The Danger of Buying Property in the United States

By Jason Fittler

Below is a link to a story run by the ABC, I recommend that anyone even thinking about buying property in a foreign country read this story. It is a hard fact of life but we often buy the dream and rarely check the facts.

ABC: Aussies lured by dirt cheap US housing market.

I have been approached by spruikers and seen a number of advertisements looking to sell houses in the United States to Australian investors. I cannot understand why anyone would take on this risk.

Lets take a look at this type of investment.

The first thing you need to know is that the Global Financial Crisis started with the US housing crisis. During early 2000 the US housing market was booming due to low interest rates loans and loose lending practices. You may have heard of NINJA Loans (No Income No Job or Assets) this was a term they used for lending in America. As we approached 2006 these lenders started to default on they loans. In America if you default on your home loan you walk away and it is the banks problem.

As more and more people defaulted the investors who owned these mortgage back securities started to realise that their investment was no longer safe and exited the investments. With the price of these investments falling the large banks of America who owned these securities started to fold. You may remember Leman Brothers who went bankrupt and banks such as Fred Mac and Fanny Mae who the government had to bail out.

The banks going broke sent the financial system into free fall and caused what we now know to be the GFC.

To stop this crisis the Government purchased all of these toxic mortgage backed securities, took ownership of the physical properties and are now selling them to real estate agents who are flogging these poor performing assets to international investors who do not know better.

It sounds clever owing a property in another country and buying a house for $64,000. But you must ask yourself, why the Americans are not buying them if the deal is so good.

These US houses are the ones the Americans do not want and many Australians are losing they hard earned money on.

You should never buy an investment you do not understand. Especially in a foreign country. It is a recipe for failure.

The fall out form the GFC is continuing to hit investors as their fear and lack of understanding for the stock market pushes them toward high risk investments such as these properties in America.

Right now the very cause of the GFC is now being sold to unsuspecting, unsophisticated investors and there are now laws in place to protect these investors.

In the meantime the Australian Stock Market has performed well over the past putting on 16% since the lows in August 2011.

All investors need financial advice from an independent qualified and regulated adviser. The advice will cost you less then the commission you will pay to the slick salesman and produce you are far better result over the long-term.

If you know someone who may be looking to purchase a property as described above please pass on this article, you will save them thousands of dollars.

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