Buying reposessions in the USA North East

[alangleben]

Hi,

I have been looking recently into buying a property for let. I have around £20,000 to invest into a property and am thinking as the dollar is so weak to the sterling that now is a good time to purchase, especially with the housing market so low.

What i have been looking at is properties in upper New York state that are valued at around $25,000. I hope to buy the property outright and fix them up on a low budget, as many of these properties need work done to them. Then rent out.

Certain properties i have found claim that i can gain $1200 rental income a month, and the areas i have chosen have at least 60% of the local population renting properties. Most of these properties are available through repossessions.

This would be my first investment and i would definately like everyones opinions.

I am hoping that within 4 years i will start making a profit and eventually sell the property at a higher price once the credit crunch is over.

I am based in Leeds, UK and will be flying out to the US in July to do some research on this.

I am looking to make further similar investments in mainland europe too, specifically looking at Budapest, Hungary.

Thanks,

Adam

[oregon woodsmoke]

I don't know that market, but the thought of getting $1200 a month for a house that you paid $25,000 for raises a little skepticism.

You should be able to find the town on HUD's site and see what they pay for Section 8 rent in that town. They make very little allowance for condition or location. It is simply so much rent for a 3 bedroom and so much for a 2 bedroom. Their rent allowance includes utilities, though. You won't include utilities if you are smart, so the rent you would get from HUD would be less than what they are showing in their rent tables.

If it is a larger town, you can look on Craigslist and see what the asking price of rent is, and what kind of house commands that sort of rent.

And finally, call a couple of different property management companies and get their opinion on rents.

Also, be aware that unless you screen very carefully, Section 8 tenants will probably tear your houses up. There are a few good Section 8 tenants but they are not in the majority.

[Paul Graveling]

Adam

If you're still looking to buy in the USA check out my post "The US Government will pay me $36,500 to rent out a property in the USA".

Too good an opportunity to miss in my opinion.

Regards

Paul

[The Soup Dragon]

Hi and welcome Adam

There have been several posts like yours on this and other forums. People that have done what you are looking to do say that 50% returns were not realistic and that the best possible is circa 20%. (That’s from people that have taken on a number of money pits to find their one true gem.)

A particularly useful thread is one in the Overseas section of the Singing Pig forum titled “USA 30% gross rental yield?”.

[Simes]

Hi Adam,

I have only just joined the forum but I am finding quite a bit of interest in buying in the US already.

I was involved in the post on singing pig that "Soup Dragon" mentions and the returns that were mentioned were probably something to do with the areas that Ajay Ahuja was buying or advising where his clients should buy.

Did you by any chance pick North East USA, possibly New York State because of what Ajay Ahuja has suggested or was it just on research of your own?

As the guys above have said the realistic rental income on a property worth $25k is certainly not going to be $1200.

In the area I am buying prices are as follows; single unit, purchase price $36k - $40k, rehab work of between $15k & $24k, revalued after rehab $100k, rental income - $850 - $900.

Multi units such as the 3 unit I am looking at buying is $62k - $65k and will rent out at around $1500 - $1800, after rehab.

So, $25k and $1200 rental income it doesnt sound right, maybe I am wrong.

All the George (Best)

Simes

[bhc]

Low crime rate and some very cheap property available.
I got two at auction for just under £10.000.

Brian

[UpstateNewYorker]

I just happened upon this thread. I'm an American and live in upstate NY. IMHO I worry that you are being overly optimistic about this real estate market. There are no killer deals here.

We very carefully invested in a handsome Victorian property in a small upstate city in 2002 and sold it in 2007 at a tidy profit, i.e. 110%. I could write a book about the experience. It was a good experience, a learning experience, and we'd do it again, but the right property hasn't come along.

We were hands-on managers, didn't allow section 8 tenants, screened very carefully, had long term tenants. I don't think you can make any money using a property manager so I don't see how you can do it from overseas. We actually continued to manage our building for a year after we sold it. We did it at a very cheap rate because it was easy for us, it was running itself by that time, but the new owner couldn't cover costs, and never learned to be a landlord. The property was for sale again within 6 months, and is still for sale.

I have a philosophy on rental property. The investment model has three pillars: you can make money on the month-to-month income/expense equation, you can save on US income taxes because you can take a loss against your other income, or you can make money when you sell it because it has appreciated. It's a successful investment if you succeed at one of those. You'll never make all three work. And you need to be clear going into it which model you're pursuing. As overseas investors, I think the second is already eliminated for you. We couldn't get any tax advantage because losses are limited by your income. And we didn't make any money month-to-month, actually lost about $5K a year. We succeeded with the third. But we worked our buns off for 5 years, going there in the middle of the night for plugged toilets and no heat.

BTW our top rent was $925 for a 1600 sq ft 3 BR apartment. And that included utilities. So don't overestimate what rent you can get in upstate NY. The area jobs have to support the rents. You can't get city rents in a rural area. And remember that (most) people who can afford big rents will go out and buy their own house. Renters are people starting out for the most part.

Utilities -- that's another thing I have an opinion on. :-) The utilities were not split out. The cost to split the utilities didn't make economic sense, balanced with the fact that tenants will pay more for apartments with utilities included. We managed that problem by having good tenants, who liked us and cared about conserving energy. The guy who bought the house believed his realtor's story about being able to split out the utilities for $5K. He must have thought we were really stupid. If we could have done it for that, wouldn't we have?

Anyway, I could go on but won't.

[hmilesjr]

I also see this as risky and would proceed with caution. Many people are promoting there homes based on appraisals from 2 or 3 years ago and thinking that the values will return to these levels. There is no guarantee and I don't see being able to get rental income this high based on that value. I could be wrong and I am by no means an expert on this subject.

[sameer.dada]

I'm interested in buying property in the US for flipping after renovating. Would really be grateful for any advice.

Buying REO or foreclosures is better?
When buying these do we get to see a report of a survey about the exact condition of the house. The things you can't see in pictures Ie. plumbing, wiring, internal etc. ( to avoid surprises later which add cost and time for repairs).
Is it better to hire 1 contractor to do the whole renovation? Do they supply the material or do we need to buy separately? Ie wooden floors, paint, tiles etc.

How many bedrooms in a house for best flip potential?

How to know where the best location is? Is there any info online about home buyer's index/statistics in particular suburbs?

Thank you in advance for any input or feedback.