Why invest in the USA?
Through our continued success in finding cheap properties for sale at discounted prices in the UK 4sale2U have now branched out to service our serious investors where the yields are even higher, (see some current deals done in Fort Myers, Florida).
We are all aware that since 2007 the USA sub-prime market has left behind some truly amazing deals and an investment opportunity that will more than likely not be seen again for generations.
On offer through 4sale2U are properties in South West Florida where typical gross rental yields on houses are a massive 21% and after taxes & insurance 17.5%.
These super yields are what remain from a huge percentage of Americans allowing their home to be foreclosed in recent years as they fell into negative equity and moved into rented accommodation. The tidal wave of foreclosures drove prices down and drove rents upwards which investors have been capitalising upon since prices bottomed in 2010.
Quote – ‘I’d Buy Up ‘A Couple Hundred Thousand’ Single-Family Homes If I Could’ Warren Buffett 2012
Southwest Florida in particular was one of the areas hit hardest as prior to the financial collapse buyers sought after second homes away from the harsh northern winter. Fuelled by the sup prime mortgage market and its eventual recessions which followed these persons were forced to consolidate outgoings by selling off their assets.
Florida property has a very different growth pattern to the UK as land is in great supply. Capital value of houses is driven by building reinstatement costs which vary upon specification and inflation but tend to be in the region of $75 per square foot plus the initial cost of the land. Second hand homes traditionally cost slightly less than this cost of building new, generally between $50 – $60 per square foot. Currently homes can be purchased for less than $40 per square foot (inclusive of the land value) which is why experts predict values to rise once the incomming supply of foreclosures slows down.
Social housing (Section 8)
Section 8 of the housing act 1937 is a US government program which authorises financial rental assistance to private landlords on behalf of low income households. The government will pay a ‘fair market rent’ directly to the landlord on a monthly basis. This method of tenanting investment properties is popular with many landlords as;
The waiting list for Section 8 housing in Florida (as across the US) is long providing a large pool of possible tenants per property
The US government make prompt, regular payments to the landlord
Tenants are incentivised to take good care of the property
Florida housing report: ‘The typical wait times for both public housing units and Section 8 vouchers ranged from six months to two years’
Now is a fantastic time to buy in Florida. Prices have taken a huge hit in recent years and are now on the recovery but by no means priced back at historical normality. Further to the likelihood for an increase in capital value the yield is so high (around 20%) on low risk government backed Section 8 housing it actually does not matter if the property increases in value or not!
US Taxation System*
There are 2 governmental bodies that tax either a person or company in the United States. One being the state and the other, the federal government. In Florida a corporation is required to pay 5.5% of its profits over $25,000 to the State of Florida and a certain % of the profits to Washington. This federal amount depends on levels of profit but essentially:-
$0-$50k = 15%
$50k – $75k = 25% + $7,500
$75k – $100k = 34% + $13,750
So…in a nutshell if a corporation only made $10,000 after costs and expenses it would pay no State tax (in Florida of course) and 15% in federal but if it made say $40,000 it would pay both
A. Florida 40-25 = $15,000 @ 5.5%
B. Federal = $40,000 @ 15%
4sale2U sources property in Fort Myers, Florida for its US clientele.
Fort Myers is situated in Lee County on the South East coast of Florida. With an international airport and two major highways (US41 & I75) running through the city there is always an abundance of activity in this area of the world
* Please take your own advice on this, 4sale2U does not give investment or taxation advice. If you are a house seller looking to sell your home fast then we would advise you to research all the various options and then call us for an informal chat.