Owning and refinancing a rental property in the US

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While working in academia in the past, I have had the chance to work with  people from many different parts of the world.  At my previous position  as a software developer at a university, I had the opportunity to meet a young graduate student from Arizona.  She was appalled at the cost and quality of rental units in Vancouver and regaled me with stories of cheap property and rental possibilities in Arizona, particularly the  university town of Flagstaff.

Photo Credit: katsrcool via Flickr

Photo Credit: katsrcool via Flickr

It got me thinking about the possibility of owning a rental property in  the states.  I’m always incredibly jealous of the cheaper housing costs in (many parts of) the US.  The Monopoly maniac in me drools at the  thought of all the property I could own and rent out.  *drool*

How would this work?  Well I imagine I’d need some local input.  I wouldn’t want to buy property in an area I had zero connection with, so I’d  probably canvas my friends and get some sense for the different markets.  I’m a big fan of renting to students (our current renters are students!) so I would seriously consider an area like Flagstaff, which  has a stable university.  With a university town, I would feel confident that there would always be an incoming population that needed housing.

My master plan would go something like this: For a property intended to be a student rental, I would definitely get a cheaper fixer-upper.  I  remember my early student days and having beautiful stainless steel  appliances was NOT on my list of must-haves.  Instead, I would focus on  making the unit clean, super functional, and easy to maintain.

After renting it for a few years to re-coup costs, refinancing might be a  good idea.  We refinanced our first condo in order to take advantage of  lower interest rates.  I would probably want to use the same tactic with a US rental property in order to lower our monthly expenses and  increase our rental profit.  There are plenty of online guides to  refinancing a mortgage in the US.

Finally, if prices rose to a point where a clear profit could be made, I would  sell and take the money and run.  When it comes down to it, owning  rental property is still work.  When it is located in a foreign country, it is even more work.  And I haven’t even started thinking about the  potential tax implications!

I think for now, owning foreign rental property will stay on the  backburner for me and Brian.  It presents a lot of tempting  possibilities, but it also presents a whole slew of complications that  just wouldn’t work with our current obligations.

Does anyone here own  foreign property?  How did you find the process?

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17 Comments

  1. Well I don’t know much about it but it seems like it would be a huge challenge (it would for me anyway). I guess you’d have to factor in the cost of a building manager because it would be too far away from you to deal with the day to day maintenance.

    • CF says:

      Yeah, we’ve looked into property managers before and prices/services seem to really vary. I’d probably try to get a referral if possible.

  2. We own rental properties, but they are all within a few miles of where we live. I don’t know how I would feel about owning property that I couldn’t keep an eye on! For some people it might work.

    • CF says:

      That’s the part that would worry me as well. I tend to worry easily and it would stress me out if I couldn’t easily keep an eye on my property.

  3. Pauline says:

    I own foreign property and would be interested in the States since there seem to be great deals with foreclosures (never that good in Europe) although I would want to be there for a few months to oversee the renovation and first tenants. Now I manage my property from another country, I know I am very lucky, the tenants are angels, it can be a nightmare otherwise.

    • CF says:

      The foreclosures tempt me too! But I agree, I’d feel better if I was at least there for a little while to make sure everything was running smoothly.

  4. Jose says:

    I don’t own any rental property and if I did it would probably be in the states. One of the costs i would factor in from the beginning is to have a local realtor manage the property for me, unless it was within driving distance from me. One of my neighbors recently moved and rented out his house. He has had three tenants there in a year (I think he finally got some good ones in) and has probably lost four months in rent out of the year. That’s turned out to be quite a mess for him and I doubt he’ll ever collect on those rents.

    • CF says:

      That sounds like a nightmare! So many cities make it hard for landlords to get rid of bad tenants.

      We’ve only had experience with our current tenants and so far they’ve been great! *fingers crossed* and hopefully they’ll stay a while.

  5. I don’t know that I would ever make the jump for owning rental property in a foreign country due to the potential complications, but I 100 percent understand the temptation! My inner Monopoly fan goes a bit nuts when I see some of the housing and foreclosure prices.

    • CF says:

      Exactly! Just like you never go into Monopoly thinking that it’s going to be a 4 hours war of attrition, but… *shakes fist*

  6. Brian says:

    I’m not sure I would want to deal with a university type crowd. Sometimes they do a really great job at destroying things well beyond their deposit. I know not all students do this, but sometimes the best looking ones (not physically, but on paper) can end up doing the most damage. Of course you could just keep the property at the bare minimum level of livability like some university landlords seem to do.

    • CF says:

      It’s hard to tell, it’s true. I would have to go with lots of references and the gut feeling on that issue. That’s one of the reasons why I think I’d need to be on site at a new rental, at least for the first few months.

  7. eemusings says:

    Landlording has never really appealed to me, let alone owning a rental overseas! Could be risky.

    • CF says:

      Yeah, at this point with two condos for us, it is a bit more debt than we’d like to take out. But I still wonder about it…

  8. I was brave enough to bought couple of the properties abroad. One of them rocked and brought me 9% above inflation, the other one only 1% above inflation.

    The process is relatively straight forward, but you have to be patient.

    Here is some more insights: http://www.niterainbow.com/2013/01/rate-of-return-roi-on-investment-real.html

    • CF says:

      Awesome – did you know much about the location before purchasing a rental property there?

      • Yes, I did some extensive research about location and the area. Admittedly both of them are in big cities (over 1 million of people in each).

        The difficulty – if you will not be accurate and precise – travelling everytime there is an expensive business to run a property 😉

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