After the American housing bubble finally burst in 2009, the level of fear and hesitation associated with purchasing real estate rose to an unprecedented high not only among American citizens but also foreign investors. When this seemingly inevitable collapse materialized, an onslaught of new guidelines and regulations were put into place by the United States government hoping to avoid another financial crisis. It is no coincidence that three of the states most affected by the housing market crash were Texas, Florida, and Georgia. In addition to ranking among the top 10 most populous states in the country, their sheer size, strategic locations, affordable housing, and weather lend to their desirability with potential homeowners. Many investors might be turned off by the number of foreclosures and bankruptcies throughout these locations, even several years after the initial meltdown, but if you do your homework and approach things the right way, you will find that you can benefit greatly from an otherwise disastrous situation and help the US economy along the way.
If purchasing real estate is a goal for you in 2015, especially in any of the states mentioned above, there are some careful considerations you should take into account before making the leap. As with any large financial undertaking, educating yourself is the single best thing you can do as a smart investor. Is buying property in the United States your best option? First and foremost, the "hows" and the "whys" of such a devastating financial collapse should be of interest to you. The following article from the BBC is a detailed exposé on how something like this can happen in the first place, how it could very well happen again, and goes on to explain the ramifications that Americans and foreign investors will be feeling for years to come due to mismanagement of funds -- http://news.bbc.co.uk/2/hi/business/7073131.stm.
The next set of questions potential home-hunters should ask themselves is, "What can I realistically afford?" and, "How do mortgage rates differ from state to state?" Forbes online compiled a list of the best locations to invest in during 2015, and it should come as no surprise that various locations in Texas and Florida made the cut -- http://www.forbes.com/sites/erincarlyle/2015/01/09/best-buy-cities-where-to-invest-in-housing-in-2015/.
Finally, if you settle on a particular property in Texas, Florida, or Georgia, know that time and patience are key to weathering the ongoing housing crisis storm. According to The Washington Post, things are slowly improving, but we will be feeling the effects of poor judgement and bad lending/spending practices for years to come -- http://www.washingtonpost.com/blogs/wonkblog/wp/2014/03/11/the-foreclosure-crisis-is-still-burning-years-after-the-housing-crisis-ended/.
Best of luck to all of those looking for a piece of the American dream.
WE knew Chinese investors have been heavily involved in buying US property for some time, but here's a new wrinkle on an old story: they are now seeking property in the key boom towns of the US shale revolution. Little towns in the backblocks of Texas and other states are becoming the key targets of Chinese property investors.
Chinese are finding a way to double up on exposure to the US shale oil boom, with property-focused investors buying up homes built for workers as energy companies move into the sector.
As a follow up to our recent post on markets where cash is king, property portal Zillow has also been kind enough to supply us with data for us to peruse on those parts of the US where the financed buyer rules the roost.
Not surprisingly, these are without exception the more expensive markets in the US. These areas are out of reach of the kind of foreign investors our book is pitched to - ordinary people in Australia, Canada, the UK, Hong Kong, Singapore and elsewhere in the world who want an entry level investment in the US. In the main, foreign buyers are cash buyers thanks, in part, to the shortage of finance options for overseas investors.
But it doesn't hurt to dream. And who knows, some of our readers might have the cash - or the finance - to compete with mortgaged buyers in these markets.
The Zillow blog post on these top ten markets can be found here, but we have summarised them below.
1. Virginia Beach, VA (92.6 per cent financed)
2. Denver, Colorado (77 per cent financed)
3. Portland Oregon (77 per cent financed)
4. San Jose, Calif (76 per cent financed)
5. Seattle, WA (74 per cent financed)
6. Richmond, VA (73 per cent financed)
7. San Francisco, CA (72 per cent financed)
8. Boston, MA (72 per cent financed)
9. Raliegh, North Carolina (71 per cent financed)
10. San Diego, CA (69 per cent financed)
Over on the Zillow blog the big US property portal has recently conducted some interesting research on markets where cash buyers are still king. It is an interesting dynamic as credit loosens and mortgaged buyers return to various marketplace, other markets are still very much cash dependent. We recently sold a place in Atlanta and encountered this very dynamic. In this case there was a ceiling that cash buyers were prepared to pay (based on approx 12 per cent net yield) so we sold to an owner occupier. The process was a bit more drawn out, but the end result was better.
From the buyer's point of view, the competition from cash buyers topped out at a particular level that they were prepared to meet. But in some markets, there simply aren't financed buyers approved or willing to hit that level.
The results are summarised below. Detroit, Memphis and Chicago were no real surprise to us. Probably the most surprisingly finding in our eyes was that Florida, probably the state of most interest to us in terms of buying, has four markets where cash is king, including Orlando.
So buyers, if you want to get in on the ground floor and you have some cash to spend, take a close look at Zillow's research and don't rule out investing in Florida while financed buyers are still not clinching the deals. Follow the links on our home page if you want us to connect us with our trusted vendor in Florida.
THE Economist, along with the Financial Times, has been among the best publications in terms of writing about US property as an asset class. The two London based publications bring a dispassionate eye to the US market perhaps with the advantage of distance.
The Economist's latest article about US housing focuses on latest data from its index of US house prices which show ongoing rises prompting The Economist to pose the question, are we heading for another US property bubble?
The conclusion, perhaps, but only in some places such as LA and San Francisco:
"To test this possibility, The Economist has compared house prices with the rental cost of housing and with median household income. If over the long-run house prices rise at a faster rate than either of these two measures, it suggests that either rents or incomes must rise, or house prices must fall. When we last published our data in June 2013, house prices looked to be at or below fair value compared with rents (meaning within 10% of the long-run average) in all but two cities. Nine months later, six cities lie outside that boundary. In the frothiest places—Denver, Los Angeles and San Francisco—houses are overvalued by around 16%."
The states favoured by most foreign investors - Florida, Georgia and others - still seem to be on track for further gains based on prices versus rents and incomes.
US author and economic doom merchant Harry Dent has his critics and his admirers.
His predictions are a bit of a mixed bag - some eerily accurate, and some way off beam.
He makes a reasonably cogent case, though, for a major drop in Australian property values in coming years.
Of course his comments that Melbourne and Sydney housing prices will drop by 27 per cent have generated the usual bulls vs bears slanging match.
In our view, his prediction of a 27 per cent fall is not actually even that controversial by his standards. The pathways and triggers to such a drop (a spike in unemployment, a rise in interest rates a major China slowdown) are well known and written about extensively.
What's more interesting to us is how the idea of Australian property being a bubble has gone from a fringe view a year or two ago to being almost mainstream. When you see poll results like the one above accompanying the article on Dent's comments, it becomes even more plausible. The poll finds 85 per cent of respondents say "yes" or "maybe" when asked if Australia is due a "spectacular crash" in dwelling prices. More than 50 per cent say an unambiguous "yes" to this question.
No wonder first-home buyers are avoiding the Australian market like the plague. They simply just don't believe in a realistic pathway to strong gains and instead fear large losses. As a result, they won't be buying until a significant fall occurs. This leaves a greedy cohort of investors leveraging further and further up to eke out a return. We wonder if they know how to spell negative equity?
WE prefer those interested in US property investment to buy our book via the buy now link on our site, but we also offer the book on Amazon for those people who - for whatever reason - want to buy the book that way. Sure, it doesn't make us enough money (Amazon takes almost 30-60 per cent depending on where the buyer is from), but we recognise some people will only buy the book this way, or come across it via Amazon in the first place.
As Amazon buyers are the minority, we have only one review on the site. To beef this up a bit, we will offer a full refund to the first five people who buy the book via Amazon and post a review. Just send us a screen shot of your review and we will send you the cash ($US9.99) via PayPal.
Yours in property investing success,
Sam Daniels and Ken Sugiura.
IF you or a member of your friends and family are thinking about investing in US property, then get the perfect gift: Buying Property in the USA: A Foreign Investor's Guide.
As you know, it's the only book of its kind and is available as an ebook for just $9.99 and is the best guide for foreign investors buying US real estate.
Make 2014 the year you or your friends and family take the leap into US property investment and do it the safe and secure way, by capitalising on all the research and tips packed into our book.
Remember, among the priceless information inside is:
Wishing you all the best for the holiday season,
Sam Daniels and Ken Sugiura
WOULD-BE investors in the US often here that with prices of US property on the rise, it's harder and harder to find good deals. Certainly that's true of places such as Atlanta and large parts of Florida, as well as Phoenix and parts of Texas.
But once in a while we come across with a deal like this pair of quadplexes that shows it's still possible to find 20% + net yields.
These two quadplexes in the attractive town of Ocala in central Florida are half-full with tenants and once filled will yield around 25%. What impresses us most about this deal is the rehab is all done and at least some of the tenants are already in place giving the buyer cash flow from the word go.
Couple that with the fact the seller is a reputable Florida company, Equity First, these quads would make a good starting point for someone wanting to get into US property investment in a reasonably sizeable way without the hassle of purchasing several individual properties.
Keep up to date with all the news on buying US property on the Buying Property in the USA blog