November 25, 2010
Many assets in the United States have rebounded since the recession hit (i.e. stocks, bonds), but real estate is one of the few that hasn’t. That means you can still find a bargain. And Canadians have an additional incentive as well– the loonie has gained 30 per cent on the US dollar since 2004 which makes everything that much cheaper. Not only that, but mortgage rates have fallen from 6.5 per cent o 4.75 per cent.
So US real estate is almost irresistible right now. But where do you buy? One investor, Jim Chuong, told the Globe and Mail that he has focused on Arizona, where prices are very low– and so is crime. He’s finding rental apartments at $50 per square foot in an area with very little crime. It also helps that property taxes are relatively low (about 0.75 %).
But it’s not all sunshine and roses. There’s a lot of risks to keep in mind (duh!). First, keep in mind that you can’t just snatch up any ol’ house and expect to turn a profit. You have to really focus on the neighbourhood each property resides in. Second, trying to own many disparate rental properties can be a very stressful game to play. Either concentrate your rental properties in one area to make a flight worthwhile, or just own rental properties that are relatively close.
Keep in mind, that this isn’t like that renovation project you took on in your 20s where you bought a house, put a year’s worth of sweat and tears into and then flipped for a 25% profit. The US real estate market is on anything but firm ground. Current inventory levels in the US suggest that prices could remain weak into 2011 and the recent foreclosure debacle doesn’t help either.
But US housing prices will eventually recover. Maybe not to pre-recession peaks, but prices will at least improve. So if you can manage, buy a property if you see a bargain– but make sure you do your research first.