5. Condition of property
A few years ago a guy from here in the UK went to Western New York to invest. He was bullish in his approach. He asked his realtors to find him any property that was under x value and he bought them all. He then found all of them needed extensive repair (he was buying through Realtors remember!)
If a property is not maintained and is perceived as being a hazard or unsightly, local government can enforce that the owner brings the property up to ‘code.’ In this story this guy couldn’t afford to do the repairs. His properties were seized and a warrant put out for his arrest. He left the US empty-handed.
Make sure you have a trusted Property Management company to manage your investment.
4 REALTORS (ESTATE AGENTS)
We have relationships with several property investors in the US, and they all tell me the same thing. ‘Realtors are mostly women who would scratch your eyes out to make a sale.’ I apologise if this sounds sexist. The point is, Realtors have a duty to the seller so every property is a good deal regardless of its condition or location. Which as we all know by now is not true.
If you’re looking to invest use a professional property company to source your properties. Make sure they know where to invest, and more importantly where to avoid. Only a property investor knows the true mechanics of what makes a good investment and what doesn’t. Most Realtors don’t own investments properties themselves.
3. CITY TAXES
As property owner you are required to pay city taxes. Similar to any council tax system, the money is used to pay for rubbish removal and local emergency services amongst other things.
Each property has an assessment by a government official every 4 years. This assessment sets the taxes for the property and the market value. Often the ‘assessed’ value is incorrect. Sometimes it can be higher than the market value, sometimes lower. Because these taxes affect your overall profit it’s always good to buy properties where the taxes are low. However, this often means buying in less desirable areas. Be careful with assessed values, use your professional property finding service that knows the areas and can research comparables for you properly.
I’ll keep these short. number 2 on the ‘investor mistakes’ list
2. Water bills
It is common in the USA that a house can be repossessed by the state if the water bill is not paid regardless of who is living in the property. The landlord is responsible and can lose their investment if this happens.
When buying property, part of your title searches done should include any unpaid water charges. Make sure this is done and the seller pays them before closing or agrees a credit for the charges owed.
Many investors think that water charges are less significant and assume that if there are any they will be just a few dollars. Don’t assume this is the case. Water charges can be high if left unpaid as late penalties will also apply. Also, it is possible that a vacant property might have a leak, and someone will have to pay for this.
Make sure your title representative gets a water statement showing the current balance.
We’ve compiled a quick snapshot of the 7 biggest mistakes Investors make when buying property overseas in the USA.
1. Purchase Price
I have seen properties for sale for less than 2,000 pounds! On paper these seem like amazing investments. Of course they do! Yields over 90%! Beware – these are not good investments. Most of these properties are in war zones. Yes, in theory you could find a tenant, chances are you would have problems getting any rent at all from them.
These housing areas have the lowest amount of unemployment and the highest crime rate.
Capital appreciation is 0% per year and most of these have experienced an historic 0% appreciation in the last 10 years! If you spent money on improvements the value would hardly increase to cover your costs.
There is almost no chance of getting a mortgage in the future. Stay away and don’t get enchanted by the price tag.
Part 2 to follow…until next time, Happy Investing!