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Real estate in the United States - real estate investments in the United States

Real estate investments in the USA - a comprehensive guide for real estate investors in the United States in 2024

In recent years, Israeli investors are increasingly expressing interest in real estate investments in the US. A major reason for this is the attempt to find profitable real estate transactions outside the borders of Israel that can be carried out with lower equity than is required here in Israel and with the potential for a higher return, while taking advantage of the economic crisis that broke out in 2008 which led to a drop in real estate prices in the US and created investment opportunities that shared Most of them are still available today.

For the foreign investor, investments abroad in general, and in the USA in particular, require in-depth research and prior knowledge that will prevent him from putting his money on the deer fund and risking losing his fortune.

In the following lines, we will present you with a comprehensive review that touches on the 9 most important issues that every real estate investor in the United States must know before making a deal. The information is relevant to both beginner and advanced investors. Let's dive in…

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Characteristics of the real estate market in the USA - why the United States?

The real estate market in North America offers a wide variety of investments thanks to the differences in the characteristics of the population, culture and consumption in its various territories. To understand the size of the market - there are currently 329 million people living in the United States.

There are quite a few factors that may affect the feasibility of the investment and its characteristics, including the level of crime in the area of ​​the property, the socio-economic status of the population living in the area, the presence of positive or negative immigration in the area, the demand for rental housing and more.

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There are 3 fundamental differences between the real estate market in Israel and the US market:
  1. property prices - The cost of apartments and houses in the USA is significantly cheaper than the prices of apartments and houses in Israel. To illustrate this, you can find a spacious land house in the USA for an amount equivalent to the price of a 3-room apartment in one of the peripheral cities in Israel.
  2. the value of the land - The price of land in the US does not have as much weight as in Israel, and construction costs are cheaper there. Because of the number of earthquakes and storms that hit the USA, it is often necessary to provide quick housing solutions, so it is customary to build houses in prefabricated construction or to build with wooden construction methods. As a result, the cost of the buildings is cheaper, but the maintenance costs may sometimes be higher in the overall summary, this greatly reduces real estate prices in the country compared to Israel.
  3. transparency - In the USA, there is complete administrative transparency, and the entire real estate purchase process is legally and legally regulated, which makes the process much easier and simpler, when compared to the process in Israel.
Real estate entrepreneurship
How did the economic crisis in 2008 affect the US real estate market?

The subprime crisis that broke out in 2007 led a year later to a global economic crisis. The name of the crisis was born from the reason for its outbreak, sub-prime loans with high interest for the purchase of properties, given to people who could not afford the repayments due to unstable income for example, and led to the foreclosure and sale of many properties.

What led to the outbreak of the crisis??

Before the outbreak of the crisis, the US enjoyed a gradual increase in the real estate market, which caused the government to grant loans for housing needs under very favorable conditions, such as low interest and without the need for an advance or additional guarantee. This approach quickly led to an increase in demand for real estate, and created a situation where it was not profitable to rent an apartment, because it was easy to get a mortgage that was fully financed by the bank (without the buyer having to bring any equity).

As mentioned, the increase in demand for real estate led to a significant increase in prices and an increase in demand for non-residential real estate. At the same time, the banks and lending institutions believed that the borrowers would be able to meet the loan repayments and made sub-prime loans available to them without sufficient control, with the mortgages financed through the issuance of high-interest bonds.

The (monetary) decision at that time to raise the interest rate made it difficult for the borrowers to meet the loan repayments, and a situation arose where many borrowers had to hand over their houses to the lenders, who were unable to sell the properties because the real estate market moderated and demand dropped sharply. As a result, the traded real estate stocks also collapsed and the crisis gave its signals in the US and spread throughout the entire world.

The last straw was the drop in the value of the apartments in the US, which led to the situation where the mortgage amounts they took out were higher than the values ​​of the apartments they owned (Under Water) and caused more borrowers to give up their properties, which exacerbated the effects of the crisis.

In the end, the banks and lending institutions were left with a huge amount of unclaimed assets, which they had to quickly get rid of in order to cover their debts, and thus real estate prices in the country reached an unprecedented low.

"The opportunity" - low prices and a huge supply of real estate investments in the USA

Following the crisis, investors with a sharp eye quickly recognized the opportunity in front of them and began to express interest in real estate in the US. With the tightening of conditions for obtaining a mortgage set by banks and lending institutions, Americans found it difficult to take advantage of the opportunity, which left the market open to outside investors and increased the demand for rental housing.

Although quite a few years have passed since then and real estate prices recovered and began to rise gradually, they are still low compared to many places in the world, and especially compared to Israel.

Does the corona crisis threaten the real estate market?"n Bara"ב?

These days we are experiencing a global crisis, which is affecting the health systems and the economy in ways we have not yet known, but contrary to expectations, house sales in the US increased by 43% during the last quarter compared to the corresponding period last year. The house price index increased by 4.29% compared to 3.25 last year, and house prices increased by 2.17%.

Below is the price trend recorded on the 20th The largest cities in the country as of 2022:

Phoenix shows the highest increase, which stands at 32.41%, followed by San Diego (27.79%), Seattle (25.5%), Tampa (24.41%), Dallas (23.66%), Las Vegas (22.45%), Miami (22.23%) , San Francisco (21.98%), Denver (21.31%), Charlotte (20.89%), Portland (19.54%), Los Angeles (19.12%), Boston (18.73%), Atlanta (18.48%), New York ( 17.86%), Cleveland (16.23%), Detroit (16.12%), Washington (15.84%), Minneapolis (14.56%) and Chicago (13.32%).

The median price for a new property in the US has increased by 20.1% in the past year and currently stands at approximately $390,000.

The median price of existing properties (second hand) is about $356,000.

Demand for home purchases continues to rise, but the number of construction starts and relatively low supply are unable to satisfy the high demand. Some believe that this imbalance is expected to benefit investors even more.

The unemployment rate that dropped to 5.2% at the end of 2021 is also an encouraging figure.

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In light of these data, what are the leading investment avenues in the US today?

✔️ Buying a private house - Single family

The purchase of a detached private house in the United States gives the owner exclusive ownership of the property and the land on which it stands, along with his rights and obligations. Although the price of a detached house is higher, it is easier to get a mortgage for it and the expected income and expenses can be accurately predicted. Also, although these houses are usually far from the city centers, and finding tenants can be a bit challenging, the data show that most Americans prefer to live in detached houses.


✔️ Buying an apartment in a building or complex

Buying an apartment in a building or complex gives the owner ownership of the apartment only, and unlike in Israel, apartment buildings in the US, known as condominiums, can contain hundreds of apartments, belonging to different owners. All apartment owners are obliged to pay a Condo ("home fee") for the purpose of managing and maintaining the building.

These apartments are relatively cheap, and most of these buildings contain additions such as a gym and a pool, but it is important to take into account that there are hundreds to thousands of additional tenants, building regulations and a body that manages the building, and that the house board payments may be relatively high, especially if the building is upgraded with additions that improve the quality The lives of the tenants. Apart from that, the increase in the value of these apartments is slower, and it is more difficult to get a mortgage for the investment in them.


✔️ Group investment in multifamily (Multi Family)

Investing as part of a group of people is done through a management company or a brokerage agency, through which you jointly purchase an apartment complex or an entire building in the USA. This type of investment requires lower equity, but the risk is higher, because the investment is similar to buying a share and a proportional share according to the investment amount.

Although a group investment in a multi-family model is also suitable for those who have a lower investment amount, it requires coordination and agreement among all investors, which depends to a large extent on the entity that manages the investment. The investor in this route does not participate in the management of the property and hardly deals with it, but for this reason he is required to pay more for management costs. In cases where the properties are not rented, these expenses can be particularly high.


✔️ Investment in real estate"Commercial in the USA"ב

Investing in commercial real estate includes the purchase of offices, stores, industrial buildings, logistics centers, hotels, public buildings, etc., which are not intended for residence but for rent to business or public entities.

In most cases, commercial property can be rented at a higher price than residential real estate, but the expenses it requires from its owner are higher. However, one of the advantages of commercial real estate is that the tenant can be a government or public body, in which case the risk of problems arising with the rent is much smaller. Beyond that, there are not many differences between commercial real estate and residential real estate, and the same tests must be performed in both types.

Real estate encyclopedia
What is the difference between short-term investing and making a profit from "flipping" compared to longer-term investing?

A significant portion of the homes for sale in the US are properties that were foreclosed upon after their owners failed to pay the mortgage. Many times these properties are in need of significant renovation, and it is not surprising to find that they have been empty for a long time or have suffered break-ins or takeovers by homeless residents.

This is also where the opportunity for investors is derived: the investor has the option to purchase properties of this type, renovate and improve them, and then sell at a higher price while making a profit. In fact, some real estate companies make their profits using this method.

Some choose to improve the property they purchased in order to collect a higher rent for it and guarantee a renovated and renewed property, which will not require much maintenance, at least for several years to come. Also, properties can be improved by expanding them with the addition of an additional floor or room, etc.

Who are deals suitable for? "Flip"(Flipping) - This type of investment is made for a short term and is particularly suitable for investors who wish to make a profit within a few months to a year. It is suitable for people who do not want to deal with rents, as well as for those who understand renovation and construction works. This type of investment actually offers higher profits alongside higher risk, as it requires more financial and operational investment.

Hot Real Estate Deals: Wholesale & Off Market
Important tests that must be performed before making real estate investments in the USA

* Property location - The differences and gaps between different regions throughout the US will usually be significant and largely determine the profitability of the transaction, therefore choosing the location where the investment will be made must take into account the following parameters:

* Demand for rent in the area - A property that is not rented out will require its owner to pay property tax, a house board, taxes and other expenses for it, which may lead to a loss. Although there is no index that accurately indicates the demand for rent in a certain area, it is possible to examine the occupancy level of the properties in the area. Also, the presence of educational institutions and employment centers such as hospitals and universities will attract a quality population to the residential area. As a general rule, it is always better to locate a place where development processes are taking place and which is located close to major roads, main transportation hubs or shopping centers.

* The nature of the population living in the neighborhood - Socio-economic situation will affect both the attraction of people to the area and the ability to actually rent the property. It is important to check what the average family income is and the level of unemployment in the area, which will also help determine the realistic amount of rent and the chance of getting into trouble with non-paying tenants. It is advisable to check in depth the level of crime in the place, the quality of the educational institutions and the level of the population. Many times a property that is priced too low may indicate an area with high crime or high unemployment.

* Real estate prices"and the average rents - Checking the market prices will largely determine the investment area. Checking the average rent will help calculate the yield.

* The population census - Negative migration may indicate problems in the area, and will usually indicate difficulty in renting or selling the property, while positive migration will indicate an increase in the value of real estate in the area. It is recommended to check the number of residents in the area over the years.

* Average return - This figure is important not only for examining the feasibility of the investment, and will indicate additional data. In general, the higher the risk in an area, the higher the return should be, to justify the investment in that area.

* Laws and taxes - In every state in the US there are different laws and taxes related to real estate. It is important to check, for example, what the law states regarding a tenant who does not pay, what municipal taxes exist and whether there are special laws regarding real estate, such as a prohibition on purchasing real estate other than through a local real estate company, etc.

* The condition of the property - As we mentioned earlier, following the 2008 crisis, there is a large stock of apartments in the US with receivers. These apartments can in many cases be purchased at a low price and profit from their appreciation. Those who prefer apartments that do not require renovation can choose from the beginning to invest in a property in a better condition, suitable for living.

* Tenants of the property - One of the most important things is to choose the tenants correctly, whether they already live in the property and "arrive with it" or whether you are the ones who let them in. Every landlord would aspire to rent it to tenants who pay on time and try to maintain the property. For this reason, it is important to examine the earning capacity of the tenants and how stable it is, as well as their past with regard to debts and violations of the law. Apart from that, if they are also nice and kind it's a bonus.


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The steps in the process of purchasing a property in the USA

The purchase of houses in the USA is carried out through the Title Company, which is an independent neutral legal entity, which includes insurance agents and lawyers, who are authorized to engage in the registration of ownership of houses in the USA.

By virtue of its role, the company examines the property and its legal status, verifies that there are no previous debts or encumbrances, etc. This test takes several days. This is the place to point out, that a debt, if any, is not registered on the previous owner of the property, but on the property itself, and whoever purchases a property that has not been paid in full must pay the debt himself.

Also, the Title company is responsible for the entire process of selling the property, including the transfer of funds between the buyer and the seller and the registration of the property in Tabu. At the end of the sale process, the company transfers ownership and provides insurance, so that it will bear the expenses if in the future there is a debt that has not been settled for the property.

An investor, or a group of investors, who wish to purchase property in the United States are required to register as partners in an LLC, which is a company registration method used in the United States, through which the commercial activity for real estate investments in the United States is carried out. Registration is done in any country that allows it in the US, and depending on the country where the company is registered, different rules apply to it.

Establishing a limited company is a fairly simple procedure that takes a few days and does not require holding a green card or American citizenship. The reasons for purchasing the assets through a limited liability company lie in the fact that this way the investor's assets and private capital are protected and only the company can absorb claims.

In addition, the taxes on limited liability companies are lower than on private investment when it comes to the tax on the profit from the future sale of the property, the same with regard to the taxation of income from the property (more on the real estate taxation system in the United States below).

in the first stage of the process The investor meets with representatives of real estate companies operating throughout the US. The purpose of the meeting is to identify the various needs of the client in order to find him a property that will provide an optimal response to his investment goals and meet his requirements and needs in an optimal way. To this end, the representatives will strive to understand what the budget the investor wishes to invest in, in which location he wishes to locate a property for investment, what type of property he wishes to purchase, etc. After identifying the customer's needs and requirements, he is given offers for different properties.

The customer can also locate properties independently. The real estate companies will help him with this, and even accompany him in the application process to purchase the property.


How is the process of buying the property carried out?

1. For the actual purchase of the property, the investor is required to produce a document, known as POF (Proof of Fund). The document, which is drawn up and issued by the bank where the investor has an account, is evidence that the investor has the financial resources to purchase the property. When the investor has the full amount to make the purchase (and the renovation, if it is required), a photocopy or copy of the account statement must be submitted. If the investor took out a mortgage for the purpose of making the investment, he must present a document from the lender along with the amount of the mortgage he took.

2. In the second step, the offer must be submitted to the seller of the property together with the document that confirms the financial ability of the investor to purchase the property. At this stage the investor may be required to pay an advance. The seller has the obligation to reply to him within a limited time, which is detailed in the offer.

3. At the same time as the second stage, the property's integrity must be verified and a defects report, known as POS, must be submitted, detailing what repairs need to be made in order to approve it for residence. The inspection is carried out by an inspector from the local municipality.

4. At this stage, the investor may refer contractors to the property for the purpose of receiving price offers to correct the defects found in it, and evaluate based on these offers whether it is worthwhile and profitable for him to make the investment.

5. In the next step, an agreement is reached with the seller on the purchase price, and the seller signs the offer submitted by the buyer. From this moment on, the parties have three days at their disposal in which they can challenge the contract, usually through a lawyer. After signing the contract, the property is inspected by the Title Company.

6. At the end of the purchase process, in order to close the deal, the investor is required to take care of all the documents and funds related to making the purchase. At this stage, all parties sign all the required forms, the money for the property goes to an escrow account of the Title company, which transfers it to the seller, and then the ownership of the property is transferred.

7. Near the closing stage, a final inspection of the property is performed to make sure that its condition has not changed since the signing of the purchase contract. In addition, in accordance with the law in the USA, one must take care to purchase a home insurance policy and settle the mortgage matter if it was taken. After that you can start the renovation process (if required).

Due to the great distance between Israel and the USA, it is common that after the purchase, a management company is used, which takes care of the ongoing care of the property. The role of the company is to watch over the property, maintain it and take care of everything related to renting it, from finding tenants to dealing with problems that may arise. The management fees for the company are paid from the rent.

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Real estate taxation in the US - how much tax are you expected to pay?

* Property tax payment - In the United States, the apartment owner pays the property tax, and is required to pay it even if the property is unoccupied. The property tax is paid to the municipality once every 3 months, and its amount depends on the value of the property and the regional taxation method.

* The cost of property insurance - Paid once a year or in monthly installments. The cost depends on the scope of the policy, the value of the property, etc., and it may range on average between $30 and $100 per month.

* House committee - When you buy an apartment in a building or an apartment complex, you are required to pay for maintenance expenses on the house, repairs, etc.

* Management Fee - are paid to the management company from the rents it collects from the tenants. Usually the cost ranges from 8% to 10% of the rent.

* Income tax from rentals and tax on capital gains - Israelis who own real estate in the US are taxed both in the United States and in Israel. The tax is charged on the current income from the rent, and in the future when the property is sold from the expected profit from the sale, the investors will be required to pay capital gains tax. The tax treaty that was signed between Israel and the US and gives priority to the second of them when it comes to Israeli investors who own assets, guarantees investors to avoid doubling taxes.

* Inheritance tax - In the US there is an inheritance tax on assets located in the United States, even if the owner is not a resident or American citizen. The meaning of this tax is that if the owner of the property dies, his heirs will have to pay a tax on the value of the property up to a maximum rate of 35%. There are various ways to circumvent this tax, such as establishing a foreign company in whose name the property will be registered, but when the property is sold, such a company will be charged a higher capital gain tax than a property registered to an individual at a rate of 35% instead of 15%. Another option that should be considered, for example if the investor is elderly or has health problems, is to register the property in advance in the name of the future heirs.

Expenses incurred for apartments, such as insurance, routine maintenance, etc., are recognized in the US for tax purposes, therefore the person who established an LLC in his name is required to submit a tax report in the US every year, showing all his profits and losses. In cases where several names are registered in the name of the company, the tax payment will be charged in proportion to their ownership in the company.

The amount of tax that is customary in the USA ranges from 10% to 35% depending on the tax levels, and for the submission of the reports the investor will be required to pay several hundred dollars.

About Us

Nadlan Group provides the entire umbrella of solutions to the USA Real Estate investors - locals, or foreign nationals. We are lending brokers with hundreds of lenders - we are doing an auction between all of the lenders to get you the best mortgage in the US - and all of our banks also work with Foreign Nationals. We have a Real Estate school and we are teaching Buy & Hold, Fix & Flip, Multi Family, Wholesaling, Land. AirBNB and more, we have a strong community of tens of thousands of people, a networking website and app, we run large Real Estate conventions & Expo's, we provide marketing for Real Estate companies, and we are also builders for New Construction properties & run Multi family syndications. In our financing company we also open Bank Accounts remotely without the need to fly to the US, open LLC's & with our mortgage company we provide financing solutions for foreign nationals and Americans investing in the US real estate market. We offer personal guidance and an advanced auction platform to help clients secure the best financing offers from multiple entities. Our company also provides ongoing support until funding is received.

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