Investing in real estate in the USA has become a trend for overseas investors. With great tax breaks, high rental demand, and an ever-growing job market, the US is calling to investors across the globe. While investing in the US from overseas may seem like a profitable venture and in most cases, it is doing so from such a far distance comes with a unique set of risks.
Investing in US real estate safely is entirely possible, however, if you take the right steps.
Understand the US Market
The US real estate market is unlike any other in the world. It has its own unique ups and downs. With such a large area to cover, the US has areas with high return on investments and some that should just have a big red X over the map. It has pockets of properties which yield high returns nestled in areas that generally display low returns, and vice versa. Even the most experienced overseas investor can be taken aback by the US market.
There are several major differences to the US market in comparison to the global market. For example, when hiring a real estate agent elsewhere to search for properties for you, you usually have to pay the agent a fee for this service. In the US, however, fees are paid by the seller at the close of the sale. The buyer is generally not responsible for the cost of the agent.
Another big difference is the listing service. The US operates a program called the MLS (Multiple Listing Service) which compiles all of the available properties across the nation into one large database. This database is searchable by any agent or buyer through several different avenues, such as Zillow or the MLS directly.
These two major differences can actually make purchasing investment properties in the US easier, as you can search via the internet and you aren’t required to work with several agents with multiple listings to find the right property.
Other considerations overseas buyers need to take into account are wire transfers, banking, exchange rates, and multi-nation taxations. Check with local experts before making any financial leaps.
Find a Reputable Company
Investing from overseas can be difficult, unless you happen to have a lot of extra money to spend on frequent plane tickets. Hiring a real estate investment company to handle the groundwork on your behalf can go a long way in finding the right property at the right time and, of course, for the right price. It can also save you a lot of unnecessary headaches, stress, and wasted trips.
When locating a company overseas to trust with your investment can be tricky, though. A lot of people can talk a big talk, but when it comes down to it, you need someone with the numbers to back it up. Do your research. Contact realtor associations and investment groups in the area where you want to invest. Scope out internet forums for conversations about local companies. Run checks with the Better Business Bureau and similar organizations to verify reputation, licensure, and insurances.
If you think you’ve found a handful of businesses which may meet your needs based on their reputation with locals, you have a few options. If you are able to fly to the area to meet, do so. If an in-person visit is off the table, consider meeting via skype or other similar video chat programs to conduct interviews before selecting a company to partner with.
Always verify any information these companies provide. Ask for references, both of past and present clients. Double check their portfolio figures and consult other experts to verify the market numbers match up.
Buy the Right Property
A reputable investment company will be able to steer you in a direction that best suits your needs and goals. The most important thing to look for when searching for a property is solid returns in good areas. Don’t be fooled by shiny, high return on investment rates. While you want a property with a good ROI, it’s more important to focus on solid, consistent returns in areas that have a proven track record.
The highest returns are usually found in areas where housing prices are lower. Of course, you need to look at the entire picture—not just the price of the property. What are the local demographics like? Does the area show good school systems, low crime rates, and a strong job market? The best properties to look for, when searching for investment properties, are often starter-homes. These are single-family homes with two to three bedrooms and usually run under $200,000. While basic, they provide you with a higher pool of renters as well as a better chance of being able to recoup your investment should you decide to sell as these are the most-frequently purchased homes.
Areas such as Detroit yield higher returns thanks to low-output costs and high rental demand. Steering clear of frivolous high cost of living areas, such as NYC or LA, will help increase the occupancy rate of the property and lower the initial investment costs.
Although you fully vetted your investment company, it is important not to take their word for solid gold. Yes, they are likely to steer you in the right direction, but just because they are saying a property is a good deal it doesn’t make it truth. Always bring in a third-party inspector to verify that the home is in solid condition. A home inspector is trained to see issues the common layperson isn’t. Even if your investment company honestly believes the property is a great deal, they may not be aware of some structural damage or foundation cracks which a third-party inspector would be able to spot.
Due to high returns, low cost output, and an ever-increasing rental demand, it is no surprise that investing in the US is the hottest trend in the global market at the moment. There is no shortage of reputable investment companies trained and experienced in dealing with overseas investors. Strategy Properties is one such company—working with overseas investors on a daily basis to form solid partnerships while delivering only the best of the best in turnkey rental properties in the Detroit Metro area.