What are the common pitfalls in investing in US Real Estate?

What are some common pitfalls made when purchasing US real estate?

Firstly, let's introduce some common pitfalls made when purchasing US real estate.

Didn't pay attention to school districts

In purchasing U.S. real estate, it is important to select properties with an awareness of school districts.
This is because the asset value of U.S. real estate depends on the ranks of schools in the vicinity.
In the United States, the selection of school districts is considered to be the most important thing that influences children's lives.
Areas with good high schools tend to attract wealthy people.
Purchasing real estate in such areas increases the rate of collection of rent.
However, what happens if a purchase is made without being aware of the school district at all?
An important thing to remember is that the asset value of real estate in Japan and the asset value in U.S. real estate differ in the first place.
In Japan, properties close to the station is regarded as having high asset value, but in the U.S. it is different.
Rather, areas in which many people use public transport is perceived as a low-income area, so properties near train stations do not have a high asset value.
If we purchase U.S. real estate with the same standards when selecting Japanese real estate, we may be unable to collect rent, create vacancy risks, or fail.

Choosing properties based on their age

The age of building is also different from Japanese real estate in terms of value.
In Japan, new buildings are considered to be good, and asset values decline as the age of buildings increases.
However, the U.S. real estate market is dominated by pre-owned homes, and many of these properties maintain their asset values at the time of new construction from 30 or 40 years ago.
As mentioned earlier, areas with good high school rankings are unlikely to lose asset value due to age of building, so we believe that we can operate them with an eye on stable rent income.

I didn't use an Escrow service

Escrow is a third-party organization authorized by the state government.
When you enter into a purchase or sale contract, you can make a safe transaction by using an escrow service.
If you do not use an escrow service, you may not be able to register the transfer of ownership.
There is also the risk that you will be liable for the previous owner's loan.
In addition, if there is a defect in the property, you can cancel the transaction through the escrow service.
In States without escrow,there also appear to be more frequent purchases of unregistered properties and fraud losses.
When purchasing U.S. real estate, it is important to select the property in a State where there is an escrow service.

Failure to do a proper home inspection

In Japan, home inspections are indispensable in order to purchase real estate with peace of mind.
Inspection refers to housing diagnosis, in which specialist investigators with architects conduct surveys from a third-party standpoint, such as whether there are defects or whether there are any areas to be repaired.
Home inspections are important in the U.S. real estate market because pre-owned houses are the main market.
If a major defect is found in the home inspection, the deposit can be returned and the contract cancellation can be carried out.
Attention should be paid to the possibility that a failure to perform a home inspection could result in the purchase of a property with an enormous repair cost.

What are the common mistakes made when selling US real estate?

Finally, let's examine some common mistakes made when selling US real estate.

Didn't consider currency risk

In U.S. real estate investments, attention should be paid to currency price fluctuations.
In the U.S., capital gains tax payments are required when a property is sold.
Of course, we also have to pay if we sell our U.S. real estate.
If you do not pay attention to exchange rates, you may incur unexpected taxes.
When selling U.S. real estate, you need to fully understand the exchange risks.

Failed at the timing of the sale

In the U.S., real estate movements become active from June, when school summer holidays begin.
Conversely, after October, activity will settle down, so demand will weaken.
In other words, when the timing is wrong, buyers often cannot be found, and the timing of the sale is missed.

Sold the property because of poor management

The same can be said when we sell Japanese real estate, but if we sell the property without making it clear, the value of the property will also decline, and it will be difficult for us to find a buyer.
In addition to the home, let's repair and upgrade the exterior walls and gardens before selling them.

In Conclusion

This time, we explained the common pitfalls made at the time of sale, including management at the time of purchase and after purchase, for U.S. real estate.
U.S. real estate and Japanese real estate have different views on asset value.
In order to prevent failure, it will be important to understand the difference from Japanese real estate.
It is also of paramount importance to find a good real estate agent and a good management company.
With these precautions in mind, take on the challenge of investing in U.S. real estate without failure.