Buying property in the United States is generally considered a worthwhile investment for a variety of reasons, from the recovery of the American property market after the 2008 economic crisis to the handsome returns these investments can yield. Nevertheless, do not, under any circumstances, invest in property in the United States without conducting a series of preliminary tests to properly assess the transaction and to minimize possible risks. The need for housing in the American market is rising by about 1.2M units annually. People will also go after their work place, therefore will rent near big employment areas.
Mitigate the risk
In the American market where yields on rental properties generally provide a respectable and stable return, it is best to avoid one-time deals that do not provide positive, stable and long-term yields from the very beginning. Don’t get into any investment that is “on paper only”. Get only to those who are based on solid facts that are validated by a respectful entity such as a bank. Don’t get into development projects but rather into investments that yields from day 1. It is also recommended that you will invest in a project rather into a single family property investment. Single family investments have a high risk of getting into a loss where it is enough to lose the tenant for 2-3 weeks in order to cause serious loss.Multi family asset on the other hand are safer projects when the entire group is enjoying the risk mitigation of the vacancy rates that is very well known and taken into consideration in the business plan. This is a huge market in the US of more than 10M units where about 10% of the US population is leaving in. these are all for rent projects having an occupancy rate of about 95% on average where the rent is rising in about 3% year over year. The properties are fully managed by professional management companies and do not need your active involvement in managing them.
Choose the right property
Beyond examining the type of investment, you should also consider the property’s location and, most importantly, its proximity to a large employment hub, which usually means large cities that provide a guarantee of work for parents and quality schooling for children at any given time.
Two additional parameters about a property’s location to pay attention to are the region’s occupancy rate and earning capacity. The higher the region’s occupancy rate, the better an investment it is. For example, in Cicago, the occupancy rate is not lower than 93 percent. In Las Vegas, the occupancy rate is only 60 percent. It is important to remember that the regional occupancy rate cannot be divorced from the property you intend to purchase.
Bank financing is a guarantee of reliability
In most cases, it is preferable to involve a bank and leverage an American property investment, primarily to receive an accurate estimate of the property’s real value and the business plan validity from a reliable entity that will be objective
because it is part of the transaction. Of course, leveraging itself will help increase your profitability alongside the fact that the taxation laws in most states allow the use of leverage to offset the interest payment from taxation on it. The US banks have implemented tremendous regulation and are cherry picking the projects they are providing mortgage to. The same has happened in the UK on March Applying for a mortgage got much tougher last month, with the introduction of new rules that mean lenders will routinely ask nosy questions like how much you spend on booze each week or shoes per year, why you made that £120 online payment to a friend six weeks ago, and whether you’re planning any big holidays for 2015. (Mark Bridge, The times) so the fact that the banks are willing after their due diligence to provide a mortgage need to mean a lot to the investors.
Who manages the property?
Additional parameter to check before investing in American property is which local management company will manage your property and take care of all the necessary steps: rent collection, maintenance and repairs, municipal tax payments, etc., so you won’t have to worry about these issues. Make sure that they have skin in the game and have the same interest like you.
Choose your investment partner
A wise man said once: first find a partner, draw up a business plan and pick the right property. (Mark Bridge, Time)
It is hard to do all the above yourself. Especially when it is a little far. Therefore you should partner with someone who can really help you with all the above. It is highly preferable that it will be someone that will invest alongside with you rather than a brokerage or an agent that will not be alongside with you later on in the investment life.
You must also make sure that the investment company, through which you are make the investment, meets particular parameters: does is have a representative located in the UK, so you can always reach a physical person whenever you need to; a list of proven successes that indicate the company knows the business of providing a return on investment to its customers;
At the end of the day, keep in mind that acquiring property in the United States is a smart and worthwhile investment that is based on a transaction, where the considerations are, first and foremost, are financial. In other words, it all comes down to the rate of return you can get on the property: it’s the bottom line that will make the decision and not the property’s external features or proximity to the beach.