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7 Questions you should ask Before Buying US Property
The housing crisis leaves the US property market in turmoil with very inexpensive prices on empty from coast to coast, opening the door to foreign investors. Aussies, who are used to one of the most expensive real estate markets in the world, are flocking to the US market at record numbers. The most common strategy for Australian investors is purchasing distressed properties through some type of short sale deal from the bank. Many are enjoying returns from 10% to 15%!
Sounds easy, right? Wrong! The fact is that purchasing property across the globe is actually very complicated.
These are the top questions that Lachlan McPherson, Chief Investment Officer at US Invest continues to be asked.
Before you make the jump in to the US real estate market obtain the answers to these important questions.
1. How do you know if it is a reasonable cost? Comprehending the market: If you are a new comer to the united states property market, you may not realise, it is not as simple as it seems at first glance! Must be house is selling at $30k, it may not be a bargain. Home values are determined according to the time it takes the property to sell relative to its value. A house selling at $30k, since it is in a community with low demand, may actually simply be worth 20k.
2. How do I find the right property? Research: So once you know the marketplace, next is research. This requires use of council information, planning and development, economics information, past trends and affordability matrices. Really, there is a lot research to be done that many do not have use of this type of info, or the some time and experience to conduct a thorough analysis. Here I recommend getting specialist or at least getting access to reliable market information. Just typing addresses right into a search engine isn't enough.
3. Do you know the tax implications? Understanding Tax: Tax is a huge one. Nobody wants to pay too much tax. But, it's literally impossible for that average person to understand a foreign state's tax codes inside a short time. It is important you will find the right tax advice from the US professional and that can be expensive. A typical accountant in america charges anywhere from $100 to $200 dollars per hour. If you can locate an alternative route to get tax advice, such as a property management company, it might help you save some cash.
4. What is HOA? Be cautious about HOA: This means Property owner Association. Often, condos look like an excellent investment. HOA fees incorporate the costs of maintaining a house. Whether it has facilities like a pool or gardens, this is often expensive and eats in to the income the thing is at the end of the day out of your investment. Many sharp sales agents available don't properly show HOA costs in yield calculations.
5. What kinds of insurance do I need? There are such a wide range of insurers out there, you really need on the floor assistance to ensure firstly that you're not getting ripped off (with a broker or else), also that your insurance covers the thing you need. Fire, theft, disaster etc. are just some of the risks that should be covered. Foreign investors tend to purchase coastal markets for example Florida, with a big hurricane season. Flooding insurance during these areas is essential!
6. How do I protect myself from the legal standpoint? You will find 50 states and 50 different markets and laws to with them. The united states is a very litigious nation and so good legal council is vital for your success like a foreign investor. The easiest method to go about this is setting up an L.L.C, which means "Limited Liability Company." You can do this through an attorney as well as some property management companies
7. How do I get reliable tenants? Unfortunately, there isn't any easy response to this, except that you have to put yourself in the perfect situation. Rental demand in the US is booming overall but reliability depends upon the community your home is in. Areas rich in unemployment and crime rates generally mean bad tenants. Ideally, you need to own a house in a nice community having a family renting. Families tend to remain in the same home for a long period of your time.
There are companies that offer research, accounting, legal, and property management services. There are also a lot of companies who claim to do so but find yourself charging ten different fees! After the day, you need to do your research and make educated decisions.
