US lending to foreign investors

First time was in Michigan (north of Detroit, Troy), second time was in Colorado (Englewood near Denver). Both were for the companies I worked for.

 

I understand that Colorado is beautiful.......and know very little about Michigan other than its ex-auto industry.

 

Insurance is expensive in USA, and you should never claim unless the house is completely demolished otherwise you will almost find it impossible to insure again, this is why we purchased in sunny climates

It's about timing, purchaing in USA foreclosure properties made sense 4 years ago because property in certain areas fell 70% and Au$ was 1.00+ at this time. Most of these markets have now recovered and with the Au$ at 70 it's a windfall

Australian property market is now starting to go from boom to bust, unless you purchased 3 years ago the environment is now higher risk. auction clearances are down and APRA is working, strategy for CG won't work moving forward

mtr

 

I know all this, but if it were great I would have refinanced my 9 properties in USA years ago and those with more experience who have many more properties am sure would have jumped in too, but it's not great that is the issue. Hard money lenders at 12% will not cut it for me

Texas won't cut it either because it won't be cash flow positive, taxes are higher in this State.

I don't think its a bad area to invest but risk makes no sense to me unless it provides cashflow, numbers don't stack up, if you believe otherwise great, love to see the figures, we can then all learn.

MTR

 

I wish I knew you a few years ago MTR, I purchased one investment property in USA - struggled with trying to get my head around lenders and to avoid the frustration I settled it in cash - it was only $40K. A few years later I sold it using an option contract - could not be bothered with it any more and no one really to bounce ideas off.

Investing only in Adelaide now so all good, but would have been great at the time to have one single person with a bit of knowledge about USA markets.

 

I was fortunate to meet up with @Karina in Atlanta and also help from @Handyandy, they had been in the market at least 12 months prior to me jumping in, I was able to tap into their expertise.

MTR

 

Agreed - for an investment property, I would stay away from a hard money lender as well. Particularly, when there are soft money lenders available, why bother.

For the sake of argument, I'll use a property that is currently on the market. I chose it based on location - elementary school at the end of the street, close to major shopping area/freeways. It's in north west San Antonio which is one of the fastest growing areas.

5807 Cliffmont Dr, San Antonio, TX 78250-3938 | MLS# 1146599 | Redfin

Priced at $80,000
Potential rental: $1,100-1,200 a month
Property Mgmt: 8-10%

In relation to land tax, it is normally rolled into your loan and the mortgage company pays on your behalf.......and is added to your monthly repayment.

For the above property, 2014 tax appraisal according to the ad is $2050.

According to the article below, property prices in San Antonio rose 10%, compared to the national average of about 5%.

http://www.bizjournals.com/sananton...own-san-antonio-home-values.html?iana=ind_rre

 

Made enquiries with about 20 brokers in Chicago over the weekend... just to see what rules are in Illinois.... most of them said they couldnt source foreign income loans. But I had a few positive responses...

IL mortgage, refinance, mortgage refinance, home refinance, purchase, mortgages, home loan, mortgage rates, refinance rates, home loan rates, mortgage calculator, Chicago, Arlington Heights, Buffalo Grove, Long Grove, Wheeling, Palatine, Addison, Lombard, Mount Prospect, Schaumburg, Naperville, Glen Ellyn, Winnetka, Skokie,

-If no Social Security Number is available, borrower must have a passport & ITIN issued,
-Max Loan To Value is 50% , so you would need at least 50% down payment
-43% max Debt-to-Incom
-Reserves required for all Real estate owned (US and non-US) - 12 months for all properties
-No property type restrictions (condo & non-warrantable condo ok)
-2nd home pricing given to properties in resort-type areas, otherwise priced as NOO, but you’ve already indicated that this is for investment properties,
-$100K minimum loan amount.
-Income and Assets need to be verified in English. If not, they must be translated using a US based company (www.link-translations.com).
-Asset depletion available for eligible borrowers



Our Professionals & Locations | Wintrust Mortgage

Minimum Loan Amount $100,000
- 50% LTV on Foreign National Investment Properties
- Up to 60% LTV on second homes in vacation areas
- Up to 80% LTV if new job is in the US with work visa, offer letter and 1 paystub prior to funding
- Cash-Out Refinances - 50% LTV
- 1-4 Unit Properties
- Need a TIN or SSN prior to close
- Need valid Passport or Visa allowing entry into the US
- All Income and Assets to be verified
- 3 Year Work History
- 12 months PITI (Principal & Interest, Taxes and Insurance) in reserves


Home - Box Home Loans

65% LTV.
100K minimum loan
They didn't provide any other details. I have emailed them again for more detailed criteria

 

Excellent resource Euro, thank you. Good on you for sourcing that information.

 

if there really is a 65% deal available, makes things much more interesting....

 

=

That's great Euro, we just sourced finance too.

We wont need income verification, which is the biggy for me, many investors cant do this one as too many hoops to jump, much more of pain in US.

Also, many lenders will only lend in a particular State and wont touch lower end stuff. Love to know what markets they will lend in. Atlanta is a very difficult one, as many lenders will only lend in North Atlanta because this is the higher end stuff, but of course not cash flow positive and where investors have purchased.

It will also come down to the valuation, this is another big one.
If you are buying in an LLC which is what US accountants recommend and have several properties tied up to one LLC, we know some banks will take all the assets in the LLC as security... ouch

Also anyone buying in a Trust, which we did is not something banks in US will look at because of the risk. It needs to be taken out of the Trust and this will impact and in Australia, stamp duty will need to be paid.

Keep us posted. I look forward to further progress on this

Where are you buying? I had no idea you were keen on US.. great stuff


I just settled on another property this in Atlanta, there are still some good deals around.

All the best

MTR

 

Hi Euro
The only problem with this as I see it is if you do not have any properties in USA or US$ it means you will have to fund the shortfall (35% funds) with Australian $, this is huge because of the currency play.
In effect that will be at least 30%+ on Australian $ to convert to US dependent on the day, if that makes sense.

MTR

 

Conversion rates are always going to be a factor. Just the nature of the beast . You could buy when its parity, and sell when its 60AUD per Greenback, or the other way around... or anything in between - it's something you cant control.

 

I agree, but it effects the bottom line that is the problem and at the moment Aussie$ is down.

If you were having to dip in $50K US $ and then closing costs, legals etc. you could be close to having to dip in another $20K Australian$.

I just wish I purchased more when the Aussie$ was at parity.

MTR

 

Euro73. I know the the exchange rate between the US and AUD isn't currently enticing.....and it may not improve anytime soon. However, the flip side is, if you earn in USD, you can take advantage of AUD weakness.

You need to access your own risk tolerance......as well as weigh up and do a cost benefit analysis between local opportunities and the US.

The US is a huge market and I suggest that perhaps you don't get focus on just your favourite city/state.....but explore the best options for you.

You need to consider entry price, return on your investment, as well as financing options.....and weigh them up equally before making your decision.

I am not familiar with the Chicago market......however, I do know that you can receive financing with as little as 25% down in Texas.

As I said, after you do your cost analysis, you can figure out is 50% down in one state better than 25% in another state in the US. Or perhaps, is investing locally in Australia a better option.

 

MTR - who did you manage to source finance through?

Can you elaborate on the detail (costs, LTV, IR% etc?) thanks

Blacky

 

Personally, I like to go against the current trend........and look at current value and future potential when making decisions.

For example, in San Antonio, I knew that grow areas are in the north west suburbs and they are priced accordingly.

However, I also know that the downtown distinct, which has been much neglected over the decades, is seeing a resurgence in government and private investment.

My risk tolerance would have me look into these neighbourhoods .....but things like crime rates and lack of support structures and government services, would have many others run the other way.

I guess it is the difference between short term rewards......and potentially greater long term rewards. And at the end of the day, there is no right or wrong answer.......other than what you want to achieve and the kind of gamble you are willing to take.

 

Will pm you

 

Hi OiT

I think if are happy and have had success with your choice that's all that matters, well done.

I can only talk from my experience and what I have done and what has worked for me.

We did not choose Texas at the time because it did not give us cash flow positive income to reduce risk investing in US and taxes were too high and there was too much land which would impact on growth as new stock would be an issue.

My $500K investment in Atlanta is now worth $1,400,000 started in 2011, I honestly can say I could not achieve this in Australia, so I am pretty happy with the short term gains. I wont be selling because my yields are over 20%+


All the best, I think US is great and there are still opportunities for those with US$

MTR

 

I agree with you. Investing is always about looking for the next growth option that can provide you with an increased profit opportunity. At the end of the day, it is based on personal opinion and experience, i.e. what you know.

We're here to share our opinion and experience.

Unfortunately......we can't go back in time. I wish I had invested in Atlanta back when you did. But we can't. So we can only make our best guess assessment going forward.