5 Essential Steps to Undertake Before You Invest in the US Property Market

Written by Noah Ansa

This article is particularly written for the foreign investor who wants to invest in the US Property market. Right now property prices in the USA are at an all-time low. You could even say they are at “give away prices”. It has become so enticing to buy as you don’t even need a loan, you…

This article is particularly written for the foreign investor who wants to invest in the US Property market.

Right now property prices in the USA are at an all-time low. You could even say they are at “give away prices”. It has become so enticing to buy as you don’t even need a loan, you can just use whatever cash you have lying around! Also, those poor unfortunates who had their properties foreclosed on now have to live somewhere so have joined the rental rat race, so vacancy rates are also at an all-time low.

Now before the bottom fell out of the housing market, yields on properties, especially multi-family dwellings were amazing for the investor. It was possible to get yields as high as 25% and sometimes more which made investing in the USA a much better option than investing at home. These yields continue to be extremely high….on paper. However, like any sensible person looking for a secure investment, you need to do your homework before you even get excited and commit to investing.

That’s why the next five steps are essential; otherwise, you could be getting yourself into more trouble than it is worth.

The first thing you need to decide is where to invest. There are many popular places in the states that offer multi-family houses, which have the higher yields. However, you must consider the following. Is the area flood prone and is the house free from the dreaded black mold? Is the area prone to typhoons or hurricanes? And if so can you get insurance and is the house structurally sound? Is the house is an area that has severe winters with average overnight temperatures of -13 degrees for weeks on end? In these places the age of the roof and condition of furnaces are paramount.

Secondly, you must research all the taxes and hidden costs that come once you own the property. Knowing the right questions to ask the selling agent is important as each state in the USA has different taxes like school and city taxes. Also just because the house is a multi-family dwelling doesn’t mean that the tenants pay for their own electricity, water, sewerage and garbage removal. So you must ask up front so you can add these costs to your calculations. It is nothing in the colder states to have heating bills of hundreds of dollars each month. If the property is vacant you have to keep the water pipes heated as well or they freeze and break leading to even more expenses that you didn’t expect.

Thirdly you must find yourself a property manager who can handle the day to day issues that arise and the collection of rent. This is not as easy as it sounds. American property investors tend to live near their investment properties and manage them themselves. This means that businesses that profess to be property managers are often not experienced and have a very different idea of what is expected from them compared to say property managers in Australia. Rent is usually collected in cash unless the tenant is on Social Security payments. Collection of rent in the USA is still predominantly done by knocking on the tenant’s door and asking for the rent. This means if the tenant doesn’t answer the door there is no rent collected.

Property managers do not generally use a computer program to enter data like rent collected or maintenance done. Issuance of monthly statements is rare. So you really need to have your own system in place and be in touch with your property agent regularly to keep on top of what is coming in and what is going out.

Fourthly you will need to have a bank account set up in the USA before you start investing. This is best done in the states and is relatively easy if you have all the relevant identification to start with. You will need to keep in mind though that not all states have branches of all banks in their towns. And not all property managers can make deposits into all banks. Internet banking is not as sophisticated in the USA. Like the collection of rent, bank deposits are done in person so if your bank doesn’t have a branch in the town where your manager is then it becomes a problem.

This brings me to the last essential step before you part with your hard-earned dollars. Go and see the property in person before you buy. I cannot stress this enough. You need to see what condition the property is in for yourself. Confirm that it has a furnace if the selling agent says it has one. See what condition the house is in, how the tenants are treating it, what the neighborhood is like and check on what maintenance issues if any, there are etc.

These are just a few of the steps you should take before you invest in the US property market as a foreigner. If you follow these steps you will be on your way to determining if your investment is really as good as it seems.

About the author

Noah Ansa

He is a business Coach, Web Designer, Writer and Information Marketer. He is always interested to help small businesses use social media to build brand credentials, promote business relationships, deliver value, manage web communications, and increase revenue.

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