US Property Investment Warning
US property investment on the face of it looks an absolute sure fire winning property investment.
Fantastic rental yields of 15% plus, capital values at the lowest levels for years and a slowly improving US economy points to a great potential investment.
Personally however I’ve not been convinced that US property investment was quite the golden egg some agents seem to tell us and have warned landlords to avoid buying off the shelf US investment packages and why I won’t be buying in the US any time soon.
The main reasons are:
1. If you think the UK property market but bigger think again! Fundamentally, they have lots of land and NO Green Belt. This means that they have a bit of a scorched earth policy on urban development. If a town or city becomes unpopular – they just leave and move on leaving whole neighbourhoods abandoned! Not funny if your property is in the middle of it.
2. Location as we know is key. This means to really know any property market you should know the area like the back of your hand. How many of us have the time to spend months in the States researching an area first?!
3. Selective advantage. Remember the US is some would argue the centre of capitalism. What makes you think that you have spotted something that all those budding US property investors have missed.
4. Maintenance. What happens if things go wrong with your buy-to-let property stateside? It’s along way to go to fix a boiler or get somebody in to sort the dripping tap. You need to be confident in your letting agents abilities.
5. If it’s so good why are you offering it to me? Fundamentally, I worry about getting deals through a middle man. If the deal is so unmissable why aren’t you snapping it up yourself. That’ s the bit I don’t get!
Financial Times – warns on US investment deals
In the FT this weekend there was a report on buying a US residential buy-to-let. It doesn’t make pretty reading. It looks like the middle men yet again make the killing and the poor old landlord is left holding the baby. The Financial Times reports on some property investors experience in the US city of Detroit. Many have made a property investment that not only has turned out to be pretty worthless but in due course is still costing them a ‘hatful of money’.
Land buying schemes
The other big scam I’ve warned Property Hawk users about is investing in land banking scams.
This is where companies buy worthless bits of agricultural land on the edge of a town or village and tout about parcels as potential development land that will go up in value 10 times over night once planning permission is forthcoming. The only drawback. Planning permission will never be granted and the scammers know this.
Again – it’s an old adage but it’s still very poignant.
If an investment looks too good to be true – it normally is!