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Using USA as a Strategy – Part Three

Screen Shot 2017-04-18 at 4.44.14 PMContinued from Using USA as a Strategy – Part Two…

 

In relation to financing, there are options for Australians that have only recently become available but that’s another editorial for that subject alone. That said, it can potentially help those investors that would have around the $50k deposit get into the US market place.

 

Back to researching, crime stats are heavily recorded in the US. The data provided is unbelievably detailed along with comparisons to state and federal stats too.

 

At the cheaper end of investing in the US, schools don’t play as large of a part of the location decision process. For properties over the US$100k mark, this is definitely a factor. This will make a huge difference on whether your property increases in value over time or not. Parents pay more for rent and property prices if their children can go to a good school.

 

Americans are not afraid to move state for work, so therefore employment is one of the biggest factors you need to consider when choosing a place to invest.

 

So for all the reasons above, I decided to invest in Detroit. It was one of the hardest hit cities during the GFC. And like all hard cities, they bounce back the best. A prime example of this in Australia is the Gold Coast which was also hit the hardest in our small GFC and is now one of the best performers for houses in the country. But Detroit has two extra benefits – one listed below and the other is a man by the name of Dan Gilbert. A Billionaire from Detroit, Dan has made it his life mission to rebuild Detroit to bigger and better than it’s former self. Where commercially the occupancy rate in the city was around 20% – it’s now almost 100% seven years later.

 

Whenever I invest in the US, I personally walk through every property for myself and our clients. Being so far away you either need to visit the property yourself or use a Buyers Agent who operates in your city in the US. On each visit, I would walk through around 30-40 houses and all of them look great in the advert but when you actually walk through the property, many are a complete disaster. The floor plan layout can be poor and many have underlying issues that can be costly. When investing at the US$75k mark, you need to be conscious on repair costs. That said, at this level, you can certainly buy some beautiful properties that need less than $1,000 spent on maintenance items.

 

Once you have settled on a house, you need to understand that property management is primitive in the US. Due to massive bank transfer costs (up to US$60 per transfer), tenants pay their rent by cash or cheque to the property manager. Whereas you receive your rent in Australia generally on the 1st of every month, you may not receive it until the 8th in the US, so be patient.

 

Now there are some extra benefits or risks that are associated with investing in the US, and yes we have to cover off the ‘Trump Factor’. Like or hate him, he is doing some fantastic things for jobs and keeping manufacturing in the US. Due to low incomes paid in the US, manufacturing is still very much alive and well. And Trump has done some amazing deals with Ford and GM in Detroit (the car city) to keep them manufacturing in Detroit. On my last visit in March this year I traveled to two new potential investing locations, one in Ohio and the other in Texas. Great things happening here too!

 

There’s one last factor that investors need to account for, and that’s currency exchange. We are currently sitting around 75c in the dollar and the Australian government would like to see this at around 60c. So by simply investing now before the dollar drops to this level, you could make 20% capital growth in your investment property as well as a 20% increase in the rent you receive each month. Now if that doesn’t put a smile on your face, nothing will!

 

To find out more, register at wheregroup.com.au/USA

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