EU citizen buying real estate in US and renting it out.

[lavidaloca]

You do realize the reason people are getting 20%+ returns is because of leverage. This is probably doable in your own country if you can get enough leverage. 20% on a rental which is 100% paid for is not going to be anywhere near common. 20% on a rental where you only have 30% of your own money in will open the door to 20% returns.

If you specifically look at the link provided by OP in his subsequent post, you will see that they are NOT relying on leverage in order to make the 20% return claims.

As I already stated, I have my own concerns about the representation in the claims and the likely need for any investors to be actively involved in setting up and following up with their real estate teams and strategies, but leverage is supposedly not one of the issues in this particular claim to 20% returns.

"Dallas tops the list of real-estate markets over the period studied, exhibiting strong price appreciation, while remaining a market in which investors saw strong rents relative to property values. Investors in Dallas stood to earn an almost 20 percent unleveraged return for residential real-estate investments before expenses."

Expenses are going to wipe a large portion of that "20 percent out." Just the way thats written suggests to me that is a pretty lousy article to go by.

OP its pretty unlikely unless you buy a property that needs work done on it or you see an angle other buyers aren't that you will get 20% unleveraged per year.

20% leveraged while renting it out you'll find depending on the rates available to you for lending.

 

[GlobalMan]

Whatever location you choose, if you do not have extensive and ongoing knowledge of the local market and also frequently spend time there you are setting yourself up for failure.

 

[JayJuanGee]

You do realize the reason people are getting 20%+ returns is because of leverage. This is probably doable in your own country if you can get enough leverage. 20% on a rental which is 100% paid for is not going to be anywhere near common. 20% on a rental where you only have 30% of your own money in will open the door to 20% returns.

If you specifically look at the link provided by OP in his subsequent post, you will see that they are NOT relying on leverage in order to make the 20% return claims.

As I already stated, I have my own concerns about the representation in the claims and the likely need for any investors to be actively involved in setting up and following up with their real estate teams and strategies, but leverage is supposedly not one of the issues in this particular claim to 20% returns.

"Dallas tops the list of real-estate markets over the period studied, exhibiting strong price appreciation, while remaining a market in which investors saw strong rents relative to property values. Investors in Dallas stood to earn an almost 20 percent unleveraged return for residential real-estate investments before expenses."

Expenses are going to wipe a large portion of that "20 percent out." Just the way thats written suggests to me that is a pretty lousy article to go by.

OP its pretty unlikely unless you buy a property that needs work done on it or you see an angle other buyers aren't that you will get 20% unleveraged per year.

20% leveraged while renting it out you'll find depending on the rates available to you for lending.

Thanks for catching that additional point. In the end, we know that there are not too many get rich quick schemes and passive income generators that are going to come, especially from something like real estate.

Like you said lavidaloca, guys have to find some kind of niche in the market that they want to enter, and then they likely have to do quite a bit of hard work in getting their systems in place and then probably also they need to have some luck, too, in order for a quasi-active investment to be transformed into a passive income generator.

I think that the article that OP pointed out is good in order for us to better understand the kind of framework and goals that he was seeking, and yeah if they are talking about profits and profitability prior to considering expenses, then that is pure pie in the sky because we cannot really talk about one side of the ledger without talking about the other before we even conclude that an investment is "profitable" and by how much.

 

[JayJuanGee]

Whatever location you choose, if you do not have extensive and ongoing knowledge of the local market and also frequently spend time there you are setting yourself up for failure.

Setting yourself up for failure and increased likelihood of being scammed.. .

 

[Nowak]

Hi there fellow members.
I rarely ask questions, but here is one of these times.

I have heard about crazy good returns on real estate in US. Lets say above 20% of annual returns. To compare to EU this is madness.
This makes me really interested in going to US and acquiring some real estate and rent it out via agency.
Problem is that my US experience is about a months of combined time, doing nothing but going to 6 flags magic mountains, drinking beer and partying. Meaning I know nothing about taxes, laws, rules, underwater stones.
Any information on that subject would be highly appreciated.

So my main questions are:
Can a foreigner own real estate in USA?
Can I foreigner rent a real estate in USA and if yes is there some sort of exorbitant tax?
Do you know a foreigner owning a real estate in US?
Is he on this forum?
What is his forum name?

I'm an American who also has EU citizenship who is interested in looking into real estate in Europe in the future, can you elaborate a bit on why returns are so poor here on the continent? I know there is more of a incentive towards ownership in the states. However,student housing and holiday rentals ,rental property can be lucrative

 

[almast]

As a foreigner no commercial bank will give you a mortgage. You have zero local credit history/income/assets. You may find a sub-prime lender at much higher rate and with a higher chance of your loan being called early.

 

[GlobalMan]

^He indicated in a subsequent post that he would be paying in cash.

 

[almast]

Quite a bit of cash would be required to achieve meaningful income.

^He indicated in a subsequent post that he would be paying in cash.

 

[GlobalMan]

Indeed it would. As he said, he's selling his property in Europe.

 

[Rico Ramon]

Whatever location you choose, if you do not have extensive and ongoing knowledge of the local market and also frequently spend time there you are setting yourself up for failure.

Great point here, I rented out my home in Los Angeles when I relocated back to San Francisco for a time and I managed it myself, The first renter I had was a french family where the husband was working for NASA or something like that in Pasadena and his wife was apparently in charge of paying the rent, they were late every month except for a couple of months and were quick to just call a plumber off the internet when there was an issue after telling them repeatedly to use the person I have a relationship with ( cheap + good work) and then wanting their full security deposit back when they moved. I ended up charging them late fees for every month they were late to re-coup some of the expenses they incurred. they stayed a year and then went back to France. I was so sick of this chick who once said, I can't pay you today because we are going on a trip to San Diego, I thought, bitch take your ass to a bank of america branch in San Diego and make a counter deposit.

The second tenant was a mother who was renting it for her daughter who was starting law school. this was a good situation because the mother was dependable in making payments on time, however she was always looking for ways to lower the rent she was paying after I already dropped the rental price to $3,550 from $3,900 upon them signing the agreement as I didn't want the house to sit empty for any length of time.

I come to find out when she moved out, she had a weed selling business from the home and brought in this guy to sub-lease one of the rooms who basically squatted in the home (for about six months, until the home was sold) after she moved out after 2-3 years at the house. It took all of my will power not to go down and beat his ass out of the house.

So the moral of these stories is make sure you have a good property management company to handle the tenants and the issues that WILL come up with the home. This will eat into your profit, but well worth the peace of mind, if you choose not to go that route don't let the tenants know you live out of the country( some people will take advantage of this fact) and make bi-monthly visits to the property to see things for yourself.

Good luck, It's a great investment for you if you choose the the right area and home and the most important thing- the right tenants, which really is a crap shoot.

 

[joost]

First rule of managing a portfolio is diversification. Unless you have many millions, putting a huge portion (to not say all) your money in a single asset... is a bad idea.

Maybe you're very wealthy and plan to buy commercial real estate in the 5th Ave in NYC. Even if your returns are going to be crap (since you're going to pay a hefty premium), there is no chance for that not give you a steady income.

You live in Europe. What if the US economy and thus the dollar gets weak against the euro (again)?

If you have at least $300k (how much a house cost), you can buy stocks from hundreds of companies from ten sectors. Hell, if you buy only REIT stocks, you're already diversifying more. Would be like buying hundreds of tiny houses from all over the world. You can invest in US, Asia, Europe... All without having to worry about managing a place.

I'm going to do a datasheet probably this month about it.

 

[Beirut]

The US is probably one of the friendlier countries to buy real estate for a foreigner as far as foreigner vs citizens.

There are no meaningful differences in rights, except restrictions on condos.

20% is not the norm at all.

You would have to have extensive local knowledge to find a deal like that, and a vast network of connections so the deal comes to you first.

Most are in the 4-10 % return range, 10 being a very good one.

 

[Deepdiver]

Question is where to buy in the USA - being on RVF one would think it would be where there are best game prospects... you can read the forum for best Cities and States to Game in --- then you need facts; what is the average fair market rent for the State, City, Neighborhood or Town you are looking at and then what is the GRM or Gross Rent Multiplier.

The USA has data on every street and address and aggregates by town and state.

GRM is simple... if a house sells for $300,000 and rents for 2,000.00 per month that equals 12 months of rent for $24,000.

$300,000 divided by $24,000 equals a GRM of 12.5

This is Merrimack NH just north of Nashua, NH a tier 3 city of 85,000 people - a bedroom community 50 Miles north of Booming High-Tech, Financial Services, Health Tech and R&D Academic Boston.

The economic engine of New England and according to "humble" Improper Bostonians of the Harvard and MIT persuasion... the "Hub of the Universe".

FY2017 Final Fair Market Rents Documentation System
https://www.huduser.gov/portal/datasets/fmr/fmrs/FY2017_code/select_Geography.odn
https://www.huduser.gov/portal/datasets/fmr/fmrs/FY2017_code/2017summary.odn

Merrimack NH has about 6,000 Plus Fidelity Mutual Funds back office employees, An InBev A&B brewery with a famous Clydesdales Draft Horse Stables and Huge Hospitality center with tours, A number of High Tech DoD and Med Tech manufacturers, and being in ZERO State income tax and sales tax New Hampshire a large Designers Outlet mall.

Yet FMR rents have DROPPED in Merrimack 2016 to 2017!

Why - anyone with a good job and decent credit can get a 15 to 30 year fixed rate mortgage at the lowest rates in the past 50 years around 3.5% annual interest. In 1982 post-Jimmy Carter rates were at 18% per year but average houses were only approx $60,000 versus $300,000 today. So people renting today universally have credit issues, low-income immigrants, elderly, divorced men out on their arses, single moms, DHHS Section 8 subsidized etc., etc.

The Final FY 2017 FMRs for All Bedroom Sizes
Final FY 2017 & Final FY 2016 FMRs By Unit Bedrooms
Year Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom
Final FY 2017 FMR $749 $895 $1,181 $1,642 $1,789
Final FY 2016 FMR $759 $935 $1,230 $1,688 $1,964
Percentage Change -1.3% -4.3% -4.0% -2.7% -8.9%

Details:

Merrimack town, New Hampshire is part of the Nashua, NH HUD Metro FMR Area, which consists of the following towns: Amherst town (Hillsborough County), NH; Brookline town (Hillsborough County), NH; Greenville town (Hillsborough County), NH; Hollis town (Hillsborough County), NH; Hudson town (Hillsborough County), NH; Litchfield town (Hillsborough County), NH; Mason town (Hillsborough County), NH; Merrimack town (Hillsborough County), NH; Milford town (Hillsborough County), NH; Mont Vernon town (Hillsborough County), NH; Nashua city (Hillsborough County), NH; New Ipswich town (Hillsborough County), NH; Pelham town (Hillsborough County), NH; and Wilton town (Hillsborough County), NH. All information here applies to the entirety of the Nashua, NH HUD Metro FMR Area.
Fair Market Rent Calculation Methodology
Show/Hide Methodology Narrative
Fair Market Rents for metropolitan areas and non-metropolitan FMR areas are developed as follows:
2010-2014 5-year American Community Survey (ACS) estimates of 2-bedroom adjusted standard quality gross rents calculated for each FMR area are used as the new basis for FY2017 provided the estimate is statistically reliable. For FY2017, the test for reliability is whether the margin of error for the estimate is less than 50% of the estimate itself.
If an area does not have a reliable 2010-2014 5-year, HUD checks whether the area has had at least minimally reliable estimate in any of the past 3 years, or estimates that meet the 50% margin or error test described above. If so, the FY2017 base rent is the average of the inflated ACS estimates.
If an area has not had a minimally reliable estimate in the past 3 years, the estimate State for the area's corresponding metropolitan area (if applicable) or State non-metropolitan area is used as the basis for FY2017.
HUD calculates a recent mover adjustment factor by comparing a 2014 1-year 40th percentile recent mover 2-bedroom rent to the 2010-2014 5-year 40th percentile adjusted standard quality gross rent. If either the recent mover and non-recent mover rent estimates are not reliable, HUD uses the recent mover adjustment for a larger geography. For metropolitan areas, the order of geographies examined is: FMR Area, Entire Metropolitan Area (for Metropolitan Sub-Areas), State Metropolitan Portion, Entire State, and Entire US; for non-metropolitan areas, the order of geographies examined is: FMR Area, State Non-Metropolitan Portion, Entire State, and Entire US. The recent mover adjustment factor is floored at one.
HUD calculates the appropriate recent mover adjustment factor between the 5-year data and the 1-year data and applies this to the 5-year base rent estimate.
Rents are calculated as of 2015 using the relevant (regional or local) change in gross rent Consumer Price Index (CPI) from annual 2014 to annual 2015.
All estimates are then inflated from 2015 to FY2017 using a national trend factor based on the forecast of gross rent changes through FY2017.
FY2017 FMRs are then compared to a State minimum rent, and any area whose preliminary FMR falls below this value is raised to the level of the State minimum.

Now for Boston where I work every day and commute 55 Miles to work taking advantage of low NH living costs and taxes and high Boston earnings.

As you can see Boston is UP 7.9% to 13%:

Final FY 2017 & Final FY 2016 FMRs By Unit Bedrooms
Year Efficiency One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom
Final FY 2017 FMR $1,194 $1,372 $1,691 $2,116 $2,331
Final FY 2016 FMR $1,056 $1,261 $1,567 $1,945 $2,148
Percentage Change 13.1% 8.8% 7.9% 8.8% 8.5%

With 300,000 Uni and College Students and a booming Tech and diversified industries Boston is up a lot even with a building Boom - New Seaport 2 bedroom condos sell for $1.2 Million to $4 Million plus depending upon sq ft and City or Harbor views.

So point is higher FMR and lower GRMs are the ideal for earning a decent profit and return on investment - links above cover the entire USA - of course, some investors think a negative cash flow in exchange for a 13% annual market value increase but warnings are a major correction is overdue like 2008/09 due to prolong ZIRP and NIRP rates. So remember if your outgo exceeds your income your upkeep will be your downfall. I never accept negative cash flows.

For real current purchase prices and tax and maintenance costs in any city and town in the USA refer to

www.realtor.com

www.realtytrac.com

and

www.zillow.com

My family did well in Nashua, NH with one two and three family income properties that we gut job restored - a lot of work by each property threw of 30 years of earnings with incomes rising as the Old man refinanced as interest rates dropped over the years - with interest rates at historic lows the opposite may be the case moving forward so must drive hard bargains and only buy the most desirable properties with the best FMR and GRMs if you will be an absentee owner.

Also good if they are AirBnB ready and present well versus competitive market inventories so AirBnB a good indicator of Nightly, Weekly, and Monthly rental values as well.

Local realtors take about 20% per month Rental Management fee for any properties they manage for investors so that also will bite into your GRM and net returns.

HTH

 

[almast]

and brought in this guy to sub-lease one of the rooms who basically squatted in the home (for about six months, until the home was sold) after she moved out after 2-3 years at the house. It took all of my will power not to go down and beat his ass out of the house.

Since his name was not on the lease, you could have changed the locks immediately and call police on him for trespassing. Why did you wait for 6 months?

 

[Rico Ramon]

and brought in this guy to sub-lease one of the rooms who basically squatted in the home (for about six months, until the home was sold) after she moved out after 2-3 years at the house. It took all of my will power not to go down and beat his ass out of the house.

Since his name was not on the lease, you could have changed the locks immediately and call police on him for trespassing. Why did you wait for 6 months?

The laws in LA county really favor the individual living in the home( whether on the lease or not, I spoke with the sheriff/police and they wouldn't do anything and I was out of the country by this time.