Your questions answered

 

Click here to see a quick summary of how this process works

 

1: How do you get such great interest rates?

Local America banks don't give out loans for foreign investors. So foreign investors can only get loans from Private money lenders and that is higher than the normal bank rates. These rates are between 8%-12% and you still have to go through a very thorough and costly underwriting process of having to prove ...read more

 

2: Why would a seller agree to sell their house to you, but keep their name on the loan (and stay liable for it?)

A seller may have a house worth $100 000 and a mortgage on the house for $100 000. If they had to sell it on the open market, they would have to fix it up a bit, and then pay an agent 6% commission after the sale, plus...read more

 

3: You say there is little to no risk in these deals? Is my credit rating at risk?

Successful property investing is increasing income, decreasing expenses and managing the risk. With these deals you are taking over the mortgage loan, but the liability and loan stays in the seller’s name. So if you default on the loan payments, it doesn’t impact your credit score, and no-one comes after you or your assets. In these cases, the only risk is...read more.

 

4: How will this model be impacted by property cycles (and the crash like the one in 2008)

The crash of 2008 impacted the sales homeownership more than the rental market. You can see a graph here showing that the rental index actually increased during the crash. People still need a place to live so when…read more.

 

5: Are all the deals the same or can I choose ones with that have greater cash flow or greater loan to value?

As you will be taking over the buyer’s loan, the terms of that loan are already set. But if we know what you are looking for, then we can find the deals that match those criteria. For example you may…read more.

 

6: Can I buy more than one house like this?

Yes, yes and yes! Because you are taking over an existing mortgage, your credit score or proof of income is not necessary. But remember that as property investors we look to manage our risk and exposure. In deciding how many houses you wish to buy, we advise…read more.

 

7: Why invest in USA property rather than anywhere else?

The USA has the stability of a first world country, and the dollar currency is a worldwide influence. On top of that, the ratio of rent to home value is much higher there than in most other countries, making the rental returns really great. And the legal system can…read more.

 

8: How do you assess if the property and deal is good? What is the due diligence process the team goes through?

Each property is very carefully inspected, both legally from a safe title perspective, and from a material perspective (the building). This includes checklists that cover flooring, roofing, heating, plumbing, cooling, and painting. The team also looks at…read more.

 

9: You mention managing risk and having a reserve fund. What is this?

Greed is what makes investors poor. We advise that all investors have 7 months mortgage payments for each property set aside. This is just in case of the odd tenant vacancy, and might be used for a sudden repair you need to make after a storm for example. And remember…read more.

 

10: Some people say a property is only as good as the team that managers the property?

The people who said that is us. We know that the property managers are key to the property making you rich, or not. That is why we only chose the agents that have a National footing opposed to being some mom and pop agency down the road. We check that…read more.

 

11: How does the investor sell these properties or exit when they need to?

These deals are just like any other property deal in that you can chose how, and when, you want to sell. You could sell it to the person renting the property; you could sell it on the open market, or you could sell it to another investor. You could even offer…read more.

 

12: You mention ongoing annual costs? What are these?

Good decisions come from having all the right information. When I first bought my properties in the USA, no one outlined the annual book keeping costs, nor the tax submission costs, nor the LLC renewal fees etc. And although these fees are applicable to everyone, I was just not aware of them.

It is our promise to you that we show… read more.

 

13: How do I take advantage of the Double Taxation treaties between the USA and my country?

These legal and technical details are best checked with your own tax advisors from your own country. But most countries have a double tax treaty with the USA whereby you DO NOT have to pay double tax in both countries. Here is a list of the countries with Tax treaties with the USA, and here is the information between South Africa and the USA.

 

14: This all looks great but where do you as the provider of these deals make money?

In a traditional purchase and sale of a house the commissions to the brokers and agents gets added on top of the cost of the house. In our case, we work extra hard to make sure we can work all of our marketing and business costs to fall within the value of the house so you don’t pay anything more than you should. That means we have to really find the right deal, negotiate really hard on your behalf, and then make sure you don’t pay a cent more.

 

15: Why is there a waiting list for investors to buy?

We see ourselves as the facilitators of the transaction opposed to ‘selling’ you a property. If we bought the property first, then we would have to hold it, mark it up and then sell it onto you. We first want to know what kind of deal you are looking for…read more.

 

16: Why do you suggest we buy the properties in an LLC (Limited Liability Company)?

It is generally agreed that a Limited Liability Company is the safest legal structure for you as a real estate investor. It limits the risk and liability to that entity so you are personally protected. To set up the company is very quick, easy and cost effective. See here for more on the set up process.

 

17: Do I need to go to the USA to set this up?

No you don’t, but we suggest you do. Funnily enough we can get your LLC (limited Liability Company) set up and your IRS tax numbers all sorted really easily from afar. But to set up a bank account in the USA requires you to present yourself in person. Although we can set up a bank account for your LLC through a representative, it means…read more.

 

18: What do I need to do and have to get ready and set up?

Once we have answered all your questions and you feel you would like to get going on your portfolio, you will complete a reservation form that will detail what you are looking for (ie the cash deposit, LTV, number of houses etc). We will go through this with you…read more.