Cambodia real estate market
10/09/2024
Investor tips Osiris-Investissements NewsAs the world's largest economy, with an expected GDP of USD 25,000 billion by 2022, the United States has a dynamic real estate market that is attractive to the French. There are several investment solutions, but there are also a number of points to be aware of.
The US economic context
As the world’s leading power, the United States is expected to post a GDP of $25,000 billion in 2022, around +2.6% above its pre-crisis level (end 2019). Its unemployment rate has been falling steadily since 2020 and is now back to its 2019 rate of around 3.5%.
The USA is an organized and stable country, both politically and economically. Households and businesses benefit from government support (social protection, business loans, anti-inflation measures, etc.), which helps to keep consumption dynamic.
Real estate in the USA
When it comes to real estate, the United States is a destination known for being particularly attractive, while remaining well regulated. The tax system is investment-friendly, and foreign investors are welcome. House prices are on the rise, with growth of +7.6% between September 2021 and September 2022, offering attractive opportunities for capital appreciation. Demand for housing is also strong among Millenials (aged 25-40), both to rent and to buy.
The challenge in the USA is that this demand is greater than the current supply on the market. Indeed, many homes need renovation before they can be occupied, and this represents an opportunity for foreign investors: the principle is to buy, renovate, then rent or resell the property with added value. Backed by owner-friendly legislation that encourages private investment, this type of real estate investment in the United States is a secure diversification solution.
Before you buy: what you need to know
Investing in the United States is accessible to foreigners, but there are of course a few things you need to know before you buy.
1. The LLC: Buying with a limited liability company
It is advisable to buy via an American LLC (equivalent to the French SARL) to limit personal liability in the case of a rental investment. Setting up a new company is easy and can be done online, usually within two to three weeks. The LLC protects the investor while remaining tax-efficient.
2. U.S. bank account: not mandatory
Most of the time, you won’t need to open a bank account in the U.S.: payments can be made via your French bank, a multi-currency account or an international transfer company. If you still wish to open an account, you must travel to the USA in person, and a good level of English is recommended.
3. On-site visit and follow-up
It is of course possible to have an agent accompany you on site to visit your property. In most cases, you won’t need to come back to follow the progress of the renovation in person: the agent will send you photos and/or videos of the renovation in progress.
At the time of purchase: Transfer of ownership
In France, the transfer of ownership is handled by the notary. In the United States, this notary role is performed by the Title Company, once the promise to sell has been signed. The Title Company is a private company responsible for verifying the validity of property titles and ensuring that the title actually belongs to the individual or legal entity reselling the property.
In France, notary fees for the purchase of an old property in 2022 are generally between 7% and 8% of the price of the property. These costs are lower in the United States, where they are generally between 1.5% and 2% of the property price.
Example of real estate investment: buy-to-let (or “flip”)
One type of investment often seen in the USA involves buying a property with the aim of renovating it and then reselling it at a profit: this is known as flip real estate. This solution is particularly advantageous in cities where property prices are affordable, and where resale capital gains are substantial.
This makes it a good solution for people looking for a short-term return on their investment. A number of agents are offering structured “flip real estate” deals, taking care of renovation with specialist companies and then resale within 3 to 4 months.
Renovated home in Detroit, Michigan.
Example of real estate investment: buying to rent
Another solution is the more traditional rental investment: buy a property, renovate it and then rent it out on a year-round basis. As with buy-to-let, you can also use a management company to handle renovation and rental.
In the United States, unlike in France, laws are favorable to homeowners. In particular, Section 8 of the Housing Act of 1937 provides federal assistance for low-income tenants, covering all or part of the rent. With tenants benefiting from this assistance, investors can rest assured that they will be paid regardless of the tenants’ situation, as the rent is paid by the federal government. What’s more, eviction procedures for unpaid rent are swift.
In the city of Cleveland, for a house costing around 110,000 USD, rents are in the region of 1,100 USD per month. After deduction of taxes and management fees, this gives you a return of 108,000 USD per year, or a net rental yield of 10%/year. *
*Amounts and estimated rental yields are for illustrative purposes only, based on feedback from an on-site manager. These may vary according to market trends.
House rented at 1,250 USD / month in Cleveland, Ohio.
To find out more about real estate in the USA…
Contact us so that we can analyze your investment project together, and then we’ll put you in touch with our expert on the USA, who will be able to tell you more about market trends, and explain more concretely how real estate investment in the USA works.
Sources :
https://www.forbes.com/advisor/mortgages/real-estate/housing-market-predictions/
https://www.worthinsurance.com/post/homeowners-vs-renters-statistics
