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Buying foreclosure property in America

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  • Buying foreclosure property in America

    Hello, I am thinking of buying a proprty in either Florida or Detroit which has massively reduced in proce due to foreclosure. I'm from the UK and would like to know of any other UK residents have done this (and what their experience is). I am looking at a two bedroom flat for approx $30,000 and i would rent this out.

    I'm not sure if there are certain pitfalls I need to avoid or what (am in preliminary stages of reaserch into this) or whether to go through an estate agent in England or go diretcly to America. I have many other questions.

    Any advice anyone can offer would be gratefully received. Many thanks! S

  • #2
    Re: Buying foreclosure property in America

    We are just about to complete our first foreign purchase. A three bedroomed detached bungalow in Detroit. The purchase price is $44,000. The house has been proffesionally renovated and is guaranteed. The property is pre tennented and upon completion of our sale the tennants will sign a new 12 month deal under the US Section 8 HUD scheme.

    I can put you in touch with a company who handles these sales if you like. PM me if you're interested. The net yield of such an investment after paying out for :-

    Management fees (10 of rental)
    Buildings insurance (Optional)
    US property taxes

    is still a whopping 15.3%. The tennant is effectively a US federal sponsored individual. I've tried to find issue and fault with investing in the states, but done properly I can't understand why I'd look to BTL in the UK at this present time. Detroit is our city of choice. Florida often attracts HOA fees which tends to kill the yield.

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    • #3
      Re: Buying foreclosure property in America

      buying in the usa if done correctly is a sound investment

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      • #4
        Re: Buying foreclosure property in America

        Originally posted by overseas guru View Post
        buying in the usa if done correctly is a sound investment
        Yep that's right! Millions of empty repossessed houses made a fortune for their previous owners did they?

        By the way Florida had hurricanes and the odd oil spill too.
        BRAND NEW HOMES
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        • #5
          Re: Buying foreclosure property in America

          Originally posted by New Homes Expert View Post
          Yep that's right! Millions of empty repossessed houses made a fortune for their previous owners did they?

          By the way Florida had hurricanes and the odd oil spill too.
          You clearly know nothing about the US property market then.

          Those empty repossessed homes now represent a fantastic opportunity for property investors. With rental yields offering 15% + in some instances I'd agree with Overseas guru.

          And if you don't want to purchase a buy to let, there are many schemes to buy a repo, rennovate and sell it to a tennant on a rent to buy scheme resulting in a 25% profit within 6 months. Thats 25% after closing costs. Perhaps you'd be better doing some research rather than posting smart ars** comments which only highlight your own ignorance. lol

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          • #6
            Re: Buying foreclosure property in America

            I was looking into buying property in Florida i think its an amazing place and after reading these posts has inspired me even more great opportunitys and you get so much more for your money than you do in the uk..
            We have debt solutions to help you get out of debt problems

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            • #7
              Re: Buying foreclosure property in America

              Originally posted by jodieB View Post
              I was looking into buying property in Florida i think its an amazing place and after reading these posts has inspired me even more great opportunitys and you get so much more for your money than you do in the uk..
              I love Florida. But from a pure investment point of view it may not be the ideal location. Obviously it depends on your own strategy. Florida property looks good for long term capital gains, but not income. The HOA fees put a real dent in your margin.

              Of course if you want it as a holiday home you'll actuially use, all of what I've written is irrelevant! lol

              We're about to make our second purchase. Plans of property redevelopments in the UK have now been scrapped completely as the opportunities in the US are just so much better. We're trying 'flipping' this time.

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              • #8
                Re: Buying foreclosure property in America

                Buying a foreclosed property can have many advantages but I would say to proceed with caution.

                Firstly always know the neighbourhood you're buying in. Because of the equal housing act realtors cannot and will not tell you if an area is "good" or "bad". I would suggest looking up the crime rate and demographics of an area by zip code. You can often do this by googling the zip code. Also, looking at the performance of the schools in an area is very important. Good school districts always sell for more.

                Secondly, property taxes vary between state, county and in places like Connecticut (where I grew up) from town to town. One buyer above mentioned buying in Detroit, properties there are very cheap. That is true and for a reason. Michigan has one of the highest unemployment rates in the country and also some of the highest property taxes. You can buy a beautiful 6 bedroom 4,700 sq ft mansion in the Boston-Edison area of Detroit for under $70,000 however the property taxes on that house are $10,000 per year! Keep in mind Detroit's population has declined every census since 1950.

                As for Florida, yes there are HOA fees, but property taxes are a bit lower. Also, if you plan to live there you can get the homestead exemption on your primary residence and this will significantly lower your property taxes. Another benefit of Florida is they do not have a state income tax. However, home owner's insurance can often be significantly higher than in other areas of the country due to the threat of hurricanes. Many U.S. insurers will not insure homes in Florida. If you do buy in Florida, good places to invest would be towns such as Naples, Palm Beach Gardens, Coral Gables or Windermere. .

                For new homes in Florida stay away from anything with Chinese drywall. This was a big issue in many of the homes built in the last decade. Also, be wary of buying short-sales as these have not yet been foreclosed and banks drag their feet with these listings. Even if you offer the asking price they will often not accept. A short-sale can take months to close.

                Finally if you're planning on renting out properties. There are a glut of rental properties in many markets in the U.S. so your yields will not be great in many areas of the country. In lower income markets you may be able to get "Section 8" renters which means the state will pay you the landlord directly. However, there are strict guidelines to comply with and I have often found that Section 8 renters can trash a house since they are not paying the rent.

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                • #9
                  Re: Buying foreclosure property in America

                  Originally posted by Albufeira View Post
                  Buying a foreclosed property can have many advantages but I would say to proceed with caution.

                  Firstly always know the neighbourhood you're buying in. Because of the equal housing act realtors cannot and will not tell you if an area is "good" or "bad". I would suggest looking up the crime rate and demographics of an area by zip code. You can often do this by googling the zip code. Also, looking at the performance of the schools in an area is very important. Good school districts always sell for more.

                  Secondly, property taxes vary between state, county and in places like Connecticut (where I grew up) from town to town. One buyer above mentioned buying in Detroit, properties there are very cheap. That is true and for a reason. Michigan has one of the highest unemployment rates in the country and also some of the highest property taxes. You can buy a beautiful 6 bedroom 4,700 sq ft mansion in the Boston-Edison area of Detroit for under $70,000 however the property taxes on that house are $10,000 per year! Keep in mind Detroit's population has declined every census since 1950.

                  As for Florida, yes there are HOA fees, but property taxes are a bit lower. Also, if you plan to live there you can get the homestead exemption on your primary residence and this will significantly lower your property taxes. Another benefit of Florida is they do not have a state income tax. However, home owner's insurance can often be significantly higher than in other areas of the country due to the threat of hurricanes. Many U.S. insurers will not insure homes in Florida. If you do buy in Florida, good places to invest would be towns such as Naples, Palm Beach Gardens, Coral Gables or Windermere. .

                  For new homes in Florida stay away from anything with Chinese drywall. This was a big issue in many of the homes built in the last decade. Also, be wary of buying short-sales as these have not yet been foreclosed and banks drag their feet with these listings. Even if you offer the asking price they will often not accept. A short-sale can take months to close.

                  Finally if you're planning on renting out properties. There are a glut of rental properties in many markets in the U.S. so your yields will not be great in many areas of the country. In lower income markets you may be able to get "Section 8" renters which means the state will pay you the landlord directly. However, there are strict guidelines to comply with and I have often found that Section 8 renters can trash a house since they are not paying the rent.
                  www.crimereports.com is a very usefull tool as is Zillow. The former is quite an eye opener into how much crime there is in many US cities!

                  We bailed on Detroit at the last minute and bought investment propert elsewhere in the mid west. But this was really down to the new opportunity that presented itself at the last minute.

                  I find your comments on Section 8 interesting though. Tenanats can trash property anywhere in the world. It's a major risk of being involved with BTL. But Section 8 has a one strike and your out rule, which in theory is a landlords dream. I know there are issues with Section 8 tennants but these seem to be extremely rare, at least on the US forums. If they don't pay or trash the place they are now kicked out and not allowed to rejoin the scheme in all 50 states, so your comments surprise me.

                  What problems did you have with your tenants?

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                  • #10
                    Re: Buying foreclosure property in America

                    The issue I had with Section 8 tenants was that they went out of their way to destroy the property. Meaning when their lease was up the place was filthy and the deposit did not cover the damage done. A co-worker of mine had a property where his tenants took damaged the gas stove in the kitchen and then filed a complaint that his apartment was not compliant. I'm sure there are some good Section 8 tenants out there, but most landlords I know want to avoid it all together.

                    Another trend I've seen happen in neighborhoods is once one Section 8 renter comes in many more start to move in and the value of the neighborhood goes down.

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                    • #11
                      Re: Buying foreclosure property in America

                      I think the topic of Detroit came up previously on the forums, but despite the yield promises, the whole thing has screamed "experience investors!" to me.

                      Interesting to note Florida coming up - no one too worried about potential sea level rise from Global Warming over the long-term? And no one looking towards California?

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                      • #12
                        Re: Buying foreclosure property in America

                        The problem with much of California is though the prices did fall, they haven't fallen far enough.

                        When you do a search for real estate in the better neighbourhoods in California the prices are still very high in relation to the median income. There are bargains, but I caution any investors to do their homework on the neighbourhood they're buying along with the crime in the area. The city data forum is probably a good place to start.

                        For a savvy investor your best bet would probably be to buy in New York City, Washington DC or their environs as both cities have been on the upswing for the past decade. I've only visited Washington DC so I'm not as familiar with the market, but I did notice that this spring that there were many gentrifying areas like Columbia Heights. So I am going to limit my advice to New York City.

                        Many neighbourhoods in and around New York were once considered undesirable, Williamsburg in Brooklyn is a good example. You can look up brownstones that have sold this year for around $1 million that in the late 90s sold for 1/10th of that. Unlike much of the US the property market in the city has held up and crime is the lowest its been in almost fifty years.

                        The key to buying in New York is to choose an area that is adjacent too an up and coming neighbourhood. Also important is how accessible is the area to midtown and downtown by subway or train. You can usually tell that an area is going to turnaround when you see young artistic types and see coffee shops and art galleries opening up.

                        Some areas that are in the early stages of gentrification are Chinatown, Astoria in Queens and Bushwick and DUMBO in Brooklyn. However, gentrification in New York happens quickly so it's important to get in while the prices are still low.

                        Washington Heights, West Harlem 125th to 155th are places that I could see under going gentrification within the next 10 years. In the longer term even Inwood, Hamilton Heights, and Fort George in Manhattan becoming gentrified. In the Bronx Mott Haven and Port Morris would be areas that could be next. I know that there are people reading this thinking that this will never happen, but I never thought I'd see the day when Williamsburg and Park Slope were expensive neighborhoods. For someone with the capital I would say it is definitely a good place to invest in, but do your homework!

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                        • #13
                          Re: Buying foreclosure property in America

                          "a two bedroom flat for approx $30,000" - have you really seen such prices in Florida?

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                          • #14
                            Re: Buying foreclosure property in America

                            Originally posted by Helen_M View Post
                            "a two bedroom flat for approx $30,000" - have you really seen such prices in Florida?
                            I've seen plenty of condos in parts of Florida advertised at $30,000. Why do you ask?

                            Well we bought a 3 bed 2 bath single family residence (detached) in the mid west initially. We then bought a duplex (pair of co joined semi detached) in the same city. We flew out to visit last month to meet the seller / money man. His builder and to meet the owners of our property management company and tenants. We have three tenancy agreement all paying on time through Section 8 and the management company.

                            A warrnty repair was required on one and we were immediately reimbursed by the seller under warranty. On our visit we got to see homes purchased by the guys which were about to be refurbished. Properties half way through refurbishment and finished home with and without tenants for sale.

                            We then combined our visit with a two and a half week trip to Florida. The flights and hotel costs will completely wipe out our US tax liability as you are allowed two inspection trips per year per property. Which is cool.

                            So another purchase is on the cards. It's worked out really well so far. Banking, money transfers and paying property taxes has been straightforward too.

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                            • #15
                              Re: Buying foreclosure property in America

                              I think Miami beach would be a better option for you if you want to rent it later. A real estate agent may suggest you better. So I think you should contact with an agent.

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