Buying Property in USA

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DariusM

Guest
Thinking of buying propert in USA as it would seem to be an ideal time to buy. Euro at its highest against the dollar ever and likely to continue to get to $1.50 by all accounts. Property in US at it lowest price in 7 years {approx}. Has anyone any thoughts. Appreciate your views particularly from those of you who have bought - looking at florida!!
 
This whole thing that agents say for a reason to buy in the US (ie. the euro is at an all time high,) is one that i don't understand.

Firstly - unless you're taking out a mortgage in the local currency then you're a small bit mad.
In which case,the curency exchange only effects the deposit (often only 10%). Now while it's not bad to save on the currency exchange for the 10% bit,it's hardly a reason to invest in the US.

So that exchange thing doesn't wash at all in my book.

Also -I don't know a whole lot about florida but going by what I've heard it's the last place i'd be investing in.

Apparently there are countless apartments lying empty.
 
America is a dog apart from New York (poss), 40th Avenue or that part of town maybe good. Currency no good unless taking MEW from your Irish property. Auto320 (RIP) mentioned Stamford or the tourist area of this patch. Search his threads. Florida a dog with fleas, LA ditto - it's a big city but big problems.
 
The one thing all good long term investors say is to only invest in something you know and understand.

I think that people believe the Dollar will strengthen against the Euro as it's currently weaker than ever before and that house prices will rise in the US because they are so low. Just beacuase something is at an all time low does not mean it can't go lower (Elan, Northern rock, etc)

An interest rate cut in the US may stimulate borrowing and push up US prices house prices but at the same time this interest rate cut will lead to the dollar weakening against the Euro and reduce the Euro value of your investment.

If this is news to you, keep your money in your pocket.
 
Yes - I would strongly advise NOT to release equity in property here just so u can purchase in euros to avail of a seemingly good exchange rate.

WHen people do that they seem to forget that if,say they are buying a property worth €500k in another country outside the eurozone and release equity fromproperty in ireland to do so then in fact they are exposed to an investment worth twice that.
i.e. a €500k bet on the property market along with a €500k bet on teh currency that are directly related to each other to compound matters.

And given that a lot iof the time currencies can be considered more volatile than property prices,the propety in fact can become the side bet with currency speculation being the main investment.(E.g. South Africas very volatile rand as an example)

That problem is then compounded in that at leact if someone just buys currency alone as a speulative buy it is very liquid and an be off loaded at any time.
Given that you can only get rid of the currency when you sell the property (Property very slow to offload in comparison) then that can work against you too.

On the flip side of course if both go your way then you're laughing.
But that is serious gambling to the point of being a bad decision !

SP - to sum up - when estate agents are trying to flog american property and say a good reason to buy is due to the exchange rate then they are just bluffing.
It doesn't stack up and is not applicable to the regular joe bloggs property investor.

That's my tuppence worth anyway - or should that be 3 US cents ??
 
Hi

another issue with American property is that in many states there is a property tax. I was told recently that in Texas (Austin area) it is 8K per year and that in some states , its higher. Therefore you should do a lot of research before buying.
 
if you did feel that you were happy to expose yourself to US property and the Dollar, then maybe your best bet would be to go through a managed fund. This way you'll at least diversify out the risks of holding an individual property, avail of economies of scale on the management expenses and have no work to do! Also the fund managers will have the experience of investing in US property that you do not have. Investing in a managed fund through an AVC would also be tax efficient.
 
DerKaiser said:
if you did feel that you were happy to expose yourself to US property and the Dollar, then maybe your best bet would be to go through a managed fund. This way you'll at least diversify out the risks of holding an individual property, avail of economies of scale on the management expenses and have no work to do! Also the fund managers will have the experience of investing in US property that you do not have. Investing in a managed fund through an AVC would also be tax efficient.
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Interesting DerKaiser...do you know if you can invest through your own pension in commercial property for instance like a SIPP in the UK & can it be foreign. I do not recommend MEW to anyone especially in forex but as Qwertyuiop was saying it was only good for the depoist..I was highlighting another reality. On taxes - a friend of mine was recently staying in an apartment in Palm Bay near Orlando..taxes were $12,000 per year. You are right in your assertion about the Greenback, it has a long way to stabilise and I would not be considering the market for a while. If China sneezes, there could be big trouble for its treasury bonds. Who'd buy 20 year bonds at a paltry rate in a company or country that should be bankrupt?
 
Can't believe what I'm hearing here.......................

The potential gains in investing in an American property now or in the foreseeable future are indeed credible especially if taking a ten year view

The same people pooh-poohing about this are sitting with property assets in Ireland in a market that is now shouting "last call" and handing out parachutes.

Anyone who has ever sat Economics 101 (which I assume is most of you) will know that America and Europe do (informally) need to keep currencies within certain bands for the world economy to keep functioning. Both sides of the pond will need to keep inflation or deflation in check. Take a look at the exchange rate graphs between EURO (Irish pound) over the last 20 years. You wont find anything too wild. The one thing you will find is that the dollar is exceptionally weak now.

For those who dont want the exchange rate risk, just finance the property in dollars.

As for the property market(s) in the US it cant be too risky to invest in propertry which is still returning respectable yields. In parts of Florida houses are now selling for close to what it would cost to rebuild them meaning that the site value has negligible value.
I'm an amateur but believe strongly that property bubbles exist in the price of the land not in the price of the build.
In Ireland its the land thats over valued not the house itself. Site prices in good parts of Cork City at 700,000 is sheer madness.

It's a good bet and one I'm going for myself.
 
which of these points can't you believe?
1) There's a foreign exchange risk
2) There are property taxes
3) There is a US property risk

Also I don't think building costs determine rents or property values, supply and demand do.
 
APHRODITE said:
I'm an amateur but believe strongly that property bubbles exist in the price of the land not in the price of the build.
In Ireland its the land thats over valued not the house itself. Site prices in good parts of Cork City at 700,000 is sheer madness.

It's a good bet and one I'm going for myself.
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Aphrodite,

I wish you well but watch out for some of the more agressive YOGI bears that will slaughter you for your sentiment(I'm a bear at present). I think the US is a good play but the timing is not quite right. The analysts expect the Greenback (which is at a 15 year low to the major 6) to weaken from its price now of €1.41 to the Euro to €1.45 in a number of weeks (hence gold achieving $730 an ounce in this bloodbath) and I to believe this case as the Fed is throwing the currency to the dogs.

I am aware of the trade limits of the dollar to other majors but I forecast there will be an eventual decoupling of the dollar within the world economy, probably within the next 3 to 5 years as India and China affect the balance of power. The IMF's report is set to slash the US growth next month as they expect the subprime to carry through 2008. According to Harvard University $4trillion is forecast to be wiped of house prices/consumer wealth as a result of this debacle and this will curtail consumption in itself by $200 billion. Since Jan 2003 when it was parity - I think that $10trillion has been wiped of American wealth as a result of the currency situation. I personally would hold until 2009 and await stablisation and invest per above threads in areas of critical mass away from the paddy pound areas of Florida etc.
 
now that's the kind of knowledge required in deciding whether you should invest in the US or not
 
DerKaiser

I have yet to meet anyone who has made meaningful returns by investing in managed funds. Not transparent enough for my liking (without a lot of digging) and too many vulchers swarming for a piece of the spoils

To answer your question, I do indeed believe there are risks in investing in the US property market but not comparable to the risks taken by investors in this country over the past five years. WHAT I DONT BELIEVE is your conclusion.

Michael Des, Nice analysis but forgive me for being wary of anyone that pretends to know the future direction of currency movement. Currency markets are too sophisticated. If speculators believe that the dollar will weaken in one month they will buy dollars today. This demand for dollars affects the supply and demand of the currency and its price (exchange rate). Nobody knows where the dollar is going, full stop.
 
APHRODITE said:
If speculators believe that the dollar will weaken in one month they will buy dollars today. This demand for dollars affects the supply and demand of the currency and its price (exchange rate). Nobody knows where the dollar is going, full stop.
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Er, no. If speculators believe that the dollar will weaken in one month, they will sell dollars today. As they sell dollars, the dollar will go down. It will become a self-fulfilling prophecy. As you suggest, this is a complex business with a market of it's own. As such, for the individual investor (in whatever they are investing in) currency is a risk. The more illiquid the assets, the greater the risk (you can't get out quickly). Property is the most illiquid asset.

Also, please don't shout. I have a headache.
 
I can believe that me, an arch Yogi-Yellowstone property bear, is making a tentative bull case for property investment but here is my 2 cents.

It is too early to buy in the US but not too early to start researching and making contact with agents. The property market slump there will probably be a drawn out affair and I still think that there is worse news to come.

Lending standards are tightening and a lot more mortgage re-sets have yet to come so expect more supply from distressed sellers (or reposessions) and also expect that those buyers who are left will have smaller amount of credit available to them.

Currency prediction is nigh on impossible but if you are serious about buying in the US I would buy some dollars now in order to lock in the current (favourable) exchange rate. I would also borrow in dollars to reduce your on going risk , though all of your investment gains could be lost if the dollar continues to slide.

State taxes in the US seem to be quite onerous so make sure that you are aware of what the annula charge for your property is.

I would not touch Florida with a bargepole unless this is a holiday home as well as an investment (and even then these arrangements are usually fromwned upon by 'serious' property investors).
 
JohnBoy said:
I can believe that me, an arch Yogi-Yellowstone property bear, is making a tentative bull case for property investment but here is my 2 cents.
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Good to see a conformed Yogi, I'd called myself a Boo-Boo (smaller bear) but not quite a Ranger Smith and switched sides. Anyways, you're right to start making contacts but it about another 12 months until there is sight of a floor on this. On the currencies I would err with the analysts advice of what’s being touted in the City. But I am prepared to eat my words. It is a social science...but $1.45 is predicted. Where in USA for investment...Rangers may only apply?:rolleyes:

I know there's some big bear out there though.
 
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