U.S. Home Sales Up -- to Australians
"The U.S. economy is at the bottom of its biggest recession since the depression," Selleck writes on his 888 U.S. Real Estate website. "Australia, in stark contrast, is experiencing an economic boom. Smart investors are recognizing this opportunity to purchase U.S. property as positive cashflow investments with the potential for massive future growth."
Selleck is not alone in his thinking. Foreign investor interest in American real estate is on the rise, and Australians are one group seeking to buy homes here, according to the National Association of Realtors.
Foreign investor interest in U.S. real estate accounted for $66 billion in purchases between April 2009 and March 31, 2010, making up about 7 percent of the purchases, according to the 2010 Profile of International Home Buying Activity study released by the NAR.
International buyers were reported in 39 states in 2010, but a slight majority of the total buyers are concentrated in Florida, California, Arizona and Texas. These four states account for 53 percent of purchases by foreign buyers, and have remained the top destinations for the past three years. Florida and California are the top two.
"We are mainly looking at buying homes in areas that are good for families to live in," Selleck says. "In places like Miami, Orlando, Atlanta, Las Vegas, Cleveland, we are getting incredible deals."
One particular property he selected for a client was a four-bedroom, two-bath home at 3168 Creekwood Drive in Rex, Ga., outside Atlanta (pictured below). His group bought the home for $23,500. He said it was valued at $140,000, and Clayton County records show that the previous owner of the 1990-built home was in default on a $107,950 mortgage as of June 2009. After purchase, Selleck's group renovated the home with new carpet, new linoleum and paint, and then marketed it for rent at $850 per month.
"We initially purchased that property from the bank as a foreclosed home for one of his Austrialian investors. Vincent used his own property management company for the renovations," says Atlanta-based Australian buyer's agent Bronwyn Douglas (left), who operates Top Rental Returns USA with partner Michael Collins - both of whom have Aussie accents. In a phone interview with AOL, Real Estate Douglas says that her business has sold more than 110 properties this year to international buyers. The average price ranges between $40,000 to $50,000 for a three- or four-bedroom home that will typically rent for between $900 and $1,000.
"There is definitely an increase of international investors because 20 percent retuns are unheard of in Australia, where home prices are near $500,000," she said.
Approximately 28 percent of Realtors surveyed by the NAR report having had worked with at least one international client over the past year; that's a 5 percent increase compared to 2008.
While buyers from 53 different countries purchased residential property in the United States last year, the highest number of purchases came from Canada, the United Kingdom, Mexico, Germany, China and France, according to the NAR. The greatest number of international visitors visiting Realtor.com came from the UK, Canada, Australia, Germany, Mexico and Japan.
The median price paid by international buyers for a U.S. home in the U.S. was $219,400, a decrease from 2009's median price of $247,100. The median price paid by foreign buyers was significantly higher than the overall median
However, Selleck and Douglas's groups target homes for clients that are much less expensive because they market them as rental properties, not vacation homes.
"We are only buying properties from the major banks that have been foreclosed upon," Selleck says. "We are putting in hundreds of offers on a daily basis on properties with ridiculous prices well below what the the bank is offering. We might end up with 10 offers that are acepted. Out of those 10 we find that only about two of those will propbably be worthwhile and require the minimum about to get them back on the market and rented at a reasonable price. This is an incredible opportunity to create rent returns exceeding 20 percent net."
Although Selleck uses local real estate agents and property managers to buy and manage properties on behalf of his clients, those in the U.S. seeking to make a business out of managing property for foreign clients, face tax issues of which they should be aware, says the Internal Revenue Service.
"The U.S. tax rules that apply to ownership and dispositions of U.S. real estate by foreign persons are different in some important respects from the rules that apply to U.S. persons," according to the IRS website. "Rental income from real property located in the United States and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investor's personal tax status."
American real estate professionals must know how to properly deal with foreign investors in U.S. real estate in order to be in compliance with the federal tax laws affecting real estate transactions.
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