- Joined
- Aug 30, 2007
- Messages
- 13,879
Many a REIN member or lay investor is tempted to buy in the US. There are also at least 3 syndication firms that I know of that invest in foreclosed US properties.
On the surface it seems like a good idea until one factors in the likely US $ depreciation, the weak mortgage market (i.e. lots of cash down !!) and the huge taxes payable in the US .. so is a Can $ invested today yielding a nice Can$ return in the future ?
Possibly .. but not necessarily !
In my learned(*) opinion a US investment makes sense right now ONLY IF:
a) it is for personal use (because you like NV or FL or AZ or HI to vacation in / live part-time), or
b) if little cash is invested, i.e. a decent mortgage can be assumed or be had .. AND
c) if property management is hassle-free, i.e. can be managed from afar with competent local people AND
d) the local market has a chance to recover and is not swamped with huge foreclosures and bankrupt condo boards that may render your investment worthless while you hold .. i.e. it is hard to rent to someone else in a semi-built out community with dirt roads or a 75% vacant condo building with the pool not working, the grass brown and the hedges untrimmed !!
Recently a friend of mine visited a Palm Springs golf course community .. what used to be a nice golf course community is now a bankrupt golf course, with weeds what used to be fountains and fairways, with what used to be multi-million $ homes vandalized .. so if you can pick one up for $400,000 cash .. wait for 2-3 years .. then maybe it is worth $1M again .. maybe .. but likely hard to impossible to rent and hard to impossible to get a new mortgage .. but that $400,000 investment may be solid if someone buys the golf course, turns around the situation and not too many homes are behind in their condo payments ..
Also: look back not just 2-3 years but 8-10 years .. so is that house that was $800,000 2 years ago and now can be had for $400,000 really a good deal ... or just "market" .. as it was probably $200,000 7-8 years ago .. so $400,000 is normal and $800,000 was abnormal and may not return for a decade or more !!!
But: if you have cash to buy and hold, do not need a renter for 3 years .. then some deals can be had .. but now the question is: is that $250,000 invested perhaps better deployed elsewhere with a similar return with less risk ?
Also, some syndication firms have successfully bought 2 or 3 houses for 70% off market in the US .. and flipped it for a profit. Good for them. Now they raise $8M and try to do it with 150 homes .. BIG MISTAKE as some business models are just not scalable. So sitting on the court steps in an Arizona courthouse might be fun for 2-3 deals, but is it repeatably doable for 50+ homes ? Inspect hem, then fix them, rent them, manage them .. exit them in 3-4 years .. is this the skill of the operator ? This operator often is a one man show that did well in 2-3 US homes and now tries to scale up .. with your money. BIG RISK .. possibly with no to low return with huge tax implications !! Be very careful here please .. more on 8 mistakes to avoid in real estate syndications: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-13817-Real_Estate_Syndications_-_A_Good_Idea_.html
(*) learned: Because I used to own a condo in Scottsdale, AZ .. one of the very few investments I ever lost (my own) money on after taxes, realtors fees, legal fees, escrow costs, appraisals, $ exchange .. and because we own a 300+ apartment complex north of Dallas purchased in 2007 .. and because we are looking to buy near Dallas .. and while we see some opportunity we see many pitfalls/risks right now !
On the surface it seems like a good idea until one factors in the likely US $ depreciation, the weak mortgage market (i.e. lots of cash down !!) and the huge taxes payable in the US .. so is a Can $ invested today yielding a nice Can$ return in the future ?
Possibly .. but not necessarily !
In my learned(*) opinion a US investment makes sense right now ONLY IF:
a) it is for personal use (because you like NV or FL or AZ or HI to vacation in / live part-time), or
b) if little cash is invested, i.e. a decent mortgage can be assumed or be had .. AND
c) if property management is hassle-free, i.e. can be managed from afar with competent local people AND
d) the local market has a chance to recover and is not swamped with huge foreclosures and bankrupt condo boards that may render your investment worthless while you hold .. i.e. it is hard to rent to someone else in a semi-built out community with dirt roads or a 75% vacant condo building with the pool not working, the grass brown and the hedges untrimmed !!
Recently a friend of mine visited a Palm Springs golf course community .. what used to be a nice golf course community is now a bankrupt golf course, with weeds what used to be fountains and fairways, with what used to be multi-million $ homes vandalized .. so if you can pick one up for $400,000 cash .. wait for 2-3 years .. then maybe it is worth $1M again .. maybe .. but likely hard to impossible to rent and hard to impossible to get a new mortgage .. but that $400,000 investment may be solid if someone buys the golf course, turns around the situation and not too many homes are behind in their condo payments ..
Also: look back not just 2-3 years but 8-10 years .. so is that house that was $800,000 2 years ago and now can be had for $400,000 really a good deal ... or just "market" .. as it was probably $200,000 7-8 years ago .. so $400,000 is normal and $800,000 was abnormal and may not return for a decade or more !!!
But: if you have cash to buy and hold, do not need a renter for 3 years .. then some deals can be had .. but now the question is: is that $250,000 invested perhaps better deployed elsewhere with a similar return with less risk ?
Also, some syndication firms have successfully bought 2 or 3 houses for 70% off market in the US .. and flipped it for a profit. Good for them. Now they raise $8M and try to do it with 150 homes .. BIG MISTAKE as some business models are just not scalable. So sitting on the court steps in an Arizona courthouse might be fun for 2-3 deals, but is it repeatably doable for 50+ homes ? Inspect hem, then fix them, rent them, manage them .. exit them in 3-4 years .. is this the skill of the operator ? This operator often is a one man show that did well in 2-3 US homes and now tries to scale up .. with your money. BIG RISK .. possibly with no to low return with huge tax implications !! Be very careful here please .. more on 8 mistakes to avoid in real estate syndications: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-13817-Real_Estate_Syndications_-_A_Good_Idea_.html
(*) learned: Because I used to own a condo in Scottsdale, AZ .. one of the very few investments I ever lost (my own) money on after taxes, realtors fees, legal fees, escrow costs, appraisals, $ exchange .. and because we own a 300+ apartment complex north of Dallas purchased in 2007 .. and because we are looking to buy near Dallas .. and while we see some opportunity we see many pitfalls/risks right now !
