Buying Property in the USA or UK?!
Oct 12th 2017, 12:39 am
#31
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Re: Buying Property in the USA or UK?!
Assuming that you are averse to losing your own money, the distinction between your money and borrowed money is illusory, and the upside is greater if you borrow money, not if you buy without borrowing.
If you buy a house for $100k without borrowing and rent it for $10,000/pa, your gross return is 10%. That is the maximum upside, it's as good as it gets!
If you bought the same house for $100k, but put down $20k and borrowed $80k at 6.25%, then rented it for $10,000/pa you would pay $5,000 in interest and have a gross return of $5,000 on your invested equity of $20k, ..... which is 25%!
If you expect gross income of $10,000 then invest $40,000 and buy two houses. You have the same income as if you had invested all your $100k in one house, but you only invested $40k .... in theory you could buy another three, though another two would be more realistic. In any case you have more income streams and have diversified your risk because if one tenant defaults you still have three others that are paying rent.
I think the easiest mistake to make is to buy houses that are two "nice", too expensive. Tenants are often strapped for cash, so in any given area you will probably find many more tenants willing to pay $1,000 than $1,500, so if buying a house to rent, aim to buy a decent house in a decent state of repair, but at the cheaper end of the market in whatever area you are looking to buy in. That's not to say that there aren't tenants will to pay more for a nicer house, but there are fewer tenants able to pay the rent the more rent you are asking.
If you buy a house for $100k without borrowing and rent it for $10,000/pa, your gross return is 10%. That is the maximum upside, it's as good as it gets!
If you bought the same house for $100k, but put down $20k and borrowed $80k at 6.25%, then rented it for $10,000/pa you would pay $5,000 in interest and have a gross return of $5,000 on your invested equity of $20k, ..... which is 25%!
If you expect gross income of $10,000 then invest $40,000 and buy two houses. You have the same income as if you had invested all your $100k in one house, but you only invested $40k .... in theory you could buy another three, though another two would be more realistic. In any case you have more income streams and have diversified your risk because if one tenant defaults you still have three others that are paying rent.
I think the easiest mistake to make is to buy houses that are two "nice", too expensive. Tenants are often strapped for cash, so in any given area you will probably find many more tenants willing to pay $1,000 than $1,500, so if buying a house to rent, aim to buy a decent house in a decent state of repair, but at the cheaper end of the market in whatever area you are looking to buy in. That's not to say that there aren't tenants will to pay more for a nicer house, but there are fewer tenants able to pay the rent the more rent you are asking.
Oct 12th 2017, 1:06 am
#32
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Joined: Jan 2017
Posts: 670
Re: Buying Property in the USA or UK?!
Assuming that you are averse to losing your own money, the distinction between your money and borrowed money is illusory, and the upside is greater if you borrow money, not if you buy without borrowing.
If you buy a house for $100k without borrowing and rent it for $10,000/pa, your gross return is 10%. That is the maximum upside, it's as good as it gets!
If you bought the same house for $100k, but put down $20k and borrowed $80k at 6.25%, then rented it for $10,000/pa you would pay $5,000 in interest and have a gross return of $5,000 on your invested equity of $20k, ..... which is 25%!
If you expect gross income of $10,000 then invest $40,000 and buy two houses. You have the same income as if you had invested all your $100k in one house, but you only invested $40k .... in theory you could buy another three, though another two would be more realistic. In any case you have more income streams and have diversified your risk because if one tenant defaults you still have three others that are paying rent.
I think the easiest mistake to make is to buy houses that are two "nice", too expensive. Tenants are often strapped for cash, so in any given area you will probably find many more tenants willing to pay $1,000 than $1,500, so if buying a house to rent, aim to buy a decent house in a decent state of repair, but at the cheaper end of the market in whatever area you are looking to buy in. That's not to say that there aren't tenants will to pay more for a nicer house, but there are fewer tenants able to pay the rent the more rent you are asking.
If you buy a house for $100k without borrowing and rent it for $10,000/pa, your gross return is 10%. That is the maximum upside, it's as good as it gets!
If you bought the same house for $100k, but put down $20k and borrowed $80k at 6.25%, then rented it for $10,000/pa you would pay $5,000 in interest and have a gross return of $5,000 on your invested equity of $20k, ..... which is 25%!
If you expect gross income of $10,000 then invest $40,000 and buy two houses. You have the same income as if you had invested all your $100k in one house, but you only invested $40k .... in theory you could buy another three, though another two would be more realistic. In any case you have more income streams and have diversified your risk because if one tenant defaults you still have three others that are paying rent.
I think the easiest mistake to make is to buy houses that are two "nice", too expensive. Tenants are often strapped for cash, so in any given area you will probably find many more tenants willing to pay $1,000 than $1,500, so if buying a house to rent, aim to buy a decent house in a decent state of repair, but at the cheaper end of the market in whatever area you are looking to buy in. That's not to say that there aren't tenants will to pay more for a nicer house, but there are fewer tenants able to pay the rent the more rent you are asking.
Diversification is always good. Which is one reason I like the idea of renting in another country, creates a little hedge against fx and markets, although they can be impacted globally for sure.
I'm renting my house in the UK, I think it would be a challenge without trustworthy local (to the property) contacts, luckily we have some. That makes a big difference. Without that, quite a challenge and a risk. How often could you even check the place, once or twice a year probably :/
Management companies are hit and miss and will try to charge you for all sorts that isnt even fair or necessary. Also much harder to check up on if far away.
I guess the ideal is buy and rent somewhere expensive and live somewhere much cheaper.
We've done the opposite, rent of a full size house equating to a small garage, but you can't always get it right first time... circumstances and preferences dictate otherwise
Btw property rises, not sure if limited to the west coast, here apparently there was a many-fold increase in prices in the last few years...
Last edited by LouisB; Oct 12th 2017 at 1:08 am.
Oct 12th 2017, 3:10 am
#33
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Joined: Jun 2016
Posts: 29
Re: Buying Property in the USA or UK?!
Thanks for all these replies. They've been really helpful.
To answer Pulaski's questions:
Where do you live?
We are currently in Santa Monica.
Where do you expect to live long term?
Ideally we'd like to stay here long term! Hoping to look into doing a GC in the next year or so. We are not even close to being able to afford to buy anything here. The dream would be to stay and rent in our small apartment for 2-3 yrs until we are able to buy a place around this area. We were fortunate enough to make £100k in profit in 2yrs with our place in London. I'm thinking if we can invest a lot of what we have (around that figure) then hopefully we can sell in 2/3years in order to make enough to put a deposit down on a place in LA.
Are you comfortable delegating all management and oversight to a hired hand?
Yes - although I know this could eat into any profits, and it would be a struggle to cover the mortgage with rent. We have family in and around London, so could potentially check up on the place now and then. I totally get that it can be a nightmare with tenants. I've had friends who have had horrible experiences.
I know the prices in certain areas of LA have gone up nearly as quickly as in London over the last couple of years. It's just whether with additional fees / realtor costs if we would actually make much if we flipped it in 2/3 years.
Diversifying would be great but not sure if we would have enough money to buy more than one with 20/25% deposits on US or Expat Mortgage.
This might be a stupid question - but are you able to part-purchase a property with other people? eg. if we put 20k into 5 properties.
In terms of repairs, etc, I would want to go down the new build route. Obviously that doesn't negate all issues that could arise, but hopefully it will help.
Not really looking at stocks/shares as we don't want a long term investment, and don't want to invest in higher risk stocks to try and make a quick buck.
So simply - best way to make the most money in 2/3 years! :-)
To answer Pulaski's questions:
Where do you live?
We are currently in Santa Monica.
Where do you expect to live long term?
Ideally we'd like to stay here long term! Hoping to look into doing a GC in the next year or so. We are not even close to being able to afford to buy anything here. The dream would be to stay and rent in our small apartment for 2-3 yrs until we are able to buy a place around this area. We were fortunate enough to make £100k in profit in 2yrs with our place in London. I'm thinking if we can invest a lot of what we have (around that figure) then hopefully we can sell in 2/3years in order to make enough to put a deposit down on a place in LA.
Are you comfortable delegating all management and oversight to a hired hand?
Yes - although I know this could eat into any profits, and it would be a struggle to cover the mortgage with rent. We have family in and around London, so could potentially check up on the place now and then. I totally get that it can be a nightmare with tenants. I've had friends who have had horrible experiences.
I know the prices in certain areas of LA have gone up nearly as quickly as in London over the last couple of years. It's just whether with additional fees / realtor costs if we would actually make much if we flipped it in 2/3 years.
Diversifying would be great but not sure if we would have enough money to buy more than one with 20/25% deposits on US or Expat Mortgage.
This might be a stupid question - but are you able to part-purchase a property with other people? eg. if we put 20k into 5 properties.
In terms of repairs, etc, I would want to go down the new build route. Obviously that doesn't negate all issues that could arise, but hopefully it will help.
Not really looking at stocks/shares as we don't want a long term investment, and don't want to invest in higher risk stocks to try and make a quick buck.
So simply - best way to make the most money in 2/3 years! :-)
Oct 12th 2017, 3:15 am
#34
Lost in BE Cyberspace
Joined: Jul 2008
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Re: Buying Property in the USA or UK?!
Purplebricks, I think is now operating in some parts of California. That may reduce your realtor fees by a considerable amount.
You can use a deed of trust to own properties with other people, but I would not recommend it.
Also if you are using a mortgage to buy overseas property you fall into the exchange rate/loan gain trap.
You can use a deed of trust to own properties with other people, but I would not recommend it.
Also if you are using a mortgage to buy overseas property you fall into the exchange rate/loan gain trap.
Last edited by mrken30; Oct 12th 2017 at 3:18 am.
Oct 12th 2017, 11:53 am
#35
Forum Regular
Joined: Nov 2012
Posts: 228
Re: Buying Property in the USA or UK?!
Fantastic - thanks for all your advice guys- it has been very useful
Oct 12th 2017, 12:47 pm
#36
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 52,448
Re: Buying Property in the USA or UK?!
In other words, IMO rental property is a longer term investment than stocks and shares.
Oct 12th 2017, 2:47 pm
#37
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Re: Buying Property in the USA or UK?!
So investing in residential property really isn't a good idea. Over 2-3 years a diversified portfolio of stocks purchased through unit trusts/ mutual funds, spread over UK, US, Europe, Latin America, and Asia would be more.likely to meet your investment goals than an "all your eggs in one basket" investment in rental property.
In other words, IMO rental property is a longer term investment than stocks and shares.
In other words, IMO rental property is a longer term investment than stocks and shares.
However buying at the right time in the right market, like anything can be a good choice. Returns can be substantially higher than the stock market in some cases.
Oct 12th 2017, 6:31 pm
#38
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Joined: Nov 2012
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Re: Buying Property in the USA or UK?!
Would you consider NJ/ Pa / NY to be tenant friendly states ?
Oct 12th 2017, 10:17 pm
#39
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Oct 13th 2017, 1:16 am
#40
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Re: Buying Property in the USA or UK?!
You could also consider peer lending or shared property schemes.
I've not yet, trying to keep my taxes as simple as can be right now but my fried does well with lending. Again the key is diversification as some loans may go bad, but allowing for that the returns can be quite good.
No bricks and mortar tie-ins. No realtor fees. No Tennant hassles.
Guess it depends how you want to play it, but there are a few alternative options to property and shares..
I've not yet, trying to keep my taxes as simple as can be right now but my fried does well with lending. Again the key is diversification as some loans may go bad, but allowing for that the returns can be quite good.
No bricks and mortar tie-ins. No realtor fees. No Tennant hassles.
Guess it depends how you want to play it, but there are a few alternative options to property and shares..
Oct 13th 2017, 1:48 am
#41
Lost in BE Cyberspace
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,425
Re: Buying Property in the USA or UK?!
You could also consider peer lending or shared property schemes.
I've not yet, trying to keep my taxes as simple as can be right now but my fried does well with lending. Again the key is diversification as some loans may go bad, but allowing for that the returns can be quite good.
No bricks and mortar tie-ins. No realtor fees. No Tennant hassles.
Guess it depends how you want to play it, but there are a few alternative options to property and shares..
I've not yet, trying to keep my taxes as simple as can be right now but my fried does well with lending. Again the key is diversification as some loans may go bad, but allowing for that the returns can be quite good.
No bricks and mortar tie-ins. No realtor fees. No Tennant hassles.
Guess it depends how you want to play it, but there are a few alternative options to property and shares..
Is P2P ready for a downturn? | Peer2Peer Finance News
Oct 13th 2017, 10:38 pm
#42
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Posts: 670
Re: Buying Property in the USA or UK?!
I would be careful with peer to peer lending at the moment
Is P2P ready for a downturn? | Peer2Peer Finance News
Is P2P ready for a downturn? | Peer2Peer Finance News
To be honest I'd be careful of just about everything UK wise, due to brexit at this time. It always pays to diversify whatever you do, I wouldn't rush to put your life savings in one thing, this or otherwise.
