This second newsletter is titled Winter (U.S.A.) as we are covering both markets: Latin American for people from the United States, and US property for people from Latin America – especially from the “República Argentina”.
Please see our last newsletter Winter (Argentina) on our website, www.argentico.com, for a review of some important foreign-buyer’s pointers for purchasing real estate and investing in the United States.
We want our third edition of “The Up Shot” (already in production) to feature new real estate-developments in Argentina as a central theme.
Our newsletters complement one another. One may go back to the Argentico website to try to get a good picture of various aspects of the real estate business, in both regions of the world. We hope, by reviewing each newsletter carefully, and in conjunction with each of them, potential buyers will become ‘experts’.
1.
COMMERCIAL SEARCHES
We are developing relationships with leading commercial real estate firms in the United States, and we want potential properties buyers to be able to initially research available property there by usingwww.loopnet.com, a low-cost and effective way to look over this market; and then we should be able to be accessed for extra help.
2.
REAL ESTATE OPERATIONS IN ARGENTINA – Enrique Maschwitz, Jr.
Argentina’s current economic measures have caused a contraction in its real estate market. The main reason is that sellers cannot get paid in U.S. dollars because of currency exchange restrictions, while buyers cannot get access to dollars or are unable to justify the origin of the funds.
Over the past two years, these circumstances have led to an ever-dwindling number of real estate transactions; therefore, sale prices have remained stable or -in many cases- decreased, especially for middle-class housing.
High-end or luxury properties are a different matter. This market usually operates in U.S. dollars, which are paid overseas via a wire transfer. Both parties agree to transfer the amount of the transaction to the seller’s account and the latter declares the income as part of his/her assets. It is common to find clients who are willing to operate under these conditions.
Enrique Maschwitz, Jr. is a distinguished Argentine notary. He is partner of the firm Escribania Maschwitz – del Campo, founded in the City of Buenos Aires approximately sixty years ago.
3.
BANKING IN THE UNITED STATES – Matthew Beem
“How to Open an Account”
Although it might seem daunting, opening an account (at either a bank or brokerage) is not so difficult. First of all, you have to decide on the bank/brokerage and the level of service (and hence costs) you wish to have. The large US-based banks (Citibank, JP Morgan, Wells Fargo, etc.) have established branches that are specifically dedicated to the Latin American market and have Spanish-speaking account managers. But they aren’t the only option – there are also smaller banks and even online banks/brokerages that charge much less in fees and have lower account balance minimums to open an account. On the other hand, there are also banks/brokerages that do not even accept foreign clients and others that require minimum balances to open the account, so it is very important to find out which bank suits your needs before beginning the account opening process.
Once you have chosen where to open your account, you must provide information (Know Your Client) to the bank so that they can comply with government regulations. This information includes proof of ID and residence of all account holders. For a foreigner, you must normally present a copy of a valid passport, while for proof of residence, you must provide two separate bills – one from a utility and the other a bank statement (from a local bank, local credit card, etc.).
The next step is to justify the funds that you will deposit after the account has been opened. In order to comply with Anti-Money Laundering (AML) laws, the bank and account manager are required to verify the source of the funds deposited into the account. Whether you sold real estate or a business or it is earned income, you must declare this to the bank, but it does not mean that the bank shares this information with third parties (including the government). This is done via a questionnaire that you must fill out, and it is relatively easy.
Once the account is opened, it is also worth noting that if you are going to wire transfer or otherwise deposit a significant amount of money, you should make the bank aware of such and justify the transaction before the fact, because if the bank detects irregularities in the account without prior notification, the bank could even close the account without warning. If the account holder is working with an international branch of a US-based bank, you can do this by telling the account manager, for example, that you sold your house for X amount of dollars and to expect a wire.
Lastly, it is very advantageous to have a signed form called a W-8 on file. This form is used for foreigners without a social security number and allows them to avoid withholding taxes on capital gains and interest (not on dividends). If a foreigner opens a brokerage account, withholding taxes on bond coupon payments, for example, are exempt in the US if there is a signed W-8 on file.
Matthew Beem has extensive experience in the financial sector, holding a wide array of positions throughout wealth management, investment advisory, research, and portfolio management. He is currently a vice president and investment counselor with EFG Capital in Miami, focusing on the Latin American markets. He is a CFA charterholder (Chartered Financial Analyst) and holds a master’s degree from Stanford University.
4.
DETROIT & HUD – Argentico SRL – Argentico SRL, Inc.
In trying to make good on our promise to begin investigating westward in the United States for potential buyers, we have begun contacting the US Government’s office of Housing and Urban Development (HUD), including preliminary communication with directors of HUD’s Single Family Asset Management division, top Detroit real estate agents, the office of the Mayor of the City of Detroit, and the office of the Governor of Michigan, including the Michigan Economic Development Corporation, and have begun to follow-up with the Detroit Economic Growth Corporation. All of these could help buyers become seasoned in the market up there — as they keep in touch.
Although any realtor can sell a HUD home, Mr. Ralph Newkirk (Real Estate One in Detroit) has been especially helpful. He has been able to give us information from his special position as a “HUD-approved listing agent”; as has Ms Pandra Richie SCRP, SGMS.T l President of Long & Foster Corporate Real Estate Services, headquartered in Virginia (near Washington, D.C.), been very helpful in offering initial guidance for this undertaking. However, neither of them, nor can anyone else mentioned above, or below, be held-responsible for what is written here.
TO BUY, VIA HUD:
To purchase a HUD home, in Detroit, or elsewhere, as an investment (not to live in as an “Owner Occupant”), here are some of the steps to take.
First, go to hudhomestore.com. Also available in Spanishhttp://www.hudhomestore.com/Home/Index.aspx?sLanguage=SPANISH. The overall, general HUD website, also has a Spanish version http://espanol.hud.gov/home.html.
The system is geared especially for buyers who intend to ‘owner-occupy’, so there is a ‘waiting period’ for investor-buyers to bid, after owner-occupant buyers. (As a matter of fact, the same day this sentence was written, the waiting time changed from a 30-day waiting term, to a 15-day waiting term, for buyer-investors. This is good for ‘our buyers’. ( Ie. NEWS FROM HUD ON DEC 2: “Good Afternoon, Effective today there has been some changes made on the HUD Sales Disposition Program. They are as follows: The exclusive bid period for Insured Properties (IN/IE) is now 15 days- Previously it was 30 days. Also, bid opening procedures for bids on Friday, Saturday, Sunday, or Federal Holidays will be reviewed simultaneously on the next business day. )
Begin by inserting the zip code of interest and peruse the site. Owner-investors can only bid on “UI” (uninsurable) and can not bid on “IN”(insurable) properties, initially.
Additionally, prospective investors can not bid without a realtor. Note: HUD pays the commission for the realtor – on both the sale’s and buyer’s sides of the transactions.
To bid, one must have have proof of available cash. This would include demonstrating a bank statement, less than 30-days-old, with an amount at least equal to the bid. This bank statement does not need to be notarized, and one can cross-out account numbers, and withold private information. It only needs one’s name and the relevant amount.
Also, an identification number is needed to bid; which usually is the Social Security number, and in the case of a non-US citizen could be a picture ID.
Earnest Money must be available to make a deposit. The amounts required are 500 dollars if the bid amount is under 50,000, or 1,000 if the bid is over 50,000. This money needs to be in cashier’s check or money order. No personal checks or cash will be accepted. This money is required only if one is the winning bidder. If the bid is accepted, two business days are given to get the Earnest Money to the listing agent’s escrow account.
Incidentally, when placing a bid, there’s an option one’s broker can make to be a ‘Back-Up” bid, should another bid fall-through, for whatever reason.
If the bidder is the winning bidder, the successful bidder is notified within 24 hours. If not notified by then, one didn’t win. Also, if nobody won the bid, the property will still be on the hudhomestore website, and the bid can be adjusted to a higher amount, presumably.
Also, if one is the winning bidder, there are five business days to do a personal property inspection. If the potential purchaser is not satisfied with the personal property inspection there are five days to get the Earnest Money back. One notifies HUD of this intention via the buyer’s agent.
HUD will not make any repairs or reduce the price due to the inspection. HUD homes are sold “As Is”. These are among HUD’s first words on the HUD website.
The property must “close” within forty-five days within the date of the accepted bid.
As buyer, one chooses the title company, to check liens, etc.
If the title is clear, the title company notifies HUD and the prospective owner to set a closing-date. HUD needs seven days to close. The title company should be in contact with everyone to make a closing somewhere in Michigan, in the case of HUD-owned homes for sale in Detroit. (It is suggested one changes the locks immediately after purchase of the property.)
ABOUT DETROIT, GENERALLY:
One can Google and see among the foreign money investing heavily in Detroit, there is substantial Chinese investment. There are also Australians, among others, investing in Detroit. One president of a very large US real estate firm, without core business in Detroit, said: “…having recently been able to get a tour of Detroit, I think it is one of the BEST places to invest in right now. Tremendous opportunity going forward!” (Emphasis in original).
However, one should not expect to make quick money on turnover – buying a wreck and fixing-it-up – in Detroit.
Average prices for HUD homes are about 30,000, and rentals can fetch, we are told, between 500-800 per month.
BEYOND HUD:
Without HUD, by using a realtor, there are also other areas to search for opportunity in and around Detroit, for property in bank-foreclosure.
For example: We are told of one zone in Detroit with stunning houses, and interesting heritage, where one can buy an attractive brick home, for 80 or 100,000 dollars, or less, is the Boston-Edison zone.
Please, see this embedded-video, produced several years ago, in advance of the full-scale crisis, as an example of some of the distinguished properties located in this area > http://www.youtube.com/watch?v=hGiIYdOU7PI
Note, on the video that the said-to-be largest residence in the area, the home of former Fisher Auto Body president, Charles T. Fisher, with about 1,000 sq meters, is said to have sold – according to the video — for 600,000 in 2008. (Actually, it was sold for 625,000, when the crisis was less-pronounced.) Today, we understand, it might bring about 300,000, but may have squatters living inside it. The price could be even lower, than 300k, if it’s been stripped of important items, such as copper and furnace(s). Nevertheless, we are told, the rental income could approximate 2,000 a month.
We understand all of these properties can be good for renting, and real estate firms in the region have property management teams to help with this. Generally, they charge up-to 20% per month. (Argentico SRL can provide details.)
ONGOING RESEARCH:
As mentioned in the first paragraph, we have begun opening the doors for Latin American buyers, across the municipal spectrum, from the US government, to the Detroit Economic Growth Corporation – with varying results. Furthermore, and maybe very interestingly, we have been told several times, by Mr. Norman S. Jezzeny, a Housing Program Policy Specialist in the Housing Office of Asset Managment and Disposition Division, that another representative from HUD, in-charge of selling HUD homes in bulk, should be very interested to follow-up with us. (We have not yet heard from this person about whom Mr. Jezzeny spoke.)
Among all the government links we have made, we are especially satisfied to report the Detroit Economic Growth Corporation (DEGC), a private non-profit organization that operates as the lead economic development agency on behalf of the City of Detroit, and which specializes in commercial and industrial redevelopment, business development projects and large scale mixed-use development initiatives, has sent web-links for your use. (See below.)
Their website is www.degc.org, and they seem interested in providing businesses, which are interested in expansion opportunities in the Detroit market, to contact them. They told us they can provide customized assistance to businesses interested in expansion in the City of Detroit.
The DEGC is especially interested in holistic redevelopment for Detroit, with an eye toward social responsibility; and they would like to see properties which are sold to investors ultimately add value, and promote responsible redevelopment across the whole City.
Two other websites which the DEGC has forwarded are www.detroitlandbank.org — which concerns ‘blight-elimination’ for the city, and www.lisc.org/detroit/ — designed to enable buyers to learn about how local community development organizations are implementing plans to provide affordable housing opportunities in Detroit.
This newsletter is not intended to provide legal or accounting advice or opinion. Such advice may only be given when related to specific fact situations, and under consultation of legal and/or accounting professionals. Circular 230 DISCLAIMER – any US federal tax advice which may be mentioned by professionals in this newsletter is not intended to be used, and cannot be used, for the purpose of avoiding federal penalties due.
Traducido por Hernán Merea, RGA Language Services rgalanguageservices.com