It’s relatively effortless grasp the basic concepts of property investment, but getting a lucrative investment property and tweaking a positive cash flow can be rather complex, especially if you’ve decided to invest in the USA, but don’t know your chosen area that well. Ideal location, the right property type and also the most lucrative investment strategy will all be crucial for a success. Our facts on property investment in the USA will give an overview of some essential points to be aware of.
Is now a good time to invest in the USA?
While no clear-cut answer can exist to this question, the current USA property market offers some unique opportunities. As house prices dropped by as much as 30-40% after the recent housing bubble, there are still a great number of BMV (below market value) and foreclosure property bargains offered in the USA. The housing market is already showing signs of recovery, and as the market is cyclical, house prices will again increase, so split up into the right BMV investment, you can realistically expect property appreciation.
Learn more about the political and economic circumstances in the USA
Before buying an investment property, it is crucial to get to know more about the economy of the USA, and any incentives or opportunities that can help you make your investment a success.
Choose your location with foresight
The USA is the third largest country in the world, and it has a variety of regions and areas you could focus on. Some states, like Michigan or Georgia can boast a large number of BMV investment opportunities, while properties in New York or Washington are more suitable for those who are on a bigger budget. Once you’ve chosen your preferred location, take your time to american investment research the local property market and the neighbourhood. Taxes can also vary between different states, so make sure that you are aware of the correct rates in your chosen area.
Make sure to suit your investment strategy to the property type
Your chosen property type will have a direct influence on your investment strategy. You can choose from a variety of properties, such as buy property in america single family residential homes, apartments, or commercial properties, but always make sure to tailor your investment strategy to the property type. Buy to let investments can bring you long term yields and regular income, while house flipping is suitable if you are looking for short term financial gains. Most opportunities in the USA property market nowadays require medium term to long term investments.
Effective Risk Management
If you are based in the UK but you’re investing in USA properties, you should pay particular interest in effective risk mitigation. Finding out to as much as you can about the area, the house and property and the investment company you are dealing with can be as important as efficient management of your investment. You should also try to spread risks and achieve a positive cash flow at all times.
Watch out – if you have money to invest for 2013 and 2014 and think you know where to invest it. If you plan on investing money in bond funds be very careful, because you may end up watching your money evaporate. Here’s why, and where you might want property in america to consider investing for both income and growth.
Before we get into where to invest and where not to invest you need to understand something. The central bank of the USA (the FED) has employed “quantitative easing” in recent times in order to inject money into the system and stimulate the economy. They are considering doing it again by buying even more of our own longer-term debt securities called T-bonds and T-notes as well as other longer term debt obligations, or bonds. Meanwhile we still have an unemployment rate of over 8%, and a lackluster economy with a record $16 trillion in national debt.
As a result of heavy buying of these debt securities bond prices have gone up and interest rates have hit record lows – which have made bonds and bond funds a good place to invest money in recent times. Meanwhile, the credit rating for the USA’s debt was recently downgraded for the first time in modern times, and at least one major independent rating service has warned it could be downgraded further. If this happens interest rates could zoom upwards in 2013, 2014 and you better know where not to invest money.
Investing money just got more hard, especially if you have been investing money in bonds and bond funds for higher interest income and relative safety. IF or WHEN interest rates start to climb significantly, bonds and bond funds will lose money. That’s the way it works, period. Where not to invest money now: long-term bonds and long-term bond funds. In the summer of 2012, the 30-yr U.S. Treasury bond (T-bond) was yielding less than 2 ½%. That’s a record low and hardly worth taking any risk to get when investing money. Where to invest for safety and income: short-term CDs or shorter-term bond funds and money market funds.
Where to invest for higher returns, good income and growth if interest start to climb: real estate in the form of real estate equity (stock) funds. These are specialty stock funds that exist by many of the larger fund companies. As interest rates start moving back up it is likely people (including the big investors) will start to chase both low mortgage rates and low real estate prices. They won’t want to miss out on what could be the chance of a lifetime.
Investing money for 2013 and 2014 amounts to comparing your investment options. In a very rising annual percentage rate environment bond investing is a losing proposition. Investing more money in stocks or diversified stock funds is questionable at best, since stocks doubled in value between early 2009 and 2012. Meanwhile, homes prices have fallen since 2007 and appeared to be on the rebound in mid-2012. Where to invest money for good income: real estate funds. Where to invest for growth and higher returns: real estate funds.
In regard to investing money in any mutual fund – don’t waste your money on sales charges and funds with high fees. Here’s where to invest at low cost: go with a large no-load fund family and work with them directly. The two biggest fund companies in the USA are Fidelity and Vanguard, and they both offer good service and funds with ZERO sales charges and lower than average fees and expenses. Go to their websites and check them out. Give them a call (toll-free). Good luck investing money for 2013 and 2014, and keep an eye on interest rates. Watch out. Bond funds in general are NOT where to invest your money if (when) interest rates turn around.