Question: Can I get a mortgage to buy properties in Detroit, USA from a USA bank?
In order to get a mortgage in USA, you need to be a permanent resident or a US citizen with a credit history and job history in USA so the answer is no. All of these investment properties are purchased with cash from investors.
Question: I live in Africa / Asia / Europe / South Pole. Can I buy a rental property in USA or specifically in Detroit and earn rental income every month?
Answer: There are no restrictions in USA for buying properties for anybody irrespective of where you reside. Whether your properties are occupied by a Section 8 Rent Assistance Program or a regular tenant who has a job and pays rent out of their own funds; it does not matter to anybody. You would sign the same docs and have the same rights as a property owner with regards to ownerhsip that as an American Citizen. Same thing goes for forming a company (LLC) in USA.
Question: Is it a good idea to form a company in Michigan to buy a rental property?
Answer: Yes. It limits your liability and is highly recommended by lawyers and accoutnants that investors should own rental properties under a LLC and not under their private names. A LLC is “pass-through’ entity for tax purposes in USA meaning whatever profits or losses a LLC generates, they are all ‘pass through’ to its owners or partners personal tax returns.
Question: Can you help me form a USA LLC in Michigan?
Answer: We recommend to all of our clients to consult with an attorney when forming their LLC’s.
Question: In the purchase price (investment), is there any additional fees or taxes to be added (Lawyers, accountant, registration fees, etc..) or is it really the Investment cost that an international investor would have to pay?
Answer: Here are the closing or settlement costs involved in buying a Detroit, USA turnkey rental property. Do keep in mind that the following numbers are estimates. You will receive a complete line by line breakdown all the numbers in the transaction from the title insurance company one week before closing. If you have any questions then the title insurance company staff would schedule a phone call with you at that time and go over line by line so you understand exactly every closing cost involved in the transaction.
At Team LBR, we are a real estate brokerage firm that specialize in property management and real estate sales. We act as a real estate broker when selling and/or listing properties that are for sale and/or for lease. If the property is being listed for sale by us, we charge a negotiable real estate commission. The commission is paid by the seller for sell of the property. As the buyer/investor you are not required to pay any fees to us except the ongoing property management fees if you choose to let us continue to manage your property for you.
What you will see on the settlement statement will be the following:
– Property Insurance (covers hazard, fire and liability on your property) – $550 – $660 per year depending upon the cost of the property being insured. You will be required to pay the annual insurance premium for 12 months at closing and then after 12 months, the insurance company will email you an invoice.
– Settlement fees charged by the title insurance company (or conveyancer as they are called in UK) that prepares all documentations needed for your purchase: $250 – $300
– Recording fees charged by Wayne County (where Detroit is located in) for recording the transfer of ownership from the seller to your LLC: $19
– Pro-rated property taxes (Wayne County and City of Detroit) – they vary depending on when the sale transaction happens: approximate $600 to $1,200. In USA, as a property owner you pay property taxes to the city and county in which the property is located in; and in many states, like Michigan, when you pay those taxes you are paying them a year in advance. If you are buying a property next week, you will be required to pay back the seller those taxes in an item called pro-ration of taxes.
This means that if I’m a seller, I paid my property taxes on July 1st 2014; and paid them through June 30, 2015. If you wanted to buy my home on January 1st 2015; as the seller, I would require you to repay to me the property taxes from January 1st 2015 to June 30th 2015, because that will be the time period in which you would be owning the house and collecting rent and not my company.
Don’t forget however that is a property asset purchase so all these costs are written off against your rental income when your LLC will file its tax return next year.
So your total closing costs will be around $1,500 to $2,000 per property. They might be $300 less depending up on the pro-ration of taxes (biggest item on the closing cost list) or they might be $75 more. But that is a good number to keep in find while allocating funds.
Question: Who is going to file my taxes next year?
Our property management company does not file any tax returns for our clients. We are not tax accountants so we refer our international clients to a good tax accountant at year end and provide them with the rental income and expenses report from our software that they would need to file your tax returns.
Question: How will I receive my rent? How often will I get my rent payment?
Upon receipt of the tenant payment, rental income less expenses is sent to the owner by the 1st week of the following month. We can wire transfer the money directly to your bank account in your country. Our bank charges a fee of $45 per month for the wire transfer. Or if you have a USA bank account, we can deposit the money directly to your account every month.
Question: What is Section 8 Rent Assistance or Rent Benefits Program? What is good about it? What is bad about it? Who is going to pay the rental? Government or other parties? And if the property is vacant sometime in the future, can an investor still get rental income (given that it’s paid by government)?
– The Section 8 Rent Benefits program is a rent assistance program by the USA federal government to help families who need a house to live in but cannot afford to pay the full rent by themselves. The money comes from HUD (a federal government department and disbursed via various local housing agencies). The amount of rent a tenant qualifies for is based on their income and their family size. Section 8 can pay either the full amount of the rent or a portion of the rent which in case the tenant pays the balance every month. So for example let’s say a property is rented for $900 per month in Detroit. Section 8 can pay the whole $900 per month rent or it can pay $500 per month and the tenant will pay the balance $400.
– The good thing about it is the automatic nature of the rent payment. No rent collected needed from the tenant unless Section 8 has allowed the tenant to pay a portion of the rent. The rent comes in automatically every month to the property management company.
– The thing you need to understand about Section 8 is their annual inspection costs. Once a year Section 8 will do an inspection on a property that is getting payments under its program. And they will find at least $600 to $1,000 worth of repairs that they want done on the property because well they have to justify their visit.
– There are no term limits on Section 8 payments. As long as the tenant is living there and stays qualified the income guidelines that get them the Section 8 assistance in the first place, and your property passes the annual inspection every year (basically do the repairs that they are asking you to do) – you will keep getting Section 8 rent payments.
– The property has to be rented out and a family has to be living there in order to get the rent payment under this program. Section 8 does not pay rent on vacant properties.
Question: Can I get a mortgage to buy properties in Detroit, USA from a USA bank?
In order to get a mortgage in USA, you need to be a permanent resident or a US citizen with a credit history and job history in USA so the answer is no. All of these investment properties are cash deals in Detroit, USA.
Question: How long do I have to wait to get a tenant in my property?
The turnkey rental properties that we have for sale are already tenanted and are being managed by our property management division You don’t have to wait for them to get a tenant as these properties are remodeled and rented already.
Question: When can I expect to receive my first rent income payment?
The purchase contract will explicitly state that date. Typically if you close in September then your first rent payment will go to on October 15th. Our property management company does all their rent payouts on the 15th of each month.
Question: How long will take from me selecting a property to actually finalizing the purchase of the property in Detroit?
Around 3 weeks.
Question: Do the seller offers any kind of warranty on your properties?
It depends on the seller of the property. Team LBR is just the selling real estate agent for these properties and does not aoffer any warranty on these properties. Some sellers offer one year on all electrical, heating furnace, hot water heating tank and plumbing systems. Some don’t offer any warranties. Either way we highly recommend that you exercise your right as the buyer to do an inspection of the property before you close. The purchase agreement gives you 10 days to hire a property inspector who will conduct an through inspection of the property (exterior, interior and mechanical systems), take photos, tour the property from inside and outside and report directly back to you. These property inspections typically cost between $250 – $350 depending on the size of the property. Click here to find a list of top rated licensed inspectors here online or email Marcus J. Twyman, Associate Broker & Sales Manager at Team LBR to refer you to some that we have used in the past.