Sheryl Lee-Walters Managing Director CiTYR: The dream of owning a “buy to let” property is the goal of almost every property investor in UK;
however with such high property prices more and more investors have started to explore the option of investing their money in property overseas. The US has become the lead destination for such investor interest; as many find the passive income, healthy returns and strong regulatory environment very appealing. It is important to note that with any purchase of property overseas there is a degree of risk embedded, however if those risks are correctly managed the investment can be highly profitable.
According to Sheryl Lee-Walters, UK Managing Director at CITYR: “The fear of investing in property abroad is clear and understandable, but simple tactics employed by savvy American buyers can easily help UK investors to establish a safe guideline for a successful transaction. This guideline is important because there needs to be a structured approach to follow in order to make the dream of maximizing returns a reality especially when the asset is thousands of miles away, this is why we have developed the golden rules. ”
Here are seven golden rules CiTYR developed for UK investors who wants to make a safe investment and income from properties in the US:
1) 3rd party Due Diligence – “When buying a property, check for the existence of an independent 3rd company who will provide the due diligence, this company must not have an interest in the property itself. Their function will be to conduct a survey to examine the quality, the structure and the condition of the property; checking should include the business (employment/economic) environment in which the property is located, the renters and a history of the previous performance of the property.”
2) Performance Report – “Further to the due diligence report, do keep in mind that income-producing properties in the US are classified as “commercial property”; as such records are kept with the historical performance of the property. Therefore, if you are interested in investing, ask the seller to see current reports regarding the property, especially the financial data which should include: project costs, rentals, as well as maintenance and repairs. “
3) Management Company you can rely on – “It is important that the management company you use will have local representation in the US that handles the property and is very familiar with the environment and culture.”
4) Separate Due Diligence and Financing from an American Bank- “The bank financing the purchase of the property aims to minimize its risk and therefore conducts a strict financial examination of the property, which includes a thorough appraisal. Therefore, if you are going to purchase the property by receiving funding from a well-known and established bank significantly minimizes your risk – this is an important safety feature for your investment.”
5) Title Insurance – “Before you decide to transfer your money to the seller, do a title search, check that you have title Insurance from an external company that will allow the transfer of funds to the seller only after proper regulatory checks and registration of the property on your behalf.”
6) Transfer funds only through an escrow account – “Please ensure that you verify that the account in which you transfer your money into is an escrow account managed by an American attorney, authorized by the state which insures the funds (this exists only in the US). Never give funds to the broker/seller directly.
7) Assistance with tax authorities – “Be cognizant of the fact that being a UK citizen does not necessarily exempt you from paying US taxes. Therefore, any such investment should be accompanied by close supervision of experts in US taxes. ”
“There is no doubt that the US real estate market has become a windfall for large institutions in UK in recent years. There is no reason why private buyers and households will not enjoy the blossoms in the field “.