Trying to buy a property in a bangable location for 0k - locations in the US?
09-12-2017, 05:09 PMQuote: (09-12-2017 03:32 PM)Australia Sucks Wrote:
Tail Gunner I think people need to differentiate between gross yields and net yields. Some expenses for property are relatively fixed costs. Whether you own $100,000 property or $1,000,000 property, a plumber coming to fix a broken pipe will still generally cost you the same money. Also things like property manager fees and strata fees, etc do generally have scale advantages. You also have to look at vacancy rates, etc. Also you have to consider in high yielding places if you are more likely to get dodgy tenants who trash the place or pay the rent late, etc. For example a 4% gross yield in a high end prime property might give you for example a 2.5% net yield, whereas a 6% gross yield in a non-prime location (which may have less capital growth) might give you a 3% net yield, so the difference is not as much as it first appears.
When you say 8-10% yields are you talking gross or net yields? What are the rental markets (vacancies, etc), tenant quality and tenant laws, capital controls, respect for private property, currency risks, transaction costs, financing/borrowing costs, etc in the countries you speak of? In many developing countries everyone (property manager, tenants, maintenance guy, etc) will fuck you over if they know you are not in the country keeping an eye on the property so there is that to consider as well. One huge advantage developed economies generally have is the low mortgage rates and low deposit requirements (for those looking to leverage into property) compared to developing economies where its typically difficult and expensive to borrow. I remember recently on Rooshv there was a property thread about investing in property in the U.K. and the o.p. was borrowing the majority of the purchase price at 2.5%!! Try and get an 80% LVR mortgage loan at 2.5% interest rates in a developing country.
I will point out that the O.P. was not clear if he has $600,000 in cash or is looking to borrow part of that money.
There is also liquidity to consider. Even in developing countries in tier one cities (e.g. capital cities, tourist cities, etc) yield are generally not going to be super high. The 8%-10%+ yields are generally found in second tier cities which in developing economies might be an illiquid market. What if you need to sell?
I am not saying you cannot make more money buying property in developing countries. I am just saying people need to do deeper research as things are not always as attractive as headline numbers suggest.
p.s. that nomad capitalist article was from 2015. I suspect the rental yields would now be somewhat lower in most of the countries listed in the article.
1) Everything that I discussed is net yields, exclusive of income taxes. You are right, gross yields mean little -- which is why I do not use them.
2) All your concerns are legitimate, but I am not here to offer a tutorial. There are workarounds for all these issues -- and once you figure it out, you now have a working template. For example, having a trustworthy local manager is essential. So, you do that first. If you plan to be an absentee landlord and cannot find a trustworthy local manager, do not invest in that country. Move on to the next.
https://www.overseaspropertyalert.com/se...as-rental/
3) If the OP does not have $600k cash, then fine. Other people who have some cash seem interested in the discussion.
4) Some of your suppositions are incorrect. In developing countries, in tier one cities (e.g., capital cities) the yields are generally high, because foreign corporations are pumping in both investment capital and employees to expand their market base. The influx of foreign nationals creates a demand for housing, only a fraction of which is typically up to Western standards. This limited supply raises the price of rents.
BTW: As a general rule, you should almost always rent to foreigners, because they are transitory (usually staying just for a few years) and do not have the legal rights often afforded to the locals (who may cease paying rent and then never leave your property). Of course, there are exceptions.
All of this information is available for those willing to do the research. I am just trying to open a few eyes to get people to think outside-the-box.