Look before you leap into investment in USA

[RonMurcia]

Hi all.
I would like to share an experience with you. With these days of very low interest rates many people are looking to land lording to get a better return. Me too. I saw an advert for tenanted property in Detroit for very little money (by European standards) with amazing returns of $1000 per month in rent with 16% net return. I looked at the sales literature and could not believe that I could get a refurbished 4 bed 1.5 bathroom property for only $51500 (£31212) It sounded too good to be true. Guess what, it was. I bought the property from the management agent and all went well for a month or two then I got an email to say the tenant had disappeared. That was November last year. Since then all I have been getting is excuse after excuse. A year on from the date of purchase I get an email asking me to sign a new management agreement. Needless to say I didn’t sign. As you can probably guess I was getting just a little suspicious by now so I arranged for the property to have an assessment. (For those that don’t know an assessment is where a professional looks at the property and gauges is general condition and values the property) Well he gave the property a value of $22000 and the rent suggested was $750. He also said that if the assessment had been for a mortgage it would have been refused due to the generally poor condition of the property. He also suggested that it would be worth my while having a full property inspection. (An inspection is where the property is looked at in detail and things like the electrics, plumbing, heating are tested, the roof is checked etc etc.). In the mean time I received an email to say that a tenant had been found but they could only pay $750 and wanted to move in within 3 days. I managed to arrange the inspection on short notice and when I got the report I could not believe it. Nearly all the advertised refurbishments had not been carried out and the house was in a dangerous condition. The boiler was badly corroded and the water heater was so old that it should never be used again. The list was endless. All of these things were supposed to have been part of the refurbishment and had not been carried out. I quickly informed the management agent not to let the new tenant move in as I didn't want to be liable for any injuries sustained.
The purpose of this post is to warn people who are hoping to be long distance landlords to be very vigilant. Do not believe the sales information EVER. Have a quick look on the Zillow web site. I know it’s not very good but it will give you a rough guide to sale prices/rents in the area. If you can’t go and look at the property yourself get the property assessed and inspected. It will cost about $750 for both depending on the location and size of the property. Believe me it is well worth it.
There are loads of villains out there just waiting to take advantage of the unwary. SO BE WARNED

 

[owendale]

Not surprised at all...

amazing , how many more uk based people are going to write stories like this?at every property show I see so many blinded by lies and greed...as a uk fully licensed and regulated realtor for Florida , I have been putting people off when considering buying , it's not in their best interests...now how many other uk based so called USA property experts can say that? My advice is simple ....do your own research and ask for a property address before you even think about investing. I could go on and on but I won't I have done every day for the last 10 years ...

Hi all.
I would like to share an experience with you. With these days of very low interest rates many people are looking to land lording to get a better return. Me too. I saw an advert for tenanted property in Detroit for very little money (by European standards) with amazing returns of $1000 per month in rent with 16% net return. I looked at the sales literature and could not believe that I could get a refurbished 4 bed 1.5 bathroom property for only $51500 (£31212) It sounded too good to be true. Guess what, it was. I bought the property from the management agent and all went well for a month or two then I got an email to say the tenant had disappeared. That was November last year. Since then all I have been getting is excuse after excuse. A year on from the date of purchase I get an email asking me to sign a new management agreement. Needless to say I didn’t sign. As you can probably guess I was getting just a little suspicious by now so I arranged for the property to have an assessment. (For those that don’t know an assessment is where a professional looks at the property and gauges is general condition and values the property) Well he gave the property a value of $22000 and the rent suggested was $750. He also said that if the assessment had been for a mortgage it would have been refused due to the generally poor condition of the property. He also suggested that it would be worth my while having a full property inspection. (An inspection is where the property is looked at in detail and things like the electrics, plumbing, heating are tested, the roof is checked etc etc.). In the mean time I received an email to say that a tenant had been found but they could only pay $750 and wanted to move in within 3 days. I managed to arrange the inspection on short notice and when I got the report I could not believe it. Nearly all the advertised refurbishments had not been carried out and the house was in a dangerous condition. The boiler was badly corroded and the water heater was so old that it should never be used again. The list was endless. All of these things were supposed to have been part of the refurbishment and had not been carried out. I quickly informed the management agent not to let the new tenant move in as I didn't want to be liable for any injuries sustained.
The purpose of this post is to warn people who are hoping to be long distance landlords to be very vigilant. Do not believe the sales information EVER. Have a quick look on the Zillow web site. I know it’s not very good but it will give you a rough guide to sale prices/rents in the area. If you can’t go and look at the property yourself get the property assessed and inspected. It will cost about $750 for both depending on the location and size of the property. Believe me it is well worth it.
There are loads of villains out there just waiting to take advantage of the unwary. SO BE WARNED

 

[homeproperty]

It's very important that you do your own research. You can't rely on someone whom you don't have a close connection with. Most definitely you'll be duped. You can prevent being duped if you take the wheel. It's your money so take care of it. Research research research. If you can't find certain information... ask ask ask. And if possible, visit the property first so you can see first hand where you will be spending your money. Be practical, be wise.

 

[Drew Drew]

Just be sure that when you do your research, you deal with the proper people!

 

[bporeo]

sorry to hear that

There are a lot of crooks in the real estate industry, I've been in this industry for 15 years and I've seen plenty of bad people make a load of money. It's just the type of industry that lends itself to thieves due to the huge numbers involved. It's all greed. Scenarios like you describe are very common, unfortunately.

The crazy part is, the numbers you give, there are actually deals in that general ballpark (maybe not quite $1,000 a month income for a $51,000 4 BR property but I see $700 a month for this price range of property all the time). Maybe $750-800 if it's a screamin deal. My area is Akron/Canton/Cleveland Ohio and the market here is similar to Detroit.

Like others have said, you definitely want to investigate as much as possible and get the property inspection and a full appraisal (we call them appraisals instead of assessments, my job actually is in the appraisal industry). Your $750 cost is pretty close to accurate so you've got a general idea what to expect for future deals. You'll also want to budget for the title report to be sure there are no liens on the property.

I hope you aren't totally scared off though, there are plenty of profitable deals - you just have to avoid the scammers.

Best of luck to you.

-Rob

 

[Drew Drew]

BPOREO - In the Ring Suburbs of Detroit we're seeing purchases for around $20k-25k and after rehab of $10k-15k, we see rents of $800-$1,000.

RobMurcia - The group you dealt with probably bought the house they sold you for less than $15k, probably put less than $5k into it and got you to pay the $51,500 you mentioned. That's quite a profit for them. These types also often "bribe" tenants so they can sell you the property at their inflated value. If you look me up here and email me the address, I can look it up and probably find out how much they paid for it. Then again, maybe you really don't want to know that info...

 

[owendale]

BPOREO - In the Ring Suburbs of Detroit we're seeing purchases for around $20k-25k and after rehab of $10k-15k, we see rents of $800-$1,000.

RobMurcia - The group you dealt with probably bought the house they sold you for less than $15k, probably put less than $5k into it and got you to pay the $51,500 you mentioned. That's quite a profit for them. These types also often "bribe" tenants so they can sell you the property at their inflated value. If you look me up here and email me the address, I can look it up and probably find out how much they paid for it. Then again, maybe you really don't want to know that info...

Had to laugh at this post , it's excellent and it's shows what a lot of uk based are falling for. It's beyond belief what happening it really is. A remarkable lot of bull over here in the uk.. I will not mention the organisations but those trying to do it right are being hit hard by the greedy cowboys.. And we all know who pays the most yes those most gullible uk based investors ... It really is a shame..

 

[Cleo]

Hi All, I am a real estate agent in Virginia, U.S.A. and one of the partners in a marketing company in Cyprus selling properties to a mostly British clients since 2006. First thing I want to say is that IMHO the Brits are overly trusting people, more so than any I have met, I am always amazed at some of the stories of my clients when they explain why they bought from a certain developer or why they purchased for such a high price or how so many bought a property by paying full price with out title deeds. Of course all these instances happened in Cyprus.

In the U.S. we have a good system in place that can weed out crooks that are giving out misinformation, however, you have to file a complaint with to the right people and you can be vindicated if you were lied to. Of course this can take much effort and time.

There are many great investment all over the U.S. and Cyprus but the truth is that if it sounds too good to be true, it most likely is. As always you have to do your research and if you don't have the ability to at least research the agent that you are employing then you are better off not getting involved at all.

 

[Drew Drew]

Cleo, thanks for chiming in!

Actually, the problem is that the deals aren't too good to be true. We've helped several clients acquire properties for $30k-$50k that generated monthly gross rents of $800-$1,000. So, the ad RonMurcia responded to sounded legit.

The problem is the lack of due diligence by the buyers regarding what & where they're buying.

Which do you think is easier:

1) Create a new market and all the necessary advertising to grab attention to perpetuate your scam

OR

2) Identify the latest "hot" market, let others do the heavy lifting of generating interest and just piggyback your scam onto it.

Number 2 is what is happening to many foreign investors with US real estate purchases. They don't due enough due diligence to discern the real deals from the fake ones!

 

[Cleo]

Royal Rose Properties I am sure you are right about the figures you mentioned. What I was stating when I wrote " the truth is that if it sounds too good to be true, it most likely is" is that the whole deal including the part about being refurbished and not having to visit the property and have it inspected.

 

[AlbertL]

I think you are hurry in get the returns. Current time is not good for the short time investors, if you held your property for next two years, you'll surely get high return.:tee:

 

[breeanne]

Thanks Ron for the information; i believe one has to do their homework very well before you buy a house.

 

[owendale]

Thanks Ron for the information; i believe one has to do their homework very well before you buy a house.

Yes do your homework and get to know what you are buying into.. It took me 3 years to finally invest into Georgia and that was during 2006 just before the big crash.
The property lost value very quickly and its only now I am clawing back to break even. By break even I mean the rent paying for my licensed realtor status and the morgage. Although the aircon was very expensive last year. I am hanging in for the turnaround ... I got a decent property in a decent area so will be rewarded for my diligence . My advice to any investor is to make your own mind up and do not believe all the hype.. A story on this forum is a perfect example. The mag a place in the sun suggested that a Florida villa to maintain for one year was around $30000 and the real life example was about $50000 it is this sort of thing that real experience is often priceless.. Each property is different so ball park figures can be miles away..
Invest if you can afford the worst case cautious and careful study of all the variables will in itself be an education... Good luck everyone

 

[Drew Drew]

Thanks for clarifying Cleo - we definitely agree!

 

[owendale]

Hi all.
I would like to share an experience with you. With these days of very low interest rates many people are looking to land lording to get a better return. Me too. I saw an advert for tenanted property in Detroit for very little money (by European standards) with amazing returns of $1000 per month in rent with 16% net return. I looked at the sales literature and could not believe that I could get a refurbished 4 bed 1.5 bathroom property for only $51500 (£31212) It sounded too good to be true. Guess what, it was. I bought the property from the management agent and all went well for a month or two then I got an email to say the tenant had disappeared. That was November last year. Since then all I have been getting is excuse after excuse. A year on from the date of purchase I get an email asking me to sign a new management agreement. Needless to say I didn’t sign. As you can probably guess I was getting just a little suspicious by now so I arranged for the property to have an assessment. (For those that don’t know an assessment is where a professional looks at the property and gauges is general condition and values the property) Well he gave the property a value of $22000 and the rent suggested was $750. He also said that if the assessment had been for a mortgage it would have been refused due to the generally poor condition of the property. He also suggested that it would be worth my while having a full property inspection. (An inspection is where the property is looked at in detail and things like the electrics, plumbing, heating are tested, the roof is checked etc etc.). In the mean time I received an email to say that a tenant had been found but they could only pay $750 and wanted to move in within 3 days. I managed to arrange the inspection on short notice and when I got the report I could not believe it. Nearly all the advertised refurbishments had not been carried out and the house was in a dangerous condition. The boiler was badly corroded and the water heater was so old that it should never be used again. The list was endless. All of these things were supposed to have been part of the refurbishment and had not been carried out. I quickly informed the management agent not to let the new tenant move in as I didn't want to be liable for any injuries sustained.
The purpose of this post is to warn people who are hoping to be long distance landlords to be very vigilant. Do not believe the sales information EVER. Have a quick look on the Zillow web site. I know it’s not very good but it will give you a rough guide to sale prices/rents in the area. If you can’t go and look at the property yourself get the property assessed and inspected. It will cost about $750 for both depending on the location and size of the property. Believe me it is well worth it.
There are loads of villains out there just waiting to take advantages of the unwary. SO BE WARNED

Hi Ron so sorry to read your story , it's not the first and it will not be the last. I have contacted the press people involved with overseas articles and highlighted how British people are just being ripped off by the kind of story you write about ... Guess what it seems no one in the UK is interested I even wrote to rouge traders and which again not one reply.. all I want is for everyone to know the basic truth. In 2003 I set out to become licensed and if things do not change I will be losing it because of the lack of support and the endless uk experts ?? That are marketing like crazy .. Thing is this would not exist we're it not for people in the USA helping them.. Sad thing is realtors some of them will sell no matter what or who pays the price. Your point about inspection is spot on and please do not use the experts people , because guess where their interest is.. Certainly not with you and guess what some little white lies may just creep in.

Is the property really worth what it is being sold for?
What is the average rental in the neighbourhood?
What is the average tax?
You know trulia zoopla and the killer tip I use all the time
The local tax collector that will have a history of the local property..
If you want more detail private message me...

They are all free and you will have no need to pay 1 dime..
It sickens me that UK experts think it ok to charge for property lists?

 

[camillesdawn]

You directly concern with your close property expert, he will guide you better. Don't just trust on anyone, since the real estate is the area where most of the illegal things happens.