In the world of 2022, real estate and property prices are moving fast. Everyone seems to be purchasing or investing in real estate as a hedge against inflation. Rising property prices have made it harder for international property investors to buy real estate in the USA as many typically did cash deals.
Because real estate has become a bit more complex and difficult, yet still a very attractive investment, we’ve created this simple guide. This should help international investors speed up the process of buying property in the United States.
Market Research
As with most things in life, planning and research is key to success. Market research can greatly assist investors that are looking to buy property in maximizing their returns. This can help them understand if the state he’s planning to invest in is tenant or landlord friendly and local taxes.
Usually, a good way to start market research is to focus on a region or state in the United States and proceed from there. Then one should look into local counties and later municipalities. Once you know where you want to invest, the next step is to locate a property.
Look for a Good Property Deal
There are a few different ways to find a property. The traditional way was to speak to a realtor regarding listings in their area and then visit properties physically. After a few properties have been viewed, the buyer selects one that fits their investment goals.
In today’s more remote, internet-based world, non-us-based investors may prefer a convenient approach. Many tend to use websites such as Zillow, Realtor.com and Roofstock.com to scope out potential properties. Potential buyers can not only view pictures of the property but sometimes take a virtual tour of the home.
Locate Professionals
After you’ve found your dream investment property, there is still plenty of work to be done. The next step is to locate qualified professionals who will assist you turn your dream into a reality.
This typically involves finding a good realtor and property manager. The realtor will help you negotiate the purchase of the property, and will support and advise you regarding the home’s potential. A good property manager will maintain the property and make sure the tenet is happy & that you’re receiving rental checks. Both are key when you own a rental property in the US and you live abroad.
Tax and Structuring Advice
Every investor should look into tax and structuring advice. A sit-down with a certified accountant can make a big difference and save the investor a lot of money that would have been wasted otherwise.
Many investors that purchase an investment property, tend to form an LLC or limited liability company and list the property under the LLC. Listing the home under the LLC will help the owner avoid any personal liability if anything goes wrong with the residence.
Generally, this process can take 14 to 21 business days. Some states can process the paperwork as fast as 3 business days, although this varies by state. The price of forming an LLC also tends to vary depending on the state it is being established in. In some states, the cost of filing and incorporating an LLC can be under $200 in others it can reach over $800. Typically it is around $500 on average.
Find a Lender Quick or Find a Quick Lender!
Once you’re close to finalizing a property deal, the next step is to find a lender as soon as possible. Today’s market is highly competitive, and speed is of utmost importance to closing that deal. Buyers that take their time can potentially lose the property, and then it’s back to square one.
Prequalification Letter
Once you’ve found a lender, receiving a preapproval letter for a mortgage is the next step. You will need to go through a relatively easy preliminary check. Generally, receiving a prequalification letter can take 1-2 business days. While this will not guarantee that the loan will be approved, the check will reveal the scope of lending amounts the potential buyer can borrow.
Providing a prequalification letter to a seller also reveals greater intent to purchase a property.
Winning Bid
Now all that’s left is to win the bid on the property. Your realtor should be able to assist you with this. In 2022’s real estate world, you may have to up your bid, depending on the seller, region, and property. Bidding wars on properties are becoming more and more common.
As long as you have a prequalification letter and make the highest bid, you should be able to buy the property. Writing a personal letter to the seller can also make a difference at times and the most important thing is to be available.
Once your bid has been accepted you’re one step closer to owning the home!
Inspection/Closing Checks
Once your bid has been accepted, inspections and closing checks are usually required. This is not only required by lenders but also very recommended to all buyers including cash-only deals.
Inspections help guarantee that there are no significant issues with the home and are generally split into external and internal inspections. External inspections check the building’s foundation walls, windows, and roofing. Internal inspections check the heating, plumbing, ventilation, and fire security.
Once an inspection is complete, the inspector will let both parties know if there are any issues. If the home is approved then the sale can go through.
A title check is also conducted to make sure that the seller can sell the property legally.
Insurance
Once you finalize the purchase of property some forms of insurance are needed. The first is of course title insurance. This unique form of insurance protects the buyer from any outstanding claim, if any, rather than a disaster. So if the seller had outstanding homeowners association fees, boundary disputes, or any previous liens, the new buyer is protected. Title insurance is a one time fee, unlike other forms of insurance.
Other forms of property insurance may also be required although it may depend on the state and region the home is located in. For example, a property in Florida may require storm insurance, while in California earthquake and fire insurance may be needed.
Property Manager
Once you’ve completed the process of purchasing a home it is time to make some money from your investment. Use your realtor to find a tenant and your property manager to make sure they are happy.
After that, you just need to manage your business properly and make sure rental checks are coming in regularly.
Expand Portfolio
The moment you have a profitable rental property, you can begin planning to expand your real estate portfolio. This will help in minimizing risk and diversifying as well as open up an additional revenue stream. Common methods of expanding a portfolio include saving up profits until a downpayment threshold is reached or alternatively refinancing the property you own.
Start Owning an Investment Property!
Interested in financing or refinancing an investment property? We can help!
We at USA-Mortgages provide specialized mortgage programs for international real estate investors interested in purchasing an investment property in the US. Additionally, we offer refinancing options to those who already own a property.