The Perfect Storm: Investing in U.S. Real Estate

They call it the perfect storm. It’s that catchy term used for just about anything these days as long as it defines the union of separate factors or events into a powerful outcome, action or experience.  And that’s how some describe what’s happening in real estate right now given low interest rates, the strength of the Canadian dollar and bottomed-out U.S. real estate prices. Those factors have created the perfect storm by which to motivate Canadians to seek real estate south of the border.

As tempting as the numbers are, though, think long and hard before signing on the dotted line, says Nick Karadza, who co-owns Rock Star Real Estate investment brokerage firm in Burlington with his brother Tom Karadza.
“We see a lot of people going into it blind,” he says. “There are definitely opportunities there, but you need to know what you’re walking into.”  

Karadza sees many clients who are hot to trot over U.S. properties, many of which have dipped by ridiculous amounts such as 50 and 75 per cent and even higher. Their drive to buy is fueled by a number of factors such as low interest rates, a strong dollar and recession-weary consumers wanting to spend again. But don’t let your clients get ahead of themselves.

Buyers need to become intimately aware of the markets that they’re considering buying in, says Karadza.

“What people need to do is research into the area they’re buying in,” he says. “There are definitely opportunities for buying. If you’re investing in a small town in Ohio because the house is $20,000 and everyone is moving out of the area, how will you make money on that home?”

If buyers are serious about an area, visit the town or city and find out about business development opportunities. Are major corporations headquartered there or moving up stakes? Is it attracting retirees mostly or young families? Talk to economic development officers, police officers, politicians. They’ll let you know how the area is faring.

Karadza recommends clients invest in cash-flow properties that can be rented out and will generate enough return. Getting renters to pay off your mortgage is a great plan. If its value rises in the meantime, all the better. “You need to know your safety,” he says. “You don’t want to just cover your costs; you want a return on your money.”

Philip McKernan has seen first hand what a perfect storm can do. The international speaker and bestselling author has seen the devastation in his native Ireland, where many purchased deflated real estate in Eastern Europe and are now stuck with properties they can’t sell or rent.

“Real estate has always been marketed by the gurus as something that’s so simple to do,” he says. “It’s for everybody and my fundamental belief is it’s not. It’s hard work. It’s a tough gig. It’s the greatest asset in the world for long term wealth but it’s not a quick fix.”

McKernan has written two books for Canadians interested in buying real estate in the U.S. His first book, South of 49: the Canadian Guide to Buying Residential Real Estate in the United States, was published in 2009 and is more for the beginner investor. McKernan followed that book in 2010 with Fire Sale: How to Buy U.S. Foreclosures Now!, a book geared more to the sophisticated real estate investor.

(Read full article from Property Wire here…)

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