Buying foreclosure property in America

[SLee]

Hello, I am thinking of buying a proprty in either Florida or Detroit which has massively reduced in proce due to foreclosure. I'm from the UK and would like to know of any other UK residents have done this (and what their experience is). I am looking at a two bedroom flat for approx $30,000 and i would rent this out.

I'm not sure if there are certain pitfalls I need to avoid or what (am in preliminary stages of reaserch into this) or whether to go through an estate agent in England or go diretcly to America. I have many other questions.

Any advice anyone can offer would be gratefully received. Many thanks! S

[Moby Jones]

We are just about to complete our first foreign purchase. A three bedroomed detached bungalow in Detroit. The purchase price is $44,000. The house has been proffesionally renovated and is guaranteed. The property is pre tennented and upon completion of our sale the tennants will sign a new 12 month deal under the US Section 8 HUD scheme.

I can put you in touch with a company who handles these sales if you like. PM me if you're interested. The net yield of such an investment after paying out for :-

Management fees (10 of rental)
Buildings insurance (Optional)
US property taxes

is still a whopping 15.3%. The tennant is effectively a US federal sponsored individual. I've tried to find issue and fault with investing in the states, but done properly I can't understand why I'd look to BTL in the UK at this present time. Detroit is our city of choice. Florida often attracts HOA fees which tends to kill the yield.

[overseas guru]

buying in the usa if done correctly is a sound investment

[New Homes Expert]

Originally Posted by overseas guru

buying in the usa if done correctly is a sound investment

Yep that's right! Millions of empty repossessed houses made a fortune for their previous owners did they?

By the way Florida had hurricanes and the odd oil spill too.

[Moby Jones]

Originally Posted by New Homes Expert

Yep that's right! Millions of empty repossessed houses made a fortune for their previous owners did they?

By the way Florida had hurricanes and the odd oil spill too.

You clearly know nothing about the US property market then.

Those empty repossessed homes now represent a fantastic opportunity for property investors. With rental yields offering 15% + in some instances I'd agree with Overseas guru.

And if you don't want to purchase a buy to let, there are many schemes to buy a repo, rennovate and sell it to a tennant on a rent to buy scheme resulting in a 25% profit within 6 months. Thats 25% after closing costs. Perhaps you'd be better doing some research rather than posting smart ars** comments which only highlight your own ignorance. lol

[jodieB]

I was looking into buying property in Florida i think its an amazing place and after reading these posts has inspired me even more great opportunitys and you get so much more for your money than you do in the uk..

[Moby Jones]

Originally Posted by jodieB

I was looking into buying property in Florida i think its an amazing place and after reading these posts has inspired me even more great opportunitys and you get so much more for your money than you do in the uk..

I love Florida. But from a pure investment point of view it may not be the ideal location. Obviously it depends on your own strategy. Florida property looks good for long term capital gains, but not income. The HOA fees put a real dent in your margin.

Of course if you want it as a holiday home you'll actuially use, all of what I've written is irrelevant! lol

We're about to make our second purchase. Plans of property redevelopments in the UK have now been scrapped completely as the opportunities in the US are just so much better. We're trying 'flipping' this time.

[Albufeira]

Buying a foreclosed property can have many advantages but I would say to proceed with caution.

Firstly always know the neighbourhood you're buying in. Because of the equal housing act realtors cannot and will not tell you if an area is "good" or "bad". I would suggest looking up the crime rate and demographics of an area by zip code. You can often do this by googling the zip code. Also, looking at the performance of the schools in an area is very important. Good school districts always sell for more.

Secondly, property taxes vary between state, county and in places like Connecticut (where I grew up) from town to town. One buyer above mentioned buying in Detroit, properties there are very cheap. That is true and for a reason. Michigan has one of the highest unemployment rates in the country and also some of the highest property taxes. You can buy a beautiful 6 bedroom 4,700 sq ft mansion in the Boston-Edison area of Detroit for under $70,000 however the property taxes on that house are $10,000 per year! Keep in mind Detroit's population has declined every census since 1950.

As for Florida, yes there are HOA fees, but property taxes are a bit lower. Also, if you plan to live there you can get the homestead exemption on your primary residence and this will significantly lower your property taxes. Another benefit of Florida is they do not have a state income tax. However, home owner's insurance can often be significantly higher than in other areas of the country due to the threat of hurricanes. Many U.S. insurers will not insure homes in Florida. If you do buy in Florida, good places to invest would be towns such as Naples, Palm Beach Gardens, Coral Gables or Windermere. .

For new homes in Florida stay away from anything with Chinese drywall. This was a big issue in many of the homes built in the last decade. Also, be wary of buying short-sales as these have not yet been foreclosed and banks drag their feet with these listings. Even if you offer the asking price they will often not accept. A short-sale can take months to close.

Finally if you're planning on renting out properties. There are a glut of rental properties in many markets in the U.S. so your yields will not be great in many areas of the country. In lower income markets you may be able to get "Section 8" renters which means the state will pay you the landlord directly. However, there are strict guidelines to comply with and I have often found that Section 8 renters can trash a house since they are not paying the rent.

[Moby Jones]

Originally Posted by Albufeira

Buying a foreclosed property can have many advantages but I would say to proceed with caution.

Firstly always know the neighbourhood you're buying in. Because of the equal housing act realtors cannot and will not tell you if an area is "good" or "bad". I would suggest looking up the crime rate and demographics of an area by zip code. You can often do this by googling the zip code. Also, looking at the performance of the schools in an area is very important. Good school districts always sell for more.

Secondly, property taxes vary between state, county and in places like Connecticut (where I grew up) from town to town. One buyer above mentioned buying in Detroit, properties there are very cheap. That is true and for a reason. Michigan has one of the highest unemployment rates in the country and also some of the highest property taxes. You can buy a beautiful 6 bedroom 4,700 sq ft mansion in the Boston-Edison area of Detroit for under $70,000 however the property taxes on that house are $10,000 per year! Keep in mind Detroit's population has declined every census since 1950.

As for Florida, yes there are HOA fees, but property taxes are a bit lower. Also, if you plan to live there you can get the homestead exemption on your primary residence and this will significantly lower your property taxes. Another benefit of Florida is they do not have a state income tax. However, home owner's insurance can often be significantly higher than in other areas of the country due to the threat of hurricanes. Many U.S. insurers will not insure homes in Florida. If you do buy in Florida, good places to invest would be towns such as Naples, Palm Beach Gardens, Coral Gables or Windermere. .

For new homes in Florida stay away from anything with Chinese drywall. This was a big issue in many of the homes built in the last decade. Also, be wary of buying short-sales as these have not yet been foreclosed and banks drag their feet with these listings. Even if you offer the asking price they will often not accept. A short-sale can take months to close.

Finally if you're planning on renting out properties. There are a glut of rental properties in many markets in the U.S. so your yields will not be great in many areas of the country. In lower income markets you may be able to get "Section 8" renters which means the state will pay you the landlord directly. However, there are strict guidelines to comply with and I have often found that Section 8 renters can trash a house since they are not paying the rent.

www.crimereports.com is a very usefull tool as is Zillow. The former is quite an eye opener into how much crime there is in many US cities!

We bailed on Detroit at the last minute and bought investment propert elsewhere in the mid west. But this was really down to the new opportunity that presented itself at the last minute.

I find your comments on Section 8 interesting though. Tenanats can trash property anywhere in the world. It's a major risk of being involved with BTL. But Section 8 has a one strike and your out rule, which in theory is a landlords dream. I know there are issues with Section 8 tennants but these seem to be extremely rare, at least on the US forums. If they don't pay or trash the place they are now kicked out and not allowed to rejoin the scheme in all 50 states, so your comments surprise me.

What problems did you have with your tenants?

[Albufeira]

The issue I had with Section 8 tenants was that they went out of their way to destroy the property. Meaning when their lease was up the place was filthy and the deposit did not cover the damage done. A co-worker of mine had a property where his tenants took damaged the gas stove in the kitchen and then filed a complaint that his apartment was not compliant. I'm sure there are some good Section 8 tenants out there, but most landlords I know want to avoid it all together.

Another trend I've seen happen in neighborhoods is once one Section 8 renter comes in many more start to move in and the value of the neighborhood goes down.