Buy to let usa property investment guide indi

Buy to Let USA

Property Investment Guide Incredible returns…annual yields up to 37%

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Why invest in the USA? If you want to earn the biggest bang for your buck, no market can compete with the USA on yields or potential capital appreciation. This is why Prime Asset Investments are focused on the USA buy to let market.

We consider the potential for high yields and capital growth in all markets by applying the following criteria: • • • • • • •

Undervalued markets Good property market data Strong mortgage market Stable political climate Zero market interference No (or little) corruption Buoyant rental market

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The USA clearly satisfies these requirements. Since 2008 we’ve helped clients buy cheap homes in the USA, mostly previously foreclosed properties. By concentrating on the areas that hit the hardest by the crash, we have found deals offering yields up to 37% a year- up to 70% cheaper than peak values.

We collaborate with experienced local US real estate agents and brokers to source easily rentable properties that are for sale at low prices, thereby offering potential high yields and capital growth. By working with local agents, it means that foreign investors can rest assured that they get the best deal and that rent collection and property management will be professionally handled until it’s time to sell.

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Property Buying Process in the USA When you invest in buy to let property in USA through Prime Asset Investments, you will be assisted every step of the way by our US partners. You will be assisted by experienced professionals who will act on your behalf, from initial offer, due diligence and closing, ensuring the process is carried out in strict adherence to the law. Once you take ownership of the property, your US property management agent can look after your property and make sure the rent is paid on time or take action accordingly.

FORMAL INSTRUCTION

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• •

Compliance & proof of identity.

Agreement to pay PAI sourcing and service fees for finding the property, closing the sale and securing management services.

RESERVATION • •

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2

Buyers’ details, price, sale date and address are required for signature.

Reservation valid once PAI’s fee has been signed and paid (unless property removed from market before payment is received)..

SALES & PURCHASE CONTRACT • •

Sales and Purchase contract detailing terms of sale and buyer / seller obligations.

Closing date usually set 14 days from contract date.

DEPOSIT • •

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Usually 10% to 20% of the purchase price.

If the sale doesn’t go through according to the Sales & Purchase contract terms, the deposit will be returned.

DUE DILIGENCE

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• •

Buyer can request extra due diligence in the time between signing the Sales & Purchase contract and before closing.

PAI will provide full building report from licenced independent professionals (this will incur an additional fee).

TITLE & LIEN SEARCH •

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Ownership and providence will be verified by an independent title and lien search will be carried out before closing.

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INSURANCE & WARRANTIES

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• •

Independent insurance valuations, repairs and maintenance warranties will be obtained in line with the clients’ wishes.

Insurance will start on the day of the purchase

HUD STATEMENT •

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24-hours before closing, a HUD report will outline the financials associated with the purchase, stating the final balance less deductions for taxes and agreed repairs.

SETTLEMENT •

Funds must be available on the closing date and payment must be made in full as stipulated in the HUD report and the Sales & Purchase contract.

CLOSING • •

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Once payment has been received possession of the property will pass to the buyer.

A PAI US agent will take possession of the keys on the buyers’ behalf.

DEEDS & OWNERSHIP

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• •

Ownership of the property will be transferred to the buyer by email.

The original will go to the County Clark’s office to be recorded then forwarded on to you.

RENTAL MANAGEMENT •

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Once ownership has been transferred, your appointed management agent will receive the keys and start marketing your property to potential tenants.

TENANT REFERENCING

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•

Upon receipt of a deposit, references, previous rental history and criminal checks will be made.

TENANCY COMMENCEMENT •

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Occupation will be granted upon receipt of satisfactory checks by the rental management company.

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The aim of every buy to let investor is to buy cheap and rent easily‌which is exactly what Prime Asset Investments will help you to achieve.

What is a buy-to-let investment?

First and foremost, buy to let properties should be considered a longterm investment.

How they work is fairly simple, you buy a property and let it out to tenants.

The potential returns are two-fold, in the short term you generate rental yields and capital growth when you decide to sell.

Buy to let is a much more attractive investment compared to the current low interest rates on savings accounts and the volatility of stocks and shares. Unlike other forms of investment, when you become a buy to let landlord, you don’t just own a property, it should be viewed as running a small business and an effective way of generating regular income.

The aim of every buy to let investor is to buy cheap and rent easily‌ which is exactly what Prime Asset Investments will help you to achieve.

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Why buy through Prime Assets Investments?

Let’s start with a brief introduction as to who we are. Prime Asset Investments was established in Switzerland in 2006. We have an office in Malaga (Southern Spain) and collaborate with trusted local real estate agents and brokers in the USA. Even though we’re based in Switzerland, as an international company we consider all property markets on their individual merits. We do this by undertaking thorough macro and micro research into residual property markets in the early stages of the property cycle, where prices are well below the historic average value.

How we source buy to let property in the USA We are firmly focused on the USA because it is currently the best buyers’ market, with above potential average rental yields and capital gains. We identify markets undiscovered markets and focus on finding property deals that aren’t listed through real estate agents and can be purchased at discounted prices below the market value.

We are firmly focused on the USA because it is currently the best buyers’ market...

Local US partnerships

And it doesn’t end there…

Our buy to let property investments in the USA are unlike any others offered, as we operate with the assistance of local real estate agents, brokers and property management companies. This means that owners can rely on the local knowledge and expertise of our US partners to manage the buying process and subsequent look after the day to day running of their buy to let investment.

Our business model includes reselling the properties we have selected for investment to new and existing clients. Many properties will already be turnkey investments with tenants already installed.

Too much information?

Don’t worry. We understand.

Contact us today and we will help you make the right investment decision.

+44 (0) 20 8 256 5815

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Frequently Asked Questions The buying process in the USA follows strict legislation. In order to clarify the procedures and explain some of the terminology, we have compiled a list of frequently asked questions and answers.

How can I reserve a property in the USA? Reserving a property is fairly straightforward.

But time is of the essence, until the property is reserved, another buyer could snap the property up at any time. Once you’ve chosen your property, the next step is to sign a Sales and Purchase Contract. This is a standard agreement between the vendor and buyer listing the name of the beneficiary, price, deposit and date of closing.

It’s worth noting, if you make an offer that is considered too low, the vendor may refuse to negotiate. This can be avoided by making sure your offer is realistic.

How much deposit will I need to pay?

Generally you can expect to pay a deposit of between 10 to 20 per cent of the sales price. In some cases, as an overseas buyer, you may be required to pay a slightly higher percentage.

Is the reservation process different for foreclosure properties?

When reserving foreclosure properties you would send the offer contract together with your deposit offer of up to 20%. These properties are in high demand, so you can increase your chances of success by submitting offers for several properties at the same time. The winning bid will take into account the price and how quickly the sale can be closed. If there are several similar bids, you may be asked to increase your offer. If you’re unsuccessful, your deposit will be returned to your within 30 days.

Will I need a lawyer to complete the Sales & Purchase contract?

Some clients prefer to retain a lawyer to provide peace of mind. However, in our opinion there is no need to incur the additional expense of a lawyer

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at this stage. Sales and Purchase Contracts are straightforward documents and provided English is your first language, you won’t need any assistance.

See page XX for an example of a Sales and Purchase Contract.

Do I need a property survey?

An independent survey should be carried out before the final closing date to make sure that the seller has disclosed any issues, and you’re happy to go ahead with the purchase. If any issues are flagged up, you can either renegotiate on the price or walk away from the sale within any incurring any financial penalty.

Our US partners can arrange for an independent surveyor to produce a details report on the condition of the property, identifying any existing structural damage or issues with permanent fixtures. The reports can cost between $350 and $1,500, depending on the level of detail required.

The more in-depth reports will also include the electrics and plumbing of the home.

Is it necessary to carry out title and lien searches?

Yes, this is very important and we can help you organise these searches. If there is a lien attached to your property, it means that money is owed to a creditor and they have a claim on the property.

Searches will reveal names on the title, liens, court judgments, bankruptcies, mortgages and foreclosure activity.

How do liens work?

If there is a lien against a property, the creditor has the right to force a sale to pay off the lien.

However, this rarely happens, particularly if the property has a mortgage, as this would have been in place before the lien and would be paid first. If

the creditor calls in the lien, it will be a case of keeping up the mortgage payments or losing the house. In general rather than push for a foreclosure sale, creditors wait for the property to be sold. Buyers insist that the property title is clear before purchasing, which means that all liens must be cleared by seller. This is often taken from the purchase price.

Do I need building and contents insurance?

Yes. As a buy to let landlord you will insurance. Prior to the final closing date, Prime Asset Investment’s US partners will source independent insurance valuations ready for the policy to begin on the first day of ownership. If desired we can also source additional repairs and maintenance warranties that offer protect against repairs and replacement of essential appliances such as kitchen appliances and system including plumbing, water heaters and electricity.

What is an HUD-1 Settlement Statement?

HUD or Housing and Urban Development is a government department that produces the legislation relating to property development and property purchases in the USA. The HUD-1 Settlement Statement (sometimes referred to as a Closing Statement or HUD), is a document issued by the Title company that lists all the charges and credits associated with the sale and the purchase. A Good Faith Estimate of the costs involved will be sent from the lender within 3 days of a loan application. The final version of HUD-1 will provide an exact list of the loan, individual charges and fees.

When is a HUD-1 Settlement Statement used?

The Real Estate Settlement Procedures Act (RESPA) specifies that a HUD-1 form should be used by lenders who provide loans to purchase property, or refinance property loans. So in simple terms, it is used whenever finance is provided for real estate. See page XX for an example of a HUD-1 Settlement Statement.

What is the Settlement procedure?

The funds needed to complete the purchasing process will need to be transferred into an escrow account at least 72 hours prior to the final closing date. And you must give your agent the authority to release them to the vendor, or bank (if you are purchasing a foreclosure). As an overseas investor, we will assign one of our US partners to oversee the purchase, deal with the paperwork on your behalf and keep you informed throughout the proceedings.

What happens on the closing date?

Closing refers to ‘closing the deal’. This is the day that you become the legal owner of the property. Up until this point, you can also pull out of the deal or make last minute alterations to the transaction.

The formal exchange of the property happens the day before, when your agent

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will collect the paperwork: Sales and Purchase Contract, title search, insurance and closing disclosure. On the closing day, the money will be released from escrow and the closing costs will be paid – as determined in the Sales and Purchase Contract. The vendor receives the final payment and your agent takes possession of the keys on your behalf.

It’s vital to stay in touch with your agent during the process. If there are any complications you can ask to delay the closing date until it’s resolved.

This must be done before the closing date expires otherwise you stand to lose your deposit.

When do I get the deeds to the property?

On the closing day, you will sign the ownership deeds to the property. The original document will be sent to the Orange County Records Office where it will be stamped and recorded, and you will receive your copy within 7 days. If you don’t receive them your representative in the US can request a copy from the Country Clerk of Courts.

It would be a good idea to request a scanned copy to be emailed to you, so that you have proof of their existence in your possession. It will also be helpful if for some reason you don’t receive the physical copy. In the unlikely event that your deeds go astray, you (or your agent) are entitled to visit the records office in person, one month after the closing date. The deeds will eventually be available online, but it can take up to 4 months.

Do I need a property management company?

We can’t under estimate the benefits of using a good management company to look after your investment. They will be able to take care of the day to day responsibilities involved in overseeing and renting out a property. A good property management company will be one of your most important assets in the buy-to-let process.

The exact obligations will depend upon the level of service you agree to pay for. In simple terms, they will look after your property and to act as a middle

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man between you and your tenants. First they will market your property and vet any potential tenants.

Once they are installed in the property they will be responsible for collecting, reporting and banking the rent each month. In the event of non-payment they will need to deal with this too, ranging from reminders through to eviction proceedings. They will have the authority to make instant decisions that you cannot as an overseas investor. Arranging any necessary repairs will also fall within their remit.

If the property is vacant, they will need to make sure the outside space is tidy and grass is cut and isn’t causing a public nuisance.

How do I find a good property management company?

One of the first things to look for is how long the firm has been in business, which can generally be ascertained via an internet search. Ideally, the company will have been operating for several years.

For example, if a management company has been trading since before 2007, and has weathered the property crash, it is a sign that they have sound businesses practices in place.

In order to safeguard against malpractice, it’s a good idea to hold the tenants security bond and monthly rent into a bank account with online access which isn’t connected to the management company. Avoid any company that states it keeps your money in their accounts, as only they will have access to your funds.

Look for a company with an online portal so you can see any activity on your account. If you want them to manage the bills, you’ll need to give them access to your account, but you can minimise the potential for losses, by regularly transferring money over to your primary account, leaving just enough to cover the insurance, HOA fees and utility bills etc.

Can I choose the type of tenant I want?

It’s important to be realistic. The neighbourhood where your home is located will dictate the type

of tenants you find. For example, a studio will attract a younger less affluent person, affluent areas tend to attract affluent tenants and good transport links are likely to appeal to professionals.

You can stipulate the type tenant that you would like to rent your property but it will be the management company that will vet the applicants via a tenant database and make the decision. Your property manager will usually be highly experienced and will know what to look out for. It’s in their interest to choose a problem free tenant.

What does a US tenancy agreement cover?

Landlords in the USA have a number of obligations that must be adhered to, including the maintenance and upkeep of the property in line with local authority and city codes, regulations and safety standards. It is also your duty to carry out any repairs as required. Payment of all property taxes and HOA fees (if applicable) will also fall within the landlord’s remit.

It is also the tenants right to enjoy the property with minimum interference, which means that the property company cannot enter without prior notice nor at an unreasonable hour. This also applies if you decide to sell the property, in which case you must give the tenants at least 12 hours’ notice should you wish to arrange an inspection prior to the sale.

In return, the agreement outlines your right to receive the agreed rent on time each month and that the property will be returned to you in condition at the end of the lease.

All obligations and rights are clearly stated in the tenancy agreement to make sure both parties are aware from the outset. Your property management company will apprise you of your responsibilities and ensure everything is included in the contract.

What are HOA fees?

When you buy a property that is part of a development you will be liable to pay Homeowners Association Fees (HOA). The amount you pay will be based on the budget required to run the development, with a small surplus in reserve. The fees are needed to cover maintenance and repairs to the roof and elevators, and common amenities such as swimming pools, tennis courts and adjacent parks and green spaces. Every homeowner within a HOA must pay their fees otherwise a lien could be applied to your property.

Too much information?

Don’t worry. We understand.

Contact us today and we will help you make the right investment decision.

+44 (0) 20 8 256 5815

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Prime Asset Investments A department of Offplan Millionaire AG Haldenstrasse 5 Baar, 6342, Switzerland

 UK Enquiries: +44 (0) 20 8 256 5815  carl@primeassetinvestments.com  www.primeassetinvestments.com