Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Is the Grass Greener in US?

Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Is the Grass Greener in US?

Article excerpt

IS buying American property an investor's dream or could it be a risky nightmare?

Maroochydore financial planning agency FBC Group have included property investment in Metro Detroit, Michigan as part of their wealth creation advice to clients for the past year.

Director Alistair McCreath is offering 3- 4 bedroom foreclosed homes in "solid middle class areas" for an initial outlay of about $70,000 with a 14-18% yield, government-guaranteed rent returns and capacity to pay them off within about seven years.

Mr McCreath advocates funding the purchase through a cash-flow positive refinancing of clients' existing mortgages, with tenants all but guaranteed.

"We deal in Metro Detroit, and they have had nearly 1million foreclosures, but those people still need a place to stay," he said.

"We also deal in Section 8, which is a Federal Government program that has been in existence since 1928. It gives people federal assistance in the form of a housing voucher that is paid to the owner, not to the tenant.

"About 50% of our clients have their entire rent paid by the government, while the rest is a co-payment whereby the tenant pays the balance. But the biggest co-payment we have is $200 per month, which is $50 a week.

"And Section 8 is much stricter than our rental assistance scheme in Australia, because you get one chance only. If you misbehave, you are out and you cannot get back on the scheme again."

Mr McCreath's business has both a realty and a property management company set up in the US to handle any on-the-ground maintenance, tenant or administration issues. FBC also renovates the properties prior to sale and offers a five-year warranty on repairs.

"There are no restrictions in America for property buying," Mr McCreath, who owns six of these properties himself, said. "We sell in the name of a company by putting the owners into a Limited Liability Corporation which purchases the property and the owners are the members.

"That provides some protection from a taxation point of view and if something goes wrong.

"We don't believe this window will remain open forever. …

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