Buying Property in America

t00054583

Hi all,

Im looking into buying property in Michigan as in investment. Bacically what I want to do is buy a foreclosed property, do it up and either rent it or sell it on.

What Im wondering is:
1 - Are there hidden expenses to this after purchase?
2 - Does anyone know the tax on rental income?
3 - Is there tax to be paid here in Ireland for that income or just in America?
4 - Does anyone know the typical property management costs?

Any other advice would be appreciated.

I am Irish and live and work here full time however I do have an American passport.

Thanks

murphaph

The US typically has some steep property taxes, that's why you see properties for sale for a dollar. They are a liability unless they are generating an income stream.

You will be liable to Irish income tax on foreign rental income. I believe Ireland has a tax treaty with the US so you'd get a credit for any (income) tax paid in the US against tax due to Revenue but I suspect you'd owe Revenue something and it would be at your top rate of income tax remember.

Seek plenty of advice before rushing into this.

Marcusm

Much of the tax you'll pay in the USwill be state/local tax which, depending onthe state/municipality, may not be available for a credit in Ireland. Michigan has suffered appallingly over the last 30 years, some towns are being torn down and returned to farm land. Be very careful.

MadsL

Closing costs are the big hidden cost. Expect to nickel and dime with your seller back and forth over every last cent. Expect around 5 grand or so. Your realtor will help, don't even think of not using a realtor if you are inexperienced.

Make sure the county can't hike taxes on you as the new owner. Some counties are desperate at assessing sometimes 100% increases on change of owner.
Check State legislation, mine limits increases to 3% annually.

Victor

The may be tens of thousands of dollars of back taxes that you will be responsible for.

Gandhi

There is a huge amount of information on properties publicly available in the US. Use trulia.com and zillow.com and you can find recent sales, annual property taxes etc. on a property. Zillow even shows the price-drop history in for-sale listings etc. Most municipalities will have web-access to their tax database which will show if a property has back-taxes owed, and more detailed sales history. Any sale will include a title search which will show this up anyway.

You should definitely get a buyer's realtor who works on your behalf, and then is paid by getting half of the seller's realtor's fee, so they don't cost you anything.

Any realtor will get you a "cheat-sheet" on any property you are interested in, which will show you full monthly payments including mortgage, property taxes, and homeowners insurance. Americans call the mortgage payment the "PITI" payment (Principal, Interest, Taxes, Insurance). They will also show you the fully itemized closing costs.

Property taxes and homeowner's insurance are typically escrowed 13 months in advance by the mortgage company. The mortgage company is protecting their collateral by ensuring that you stay current on both these bills, but they also lead to higher closing costs. You do get this money back when you eventually sell the property.

Property taxes are based on the school district the property is in, and so can vary wildly even in two comparable properties across the street from each other.

For a rental agency, we paid one month's rent to have an agency find a tenant, including doing all advertising, showings, credit and background checks. From what I hear, this is about typical. We are doing day-to-day management ourselves, but this typically costs 10% of the rent.

Rentals in the US are typically NOT furnished, which should make life easier for you. They do normally have appliances provided. For example, in Philadelphia you MUST provide a working fridge, stove, oven. Dishwashers, washing machines, dryers etc. are optional but you'd obviously be advised to match what competing local landlords are offering. There are also regulations about smoke detectors etc. which vary between localities, but a local rental agency or realtor should know them all backwards.