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armchair investments in USA

armchair investments in USA

Old Jun 15th 2010, 5:21 am
  #1  
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Default armchair investments in USA

Hello,
I thought I would ask people who know the US better than me.
I am in the UK. There are companies that are offering properties in areas like Detroit for around £20,000 with guaranteed rental returns of around
12% - 15% net for periods of up to 5 years, fully managed, everything inclusive (refurb, insurance). Everything except the annual SEV.
Is it possible that a tenant in the US could sue a landlord for something that a management company doesn't put right and I could end up losing everything including the house I'm living in here in the UK.
The rental returns look great but is it a good idea to put money into this?
I would welcome your views thanks.
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Old Jun 15th 2010, 5:58 am
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Default Re: armchair investments in USA

Do not buy real estate in Detroit unless you are from Detroit.

Ok, that's a bit of an exaggeration, but Detroit is falling apart now. The city is literally buying up blocks of houses and TEARING THEM DOWN, pulling up the roads and reverting large areas into open space (to reduce the cost of maintaining those streets, providing police and fire protection, etc) to blocks of basically empty houses.

If you want to do this, set up a shell company somewhere, like an LLC or something. Have the company buy and run the house. If there is a massive suit that comes back on the company (i.e. the house falls in and kills someone inside) the best they can do is sue the company (which will have limited assets).

But really, there are better ways to make money that being a landlord in Detroit...
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Old Jun 15th 2010, 6:36 am
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Default Re: armchair investments in USA

Originally Posted by kelly77 View Post
There are companies that are offering properties in areas like Detroit for around £20,000 with guaranteed rental returns of around
12% - 15% net for periods of up to 5 years, fully managed, everything inclusive (refurb, insurance). Everything except the annual SEV.
Any investment that promises a 12% - 15% net return is, at best, extremely high risk and, in this case, quite possibly a complete scam.

As penguinsix already pointed out Detriot is probably about the worst place in the US for an amateur to invest in property.

If there really is a property, and the company actually owns it, then I bet it would sit empty for most of the 5 years racking up expenses and producing no income.
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Old Jun 15th 2010, 11:12 am
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Default Re: armchair investments in USA

Was thinking about this and how it could be a scam.

First, we're seeing houses go in Detroit for $10,000-$20,000 US (not £s). They could buy a house in a known 'dead' area--i.e. an area about to be condemned and seized by the government. They buy it at foreclosure for $10,000 US, sell it to you for £20,000 ($30,000 US). A few months later the city condemns that entire block and all the landowners are given the 'fair market value' for their houses. Sure you paid £20,000 ($30,000) but all the houses are only going for $10,000 on the rest of the street, which is how they will determine the value. They have sold you a house that is about to be seized by the government for twice the value, and the government will only give you the fair market value for the house ($10,000) once they take it.

Not a bad scam if you are looking to run one.
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Old Jun 15th 2010, 11:43 am
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Default Re: armchair investments in USA

Like everyone above has said, I would steer clear of this.

Even when getting involved in a so called "armchair investment" it should always be in an area where you have some knowledge. In this case that would be both property and renting, and Detroit.

If you still are not convinced to steer clear after all of the above, take a fact finding trip to Detroit, then you will see what you are getting into.
I'm no expert on the area, but my sister lives in the suburbs. Just from what I see when I travel there, I can see it's not a landlords paradise.
Add the fact that the property market is a nightmare, and the number of properties far outweighs the number of tenants, and the picture looks bleak.

Google what happened to the Pontiac Silverdome if you want an indication of how bad things are in this area.
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Old Jun 15th 2010, 1:23 pm
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Default Re: armchair investments in USA

Originally Posted by kelly77 View Post
Hello,
I thought I would ask people who know the US better than me.
I am in the UK. There are companies that are offering properties in areas like Detroit for around £20,000 with guaranteed rental returns of around
12% - 15% net for periods of up to 5 years,
fully managed, everything inclusive (refurb, insurance). Everything except the annual SEV.
Is it possible that a tenant in the US could sue a landlord for something that a management company doesn't put right and I could end up losing everything including the house I'm living in here in the UK.
The rental returns look great but is it a good idea to put money into this?
I would welcome your views thanks.
Nobody can make such a guarantee legitimately. It's a scam.
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Old Jun 15th 2010, 5:18 pm
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Default Re: armchair investments in USA

Originally Posted by penguinsix View Post
Was thinking about this and how it could be a scam.
I was thinking more along the lines of simple fraud - there is no property, they take your money and you never hear from them again, or some kind of Ponzi scheme where they pay out for a short while using money from other investors and then just disappear.

You have to ask why, if this is such a good investment, they are advertising thousands of miles away in other countries when, presumably there are people right on their doorstep who would jump at the chance of getting in on such a great deal. Could it be because they don't want to have their investors show up in person and ask to see the property?
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Old Jun 15th 2010, 5:22 pm
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Default Re: armchair investments in USA

Originally Posted by kelly77 View Post
guaranteed rental returns of around
12% - 15% net for periods of up to 5 years
is not the same as "guaranteed rental returns of 12%-15% for 5 years." 1% for 1 month would legally fulfill the guarantee.
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Old Jun 15th 2010, 8:46 pm
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Default Re: armchair investments in USA

having lived in Detroit, I can honestly say that I wouldn't buy a roof shingle in that town, let alone anything else.

this is ridiculous...... point blank.
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Old Jun 15th 2010, 8:53 pm
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Default Re: armchair investments in USA

your replies are wonderful thanks very much I shall look elsewhere! Thanks everyone
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Old Jun 15th 2010, 9:35 pm
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Default Re: armchair investments in USA

Originally Posted by penguinsix View Post
...
prob exactly what they're doing.
Notice it says NET over a period upto 5 years?... after all their 'expenses', so $300-$450?? Wow!
If its too good to be true...

besides, if its such a lucrative return, a) why sell it b) approach people abroad?!?! Reminds me of when US banks were going all the way to the likes of villages in Scandinavia trying to sell their portfolioed toxic loan products.... Alarm bells should have rung then.

BS detector phrases "Fantastic Opportunity" - "Once in a lifetime.." "Hurry, won't last!"... and others.
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Old Jun 16th 2010, 12:15 am
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Default Re: armchair investments in USA

I live in Chicago. I could drive to Detroit in maybe six hours but I would absolutely definitely not buy a rental property in Detroit.
It may be a fabulous investment but I somehow doubt it.
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