Don't be swayed by low cost promises in U.S., investor says

by Madeline Ficaccio and Patrick Gergen22 Aug 2014

The promise of low cost properties down south continues to lure Canadian investors. But Madeline Ficaccio and Patrick Gregan from American Multifamily Alliance Group share their secrets to ‘right’ investing in the U.S.

Investors must be aware that just because a property seems “too good to be true” with respect to price, this does not mean that it is a good deal within that particular market. It’s important to deal with someone who has experience in the particular market you are buying.

Secondly, investors must know enough about what they are considering purchasing. Investors have to have the ability to do independent research without wholeheartedly trusting the appraisal or comparable provided.  Just because someone with a license places a value on a house, it doesn’t mean it’s worth that price

From our experience, one of the difficulties that we have found purchasing houses in the U.S. is that we are have to landlord from a distance. When purchasing only a house or two, there is not the cash flow to be able to fly out to check on your property every so often. Therefore, you have to place your trust in management and “hope” that they are taking good care of your property.  We all know, as real estate investors, that our biggest challenge is always management, so be sure of what management company you are using. Investors should still expect and include in your costs the need to fly out and be checking on your houses as well.

This is a large part of the reason why we started purchasing multifamily properties.  It afforded us the opportunity to self-manage (although we realize this is not everyone’s cup of tea) and to be able to fly often to keep a close eye on our properties and not leaving it up to anyone else. All 818 units are located within 10 minutes of each other and therefore, we know the areas inside and out and do not compromise by going into areas we are not familiar with. It is important to be an expert in your area and not be purchasing all types of properties in all different markets.

Investors that live in the East of Canada are investing in Florida and those who live in the West are investing in Arizona and Nevada, partially for retirement purposes and the fact that they can catch a direct flight to those markets.  However, we have targeted an amazing market in Dallas, Texas. The Texas market is very strong, has strong consistent population growth, has employment from many different sectors and is in our opinion, much less risky that most markets in the U.S.

The opportunities are that properties purchased in the right market can significantly cash flow compared to many Canadian markets because purchase price can be lower with little difference in rental rates. There is also much room for appreciation as markets increase and recover from the recession.

Foreign investors need to take the time to learn different markets and decide where is the best place to invest.  It is important to note that in large centers in the U.S., where one street is a nice neighborhood, three blocks over could be a very rough area.  Therefore, research is imperative or invest with someone that you trust who knows the market well and is looking out for your better interest.

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