Beware cheap homes overseas being offered in Singapore. (Photo courtesy of PropertyGuru)
By Andrew Batt (courtesy of PropertyGuru)
You've probably seen them yourself: "Buy five U.S. properties for US$250,000" (S$315,000).
These advertisements have been running on television and in newspapers in Singapore for several months. These distressed property investments are proving popular with Singapore buyers, as a sell-out of more than 80 such properties offered at an exhibition last October proves.
What if I told you that US$25,000 (S$31,500) was expensive for a U.S. distressed property? What if you could own but one of these homes for much less?
eBay, the global internet auction site, is probably familiar to you but I doubt you've searched for overseas property. It's likely very few buyers from this side of the planet have the confidence to bid and win auctions for an overseas property they've never seen with their own eyes, and rightly so. These properties are, to use the words of one agent, crummy.
The new owner would need to invest several thousand dollars at least to even think about any kind of rental income. U.S. citizens can hold the property for one year and one day before donating it to a registered charity and benefiting from a tax refund that could potentially equal 100 percent or more of the purchase price.
Location, as with any property, is the key and with these properties that's no exception. Don't think for a second these homes are in even moderately good locations. They're not. They are cheap for a reason, and in most cases it's because no one wants to buy them.
One property being listed right now is a three-bedroom home in the city of Detroit, Michigan. Built in 1918, the 1,106 sq ft home can be yours for just US$5,000 (S$6,300).
Don't all rush at once. Real estate agent Joe Crump says, "The catch is that they are crummy houses. As they stand, most of them are not habitable. They are all in depressed areas where the market has declined dramatically in the past year or two. You probably would not live in or around these communities. Odds are, you don't even live, or want to live in the State where they are located."
Let's assume you wanted to gamble — that's essentially what you'd be doing — and big for one of these homes. You win. Congratulations. Now what?
Your first investment might be in an airfare to view your new purchase, and that could easily amount to half of the price you paid for the home. You would want to hire a local builder to renovate the home, maybe a property management company, too. You would need to advertise for tenants, assuming you're buying for rental income. You might be lucky to get US$300 (S$378) per month in rental for a home like this.
Something goes wrong and your tenant calls you for help. The time difference means you're awoken from your sleep in the very early hours of the morning. Who are you going to call?
I know it may sound obvious but you need to be brave and probably somewhat crazy to consider buying a property such as this. At the very least, you need to be an experienced overseas property investor with the ability to handle anything your new baby might throw at you.
Andrew Batt is Regional Group Editor at PropertyGuru.
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