Why NOT to buy in the USA?

[Deltaberry]

One main thing would be do you understand what you're buying into.

What's that city / area like? Some friends have talked about Kansas lately. I don't even know wtf that is, and the fact they're selling like hotcakes for $30k suggests even at their peak they were worth $150k? That almost sounds like some pretty ***** up place if at it's peak it's only $150k since I'm a big believer in location location location.

These properties were always cheap even at their peak, and perhaps for good reason. Is this place another Detroit in the making? I've heard several US cities are transforming into donut cities - ie humans live on the outside and people just travel to the centre for work and leave before nightfull as all the vampires, ahem I mean crmininals and red necks, come out sucking blood, I mean wrecking havoc. Hear houses within 5-6km of some Downturns are not even rentable since if you go there you'd probably be shot by the vampires, I mean squatters...

All in all, part from NYC / LA / Chicago, the US sounds like a massively **** up country and the end of a civilisation.

 

[lawsjs]

If you have any interest in US stuff, my sister is finally posting here. Checkout my 'Dymphna Boholt - NO' post. Plenty there for anyone to get their teeth into...

 

[Chui]

Thanks

That's so scary. Crime can take out most of the value of an otherwise competent investment. What kind of area in LA is it?

 

[Indifference]

Oh, and rental properties there often seemed to come with fridge and washing machine and dryer included... as well as gardening service in the case of a family style home.

Yep! All the properties I looked at to rent included ALL white goods.

Fridge/freezer, washer, dryer, dishwasher, microwave. This equals potentially higher maintenance costs...

 

[Sunfish]

Yep! All the properties I looked at to rent included ALL white goods.

Fridge/freezer, washer, dryer, dishwasher, microwave. This equals potentially higher maintenance costs...

Any idea if the American made white goods are OK? The American vending machines I have bought are only just OK. Sadly, Sanyo no longer makes them.

 

[Michael Yardney]

At the Sydney Property Expo last weekend people were flogging cheap USA properties.

It inspired me to write this blog for API magazine - maybe worth a read http://www.apimagazine.com.au/blog/2010/11/is-the-investment-grass-really-greener-in-the-us/

 

[redwing]

*Bump*

Interesting thread


Any updates?

 

[Perp]

You must be psychic, redwing.

My patient waiting and watching may be about to produce results. Approx 80 units multi-family property, < $800K (ie < $10K per door), gross income $430K, net income (after expense of 4 full-time staff) $135K... Putting together an offer right now.

The mortgage on it is $1.7M so a real lender has valued it at $2M+ in the not-too-distant past.

 

[lawsjs]

I trust you to know what you are doing!!

What area/city is it?

Looks simple enough - assume the mortgage and offer $200k cash. Like the sound of it.

Just in case things ever do go wrong, you might like this:

http://www.smith-wesson.com/webapp/...57786_757784_757784_ProductDisplayErrorView_Y

$ per kilo it it is the best in the range - 16 round is much better than 10

 

[Rixter]

I have only one question in relation to USA purchases and still cant find a answer.......

If these so called 'bargains' are such a bargain why arent the USA locals picking them up instead of having to market them here in Australia?

 

[Token Funder]

I have only one question in relation to USA purchases and still cant find a answer.......

If these so called 'bargains' are such a bargain why arent the USA locals picking them up instead of having to market them here in Australia?

Refer 1990s QLD

 

[Amadio]

I have only one question in relation to USA purchases and still cant find a answer.......

If these so called 'bargains' are such a bargain why arent the USA locals picking them up instead of having to market them here in Australia?

Exactly.

My friends there experience the news all day and night and the news reiterates repeatedly in that full-on CNN ad nauseum way that the re market is still going down, not up.

It's hard to imagine the level of gloom there is from over here but it's very real.

Given that it's America and overly dramatic, as soon as an upturn happens it will be just as full-on panic buying.

 

[lawsjs]

Rix,

One thing to remember about the US. Try to imagine what this site would be like if EVERYONE had lost 50-70% of their equity and on those rare properties (like mine ) that didn't fall in value it made no difference - you still couldn't borrow.

My turnaround specialist in LA is desperate to get some hard $ from anywhere. She has a place in Laguna Beach she paid $2m for but just cannot get a loan on it - so no loan, no money, no great buys, which explains why few people can make the most of this amazing opportunity.

Everyone else,

I have found as has Ms. Perp has (on this deal it seems) that people are not able to sell what they might WANT to sell, but what they HAVE to.

There is no doubt that finding a very good deal is like finding the preverbial, but when you do they can be rippers. The trick is sorting the wheat from the chaff which is why I am SO against the marketing and buying of horrendous JUNK that most Aussies are leaping into with reckless abandon.

Ms Perp is looking at the stuff I looked at 10+ years ago. I couldn't pull one together back then, but if I had my life would have changed dramatically. Now I am gunshy and playing in my own pond, but I congratulate her on this new find. My advice to anyone is follow her path to the letter and arrive at your own level of expertise, or (in a lower cost option) find someone _like_ my sister (or my broker in LA) and piggy back off their expertise. You need to become an expert or prove to yourself you have a genuine expert working FOR you.

 

[Rixter]

Rix,

My turnaround specialist in LA is desperate to get some hard $ from anywhere. She has a place in Laguna Beach she paid $2m for but just cannot get a loan on it - so no loan, no money, no great buys, which explains why few people can make the most of this amazing opportunity.

Lets compare apples with apples here....my question is in relation to US property sub $50k to $75k being spruiked here in Australia

 

[lawsjs]

Rix,
My vehement feelings on that ripoff market were deleted because (apparently) they were 'libellous'.

Keithj seemed to think (in my opinion somewhat erroneously) that out and out rip off spruikers deserve the full protection of some imaginary law. I actually ran my comments by my Au barrister and it was (at law in Australia anyway) as I thought. However, casting Keithj's attitude to consumer protection aside

If you buy a property from a <120k 'spruiker' you are an idiot if you cannot PROVE to yourself (or more correctly someone like your accountant) they are not making 90% of that price in pure profit.

I am very happy someone like Ms Perp has found mega-great deals without going through Emma. 1) I don't like appearing to 'push' my sister all the time and 2) It has 'proved' to me that you do NOT need an expensive seminar speaker to find good buys in the US.

Ms Perp has attacked the problem in the same way I would. You WILL find amazing buys 'if' you can spend a little more than average bear. Its horses for courses, you CAN find good deals in any price range. It just takes expertise, persistence and - especially when spending $1m+ a bit of experience

 

[Perp]

If these so called 'bargains' are such a bargain why arent the USA locals picking them up instead of having to market them here in Australia?

I have been asking myself the same question for about 6 years, since I first began researching the US market. It's a valid question, but I do think there are good reasons other than "they're not bargains".

1) They simply don't have the Mum-and-Dad (hate that term, but can't think of a better one for now) property investor culture that we do. US citizens can get a tax deduction on their PPOR mortgage, so most people in the US focus on buying their PPOR, since it gets them a deduction anyway.

2) The market is also segmented differently. Properties are an investment for much bigger investors in the USA, because their returns are competitive, whereas Australian housing doesn't generate returns which attracts institutional investors. So superannuation funds, syndicates, big corporations, etc, buy hundreds of houses, or thousands of apartments, at a time. The landlord who's an individual, whilst certainly not unknown, is far less of a significant player than in Australia. Most of the properties in the $500K - $3M bracket are too big for many individual investors, but too small for the big guys. That's where I'm focused.

3) If people want to "dip their toe" into investing, they want to buy one house, and ironically, it's much harder to finance one house than a complex of apartments, because your credit rating as an individual is all-important, whereas on the larger deals, it's all about the deal. So financing is more of an issue for small investors in the USA than it is in Australia.

4) "Landlording" is, culturally, considered to be extremely difficult, and many Americans think you'd be crazy to try it. They don't have property managers to anywhere near the extent that we do, and most landlords self-manage. Therefore amateurs get involved, create nightmares, and their stories spread as urban legends, and people get deterred from investing. Ironically, landlords have way more rights in the USA than here, so to an Aussie, it's not as intimidating to take on.

5) As lawsjs rightly points out, many in the USA have lost a motzah on their own home, and don't have any equity left to take advantage of current opportunities. Even if they have equity, the lenders are so nervous that converting your equity into cash is nearly impossible the past 2 years. When you also consider the fact that most small landlords self-manage, there's a much greater tendency for investors to buy immediately in the area in which they live, than in Australia. So exactly in the locations where the best bargains are - which have had huge drops - the locals no longer have any money to buy them. That's why nearly all bargain properties are being snapped up by non-locals, moreso than because the locals don't want to buy them.

6) Finance has really, really tightened in the USA. Foreigners who can borrow in their home countries are at a distinct advantage.

There are definitely traps, and it's definitely not something to do lightly. And it's very different to our market. But there are definitely opportunities there which outstrip anything I've seen here in Australia by a country mile.

 

[Perp]

Lets compare apples with apples here....my question is in relation to US property sub $50k to $75k being spruiked here in Australia

Those are near impossible to finance for locals. Add to that, the property management industry - for individual houses, as opposed to managing complexes of apartments - is much less well-established in the USA than in Australia. So you may not have many choices, and from what I've heard, there are not too many reliable ones. We have trouble finding a good PM here in Australia, and we have many more to choose from.

BUT if you can finance these houses, and you can find a reliable PM, many of them are in fact the bargains that they appear.

I am very happy someone like Ms Perp has found mega-great deals without going through Emma. 1) I don't like appearing to 'push' my sister all the time and 2) It has 'proved' to me that you do NOT need an expensive seminar speaker to find good buys in the US.

LMAO... I've been to many Dymphna Boholt seminars. But that was the beginning of my education, not the end.

I don't want to list my deal publicly yet, for several reasons, but I've given the info to lawsjs and am encouraged that he thinks it's a ripper, too. Thanks, Jeremy, for your input. I'll continue my due diligence!

 

[lawsjs]

Ms Perp. Great post.

I will add this to your great comments above.

Most US citizens I have met have for decades been enamoured with stocks and bonds and they all seem to know someone who has made $1m from a 2c share they bought on a tip from someone. APPL, Yahoo, Google, MS etc etc.

There are now a whole heap of generations that 'know' real estate is one god awful investment.

I read a Bloomberg article that suggested the US might go the way of France. High volume renters, low up front property costs. More money in your pocket each day to cruise malls and buy the great new watch that Paris or Lilo has just bought. I am struggling to find much evidence to contradict that.

 

[lawsjs]

LMAO... I've been to many Dymphna Boholt seminars. But that was the beginning of my education, not the end.

You disappoint me! I could picture you on a $10k bus trip salivating at the prospect of seeing for the first time a property someone else had allocated you

For accuracy I must point out that whilst I know one of the spruikers uses the insanely expensive lottery card/bus trip system to allocate properties to buyers, I am not sure it is actually the (no doubt) lovely Ms Boholt - or any representative of hers.

 

[Ocean Architect]

I'm personally banking on a US currency/debt default, and so the only way I'd buy in the US would be based on US denominated debt, so that I could pay off my US house with shrapnel collected from under my bed.

Apart from that, the US is a basket case. Plus they grope you at the airport, so I'd never see the place. No one touches the OA jewels except for the OA, and women of low moral calibre. No one.