Buying Property in USAThis blog follows a journey of a foreign investor who is Buying Property in USA, includes tips and important info for investors. Find out how to buy house in USA!

Nicklin Property Management – Las Vegas = BAD experience

This story isn’t just for people interested in Nicklin Property Management, but it can give you some information about property management companies in general and about their bad practices. When searching for a Property management company in Las Vegas, I got a recommendation to Nicklin Property Management on Trulia. When I came to Las Vegas, I went to visit them and the people there were very nice. They explained to me that they are the biggest Property Management company in Las Vegas with over 4000 properties and that they have very low average vacancy rates etc etc. It sounded all so good and so I made a mistake – I didn’t ask for references to call. Also I didn’t follow the rule about big property management companies, which says to choose a small property management company rather than a big one, since (in most cases) your property will get more attention.

They didn’t charged me any monthly fee, however they charged $50 per week for advertising. They said that they would post my property on the rentalhomesplus website and that they would post it on a “one page” general ad in the local newspaper every 2 weeks. Not as a classic listing, but just as a part of their huge ad.

Their fees were a little bit higher but still ok. The set up fee was around $200, 20% of the first rent and then 10% from each rent following (but at least $70).

They also said that since they are so big, they have really favorable prices with external handymans and other companies.

I signed the papers and sent them $500 (set up fee and money for advertising) and then the problems started.

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Finding Property Management company

Part of investing and buying property in USA as a foreigner is finding a reliable property management company. As a foreigner, you can’t be present in the location of your investment property and therefore you don’t have the choice of doing the landlord by yourself. Using a property management company doesn’t have to be necessary too expensive and after all it is much easier for the investor, so he can concentrate on rather the investing part than landlording. However finding a reliable Property management company may be harder than it seems.

For sure rule #1 will be to ask around and get some recommendations for local property management companies. I have used Truila.com and asked around.

Rule #2 : You should choose rather smaller companies than bigger. When the company has 4000 properties, your property won’t get so much attention and it will be hard to get some custom requests done.

Rule #3: Pick at least 2-3 property management companies and compare them. Ask for references to 2-3 current tenants and 2-3 current investors (possibly the ones who joined this year, and own the same type of property as you – condo/house). Call the tenants and investors and ask them good questions. You don’t have to call to all of them, I usually called just to 2 of each. Ask them not just weather the “property management company is good”, but more detailed questions, like:

Asking investors:

– When did you hire this company?

– Do you own a condo or single-family home?

– How much time did it take for the company to rent out your property?

– Are they often charging you some fees for smaller repairs?

– Did the company have to do some major repairs before they started renting it out? Did they do a good job?

Asking tenants:

– Is the company treating you well?

– Do they always fix any problems fast – within 1-2 days?

– Do they answer their phones on weekends?

Rule #4: Try to call the company on the weekend and see if there is somebody who answers the phone, or if there is at least some reasonable voicemail message and then they call you back during the weekend. I found out that majority of the calls from potential tenants are actually coming during the weekend and many property management companies simply don’t pick up the phones.

Rule #5: Fees – usual is 10% of rent, $200 – $300 set up fee. I don’t recommend companies who charge you some fees when the property is vacant and actually I don’t even recommend much letting them charge you fees for every week of advertising. There are companies who advertise your property on a few websites for free (craigslist, rentalhomesplus, their own website) and some will charge you $30 every week for that. Another thing is if they offer you some additional advertising for some fee. Real Property management Las Vegas offers advertising your property on 200 websites for $200 for example.

This weekend I will write about my personal experience with property management companies in Las Vegas and Phoenix. Mainly about my bad experience with Nicklin Property management.

What I have bought in Las Vegas

As I already have written in the Buying property in USA blog, there are many buyers in Las Vegas and huge bidding wars on all the cheap properties. I spent most of the 3-week stay in Las Vegas, driving around new properties on the market, visiting them with my Real Estate agent and placing offers. In total I placed more than 25 offers and up until the last day none had been accepted. One third of them were declined during the time I was there and the rest was still pending. Since there is so many buyers, the sellers know that they don’t have to hurry so much to sell the property. They’d rather wait a few weeks, before making a decision. It was driving me crazy, that I spent so much time there and hadn’t got any offer accepted. Towards the end of my stay, I had been placing higher and higher offers (usually between $10,000 to $15,000 above the listing price). {Click the READ MORE button to continue reading about buying property in USA}

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How I bought a property in Phoenix

I had 3 weeks to buy two properties in two different cities – Las Vegas, NV and Phoenix, AZ. Buying property in USA in these two cities has an advantage, they are less than 6 hours away from each other by car! Therefore approximately after 10 days spent in Las Vegas, I left early in the morning to Phoenix. Similarly as in Las Vegas, I have found my Real Estate agent in Phoenix via Trulia and I was already in contact with him for a few weeks over the phone.

NOTE: When I was calling to Real Estate agents and mortgage brokers from Europe, I was always using skype. You can create your own number and for really low monthly fee (around $5 a month) you can have unlimited calls within US and Canada (home and cell phone numbers).

I met my Real Estate agent Joe and we went fast through the newest REO’s in the MLS database. We checked it on my computer in my motel room. We picked the best 6 of them and he drove me around them. He gave me a lot of information about the locations and his personal opinions on them. I did the similar things which I have learned in Las Vegas (grading system for the properties etc,..). In the afternoon we were done and I had decided to put in 3 offers.

Real Estate market in Phoenix isn’t so full of buyers and is offering cheaper properties than the Las Vegas market.

It doesn’t have sense to look at the properties for less than $20,000, because they are always in really bad neighborhoods or in really bad shape. I was looking for properties around $30,000. The good thing is, that since there aren’t so many buyers in Phoenix, you not only have a chance to buy the property for the listed price, but more you can even negotiate a lower price or some repairs made by the seller. (This is not the end of the article, click on the read more button to see the rest.)

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Buy House in USA for a good price = Bidding wars!

In this post I will continue my story of buying property in USA this summer. As I already said, I have spent 6 months of preparations and then finally I got my tickets from Europe to USA. When I arrived to Las Vegas, I rented a car and got accommodation. Accomodation is super cheap in Las Vegas – I was living in different casino hotels in the Downtown LV always for less than $20 a night. If you would be looking for cheap hotels – try kayak.com, it worked the best for me.

The first morning I got a Tmobile plan for my iphone and then met my new Real Estate agent – Jodi. She was great and had similar work attitude as me – we both kept everything very organized and exact. She already had 10 interesting properties prepared for me and we have driven around 4 of them already the first day.

She explained to me that since there are quite many buyers already on the market, the properties never sell for their listed prices. There are bidding wars! On each cheap and nice REO property there are up to 20 offers from potential buyers. She told me that if I want to win, I will have to put up for example $10,000 more than the asking price. I couldn’t believe it, and I was hoping that I will be able to get it still for less.

During the 3 weeks I was looking at many condos between $20,000 – $35,000 and putting offers on them. I always got a list of new 30-40 properties every 2 days in this price range and then did my homework – I have checked zilpy.com for estimated rent, I counted ROI potential (Return on Investment). When my agent didn’t have time, I have also jumped in the car early morning and drove through the locations to make notes about the neighborhoods (I was grading them by numbers 1 – 10). Then I had the best 3-4 properties which I have visited with my Real Estate agent every day and put down in average 1 offer. Buying property in USA is obviously quite a bit different than in Europe.

Important things to look for when checking properties are:

– location – even though your Real Estate agent can’t usually talk much about the area (due to their policy), you should have your eyes open and search things online, to see which areas in the certain city should be avoided. You also should check how far is the certain area from the downtown, highway etc.

– neighborhood – drive around your potential condos by yourself without a Real Estate agent to save some time. Look around, see the people, shopping centers, too busy streets. Look in the community if possible (when gated, usually I just waited and drove behind some resident’s car) – check club house, pool and “for rent” signs. I would always take a picture of the “for rent” sign, and sometimes I called and ask how much the owners were asking for and for how long they were trying to rent. I also tried to talk to the residents in the communities – about the community, noise, criminality and vacancies. All these information give you better idea of the neighborhood and then you can give it a grade.

– inside – when you finally get inside of the property with your agent, look through all of the rooms, take lot of pictures. Check bathrooms and kitchen for mold. Check the carpet and paint (mark it in your notes, if it seems to be necessary to change some of them). These all are the extra cost which you have to count with when doing your final numbers. Mark down what all amenities are included (washer, dryer, fridge, stove,…). Sometimes I also checked AC. Be prepared that the last owners sometimes leave the condo in a huge mess. I have seen rotten food, not flushed toilets or used condoms in many of the condos. These things can be potentially good for you, because many people are disgusted  and don’t even bother checking the opportunity = less offers. Extra $200 spent on the cleaning can save you few thousands $!

After visiting the condos I would have sat down to go through my notes to decide if I should put an offer on each of them. You can put as many offers as you want and actually that is the best way. You shouldn’t put in one offer and hope that the seller agent will call you in 2 weeks. Put as many reasonable offers as possible. In the beginning I was trying to put low offers – i.e. just $5,000 more than the listed price etc. When the time was going by I was putting in higher and higher offers. Once I even put $40,000 offer on a $20,000 listed condo – and I still didn’t win!

NOTE: Always end your offers with a $100 or $200. For example $40,100 – it can be the extra $100 which will make your offer the winner!

Even though I was buying cash, which is much better accepted than offers with financing (mortgage), my offers just weren’t good enough. You have to count on 1 – 3 weeks for the sellers to decide on the offers. That’s a long time and you usually can’t just wait and hope. Therefore you have to be searching still for new opportunities.

Next time I will write about buying property in Phoenix, Arizona and how I got finally accepted offers in Las Vegas. Stay tuned on Buying Property in USA blog! Leave comments if you have any questions.

I bought a property in USA!

Thanks to everybody who was reading my blog and was adding comments to my articles – to motivate me! I was extremely busy the past few months with work and I didn’t have chance to add new blog posts here. Today I checked the google analytics and I couldn’t believe how many people have visited my blog yesterday. It was over 100 (mainly Australians), so I told myself that I have to start writing again about buying property in USA by foreigners.
As you could have seen here, I bought a ticket from Europe to Las Vegas this summer for just 3 weeks stay with a vision of buying property in USA!

Financing

Before leaving I was actually trying to figure out financing. It took me 3 months and hundreds of calls to various mortgage brokers, banks and lenders all over USA and in the end I still didn’t have anything. By that time it was simply impossible to get a mortgage as foreigner. And if somebody was doing a mortgages for foreigners, they had a requirement of minimum $70,000 loan for one property. With 70% LTV (Loan to Value), that would make it possible for a property for minimum price of $100,000. However I was going to buy properties for $30,000, so this wasn’t obviously my option. I got to a situation where my last option of getting some financing in USA were hard money lenders with very tough terms (short term 3 year loan with 12% interest wasn’t an exception). I did my calculations and with my estimated appreciation of the really cheap properties I was going to buy, it still made sense to get even such an expensive financing. Then I thought – why I should be giving such a great interest rate to some people I don’t know. I asked around and I found a friend who was willing to borrow me $40,000 @10% for 5 years. I had savings of another $40,000 – so in the end I had $80,000 ready by the end of July!

LLC

Another thing I had to take care of before leaving from Europe was the foundation of my real estate company – LLC. I have done quite an extensive research and LLC is the best option from all possible business structures when dealing with income producing real estate. So forget about Inc.

There are also quite many disadvantages of owning the property just under your name as a personal property. You can’t deduct many of the expenses, so it’s more expensive, you are more liable if something would happen in your property, so it’s more risky and also the LLC is an American entity (even though it’s owned by a foreigner) and therefore it’s possible to have better financing possibilities in the future etc.

Founding an LLC is very simple if you use some of the special companies who do it for you. You should do it at least 3-4 weeks before coming to USA, otherwise you will need to pay additional fee for extra fast process. I have founded the LLC in Las Vegas, because in Nevada there isn’t any state tax (only federal tax) and it cost me:

$194 … Nevada LLC Organization
$129 … Nevada Registered Agent for 2 years (it’s mandatory to have a local agent)
$25  … EIN (Tax ID) filling (you can do it on your own and save $10)
$135 … Initial List (this has to be done within 1 month after foundation of LLC)

Which is less than $500 in total. I have used incparadise.net (Eastbiz), because they have been the cheapest and also I had a reference to the director John Vanhara. The staff was very friendly and I have also visited them in Las Vegas. They offer many more services which you might need or want – like US address etc. (I send everything to my CPA).

Bank Account

You will need a business bank account for your company. There was a list of recommended bankers on the incparadise website. I have read few reviews and decided for Larry Hehir in citibank, and he was great! It’s quite important to contact the bank before coming to USA, because they might require some paperwork you wouldn’t maybe take with you. For example they needed a proof of my European address – a telephone bill, which I wouldn’t take with me. It’s better to send all the paperwork before leaving.

Team

The last thing which was important to do before coming was finding the right people for me. I had just 3 weeks to do everything in USA and so I didn’t have time to lose. I have used Trulia mostly – and just asked around for a good Real Estate agents and CPA’s (accountants). I called a few and always explained them my situation and told them what I am looking for. Then I told them to send me a list of properties they would think would be good for me. Even though this was 1 or 2 month before coming – so it was obvious that those properties will be gone by the time I will arrive, it was important to know how the agents work and if they understand my needs. Important thing – in USA it doesn’t have sense to have more Real Estate agents in one city, because they all use MLS (Multiple Listing System) to see the available properties and therefore they all can show all the properties. It’s different in Europe. Before coming to USA I made already appointments, so the first morning I was already meeting Real Estate agent and my CPA in the afternoon.

That is everything I have done before going. I spent 6 months planning the whole thing and then I finally got to the plane and landed in Las Vegas. In the end I purchased 2 Condos and I have rented 1 of them so far. There were many things which surprised me and for sure I will write about them in next posts, so stay tuned on Buying Property in USA blog!

NOTE:
If you have questions about anything, please use rather the forum than comments, because it’s better structured and more people can find the questions interesting. Hopefully also more people who have some experience will be answering there. I am not any Real Estate expert, I haven’t studied this in school and I have just started. However I will share all I know and hopefully it will help somebody!

New Forum on this blog!

I have added new forum to this blog. There are quite many visitors on this website every day and we all have the same interest – in investing in US Real Estate. The best way how to find answer to any question is to ask the people who have the same interest and therefore I think that we could all share our knowledge an opinions on our new forum. You can access the forum through the link at the top of the page. I have created four main categories so far and you can add topics and posts even without registration. However I recommend anyone to register, because in future this will be mandatory anyway. If you have any suggestions for other categories, let me know.

Real Estate Investment Opportunities in USA

The US property market was the place where the recent credit crunch and recession started. Over ambitious lending to customers that did not have the ability to repay fuelled the expansion of the property boom in the early part of this century but also proved to be its Achilles heel once defaults and repossessions started to kick in and the financial markets began to realise that the underlying property behind the lending was valueless.

Property prices in the US have fallen dramatically in the past two years. Demand has dried up and new housing starts by builders have reduced to a trickle. Once booming and popular property areas like Florida, Las Vegas and California have undergone a rapid fall in prices of up to 50% as lenders dump their repossessions into the market in a hope to recoup something from their failed investments.

If you are an investor, this is good news! With the US dollar equally as weak as Sterling, exchange rates have recovered somewhat and buying in the US represents a fair investment opportunity compared to continental Europe where the Euro has strengthened considerably against the pound.

In addition, buying in the US is a relatively straightforward process. All the documentation is in English and the process is not too dissimilar to that in the UK. Beware, though, in that the real estate agent has a vested interest in the sale of the property and will not always have your best interests at heart. Find a professional and independent licenced real estate agent to work on your behalf even if you are buying property.

Getting a mortgage to help buy your property can be a challenge. Essentially you can try and borrow in the UK in sterling so you become a cash buyer in the US or try to arrange a US dollar mortgage through a local lender. Understandably, the market for lending is somewhat tighter than a few years ago so be prepared to hunt around and put down a sizable deposit whatever route you undertake.

If you plan to let your house in the US to earn some income whilst you or your family and friends are not there then you will need to make sure that the property is licenced for short term rental. Some districts prevent houses being let on a short term basis so make sure to check that your area is correctly zoned.

You will also need to register for a tax identity number with the Internal Revenue Service and, probably, set up a local bank account. You will almost certainly have to file a US tax return each year if you engage in any letting activity. As a property owner, you will also become liable for a range of taxes from real estate to regional tax charges. You may also find yourself part of a community and have one or more housing association fees to pay for the upkeep of common areas.

Link: property in Durham

Buying right now!

I am sorry that I haven’t been updating my blog lately, however I was busy with getting my business ready. I have been working hard on finding 5 properties and then I spent another few weeks in getting financing for them in USA. As you know, banks are not willing to lend too much, however I have succeeded even as a foreigner – I am getting 70% LTV 30 year fixed loan at 6% rate.

I am now founding a LLC, which will own the properties, since it’s better for tax optimization. I am flying to US in few weeks to close the deals.

If you are interested in finding out more about the financing and finding the properties, please give me a comments so I know that people want to know about this. It will be better motivation for me as well.

Thanks

Rental Yields & NOI – How to explore them?

Before buying property in USA, you have already done research of cheap REO properties on Bank of America’s website, then you have reseached prices in a particular location using Trulia.com, but you still need more information to be sure that the particular property will be a good investment. For this you have to find out what will be the rental yields and net operating income (NOI) of the property. Rental yield is a rent collected for the whole year less all expenses connected with owning your property. It is expressed in percents and it will help you to estimate your Return on Investment (ROI). To find out this marked data you would either have to go through local newspapers and look for all the “For rent” ads in the area and for properties with a similar number of bedrooms, bathrooms etc. That would be really hard, right?

And here comes the new great tool, called ZILPY (www.zilpy.com). Zilpy is providing free Rental Comparative Market Analysis with data gathered from variable sources and it enables you to find rental yields of properties in your location, with similar square footage, amenities and property type. Go to the zilpy.com and select Investors section. In the search field type the location address, zip code or city (i.e. “247 N. Capitol Ave.,San Jose, CA  95127”). Here is the page which comes out: http://www.zilpy.com/US/California/Santa_Clara_County/San_Jose/Zipcode_95127/247_N_Capitol_Ave/0,0,1,0,0,0,37.36827,-121.8414,0,0 What important data can you find here? Well most important are the median rents for your type of property. In the left top module, you can choose “Single Family Home”, “Duplex”, “Appartment” and then also number of Bedrooms or Bathrooms. Click on UPDATE and see what Zilpy finds as a best fit to your specification. Then you can see pretty well what could be the expected rent!

Another important data are below in the Neighborhood information. You can see there the vacancy rate, renter occupied percentage (important), household income etc.

Hope you will like this great tool. I have many more tricks and tools ready for you! So bookmark this blog and stay tuned. More is coming next week!