Property in the United States is gaining an enormous amount of attention by foreign investors who want to expand beyond domestic investments. Not only are people in Australia looking to invest in USA property but also people from countries all over the world, including the United Arab Emirates, China, France and the United Kingdom.
One of the reasons for the high number of international investors is that the U.S. housing market is finally recovering from the 2008 mortgage crisis, and while home prices are still low, they are making steady gains each year.
The U.S. economy has not yet fully recovered from the recession, but all the signs are pointing to a slow but sure recovery over the next few years. Many expert economists have already crunched the numbers to report that home prices are on the rise, making now the perfect time for property investors. In addition, local real estate agents and casual U.S. investors are confirming that returns are currently high, and they have been gaining since 2009. The highest increases were in 2012, and this has prompted some investors to believe that the market will stop growing.
However, even though growth slowed in 2013, it is predicted to continue through 2018 at the very least. One of the drawbacks to investing in U.S. property is that not every market is gaining. Suburbs in several major cities have never fully recovered, and home values are falling.
Some of the cities that have been hit the hardest are Detroit, Houston, Phoenix and Seattle, all of which have seen declines of up to 70 percent. Houses that were once valued at up to $400,000 can now be purchased for $100,000 or less. However, these markets are also expected to recover soon, which provides a great opportunity for long-term investors, and anyone who wants to invest in USA property would do well to consider it a long-term investment.
Investing in U.S. property is a real no-brainer, and housing market analysts are saying that it is easy growth money, which is a term for buying an investment asset at the lowest possible price. After the purchase has been completed, an investor simply has to play the waiting game while the market cycles upward.
Many investors in Australia are reluctant to make foreign property investments because they mistakenly believe that the process is too complex to be worth the effort. However, when you hire a reliable investment company or international real estate agency, the process is very simple.
The top five reasons why you should invest in USA property:
1. Low initial investment
The initial investment required to buy U.S. property is actually very low. It is so low, in fact, that demographics that are not usually considered to be heavy investors are jumping into the market, including young adults in their early 20s and people on limited, fixed incomes, such as retirees. With prices starting at around $50,000 and down payments on mortgages much lower, the U.S. market is very attractive for investors of all types.
2. Favorable interest rates
Investing in U.S. property does not necessarily require a mortgage, but most investors make their property purchases with home loans. When buying U.S. property with a loan, the law requires that the loan is originated from a mortgage company licensed to do business in the United States. The good part about this is that interest on U.S. mortgages is generally two to three percentage points below the interest on Australian mortgages.
3. Low prices
Property prices are so low in many U.S. markets that they literally cannot get any lower. Some properties are already priced at the value of the raw materials comprising the structures plus the rural land value. At this price point, the market has nowhere else to go but upward. The trick is to have a knowledgeable and experienced agent who knows exactly where these homes are located.
4. Positive cash flow
Most of the profit experienced by property investors is from rent rather than from capital gains. The benefit for U.S. property is that most of it provides instant positive cash flow. This means that investors stand to make money directly after closing on a property instead of waiting several years for the market to improve. Homes that cost only $100,000 to $120,000 can command monthly rental rates of $1,000 or more.
5. Capital growth
Although capital growth should be considered a fringe benefit when you invest in U.S. property, now is the perfect time to experience large capital gains. To experience the highest capital growth, you only have to predict which cities and markets will recover the quickest.
Author: Simon Worthington
Simon is the International Sales and Marketing Manager at Ray White Surfers Paradise, Gold Coast, Queensland, Australia and Ray White USA, Atlanta, Georgia.