Although the number of foreclosures has dropped in the United States, those that are still becoming available are so lucrative that they have been attracting the attention of foreigners who are investing in property.
Among those who are most interested in investing in the USA are Australians. Several Australian investors have recently entered the U.S. housing market after only a minimum of research and training in foreign property investments.
While some of these entrepreneurs are jumping into the waters on their own, many others are aligning themselves with specialized real estate agents and foreclosure experts to simplify the process.
Investing in Property in the USA
Australians and citizens of many other foreign countries are beginning to understand that investing in the USA can lead to high returns. One of the best investments to make at this time is foreclosures and other existing properties, which can bring in annual returns of up to 20 percent.
Currently, properties in several U.S. cities can be obtained at bargain prices, and the market is set to grow continuously through 2018. However, this opportunity for profit has a limited timeframe, and every delay will decrease the potential earnings to be made.
One of the biggest reasons why investing in the USA has become popular with Australians has to do with the housing bubble that led to the Great Recession. In the early 2000s, up until 2007, lenders were qualifying nearly everyone who applied for mortgages, and they often required very little in the way of a down payment. The lenders would then sell these mortgages to large investment firms, which couldn’t get enough of them to meet demand. The investment firms, in turn, packaged the mortgages into securities and offered them to the public. Nearly everyone made money in the process, but the situation became unstable.
Thousands upon thousands of homeowners soon began to default on their mortgages because they couldn’t afford the payments, and several large financial institutions went bankrupt virtually overnight. Property values began to plummet as the market became flooded with foreclosures, and the economies in the U.S. and countries around the world went into a deep recession. Now, however, the U.S. economy and housing market is starting to recover. Homes of all types are still priced extremely low, but they are increasing in value every month.
Reasons to Invest in U.S. Property
• The U.S. is the richest country in the world, and it has the largest economy in the world, which makes it more stable than many other countries.
• The U.S. is not only economically stable but also politically stable, and it is friendly to non-resident investors.
• Properties can be found for as little as $30,000, and those worth hundreds of thousands of dollars may be purchased for only $150,000.
• Properties in the U.S. are producing steady cash flow, and some homeowners are experiencing yields of up to 20 percent each year regardless of appreciation in value. This means that an investment of $100,000 may return a profit of $20,000 in a single year in addition to the profit realized from the increasing market. According to the U.S. Federal Reserve, housing prices increased an average of 10.2 percent in 2012.
• The Australian dollar (AUD) is extremely high against the U.S. dollar (USD), which creates an increase in profit from the forex market when selling in the U.S. and converting USD to AUD.
• Australians who own U.S. property may count trips to the U.S. as a business expense for tax purposes.
Buying a U.S. Investment Property
Buying property in the United States is relatively simple, but following a few guidelines can make the transaction run more smoothly. Australian investors are urged to take their time to research the market in several U.S. locations and to research specific properties and neighborhoods once a few initial selections have been made. Several resources are available in Australia that will teach new investors how to enter the U.S. property market and provide listings of properties for sale.
When an Australian investor is ready to purchase a property, he or she should prepare to navigate the U.S. legal system and the Internal Revenue Service (IRS), which is the federal agency responsible for collecting taxes. A few ways Australians can protect themselves and prepare for investment buying are as follows:
• Open an account with a bank that handles foreign transactions.
• Create a limited liability company (LLC) so that purchases can be made through a corporate entity.
• Research tax laws or hire an American certified public accountant (CPA).
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.