Real Estate Investor Magazine South Africa February 2014 | Page 47

OFFSHORE
9. What can we do to improve the buyer
experience?
These are all key questions to get investors
started in markets they don’t know.

Process for investors starting out
1. Develop a plan
2. Educate yourself about each market
3. Find out how renovations are managed
4. Find the right property
5. Marketing for qualified tenants

Going it alone – good idea or bad idea?
Investors going into an offshore market on their
own can find it quite a daunting task. Scott
Picken, founder and CEO of IPS, says that going
it alone can be costly, especially for those doing it
for the first time. He can tell many horror stories
of South Africans who lost their money through
buying alone, but most commonly, these buyers
identified a property on the Internet at a ‘low
price’, only to discover too late that the property
has been trashed or is located in the worst part of
town. Others found themselves faced with massive
maintenance costs on old properties, while some
were stuck with outstanding taxes, homeowners’
association fees and liens against the property,
which gives ownership to the holder of the lien.
Another common challenge for investors living far
away from the investment property, notes Picken,
is sourcing reputable maintenance companies at a
reasonable cost. But the biggest challenge of all is
finding a reputable property management company
to place and manage a tenant.
It is also crucial to understand the US tax rules,
which differ for foreigners and US citizens.

Overview of the cities visited
Williston, North Dakota
Williston, North Dakota is like a gold rush
town. Not only is this city dotted with oil wells
everywhere you go, but there is also bustling
activity, with trucks of all sizes that occupy the
highways. Williston is the biggest oil find in the
world and can sustain the US for at least the next
10 years.
Employment is being created on a massive scale
and people from all over the US - even from afar as
Phoenix, California and Texas - are flocking here
for jobs. Opportunities for real estate investors
here are in a different guise to the rest of the US. It
is a bit riskier with properties selling for $250 000
upwards, and major shortages of accommodation.
www.reimag.co.za

New York City, New York State
There is little space in the financial capital of
the world, New York City, and especially in
Manhattan. New York is expensive and a highly
taxed state. Outside of New York, areas like New
Jersey and Hoboken do offer investors some value.
Single family homes in New York tend to be
older and need a lot of maintenance, and also
come with higher taxes and insurance rates than
the national average. This, of course, affects
yields. Another downside is that the regulations
applying to investors are tougher and the rent
control is mostly in favour of the tenant. There
are always pockets of opportunities in every
city, but it takes a wily, high-risk investor to find
real value in New York. As such, our advice is to
stick to the cities that deliver better yields and
are more investor-friendly. Fortunately, there are
many of these.

Memphis, Tennessee
Memphis, Tennessee is known as America’s
Aerotropolis (a city that extends from an airport
hub). It is the number one distribution centre in
the world and has housed the busiest cargo airport
in the world for FedEx for more than 17 years. It
also has the busiest trucking corridor in the US.
In an article by Realty Trac in the Wall Street
Journal, Memphis was named as the number
one cash flow market in the US in April 2013.
According to Forbes magazine, Memphis is
among the top 10 housing markets in the US.
This is where investors get real bang for their
buck in the US. Using a formula that calculates
cash purchase capitalisation rates (annual net
cash f low from a rental property purchased
with cash), properties in Memphis are the most
profitable, with a cash purchase cap rate of more
than 10%.
Example of a typical Memphis rental property
Year built:
1968
Size:
1908 Sq ft (190 m2)
Foundation:
Slab
Purchase price:
$99 900
Estimated value:
$99 900
Property type: Single Family Home
Rooms:
2 Beds, 2 Baths, 2-Car

Garage
Monthly Rent:
$995
Monthly Taxes:
$132
Monthly Insurance:
$59
Monthly Management Fees:
$95

REALE ESTATE BUSINESS DIRECTORY

February 2014 SA Real Estate Investor

45