While there has been an increase in the number of opinion pieces in the media and online claiming significant financial benefits for Australians who invest in the US property market, I’m afraid I have to disagree.
As the CEO of an Australian homebuilding company operating in the United States, I am often asked for my opinion on Australian property investment in the US. To me, promises of double the investment returns of those here in Australia seem too good to be true. My advice is ‘buyer beware’.
In recent years more and more US investment services have appeared, offering a one-stop service for Australians to purchase investment property in the United States. They all provide a plethora of dirt-cheap properties for sale – properties that Americans themselves can’t afford.
No doubt, there are Australian investors who have been successful in making money this way - but there are also cases of Australians losing their life savings. And as with any moneymaking opportunity, consumer advocates warn there are always sharks out there trying to get their piece of the moneymaking pie.
I’ve heard horror stories of Australians buying $60,000 homes with the promise of 20 per cent rental returns, only to have squatters inhabit the property. Last year, a US tenant gunned down his Australian landlord and property investor while he attempted to collect late rent.
Not all investment experiences are this extreme, but the dangers of entering a foreign market are inherent and must be considered. It’s a very risky game when compared to local investment, where even amateur investors are in a good position to judge whether real estate agents are trusted and reputable.
Without a trusted agent or property manager, thorough knowledge of the regulations and the ability to make an informed purchase that guarantees consistent tenant demand—investors put themselves in a highly vulnerable position.
It is true that many segments of the US property market are showing signs of recovery, with the first increases since the global financial crisis.
There are still many volatile markets in the US and unfortunately it is usually the risky areas offering highly appealing large returns.
Cheap investment properties should be weighed up against high unemployment and crime rates that are not improving in line with a broader economic recovery.
If you are considering moving into foreign investment, it is important to do your research and only deal with trusted, regulated professionals. Be prepared to factor in additional costs such as travel to the US, double legal fees both here and overseas, insurance to protect landlords and fees associated with more comprehensive property management services.
Australians investing in the US are being lured by life-changing promises and are much more vulnerable than if they are buying property and managing the rental on their home turf. There are good signs coming from the Australian property market, and not nearly as many risks.
Like any large investment, you need to do your research and ensure you’re making a secure and informed commitment. If you look close enough, you could see that the best and safest option for your next investment is on home soil.