Author Topic: US Property Investing Strategy for Foreigner  (Read 5686 times)

nktokyo

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US Property Investing Strategy for Foreigner
« on: May 12, 2013, 01:17:56 AM »
For a while I've been eyeing up your cheap real estate and low rates.

Are there any lenders who will lend to a foreigner that doesn't live in America. I'm happy with a lower LVR than normal. What I've heard is something along the lines of "forget about it, nobody's lending".

Have any other foreigners been able to get a somewhat geared portfolio going stateside?

daverobev

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Re: US Property Investing Strategy for Foreigner
« Reply #1 on: May 12, 2013, 07:09:54 AM »
If you're Canadian there are ways (RBC has an american part that can use a Canadian credit score, for example).

I assume you are in Japan. I would strongly suggest 'forget it' - not worth the hassle that comes with owning single properties when they are half the world away. Just buy a Vanguard REIT ETF, if you really want to get exposure. Leverage on something else you already own?

IMHO!

arebelspy

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Re: US Property Investing Strategy for Foreigner
« Reply #2 on: May 12, 2013, 11:48:31 AM »
Have you contacted any mortgage brokers to ask?

From what I understand, you'll get something like 50% LTV, and of course the higher interest rate that comes with an investment loan (non-owner occupied).  It probably will also have a shorter amortization, probably 20, maybe 25 years.

In terms of investing out of country, my favorite method is to be the lender yourself to someone local.  You'll hold a lien on the property and collect a nice interest rate (8-15% depending on the type of loan).
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

totoro

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Re: US Property Investing Strategy for Foreigner
« Reply #3 on: May 12, 2013, 12:31:18 PM »
If anyone has found a good method I would be interested in more information.  I did not when I looked into it before but I'm not really experienced with US options.

arebelspy

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Re: US Property Investing Strategy for Foreigner
« Reply #4 on: May 12, 2013, 05:21:21 PM »
If anyone has found a good method I would be interested in more information.  I did not when I looked into it before but I'm not really experienced with US options.

A good method for what?  You'll need to be more specific with what exactly you want to do (not a vague "invest in US real estate") in order to get a helpful response.

Did you see what I posted above your post?
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

nktokyo

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Re: US Property Investing Strategy for Foreigner
« Reply #5 on: May 12, 2013, 05:31:02 PM »
Have you contacted any mortgage brokers to ask?

From what I understand, you'll get something like 50% LTV, and of course the higher interest rate that comes with an investment loan (non-owner occupied).  It probably will also have a shorter amortization, probably 20, maybe 25 years.

In terms of investing out of country, my favorite method is to be the lender yourself to someone local.  You'll hold a lien on the property and collect a nice interest rate (8-15% depending on the type of loan).

I haven't heard of this. Do you have some examples of how it would work?

arebelspy

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Re: US Property Investing Strategy for Foreigner
« Reply #6 on: May 12, 2013, 06:02:22 PM »
You'd be a private money lender or hard money lender, loan the money to an investor, who invests it in real estate.  Your money would be secured by the property (essentially there would be a mortgage on the property, payable to you).  You'd be the "bank" and they'd pay you your loan + interest.

If they default, you get the property.  Otherwise you get a decent 8-15% return, depending on the type of loan.

You don't own the property, but hold a (lien/mortgage/note) against it. 

By far my favorite way to invest non-locally.  No maintenance ever, no finding tenants, etc.  The mortgage payment just shows up.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

totoro

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Re: US Property Investing Strategy for Foreigner
« Reply #7 on: May 12, 2013, 06:21:56 PM »
I'm Canadian.  I don't know how to:

a. qualify for a mortgage with good rates for US-owned properties (most Canadians seem to take a  HELOC to do this);
b. how to become a private or hard money lender for US properties and what the tax consequences might be.

How this b could interact with a TFSA...

The information I've reviewed indicates that you can't use a TFSA for this (or RRSP) and I don't know how it would make sense for  Canadian to do this.  If there is a Canadian out there with great experience this would be good to hear about.  I don't know of any.

arebelspy

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Re: US Property Investing Strategy for Foreigner
« Reply #8 on: May 12, 2013, 06:29:06 PM »
1)
I'm Canadian.  I don't know how to:

a. qualify for a mortgage with good rates for US-owned properties (most Canadians seem to take a  HELOC to do this);

From above, you may have missed:
Quote
Have you contacted any mortgage brokers to ask?

From what I understand, you'll get something like 50% LTV, and of course the higher interest rate that comes with an investment loan (non-owner occupied).  It probably will also have a shorter amortization, probably 20, maybe 25 years.

2)
b. how to become a private or hard money lender for US properties

Right, there would be a learning curve, like any investment.

3)
How this b could interact with a TFSA...

The information I've reviewed indicates that you can't use a TFSA for this (or RRSP) and I don't know how it would make sense for  Canadian to do this.  If there is a Canadian out there with great experience this would be good to hear about.  I don't know of any.

Being from the United States, I don't know anything about anything outside our borders, and I barely know anything about what's within it.  However I do know that here you can get "self directed" IRAs that let you loan money (get promissory notes) within that self directed account. Perhaps there is a way to do a similar thing in your TFSA?  I'd probably start by googling terms related to it.  This link was one of the first that came up with a cursory search I just did.

Definitely something to look into, otherwise you'd have to do it as a regular taxable loan/investment.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

nktokyo

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Re: US Property Investing Strategy for Foreigner
« Reply #9 on: May 12, 2013, 06:50:19 PM »
You'd be a private money lender or hard money lender, loan the money to an investor, who invests it in real estate.  Your money would be secured by the property (essentially there would be a mortgage on the property, payable to you).  You'd be the "bank" and they'd pay you your loan + interest.

If they default, you get the property.  Otherwise you get a decent 8-15% return, depending on the type of loan.

You don't own the property, but hold a (lien/mortgage/note) against it. 

By far my favorite way to invest non-locally.  No maintenance ever, no finding tenants, etc.  The mortgage payment just shows up.

This is really interesting to me. How have you found your investors?

arebelspy

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Re: US Property Investing Strategy for Foreigner
« Reply #10 on: May 12, 2013, 07:04:25 PM »
First decide on an area you want to target, then look for people successfully investing in the area.  Find ones with a good track record and lots of experience (not someone new who doesn't know what they're doing).
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

nktokyo

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Re: US Property Investing Strategy for Foreigner
« Reply #11 on: May 12, 2013, 07:14:56 PM »
Got it, thanks.

Plug: I do a lot of renovations in NZ and we run Joint Ventures. Anyone (probably from NZ or Australia) who is interested in the type of investment arebelspy has described please PM me :-)

arebelspy

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Re: US Property Investing Strategy for Foreigner
« Reply #12 on: May 12, 2013, 08:23:24 PM »
Got it, thanks.

Plug: I do a lot of renovations in NZ and we run Joint Ventures. Anyone (probably from NZ or Australia) who is interested in the type of investment arebelspy has described please PM me :-)

I've done some joint venture partnerships as well, but I'm not looking for funding right now.

Why don't you share some more information (maybe in a new thread) about what you've done and are doing?  Not as a solicitation, but sharing for knowledge often leads to confidence in investments, from what I've seen.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

nktokyo

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Re: US Property Investing Strategy for Foreigner
« Reply #13 on: May 13, 2013, 05:18:43 AM »
Is that OK here? I am happy to help people with RE stuff but since I've only been on the boards a little bit I don't want to upset people by making that kind of a statement.

totoro

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Re: US Property Investing Strategy for Foreigner
« Reply #14 on: May 13, 2013, 07:11:31 AM »
1)
I'm Canadian.  I don't know how to:

a. qualify for a mortgage with good rates for US-owned properties (most Canadians seem to take a  HELOC to do this);

From above, you may have missed:
Quote
Have you contacted any mortgage brokers to ask?

From what I understand, you'll get something like 50% LTV, and of course the higher interest rate that comes with an investment loan (non-owner occupied).  It probably will also have a shorter amortization, probably 20, maybe 25 years.

2)
b. how to become a private or hard money lender for US properties

Right, there would be a learning curve, like any investment.

3)
How this b could interact with a TFSA...

The information I've reviewed indicates that you can't use a TFSA for this (or RRSP) and I don't know how it would make sense for  Canadian to do this.  If there is a Canadian out there with great experience this would be good to hear about.  I don't know of any.

Being from the United States, I don't know anything about anything outside our borders, and I barely know anything about what's within it.  However I do know that here you can get "self directed" IRAs that let you loan money (get promissory notes) within that self directed account. Perhaps there is a way to do a similar thing in your TFSA?  I'd probably start by googling terms related to it.  This link was one of the first that came up with a cursory search I just did.

Definitely something to look into, otherwise you'd have to do it as a regular taxable loan/investment.

Thanks!

I have friends who own in Phoenix and Las Vegas, but they both paid cash and use the places for their own vacations.  I would be looking at it as either a lender or a leveraged financed investment - which is a different thing.

I have researched the loans available a fair bit - and the tax rules - although that was about two years ago.  My conclusions at that time was that, although it could work out well, the restrictions (ie. you can't fix up yourself) and taxation issues made it less attractive to Canadians. What I am missing is speaking not with a broker, but with someone from Canada who has made such investments. I'm okay on the research the internet front but short on real life examples.

FYI, you cannot use a self-directed RRSP to hold a US mortgage, only a Canadian one.  Doesn't make a lot of sense right now anyway given interest rates - although would make sense if was available to purchase in the US in a depressed market.  TFSA are pretty restrictive - unless something is organized through a REIT I suppose - which someone else may have looked into.

I was more looking to see if there was a Canadian who had done this successfully and how their experience was and how they managed the taxation and financing aspects.


arebelspy

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Re: US Property Investing Strategy for Foreigner
« Reply #15 on: May 13, 2013, 07:20:03 AM »
Yes, purchasing in cash is one option, and the HELOC is the easiest if you want leverage.

Then you're dealing with managing properties in other countries.  It can work, it's just not my preferred method, like I said, I prefer notes.

And, of course, a vacation home is not an investment, it's almost always a poor financial decision based on emotions rather than numbers.

Certainly getting other people's experiences is good, but don't let it stop you if you don't find exactly the anecdote that applies to you.  Too many people want "just one more piece of information" and never pull the trigger.

There are tons of foreign investors coming into the US right now (lots of Canadians and Australians, specifically, here in Vegas), so I know that it's done all the time.

Do you not hold any investments outside retirement accounts?  I almost exclusively invest outside of them, and deal with the taxes, because the avilabability of returns and lack of restrictions on what I can do make it worth it (regarding real estate - my equities are held within taxable accounts).
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

totoro

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Re: US Property Investing Strategy for Foreigner
« Reply #16 on: May 13, 2013, 05:50:45 PM »
Purchasing cash is an option (within a lower end limit like $60,000), but it seems kind of wasteful given the power of leverage.  I'm headed to Texas in July and plan to check things out then.