Property Management – Calabasas –
Property investment in the US is cheaper than ever with mortgage rates lowest since 1950s
Mortgage rates in the United States are now near their lowest levels since long term mortgages were first offered in the 1950s, according to new research.A 30 year fixed mortgage currently costs as little as 3.6% in interest to service each year and this has made houses more affordable and driven a big rise both in mortgage applications and in refinancing to cheaper deals, experts claim.
American property has also turned the corner with prices continuing to rise, according to the latest research from the leading measure of US home prices S&P Case-Shiller index. The data shows that house prices rose by over 10% in the last four quarters and all 20 cities in the index posted positive year on year growth.
For those considering property investment in the US, the climate is favourable and hotting up. Low, but rising prices and increasing average rental rates make it possible to achieve much better yields than in the UK, says Axis Property Investment.
‘America’s demographics also support the market. Younger people still find houses relatively expensive, so they’ve switched en masse to renting. As a result, America’s rental market has boomed in recent years, helping to support prices,’ the firm says in a report.
It also points out that rental vacancies are now at their lowest levels in over a decade, while the homeowner vacancy rate is at its lowest point since March 2006. Selected regions in the US can easily give a rental yield of well above 5%.
While there are great opportunities to be seized in the US, there are also significant risks for overseas buyers and the firm says buyers need to realise that real estate brokers don’t necessarily operate in the same way as in other countries.
It points out that properties are often sold as seen and you can be taking on a property with associated problems either in terms of the fabric of the building or debts linked to the address which may be passed onto the new owner.
‘When buying real estate in the US you are dealing in with property thousands of miles away. The legal system, language and feel may be similar to the UK or indeed elsewhere, but there are a many differences, both subtle and significant. Location is absolutely critical, for example, as one side of a street may be a great investment while the other side is a disaster,’ the firm says.
It believes that more research needs to be done into prices before buying as property valuation in the US is different. ‘Firstly, you need to know if you are paying the wholesale or the retail price for a property. It could be the case an area has a heavy concentration of wholesale units for sale at a certain time and this could well affect the perceived market price. Detailed research of local, regional and national markets and trends is necessary in order to get a holistic picture and this could well prevent you from making an expensive mistake,’ it explained.
Other issues worth checking if you are renting out the property is where there is a tenant before you buy. ‘A pre-tenanted property means there will be no initial void period and your income stream will start to flow into your account. Furthermore, there is also associated hassle and stress with an empty property such as the chance of vandalism, or the higher insurance premiums you may have to pay for an empty unit,’ the report says.
‘Carry out independent research to ensure the deal really stacks up. Check out what is said about the neighbourhood, conduct comparable price checks. Consider independent legal advice and make sure you understand the relationship between you, the vendor and the legal professional assigned to look after the sale. Some Title Agents do precisely what their name suggests, they merely check the title on the property is clear and will not feel it is their place to advise you on other aspects of the deal. You may want to consult an independent legal representative in order to make sure the contract is fair and reasonable,’ it adds.
The firm also recommends that overseas buyers commission an independent property inspection report and for investors to have a realistic exit strategy. ‘We are currently at the bottom of the US property cycle just at the point where prices are starting to rise. In order to derive the greatest overall returns, you should be looking to sell at the top of the cycle and this will take some time to arrive, maybe even a decade from now,’ it says.
From propertywire.com
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