AUSTRALIAN property investors risk losing hundreds of millions of dollars after snapping up thousands of US housing bargains at forced-sale prices, experts have warned.
Emboldened by the soaring local dollar, Australians invested about $600 million in US residential property last year, according to the Washington-based National Association of Realtors, as overseas buying of US housing doubled.
But consumer advocate Neil Jenman predicts thousands of Australians will lose their money after unwittingly buying undesirable property.
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''It's going to be a calamity, for sure and certain,'' he says.
Many investors are being lured by agents promising unrealistic rental returns of up to 20 per cent.
Investment experts who spoke to The Sun-Herald, warn that swaths of properties for sale are in bad neighbourhoods where it would be almost impossible to get a tenant, and even harder to get your money back if you later decided to sell. In the past six months, Australian companies that help investors buy US residential property have reported a surge in interest.
Vincent Selleck of Byron Bay-based buyers' agent 888 US Real Estate says his business has grown five-fold since June.
The robust local dollar means Australians' purchasing power in the US has not been this strong since the Australian dollar floated in 1983. Last week the dollar hit a high of 101.98 US cents.
At the same time, bank-forced house sales after the global financial crisis have flooded the US residential property market with millions of homes at bargain-basement prices.
With a strong local market offering relatively low rental returns, frustrated Australian investors are looking overseas for opportunities.
Property experts point to a number of potential pitfalls including buying over the internet sight unseen, finding a trustworthy property manager, ensuring the property is in a location that potential renters like, local tax laws, and a tough market which might make it impossible to recoup your money if you need to sell.
''Some of the properties being offered are in ghettos and you need a bullet-proof vest and an armoured Humvee to collect the rent in there,'' Mr Jenman says.
''Tenants also have more rights in the US and if they don't clear the garbage up, it can be the landlord that gets fined - there are a lot more legal issues.''
Sydney woman Kathy Graffiti bought three properties in upstate New York in 2005 and estimates she has lost between $300,000 and $400,000 on her investment.
She bought two properties in Rochester and one in Buffalo for a total of $250,000, expecting rental yields of between 22-23 per cent.
The rental income stopped in 2007 and Ms Graffiti was forced to sell two of the properties at a significant loss. She has been offered $10,000 for the third property.
She regrets not having done her research into the areas before going ahead with the purchase.
''The areas I bought in were depressed and the quality of tenants was not very high,'' she said.
Property Planning Australia's Mark Armstrong advises potential buyers to do their own ''on-the-ground'' research.
Mr Selleck warned of a further 3 million foreclosures during 2011.
http://smh.domain.com.au/real-estate-ne ... 19ciy.html
Caveat emptor
Caveat emptor
Profiting out of others misery? Deserve all you get...
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
Re: Caveat emptor
In most markets US RE will be flat or have a small change +/- in the near-term. Finding individual properties which appreciate significantly within 10 years would be challenging. Some areas will be depressed for much longer; the most overbuilt areas like inland California, Nevada, Florida, parts of Ariz. may not be a good investment for 25 years or more.
I don't think they can lose much on equity, since most of the hammering is over, but transaction fees, management fees, and irregular collection of rents can bleed them pretty good. Most of the RE people I know wouldn't own rental property that was an hour away because its too had to keep track of and property managers take too big a slice to make it worth anything economically, but overseas! Insane. (I'm referring to people who are buying as an investment not those who 'drift' into a situation where they move and decide to rent not sell the house they are leaving) Why not just buy into an REIT instead?
yrs,
rubato
I don't think they can lose much on equity, since most of the hammering is over, but transaction fees, management fees, and irregular collection of rents can bleed them pretty good. Most of the RE people I know wouldn't own rental property that was an hour away because its too had to keep track of and property managers take too big a slice to make it worth anything economically, but overseas! Insane. (I'm referring to people who are buying as an investment not those who 'drift' into a situation where they move and decide to rent not sell the house they are leaving) Why not just buy into an REIT instead?
yrs,
rubato
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oldr_n_wsr
- Posts: 10838
- Joined: Sun Apr 18, 2010 1:59 am
Re: Caveat emptor
During the RE boom time there were many a speculator who helped "pump up" the bubble. I hope they all took a bath.
Re: Caveat emptor
It is one hell of a risk for a small real estate investor to purchase rental property that is 10,000 miles away. "Doing your homework," is not sufficient to describe the appropriate level of due diligence.
I have heard of remote investors in inner-city property (e.g., urban Detroit), but these properties can be had for $5-10 thousand and some of them are quite good buildings, mechanically. That is a risk that might be worth taking since the maximum loss is finite and the potential payback if it works out is considerable. The re-sale of a productive rental property is some multiple of the annual net rents, so a gain could be realized even in a distressed area.
You said it,Gob: Caveat emptor.
I have heard of remote investors in inner-city property (e.g., urban Detroit), but these properties can be had for $5-10 thousand and some of them are quite good buildings, mechanically. That is a risk that might be worth taking since the maximum loss is finite and the potential payback if it works out is considerable. The re-sale of a productive rental property is some multiple of the annual net rents, so a gain could be realized even in a distressed area.
You said it,Gob: Caveat emptor.
Re: Caveat emptor
Ok, suggestions, from anybody from anywhere in the US.
If you had a spare $20,000 to invest in a property local to you, what would you buy.
Links to estate agents details appreciated!
If you had a spare $20,000 to invest in a property local to you, what would you buy.
Links to estate agents details appreciated!
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
Re: Caveat emptor
Gob wrote:Ok, suggestions, from anybody from anywhere in the US.
If you had a spare $20,000 to invest in a property local to you, what would you buy.
Links to estate agents details appreciated!
Try 20x that amount for ANYTHING habitable around these parts.
Your collective inability to acknowledge this obvious truth makes you all look like fools.
yrs,
rubato
-
oldr_n_wsr
- Posts: 10838
- Joined: Sun Apr 18, 2010 1:59 am
Re: Caveat emptor
$20K wouldn't buy you a 50ft x 50ft empty lot here on Long Island. Hell, it would barely cover 2 years worth of property taxes on that lot without a house, forget about it with a house.Gob wrote:Ok, suggestions, from anybody from anywhere in the US.
If you had a spare $20,000 to invest in a property local to you, what would you buy.
Links to estate agents details appreciated!
The cheapest houses I've seen are around on Loing Island are between $125k-$175k and that's in the worst of neighborhoods.
Maybe upstate NY (no jobs, no one to rent to, no nothing) you might get some property and maybe with a house/trailer on it.
Considering the state of our interest rates from banks and return on investment from stocks, I am considering send you Gob $20K to put into a regular savings bank seeing as you guys get 6+%. I am lucky to be getting 1/2% on my savings account and well less than 6% (probably about 3%) on long term savings accounts (aka CD's).
Re: Caveat emptor
Nobody here in "Urban Detroit" with hot tips on a 10K property then? Shame 
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”
Re: Caveat emptor
Nope only a suburbanite
Okay... There's all kinds of things wrong with what you just said.
Re: Caveat emptor
Ok, maybe Hen would like some new shoes on the cheap instead..
Sarah emerged from Juicy Couture with three bags stuffed with dresses, leggings, tracksuits and T-shirts.
''She bought $US300 worth of clothes in 10 minutes,'' Ms Walsh said.
Sarah did not mind blowing her savings on the clothes.
''In Australia this would have cost me $2000, so I'm actually saving money,'' she said.
http://www.smh.com.au/travel/travel-new ... 19hmu.html
“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and weren't so lazy.”