property. So by the time you add in these costs often your real or net return can be well under 10%
However, when you look at commercial property there are some advantages. Firstly even as a foreign national you can borrow around 60% on low rates through a bank.

Some of the deals I have been looking at are returning around 17% net, that’s after all costs including Property Management, finance and of course property taxes. The second advantage is that even if you invest with other people you are generally buying into much higher quality properties, which is why the banks are prepared to lend around 60%. Thirdly apart from the cash flow we also believe that there will be strong capital growth over a 5 year period. The next point is if you buy a single house what happens if you lose a tenant. It means from day one your cash flow takes a 100% hit. However if you own ant Apartment complex, one vacancy short term will not dramatically hurt your cash flow. Finally you are able to leverage your money in other words if you put down 40% in cash you can borrow the rest allowing you to buy much higher value investments. However before you invest do your due diligence carefully and remember that the quality of people you work with on the ground will determine whether you succeed or not.
 
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Good point Nigel.
Leverage makes money.

But can you go into a little detail like what banks in the US will be willing to lend to a foreign national and what their Lending criteria is. I have travelled 4 times this year to the US and have purchased myself a number of deals. But having spoken to a number of banks/FIs about ways of Lending towards my portfolio - Noone will Lend.
 
Lending

Hi Gentle Chef

You are correct. For normal residential lending finance is not available to foreign nationals. However if you are buying commercial property it is. I believe the reason for this is a bank sees less risk with someone buying a 30-200 unit complex than if they were buying a single dwelling. In many cases the complexes that we are looking at already have a 95% occupancy rate. The lenders will check out the properties in detail before sign off on them. In terms of the banks I have a business partner who is in Florida but works with one of the largest Commercial firms in America. He deals with commercial brokers who arrange the finance. I am sure I can get the details for you however this is for commercial finance.
 
Hi Nigel

This is interesting.

What sort of value are we looking at for these deals? You are saying cash down of 40% but its 40% of what? $100k, $1mil, $5mil?

Just interested.

Cheers

Blacky
 
value

The properties will vary in value from $300,000 to 7 million
I have seen a few for less however with commercial property the lenders do there own risk assessment. If you are looking at a 50 unit property you might be paying 1.2 million.

The most important point is that you are leveraging your money on property with strong cash flow but also with strong capital growth
 
The properties will vary in value from $300,000 to 7 million
I have seen a few for less however with commercial property the lenders do there own risk assessment. If you are looking at a 50 unit property you might be paying 1.2 million.

The most important point is that you are leveraging your money on property with strong cash flow but also with strong capital growth


Just wondering Nigel what Visa do you enter the US on,the normal 14 dollar one or a Business class,thanks for the post..
 
Yes I just use the visa waiver program

When I worked in Texas I had an A3 visa for two years
Thanks Nigel,i have got the new business visa myself,the 14 dollar one is the simple easy online to get,just i needed the business visa for what i intend to do in the US..
 
usa

What are you doing in the States?

The only reason I don't have the a3 visa is because I have a business partner on the ground in Florida. I may even consider moving there in the next few years
 
What are you doing in the States?

The only reason I don't have the a3 visa is because I have a business partner on the ground in Florida. I may even consider moving there in the next few years
Well it won't be herbal-slim tea from the Gold Coast...nor US property...just an idea i've been working on for a few years,in home fire safety just have one test unit made and working..
 
I recently read that the value of food stamps in the US now averages $133.14 a month, with around 46.4 million Americans now receiving food stamps

Where to from here for the US with its QA strategy?
 
I recently read that the value of food stamps in the US now averages $133.14 a month, with around 46.4 million Americans now receiving food stamps

Where to from here for the US with its QA strategy?

What - quality assurance or did you mean QE being quantitative easing.:D:D
 
What - quality assurance or did you mean QE being quantitative easing.:D:D


The latter :eek:

They've pretty much used up the value of dropping their interest rates so quickly and that didn't result in an economic turnaround, so the government turned to other forms of stimulus. Enter something called quantitative easing "printing more money" tax cuts and government spending programs.

Aaron has posted numerous times on SS re QE1, 2 and Quantitative Easing 3 (QE3)

I'm wondering, where to from here :confused:
 
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