Challenges in US investment

Hi All,

I recently came across an sales pitch from a BA where it was mentioned that they are buying in Detroit (USA) in the range of USD 60k with rental yields of 19%. I have come across a lot of stuff with people buying properties in USA but it seems too good to be true. When buying is so affordable, why would people pay so much in the rents to yield 19%.
Have people on our Forum have actively purchased in US? What are the challenges and how hard is the process? If it is really feasible, is there a harm to mix US properties along with locals in your portfolio. Views from PCers.....

Thanks in advance!
Nish

 

If you are going to make an investment, you want that investment to appreciate over time, and to produce income while you hold it. However, the future prospects of Detroit are pretty bleak. You can take that same money and invest in a house in other areas where growth is much more likely to take place and have a much better investment. If you pay for a house in Detroit today, there is no assurance that it will be worth more in five years, and could even be worth less as it is still a very volatile risky market.
Further, there also a number of company setup costs to consider and the tenant has a lot more rights in the US than Australia but if you are seriously looking into the US, I'd suggest you look to Texas or Atalanta.

 

Thanks for your inputs @Mr Dabolina
Probably buying outside could be a later part of the strategy then once I have some equity from the local IPs and also more confidence and knowledge

 

Wow sounds like this BA should start an unlisted reit, capture the 19% and just pay the investors 10-12%? Amazing stuff.

 

This may help
US - Atlanta, GA - USA Property Investing

 

Have you read about Detroit & watched over the years ? Do you know what Detroit is famous for ?

Frankly, I think when the dollar was above parity was the time to get into the US in *select* places, not just anywhere, 19% return may be no good if 90% of people cannot pay, so really look closely.

 

From what I have read .... there have been those that have made it work but they will be living in Detroit, know the beast they are dealing with. But even experienced US investors state its a very tough market to work in, same as Rochester NY. Chances of foreign investors failing would be high I expect, not a market I would touch.

There are great markets in US to play in that are much lower risk which provide high returns but its like everything you have to find them and then comes more work.

MTR

 

Indeed. Like this poor bloke. Detroit lottery millionaire guilty of Australian's murder

 

That is the one I was talking about in another US thread....so if they can't pay, you may be playing russian roulette if you force the issue....

 

I thought the same as well, but there are other ways to work around this.

 

US is a big place, this was very sad scenario, but I also wonder whether he purchased in the hood??

 

I wouldn't do Detroit with the AUD where it's at... at least in the past with the dollar above parity you're in the money market AND the property market = win/win.
Now? - You're playing the property market (in a risky market) with a money market that won't do you any favours - how much lower can our dollar get to make investing in the US viable? When our dollar goes up, the Aussie dollars you sent to the US won't be worth as much, so you'd be losing money. Unless, of course, you converted your money back when we were at 1.06!
This is why the Chinese investors have been spending insane money on Aussie property - they're making money just on the currency, let alone the property!
MTR had it right with Atlanta five years ago!

 

Im not sure you could have sounded more "upperclass white girl" if you tried

 

watcha talkin 'bout bro ...umm .... cuz ...

Cliff

 

LOL... OK, Bro

 

Thanks for all the inputs coming through!!
@MTR, thanks to the link to your post. It is really informative ...