Foreigners picking-up US real estate

[globetrotter]

1. I agree its not likely you will get seriously scammed as long as you don't invest or buy big ticket items there. If you don't have money with you, there's nothing to scam.

My money is with me, I just don't get burned. It's a mystery, I tell ya. Somehow I manage to avoid being scammed. Not everyone falls for it, you know. One guy wanted me to buy a house, another a topline motorcycle, one assistant asked to borrow money and another wanted me to buy him an expensive ($1,000) medical implement and he would 'pay me back' once he got it.

I can't figure it out - somehow I don't get scammed. It is a mystery, isn't it?...

3. If you keep most of your money parked in liquid US$ assets while living in China, I hope you realize that you are holding a rapidly wasting asset.

My assets are in 3 things:

80% Yuan
19% Yen
1% USD - this is just a US bank account to make life easy.

All hard cash

As far as I am concerned I want all US assets to drop -90% in value, so that when this shakes out in 10 years, I can buy my niece a nice place to live for $20,000. For myself, I have no intention of ever buying any US asset ever again.

The US has proven that much of its economy is based upon The Con, and I won't play anymore. That is why I left. I could see what was happening to the business culture and I had had enough.

The only winning move is not to play.

[momopi]

It's not realistic to want all US RE assets to drop by 90%. The decline in value is uneven from location to location. The best time to buy in this current down cycle, IMO, was early summer 2009. You could actually find SFR's in central OC (Santa Ana) at 50% off peak, by end of summer it was all gobbled up by local investors.

For condos, it's about 33% drop from peak in South OC, versus 66% drop from peak along the I-15 in inaland areas. SFR's tend to hold value a little better. In Summer 2009 you could buy a condo that was priced at $300k in 2005 for $80k-$90k cash bid in the above mentioned inland areas. Today the same condo would cost you $110k-$120k to buy, with much smaller inventory to fight over. However, with the lower interest rate today, cash flow investors can still make the numbers work.

For Palm Springs, I saw houses that were valued at $200k decline to $50k (75% drop) in 2009. In Riverside, there were actually houses that you could bid on for as low as $12,000 to $20,000, prolly 80%+ drop from peak, assuming you're brave enough to rehab former drug den and can speak Spanish. I don't recommend anyone to be a "remote slum lord". I have several relatives from Brazil and friends in North CA who are slum lords and they all learned to speak Spanish and collect rent in cash every month. Basically you buiy a house and make as many rooms as possible to cram a lot of Mexicans in it and collect rent. When economy is doing well you can cram a lot of Mexicans into the same house. When the economy is bad you cram fewer Mexcians in the same house. They make great cash paying renters and rarely squat, if they can't afford to stay they'd just pack up and go back to Mexico.

If you invest in more upscale locations, you can simply hire a property manager and be done with it. I pay my manager $70/month and she does a great job. When I got into a dispute with the HOA board she went to all the meetings for me and took care of it. Some property management companies collect $100+/month and do nothing for you.

[Rock]

1. I agree its not likely you will get seriously scammed as long as you don't invest or buy big ticket items there. If you don't have money with you, there's nothing to scam.

My money is with me, I just don't get burned. It's a mystery, I tell ya. Somehow I manage to avoid being scammed. Not everyone falls for it, you know. One guy wanted me to buy a house, another a topline motorcycle, one assistant asked to borrow money and another wanted me to buy him an expensive ($1,000) medical implement and he would 'pay me back' once he got it.

I can't figure it out - somehow I don't get scammed. It is a mystery, isn't it?...

3. If you keep most of your money parked in liquid US$ assets while living in China, I hope you realize that you are holding a rapidly wasting asset.

My assets are in 3 things:

80% Yuan
19% Yen
1% USD - this is just a US bank account to make life easy.

All hard cash

As far as I am concerned I want all US assets to drop -90% in value, so that when this shakes out in 10 years, I can buy my niece a nice place to live for $20,000. For myself, I have no intention of ever buying any US asset ever again.

The US has proven that much of its economy is based upon The Con, and I won't play anymore. That is why I left. I could see what was happening to the business culture and I had had enough.

The only winning move is not to play.

OK then. Good for you. Your Yen has probably outperformed most fiat currencies and kept pace with gold if you've been in it for awhile. Its closing in on an all time high against USD (cica 1995) so you might wanna consider taking profits and moving into a laggard non-USD currency. Secular trends have never lasted forever with developed world currencies.

As for you RMB, it should be a good medium to long term hold. And I have a question for you. Are you able, with your PRC residency and work status, to deposit your Yuan in an interest bearing local bank account? And if so, what sort of interest do you get? From what I've found so far, the only way I can buy the Chinese currency is via a non interest bearing account at Everbank in States or to buy RMB cash here in Taiwan and stuff it into a safety deposit box, with no interest of course.

[momopi]

A few interesting posts:
http://www.irvinehousingblog.com/blog/c ... eir-homes/
"20% of Mortgages Will Default: 11 Million to Lose Their Homes"

http://www.irvinehousingblog.com/blog/c ... ng-bubble/
"Private Property Rights: A Casualty of the Housing Bubble"

http://www.irvinehousingblog.com/blog/c ... r-default/
"What Really Prompts Borrowers to Accelerate Their Default?"


Comments from a real estate agent:

Astute Observation by Shevy
2010-10-07 10:59 PM
I just got off the phone with a friend of mine that started working for a bank a couple of weeks ago as an asset manager. He said that the federal government is paying his salary because this bank took on a bunch of failed banks through the FDIC thus forming his department and creating his position. He further verified how bad the shadow inventory issue is and confirmed that the banks are holding properties and not realizing losses with the backing of our government that has created a no lose system for them and the banks will make a windfall for themselves at the expense of our economy as a whole.
Moreover, I just go this from CAR-

“MAKING SENSE OF THE STORY FOR CONSUMERS

•Following near record-high levels of year- over-year sales increases, home sales are expected to decline 10 percent in 2010 compared with 2009, according to the C.A.R. forecast. C.A.R.’s economists predict home sales will increase 2 percent in 2011 compared with 2010.

•Home sales are expected to end the year at 492,000 units, compared with 546,500 in 2009. C.A.R. forecasts sales will come in at 502,000 units in 2011.

•The median sales price is forecast to increase 11.5 percent to $306,500 for 2010, and an additional 2 percent in 2011 to $312,500, C.A.R. announced.

•According to C.A.R. Chief Economist Leslie Appleton-Young, the Association expects a net jobs increase of approximately 1.4 million jobs in California for 2011 and an improvement in unemployment figures, which many believe are key to the economic recovery.

•Ms. Appleton-Young also noted that a lean supply of available homes for sale will drive up prices at the low end ($500,000 and less), but larger inventories and limited, less-attractive financing will cause continued softness at the high end of the market ($1 million and more).�


Bankers are taking huge bonuses and they successfully restricted supply so much that the median sales price went up 11.5% in 2010! What a joke, “sales decline 10% in 2010�, price up 11.5%, magic! We have huge unemployment, and I doubt peoples incomes went up 11.5 percent in 2010. Do economists, legislators and other decision makers continuing this charade not see that there’s something wrong with this picture? I hate to say it but most of us are supporting this corrupt system in a way as customers of banks. Banks win everyone else loses in 2010.

Also note CAR writes, low end, $500,000 and less, “will drive up� what’s the average household income in CA again? At least they got it right about the high end, but then again they will probably continue to restrict supply there too.


=========================

The authors above lives in a city that was at $320/sq ft early last year, and is now selling at $360/sq ft. IMO there's a certain feeling of bitterness that RE did not crash as much as they think it should have.

[momopi]

BofA: "Hey let's cut the supply even more!"

http://www.latimes.com/business/la-fiw- ... 7580.story
Bank of America halts foreclosure sales in 50 states


Las Vegas: "Our inventory is up! Only 35% owner occupancy!"

http://www.lasvegassun.com/news/2010/oc ... ory-rises/
Home sales, prices tumble in September as inventory rises


Make sure you buy fire insurance!
http://www.lasvegassun.com/news/2010/oc ... ge-100000/
Man late on rent accused of arson; damage at $100,000


Comments from IHB:
Astute Observation by IrvineRenter
2010-10-08 07:43 AM

The more people who believe Las Vegas is Detroit, the less competition I face to acquire the properties I want. Market despair is a classic sign of a market bottom. The best deals go to those who buy based on reason when others are selling based on emotion.

Prices in Las Vegas have rolled back to the 90s. At auction, I am obtaining property at late 80s early 90s prices which are below replacement costs. If everyone recognized the value I am obtaining, I would face more competition, prices would go up, and the deals would not be so compelling.

I am thrilled that naysayers come post here. It demonstrates market despair better than any explanation I can give. Like the many others who have come to this blog and told me that I am wrong, their foolish comments will remain long after the market reveals their folly and they disappear from embarrassment. In the meantime, I will continue to pick up Las Vegas flips with 15% to 20% net margins and buy-and-hold cashflow properties with 8% to 10% capitalization rates. I hope the despair continues. It is the only reason the deals are so good.

[Rock]

Thanks a lot Momopi. Vegas sounds attractive. Pls. do PM or post your broker contact. Not sure about SoCal though. Aren't yields lower there?

http://lasvegasrealestateupdate.blogspot.com/

Tell him Dat's friend sent you. He also has a property manager in same office. Go north from Vegas on I-15 N, then take 95 W, then 95 N. You'll see a lot of recent/new developments along the 95 FWY. If you're going to buy condos, buy something <10 years old, or preferably <5 years old that are turnkey. I don't recommend fixer-uppers unless if you plan to do the work yourself.

If you're interested in So Cal, contact me when you visit and I'll show you some places.

I'm making bids with 25%-30% down payment + loan right now, because the rates are just way too good to pass up:
http://online.wsj.com/article/SB1000142 ... 79198.html

The 30-year fixed-rate mortgage averaged 4.27% for the week ended Thursday, down from the prior week's 4.32% and 4.87% a year ago. Freddie has been tracking such rates since 1971.

The 15-year fixed mortgage averaged 3.72%, down from 3.75% the previous week and 4.33% in the like 2009 period. The latest week's figure was the lowest since Freddie started tracking such loans in 1991.

Thanks Momopi. I contact Grant House who was very patient and straightforward. He spent a few minutes educating me on the Vegas situation. Sounds like $85-95 per sq. ft. for new stuff in decent areas and gross rental yields of around 10% (net around 6-7%). We will be following-up via email.

As you've mentioned, supply is being artificially constrained so prices are still high from a true market perspective. And Vegas is a very risky area now. Check-out this recent clip from They Young Turks which spins it as an economic disaster zone: http://www.youtube.com/watch?v=yIf70VN5vE0 .

I will spend more time analyzing the situation.

[momopi]

Almost forgot -- Vegas condo associations have low owner occupancy rate right now, so that might make getting a loan difficult if you are not buying with cash.

Here in Cali my mortgage broker prefer condo associations with at least 51% owner occupancy vs investors.

Since I am buying with down payment plus loan, in worst case I can mail the keys to
the bank. But buying with all cash means assuming 100% of the risk. So buyer beware!