Like all out of town investors, you will be using a trusted Property Manager to manage your property day to day. Your agent will collect the rents and pay you your rental profits. A UK-US dual tax treaty makes this financially advantageous for us.
However, you must obtain an ITIN (International Tax ID) number before you can receive rental profits. Your Property Manager has a duty to hold onto all rental profits until this is in place. Make sure you apply for this as soon as you can.
First off you will need a foreign notary to certify your passport. You can use any notary in your home town. This will be sent to HAGUE for approval. Only then you can apply for an ITIN. The whole process takes approximately 8 weeks.
‘Section 8’ is our equivalent of housing benefits. Your tenant has a portion of their rent paid by the state based on their financial circumstances. Buying property that is ‘section 8 approved’ with or without a tenant is a good sign that the property is up to ‘code.’
Each year an assessment is made on the property and a section 8 is extended providing it is in good working order and meets the criteria as set out by the state.
If you’re buying a property that is section 8 approved make sure it is up to code. In the event that it isn’t then at the next annual assessment benefits to the tenant will be held until the property is brought up to code.
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.