After working in the real estate market for over a decade, I’ve seen my fair share of the good and the bad that can occur when developing or investing in US real estate.
As the founder and CEO at Rycal Investment Group, I have worked on both residential and commercial land projects for foreign investors interested in US real estate. Rycal’s involvement with these project spans a spectrum of capacities from purchasing to renovating and selling to renting residential properties as well as developing new build real estate.
Today, the US real estate market continues to maintain its status as one of the most attractive investment options for foreign and domestic investors. However, despite the many advantages, it’s important to note that it does come with an array of new laws, processes and pitfalls that can significantly affect your bottom line.
Outgoings and rental agents in the US rental market
On an annual basis, the US real estate rental market has experienced above average global returns. However, due to a landlord’s outgoings such as property taxes, water and refuge – the return on investment (ROI) can significantly decrease by as much as 35%. In addition, ROI can decrease once vacancy rates and upfront rental agent fees are factored in.
Many rental agents are paid for both the maintenance of a property and a monthly rental fee. This is because most rental agents own their own separate maintenance company so they can charge high and unnecessary additional services fees. From my experience, it’s important to do your research and employ the right rental agent to ensure that your investment is protected as well as hire a separate maintenance firm that you trust.
Challenges associated with US commercial real estate lending
A challenge faced by developers and investors of higher valued commercial developments is financing. Many times developers and investors are forced to work with alternative lenders if they are unable to get a loan from a standard bank.
While these alternative lenders may loan you capital for your project, they charge a much higher loan interest and significant upfront fees on tasks such as: underwriting, appraisals, administrative fees, site visits, commitments, and the list goes on. These charges will put a significant strain on how profitable a project is and can lead to potential loan defaults.
Read full article by Simon Calton: NuWire Investor