Frequently Asked Questions

June 14, 2010

What sort of returns will I get?
There are never any guarantees in investments but the typical Gross yield on the properties offered by Abbotsinch are 15-30%

What sort of capital appreciation can I expect?

This depends on the location, but our business here focuses on solid cash flow rather than speculative investment purely for capital growth.

What is the buying process in US and what costs are involved?

The buying process is very straightforward. When you reserve a property, $1000 is paid into the lawyers Escrow account, you will receive the sales contract (and mortgage contract if appropriate), and then the sale normally completes within 4 weeks.

What are the risks?
While we take every care to minimize risks, investing with us include the normal risks associated with real estate investing – there is a risk of the house becoming vacant, although this tends to be small, especially with single family houses. There is the risk of a large repair being needed although this can often be covered by the house insurance. If there is a wish to mitigate any of these risks then please contact us as often this can be done on a case by case basis. Finally there is of course a currency risk if the investor is not US$ denominated.

Are the rental yields in the property list guaranteed?
No. However, a rent guarantee can be arranged if required.

What tax can I expect to pay on rental income?

The normal Corporation Tax in New York State is 15%.

What rights of ownership do I have as a foreigner buying in US?

You or your companies have full Freehold ownership rights.

Is US property freehold or leasehold?
All houses are sold fully Freehold.

How do I know which property to choose?
This depends on your risk profile, although we can help here in recommending a suitable investment.

How safe are the areas?
The areas we are buying in are typically safe working areas. The yields can be much higher (circa 50%) in ’ghettos’ but the associated risks are also much higher.

How do I get to Buffalo NY and what is the flying time?
From UK there are daily flights from all major Airports (for example, Heathrow, Manchester, Glasgow) to nearby Toronto which is less than two hours drive away. The flight takes around 6 hours. Flights connect from here if required and also from most major US cities.

How safe is it to send money into US?
Setting up a US bank account is a straightforward procedure. Typically sending Money to the US Lawyers Client account is as safe as doping the same in the UK.

How long will it take to sell the property?
There isa n active resale market in these properties from both investors and owner occupiers – however if the seller wishes to sell to an owner occupier (for a higher price) then a higher specification of decoration will ensure a quicker sale.


What type of rental agreement do we sign?
For ’Section 8’ (Government paid) tenants, a 2 year rental contract is normal. For private tenants a rolling month by month tenancy is typical, as the tenants tend to stay longer and this allows for rent increases as and when the market allows.

Who would be the tenants?
Typically in Section 8 it will be single mothers, who tend to be good quiet tenants. For the private tenants tend to be working ’blue collar’ families.


How much does management service cost?
Our Letting and management Service costs 11% of rent, payable monthly ($50pm min). There is also a fee of one month rent when there is a tenant changeover (min $400)

Can I find my own managing agents?
Yes. We recommend that we manage the property internally as we are established (with over 400 houses locally under management) and familiar with the properties but Investors are free to move at any time.

How do I know the property will be rented out?
We are active with a number of local agents and only get paid when the property is rented, so we have the same incentive as you. The house will be sold to you with a tenant already in place.

How do I know the management is looking after my property properly?
You will receive a password to your own part of the website where you can check online your regular statements, showing rent in etc. Regular Inspections are made on the condition of the houses, and the management company has a good reputation locally. With 5 staff in the office in Buffalo, we are happy to communicate on any aspect of the property management ongoing.

What are the monthly utility costs?
This depends on the property and is covered in each property description.

What happens if the tenant stops paying rent?
There is a rapid process to either evict tenants quickly (within 30 days) via court or to agree a payment schedule which is agreed with the court. Our management tea mis very experienced in this and doesn’t allow for non paying tenants to remain in the property where legally possible.

How long will it take to evict a tenant?
Typically less than 30 days via court.

What are the typical faults found in properties?
Typically properties are sold newly renovated, but the most expensive repairs that can be found will generally be connected to the roof or boiler (as in most rental properties worldwide) When sourcing properties we take this into account and look for houses with roofs and boilers in good condition. The properties are rented unfurnished so there will be no furniture wear and tear that the investor needs to consider.

What are the typical refurbishment requirements?
Houses are usually sold newly refurbished already. Our partners will purchase the houses as Bank Foreclosures, renovate them, tenant them, and sell them on ’investor ready’.


How much money do I need to invest?
This depends on the property but typically this can be $10,000 – $40,000 per unit.

How much is the deposit and when do I have to pay it?
There is $1000 non refundable reservation fee, and the remainder of the investment will be paid on completion of the property.

What happens to the deposit if I pay them and decide not to go ahead?
This is not returned and the house will usually be sold to another investor. This covers the cost of wasted time.

Can you arrange finance?
Yes, usually 30% vendor finance can be obtained for foreigners at (currently) 10% interest rate for 5 years. This is almost always covered comfortably by the cash flow in the houses (with typical net yields upwards of 15%).

Is finance available to foreigners looking to buy in US?
Not typically, until there is a track record available of string cash flow. Then banks will look at the company from a lending point of view.

What types of mortgages are available?
Vendor financing is currently available but mortgages from normal banks are not normally available to foreign investors.

Can I buy the property in shared ownership?
There is no restriction on any number of investors owning shares in the LLC owning the property, although shared ownership with the government (as in UK) is not normal as the investments are private houses.


What taxes do I have to pay during the ownership?
If the investment is with an LLC, the tax rate to the individual would depend on the net profit.

Tax rates are:
10% up to $8,000 in profit
15% b/w $8,000 & $32,000
25% b/w $32,000 & $79,000
28% b/w $79,000 & $165,000
33% b/w $165,000 & $357,000
35% over $357,000

How much capital gains tax can I expect to pay?
Long term capital gain tax is $15%.  Repatriation of money would depend on treaty for withholding rates.

How long must I keep property to avoid capital gains tax?
There is no avoiding capital gains tax.  Anything shorter than one year is taxed as ordinary income tax rates at whatever bracket you are in.  Anything longer than one year is taxed at the 15% federal rate


Why should I use Abbotsinch Capital rather than going direct to estate agents?
We source property off market, typically 30% less than the ’city assessed value’, so the houses tend not to be in the estate agents and not for these prices. We also provide ’full service’ turnkey investment, including refurbishment, letting, management and access to legal, tax, accountancy services, as well as ongoing help and support.

How much is the finder’s fee and what does it include?
Our commission is typically 5% and is included in the price of the house. This fee will be shared with any agents who introduce business.

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