Personal Finance

Buying rental property in USA

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  • Oct 23rd, 2013 2:24 pm
Deal Addict
Feb 15, 2013
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laptop-tech wrote: Interesting read... companies are buying everything they possible can.

http://insiderealestate.heraldtribune.c ... er-market/
Thanks for the share. Appreciated it!

This has been happening for awhile now. Financially speaking nothing makes sense now. I've moved on.

Oct 2012 - With bargains becoming tougher to find and other state’s housing market attracting potential homebuyers, investor interest is trending downward, the report said. Still, 30.3% of all homes purchased in Maricopa County, the county seat of Phoenix, were purchased by investors in September, up from 27.5% in the year-ago period, but down from August numbers, according to the report.
http://www.housingwire.com/fastnews/201 ... t-declines

Jan 2013 - "The Phoenix-like phenomenon has migrated to other markets," says Sam Khater, economist for CoreLogic. It says Phoenix home prices were up 24% in November year-over-year, vs. 7.4% for the nation. Like many of the big investors, Blackstone started investing in Phoenix. It next moved into California, then Atlanta, Tampa, Orlando, Chicago, Las Vegas and Charlotte. Blackstone has accelerated its buying because home prices have risen faster than it expected, says Jonathan Gray, Blackstone's head of real estate. In some markets, the window to buy before prices rise too much "is closing faster" than in others, he says. Colony, for instance, has slowed purchases in Phoenix.
http://www.usatoday.com/story/money/bus ... s/1851187/
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Feb 15, 2013
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PrinceMS wrote: So basically to buy property in US. We need to arrange:
1. Lawyer
2. Selling Agent working for you (to confirm / re-check the property)
3. Bank / Mortgage agent
4. Property Management company
5. handy man?

Am I missing an entity?
Speaking for myself, I don't need a handy man. My property management company arranges for all that. I get quotes/have sign-off approval before any work is done.

I think what you need is a buyer's agent. Inventory is represented by a wide variety of selling agents. That's what I used anyway.

I also don't have a mortgage agent because I bought with all-cash. If an individual isn't able to purchase in all-cash they won't stand a chance. Even simple all-cash offers are getting turned down in the face of multiple all-cash offers.
PrinceMS wrote: Maybe we should start making a list of steps - and working on making checklists for each step?
The time has passed. Investors at this point are banking 99% on future price appreciation.

I didn't bother with a "checklist". I just did it and figured it out on the way. Anyway, the best time to buy (for cash flow and future price appreciation) was 2010 and 2011 where I got 75% off-peak prices. I bought condos for $40k and houses for $55k. They're virtually double that now.

Even though today's prices are 50% off-peak prices, those prices still make no sense on a month-to-month cash flow basis. Prices may have doubled but rents haven't.

My opinion only.
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Jul 16, 2003
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Yep...

I missed the 75% off, but got a few at 65% off. Last week I was again outbid on a condo in Tampa, priced at 59k. The owner had bought it 18 months ago, for 22k! The 2006 price was 150k. Ridiculous!

William W wrote: And as a result, prices are now 50% of its all time high.

http://www.orlandosentinel.com/business ... 9435.story

The half full way to look at this is those who buys now is still getting 50% off. Half empty way is they missed the boat as those who bought 3 years ago were getting it at 75% off.
Andre Oliveira - Mortgage Agent
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Nov 26, 2004
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Rickson9 wrote: Speaking for myself, I don't need a handy man. My property management company arranges for all that. I get quotes/have sign-off approval before any work is done.
Put it this way, I don't think it hurts to have your own set of trades. In Florida, I have my own HVAC guy, Flooring guy and Handyman. That way, I can send each of them in during the inspection period to give me a picture of how much the post purchase repairs will cost. Besides, I like to have the check and balance between my property manager and my trade. That way, when they put in the quotes, they know there will be someone competing with them. And if I use my own crew, I know that my property manager will point out any little details that may have been missed by my guys.

Rickson9 wrote: The time has passed. Investors at this point are banking 99% on future price appreciation.

I didn't bother with a "checklist". I just did it and figured it out on the way. Anyway, the best time to buy (for cash flow and future price appreciation) was 2010 and 2011 where I got 75% off-peak prices. I bought condos for $40k and houses for $55k. They're virtually double that now.

Even though today's prices are 50% off-peak prices, those prices still make no sense on a month-to-month cash flow basis. Prices may have doubled but rents haven't.

My opinion only.
I think it depends on where you're.

From a buying perspective, one can still get a 10-15 years old 3 bedroom, 2 bath, single family home in Poinciana, a sub-burb south of Orlando for $70k. Depending on location, they can be rented for $800-$850/month. So one can still make a 8-10% pre tax net return based on rental income, which still make sense on a month to month perspective or much better than anything here in Canada.

From a rents perspective, I did noticed that rent in Vegas hasn't gone up much. But rent has gone up quite a bit in Orlando. Take for example a community call Hawthorne Village in zip code 32837. Back in 2010, the 2/2 there rents betwee $700-750/month. Now, they are being rented for $825-875. So its all area specific.

All I'm trying to say is people should do their own homework before buying rental properties in the States. Pick a location, find out what's the return you're looking at. And if you're comfortable with let's say a 8-10% cash on cash return, with a chance for future appreciation, I would say go for it. But that's just me, as I'm still making offers. The properties that I got this year may not be as profitable as the properties I bought in 2009, but their rental return is still higher than the 2.89% 5 years mortgage that the banks are offering these days.
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Nov 26, 2004
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PrinceMS wrote: Maybe we should start making a list of steps - and working on making checklists for each step?
This is not a comprehensive checklist, but the steps that I have taken when I first got started.
(1) See if any of your friends and families had experience buying in the States, and pick their brains for ideas.
(2) Seek legal advise as to how you want to hold ownership to your property
(3) Open a chequing account, possibly with RBC or TD, so you can start writing offers
(4) Find a buyer agent that you can work with
(5) Make a trip to the city you're interested in to familarize yourself with the various neighbourhood. With the current market, unless you're willing to grossly overpaid, more likely than not, you will be buying the property sight unseen. So that is why you need to find a buyer agents that you can trust and will take photos/videos for you.
(6) Locate handyman that you can trust/work with if you're interested in buying the "dents and scratch" REO specials.
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Feb 15, 2013
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William W wrote: Put it this way, I don't think it hurts to have your own set of trades. In Florida, I have my own HVAC guy, Flooring guy and Handyman. That way, I can send each of them in during the inspection period to give me a picture of how much the post purchase repairs will cost. Besides, I like to have the check and balance between my property manager and my trade. That way, when they put in the quotes, they know there will be someone competing with them. And if I use my own crew, I know that my property manager will point out any little details that may have been missed by my guys.
This is probably good practice. I'm just too lazy for all that, but a good idea nonetheless.
William W wrote: From a buying perspective, one can still get a 10-15 years old 3 bedroom, 2 bath, single family home in Poinciana, a sub-burb south of Orlando for $70k. Depending on location, they can be rented for $800-$850/month. So one can still make a 8-10% pre tax net return based on rental income, which still make sense on a month to month perspective or much better than anything here in Canada.

From a rents perspective, I did noticed that rent in Vegas hasn't gone up much. But rent has gone up quite a bit in Orlando. Take for example a community call Hawthorne Village in zip code 32837. Back in 2010, the 2/2 there rents betwee $700-750/month. Now, they are being rented for $825-875. So its all area specific.
Another very good point. Real estate is very local. In the small areas that I'm involved with in Phoenix, AZ the rents haven't really changed much. $700-$750 a month for a 2/2 condo and $850 a month for a 3/2 detached home. Based on the prices that I paid, this represents a 20% gross margin and a 10% operating margin (i.e. before interest and taxes).
William W wrote: All I'm trying to say is people should do their own homework before buying rental properties in the States. Pick a location, find out what's the return you're looking at. And if you're comfortable with let's say a 8-10% cash on cash return, with a chance for future appreciation, I would say go for it. But that's just me, as I'm still making offers. The properties that I got this year may not be as profitable as the properties I bought in 2009, but their rental return is still higher than the 2.89% 5 years mortgage that the banks are offering these days.
Good insight. Again, it all depends on the individual's situation and personality. A 8-10% cash-on-cash return is satisfactory for some and not for others. Keep in mind that there will be phone calls, emails and annual trips to your accountant. It's not really difficult work, but there is a bit of babysitting. Individuals need to make their own determination and go from there.
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Nov 26, 2004
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Rickson9 wrote: Keep in mind that there will be phone calls, emails and annual trips to your accountant. It's not really difficult work, but there is a bit of babysitting. Individuals need to make their own determination and go from there.
Definitely, and I think that's why a lot of Canadian investors, at least the ones on this forum, who goes there buy mulitple properties to gain economy of scale. :razz:
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Feb 15, 2013
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William W wrote: Definitely, and I think that's why a lot of Canadian investors, at least the ones on this forum, who goes there buy mulitple properties to gain economy of scale. :razz:
For sure.

Coincidentally this just popped up on Yahoo! Finance:

During the boom, 49,000 units were built, as investor-flippers used easy mortgage money to swap properties and push prices. When it all came crashing down, the lights went out in Miami, literally. Tall buildings stood dark at night, as banks took back properties and projects. Most thought it was all over for a good long time.

But somehow there are just 2,400 unsold units left, barely a year's worth at the current sales pace. Prices are up nearly 25 percent from a year ago, according to the Miami Area Association of Realtors.

How did it happen? Foreign, all-cash buyers like Venezuelans, Russians, Chinese, Canadians, and Brazilians. They were either looking for a safe-haven to park their money or were taking advantage of a weak dollar. Whatever the reason, they came, they saw, they bought.

Miami Condos Flying High Again
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Jan 27, 2006
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PrinceMS wrote: ^ I have a different way of looking at this. Price point is irrelevant (for most parts). What you have to ask yourself as investor is
1. - Can you afford it? (especially in most-likely worse case scenarios).
2. Are prices still going up? (and most likely will be going up).

As long you have those two factors - why dwell on how much money I could have made?

-------------------------
So basically to buy property in US. We need to arrange:
1. Lawyer
2. Selling Agent working for you (to confirm / re-check the property)
3. Bank / Mortgage agent
4. Property Management company
5. handy man?

Am I missing an entity?

Maybe we should start making a list of steps - and working on making checklists for each step?
I would add the following:

6. House inspector that you can trust
7. Accountant that understands tax laws
8. House Insurance
9. Title search company

And I would modify the following:

1. Lawyer that understands how to protect assets
3. Bank / Mortgage agent <- hardest of the bunch if you want to get a normal mortgage as well as buy the rules (ie. not saying it's owner occupied when it's not)
4. Property Management company who will actually work for you and return your calls
5. Handy man - don't really need one as a good property management company will help you on this point.
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Feb 15, 2013
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Phoenix has been leading the charge in residential home price increases for many months now. And by leading, I mean like Michael Phelps in the 200 meter butterfly in Beijing (not London) - pretty much trouncing the other 19 major metros that make up the Case-Shiller index.
Seeking Alpha

At the sales office for a new development southeast of Phoenix called Waters at Ocotillo, the PulteGroup (PHM) representative says she’s too busy to talk. It’s a Monday afternoon. One customer is signing a contract in her office, she explains, and another is due soon. The model for Pulte’s Yucca home is open, though. The price starts at $392,990. It’s two stories and 2,688 square feet, designed for four bedrooms and three cars. It’s stucco—as is nearly every home in every subdivision in Phoenix—high-ceilinged, and energy-efficient. The model is completely furnished, with fake iPods, iPads, and family photos. There’s a real foosball table and Whitney Houston’s Greatest Love of All streams through built-in speakers. The Yucca is part of what homebuilder Pulte calls the Cactus line; there’s also the Majesty line, which is bigger and has courtyards.
BloombergBusinesseek
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For the first time since the housing-market free fall began more than five years ago, it’s now possible for every type of player to get back in the real-estate game.

Basic economic laws of supply and demand worked their magic over the past year, as a huge number of distressed properties were snapped up by institutional buyers and other investors. That played a big role in solidifying the market, and as the year passed, a stronger economy brought a healthier mix of players into the game. They included an ever-growing number of first-time buyers, new-home buyers and homeowners who finally were able to sell for a profit.

Overall, the growing group of buyers helped propel the region’s median sales price up more than 34 percent in the past year, as affordable properties on the market were in limited supply. That price increase, in turn, has motivated more homeowners to put their homes up for sale because they are no longer underwater.


Phoenix Housing Prices Rise
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Mar 19, 2010
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Markham
daverobev wrote: or just buying stocks)

Thanks!
Personally, I am playing the U.S. real estate market through stocks. Too many headwinds with the logistics and red tape involved with non U.S. residency.
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Mar 19, 2010
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curtiszerr wrote: Yeah I would definitely be concerned about the Canadian dollar sinking. It's impossible to know where it will end up, but it might be wise to hold off for a bit.
I am really shocked that the Canadian Dollar is trading @ 98 cents. I am expecting it to go down to the low 90's later this year.
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angelok wrote: I am really shocked that the Canadian Dollar is trading @ 98 cents. I am expecting it to go down to the low 90's later this year.
Those who already own RE in the States are certainly hoping for the Canadian Dollar to sink further. As that would simply translate to a higher monthly income as well as greater appreciation of their properties.
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William W wrote: Those who already own RE in the States are certainly hoping for the Canadian Dollar to sink further. As that would simply translate to a higher monthly income as well as greater appreciation of their properties.
Maybe higher monthly incomes but the greater appreciation may not happen too much... Since a lot of the purchases are done my foreign nationals and in cash, as the US dollar goes up, then those houses get more expensive resulting in less demand.
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craftsman wrote: Maybe higher monthly incomes but the greater appreciation may not happen too much... Since a lot of the purchases are done my foreign nationals and in cash, as the US dollar goes up, then those houses get more expensive resulting in less demand.
And those demands can be offset by others such as speculators entering the market, lenders returning to the condo market or the boomerang buyers.

Even if prices stop going up and stay stagnant, I suppose the appreciation will happen when it comes time to sell if the Canadian dollars goes down.

I found this is a pretty article summarizing what's happening with Foreign buyers right now.
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Yep - people here dont realize whats going on there. You see a new listing today, let's say at 60k for a bank owned property, and they are not accepting bids from foreigners for 10 days. After 10 days you offer 66k (10% over listing price) and STILL get outbid. Im not kidding when I say I was probably outbid on 50-60 properties last year. Initially, I was offering medium prices based on recent sales over 6 months... then had to change the strategy to offer full price... then, had to start offering 5% over asking, then 10% over... still, outbid in 95% of the cases. I bought 4 condos in Sarasota, and for the past 1 year at least there is NO inventory whatsoever that fits my criteria (up to 75k , condos, not older than 1999, low condo fees, etc)... 1 year! I started buying in Tampa because it is a much bigger city with tons of inventory... so I thought! Early last year - yes. Now? pretty much nothing. There are 2-3 developments in Tampa with a lot of listings because they have either high condo fees or a bad reputation (subsidized rent programs, etc). In the developments I bought in Sarasota, prices are now 50% higher than last year. I went to check my condo in the "Serenade" development (Sarasota) last Xmas and spoke with the condo manager there about the few units available... all of them in the 95k to 125k. I bought one 8 months ago for 65k.
A LOT of locals have just been waiting to snap those properties but could not do that before as the credit was ruined by foreclosures, etc. As time goes by, they are buying everything back, at whatever price they can get. If you lived in a condo worth 300k, had to sell it (or abandon it) for 60k and now could buy it back for 100k.. wouldn't you do it? This is what is happening. Not to mention the canadians buying anything they can, or the large corporations buying hundreds of properties every month.
Andre Oliveira - Mortgage Agent
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laptop-tech wrote: If you lived in a condo worth 300k, had to sell it (or abandon it) for 60k and now could buy it back for 100k.. wouldn't you do it? This is what is happening.
This is a good thing though. It shows that the U.S. is on the road to recovery. Just like the Dow and S&P 500.

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