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21 March 2008

Property Investment in the USA

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by Brian Turner

USA

Basic Property Investment Guide for the United States

The United States real estate market had been in an artificial boom for several years, fueled mainly by sub-prime mortgages. In 2006, the market began to correct itself and prices have slowed down. Still, the rise has not given way to decreases in most areas of the country. Appreciations still occurred around 3%.

Over the last couple of years, the US Federal Reserve has been lowering interest rates to try and stimulate the real estate industry. Higher rates in the sub-prime mortgages have forced a record number of foreclosures through out the country. The decrease in prices caused by interest rates and a large number of structures flooding the market means prices are ripe for investment.

The rental market in the United States has continually grown over the last decade. The prices have increased as well. Many of the rental properties offer up to a 5.5% yields on the investments. As the economy in the country continues to shift and settle, it is likely that the yields and opportunities for rental property will continue to increase.

Anyone can purchase land in the United States (except in the state of Oklahoma which limits purchases to foreigners to condominiums).

The largest portion of the transaction costs for real estate purchases in the United States typically falls on the seller (mainly because of the real estate broker fees). Buyers in the country can expect to pay around 2% of the purchase price.

It is extremely important that you consider hiring a lawyer when purchasing real estate in the United States. The process can be complicated and varies from state to state (and sometimes within the states as well). The attorney will help navigate the laws, review and negotiate contract deeds, initiate title searches and insure that the agreement will be beneficial to you. Attorney fees are negotiable, and are often a percentage of the purchase price.

Important legal terms & fees

Title Search – conducted to insure that the real estate being sold is the property of the seller – without encumbrances. Typically it will include a deed history, a research of covenants and limitations and conveyances that have been issued.

Title Insurance – secures the property from future claims and can not be obtained without a thorough title search.

Recording fees – paid to the government entities in the community where the real estate is located. These fees serve to register official change of ownership and are typically minimal.

Transfer tax – amount charged by government bodies when real estate changes possession. The amounts differ from state to state (with a few states imposing no tax).


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