Originally posted by @Daniel Alvarez:
Originally posted by @Juan Pardo:
Originally posted by @Daniel Alvarez:
Hola Juan,
Welcome! I'm not a foreign investor but I was in your boat a few years back. Cash purchasing can be easy enough in the US (cash is king, queen and jack!), however getting a loan is where it gets tricky. Lenders need to assess risk and without access to your history they may not lend at all. Hence cheap government-backed loans may not work without a US social security number, however many private lenders might be ok -at higher rates. Once you purchase you will have to file your US tax returns annually (state and federal) and if eventually you sell, the IRS will want to hear back as well. See link below.
https://www.irs.gov/individuals/international-taxpayers/firpta-withholding
I now work in the US but I'm facing the same problem in the reserve direction. I looked at buying an apartment for my mom in Spain. It didn't go very far!
What US regions / cities were you contemplating?
Dani.-
Hola Dani, qué tal estás?
I thought about not being able to finance (or refinance and take cash out) through an US bank right after I sent my initial post haha.. It is the same in Europe. If I went to another eurozone country I wouldnt be able to easily obtain financing to purchase real estate, so I have to buy with cash. This is a problem for Spanish people who go to work abroad (i.e. Switzerland) and want to purchase a home back in Spain, but cant get financing either from Switzerland or Spain.
Eurozone banks dont want to have to appraise or do any kind of due diligence work in foreign countries. That's the most clear sign of the absence of bank integration in the eurozone. Actually, it is very strange that a Swiss bank cannot do this, because they have teams that can speak pretty much any language, to cater to clients all over the world.
I dont have a very specific idea about a location to invest yet. I wouldnt be able to invest in the most expensive areas, though. California seems to be experiencing a real estate bubble, specially SF and LA. A long long time ago I was offered the possibility to teach Spanish in SF but turned it down. At that time I might have been able to live there on that salary. Today it would be just impossible.
I feel attracted to areas that are different from Spain, that maybe have more green or a colder weather, so have to rule out Arizona (although prices seem ok), California (expensive!) etc I was wondering who buys today in California, taking in account that some US real estate websites provide price history and it is apparent that prices just rocketed (the SF bubble extended to Oakland!).
I like Chicago, the area around Washington, and (in my mind) states that I have not deeply researched and never set a foot on like Maine or North Carolina (Wilmington looks nice, on paper, I have to research). For instance, I had a look at this property in Chicago:
https://www.zillow.com/homedet... property probably needs a costly renovation, and I would have to research its location, neighbourhood etc more, but seems to look good. It would be just impossible to buy something like that for just 99k in Spain.
What about you? In which part of Spain do you want to buy? Maybe I can help you..
Saludos,
Juan
@Juan Pardo
Another resource you can use from the distance is Trulia.com, like Zillow but also showing neighborhood crime information that you can use to understand the area type. Then you can take your shortlist and reach out to a local resource (or BP) for more concrete insights.
The missus and I are able to do REI as a personal interest and so far have a fairly low risk tolerance. For both those reasons we tend to lean toward turnkey properties in markets with solid rental demand (for instance where there're military bases) and below market value (like REOs). With much research, many conversations and a good pile of luck we're cash flowing on all properties and are trying to refinance two of our initial deposits out.
In Spain I looked here I've got family, in Madrid's western suburbs (Majadahonda, Villanueva de la Cañada) and in Las Palmas (Canarias), where I'm originally from. Certain banks would go 50% LTV, others just wouldn't / couldn't work with me. I expected slowness but was surprised about the amount of small print and the poor communications and the inefficiency. Almost like a general lack of interest... We're definitely spoiled in the US. After spending 4 months of slow back and forth with UCI I had to pull out and jump on a short sale in the US.
I think as long as there is poor transparency and old continent bureaucracy Eurozone investing for individuals will never come close to the United States. Such a lost economic opportunity, I would love to understand the circumstances better and try to work a way through it / around it. I say lower the barriers to entry and foreign capital will come, manage (price in) the risks and over time competition should do the rest... the lack of financial integration across euro countries just creates barriers, no? I don't see the upside. I found even large international banks operate largely in silos in Spain -albeit my experience has been VERY limited so far. Anyway, any thoughts or tips on lenders, process, contacts, etc. in Spain would certainly be extremely appreciated :)
Also another exposure to think about I suppose is currency. The USD right now might be on the expensive side, and even if you find the cheapest forex broker or service (which btw I've worked with many and I really like TW), there is always potential for downside if / when you eventually want to repatriate capital...
Un saludo!
Dani.-
Hola Dani,
I've had a look at Trulia, and saw the crime info and also the other users comments, which are really useful to get an initial feeling of how's the neighbourhood. I am just educating myself on the US market. I was looking at historical prices (very general information, for the whole country) on Zillow, and the real estate market seems to be pretty high:
https://www.zillow.com/home-va...
However, properties do not seem so expensive to me as compared to Barcelona (but Barcelona is one of the most expensive places to buy in Spain). For instance I had a look at this apartment, not from an investment perspective:
https://www.trulia.com/p/il/ch...
To me that price for a primary residence does not look crazy, but I notice that montly HOA (for that property is over 400 USD / month) is really expensive in the US, and I dont really understand the property tax. I guess for that property it is 5,808 USD per year. This is significantly more expensive than in Spain. In Spain we pay monthly the condominium of co-owners fee (for flats, apartments, in a building), and then we pay individually, each owner pays for heating, water etc The montly fee in Spain can be around 80 euros on average. And property tax maybe 1.000 euros on average per year, for a flat.
Does HOA include utilities, like water, heating etc? Why is it so expensive? it cannot include just the maintenance of common areas in a building..
I looked at property tax for this other property, which is a lot less, 1,818 USD / year, but HOA is higher (696 USD monthly), so I am confused. Why property tax is cheaper for this property and HOA higher?
https://www.trulia.com/p/il/ch...
I had a look at a SFH just to see what info Trulia displays, and there are comparable properties listed, and the prices they were sold for, and also a price history for the property advertised. Where does Trulia get the historial price information and comparables from? Is it data provided by some official agency in the US? Or is it data collected by Trulia on its own?
https://www.trulia.com/p/il/ch...
I imagine there are strategies to buy and sell property based on the historical prices listed at Trulia. I saw one property that was advertised for a low price and then sold much higher. Does that mean that multiple buyers bid on the property and raised the price?
As for Spain: as an investment near Madrid I recommend you to look at the cities along the A-2 highway (Vicálvaro, Coslada, San Fernando, etc). The rental market is strong there and prices are more competitive than on more expensive areas around Madrid like Majadahonda, Pozuelo (very expensive), Las Rozas, Boadilla (expensive, Banco Santander is headquartered there).
Regarding Las Palmas. I have lived there. Prices are pretty high now and are, in general, higher than the rest of Spain due to tourism and foreign buyers (second residence). Prices in Spain have been climbing for 7 years. If I were to make an investment there, I would look for a house to tear down that has buildability (you can build so many sq mt). In general, if you look at a particular street and you see an old house (one storey) and next to it a building with 4 storeys, it is very likely that the old house has buildability up to 4 storeys (you can tear down the house and build a 4-storey building there). This has to be double checked at the local urban planning department, and you may look directly at the PGOU (Plan General de Ordenación Urbana) and other zoning provisions. There were houses like that at the area of the city called "La Isleta".
For some reason many people like to live in Ciudad Alta, for instance, La Minilla, which is, in my opinion, overpriced, or at some landmark building, like the Sol y Vistas building, which I find overpriced too (and some apartments do not have a great layout really).
Siete Palmas, near Negrín Hospital, has some nice buildings too, but it is a bit disconnected from the city. It is easy to go to the beach from La Minilla.
Regarding European banks, yes, they are incredibly slow and bureaucratic. They can certainly make a deal NOT happen, so in order to buy fast, and properties at reduce prices it is important to have cash, at least an amount that will make the deal work, even if the bank is slow (around 25%-30% of the price). The situation can be even worse in other countries in Europe. I have been looking at properties in Eastern Europe, in countries where I cannot even read the cyrillic alphabet, or with complicated languages.
UCI is one of the most flexible big lenders in Spain. Big banks should be even worse, slower and let you borrow less.
In Spain the investment funds do find flexibility, but they buy property in the bulk, thousands of millions of euros worth of property, in packages. The process is only slow because their legal teams have to review everything during the due diligence process and their brokers also need to adjust prices after due diligence is carried out.
For an individual investor to make a good deal in Spain, with a big discount, one has to find the deal outside the real estate websites (not on idealista.es or fotocasa.es). You have to find the deal by word of mouth, or through some notary public you know, or through a lawyer that deals with inheritances, or at court auctions (and this is really really slow, and takes a deposit that wont be refunded if the deal analysis was wrong - information on the auctioned property is also limited, you cannot see the property at all, or any pictures). You can buy "nuda propiedad" too, but this is complicated and risky. Be careful with properties for sale saying "ideal para inversores" (for investors) because it usually means it is risky and if you see this adversited at a real estate website it is very likely going to be overpriced. The really good deals are seldom on the Internet.
As for the US, I was wondering if there is also this "off market" where an investor can find heavy discounts through leads, lawyers, notary publics etc. I have read people do a lot of massive mailing etc Is it possible to buy a list with owner's phones to contact them by phone?
Saludos,
Juan
