Frequently Asked Questions
And a Helpful Glossary of Real Estate Terms
- When will the building(s) be completed?
Construction is typically completed within 5 months after we start the project, the initial phase of getting the necessary permits may take up to 1 month resulting in a 4-6-month process from contracts to the time of closing on your new property.
- Is it Leasehold or Freehold?
If leasehold, for how long? Freehold
- Is there an assured rent? How much and for how long?
Our program is set that rent is assured for 36 months from the date of the closing. Rental rates are stated in the marketing information for that specific property within a development.
- Who are the solicitors?
Solicitors are the Escrow Agents who are responsible for holding and distributing your deposit and closing funds.
- Is there a build warranty?
We provide a standard 10-year builder warranty on every property.
- How much is the management fee?
Property Management fee through our company is an industry standard 8% of the gross monthly rent. This is paid out to the Property Management company every month.
- What is the tax involved and how much is it?
Real estate taxes are imposed on privately owned properties in the US to pay for local services like road maintenance, public schools and operations of local governments. The estimated tax amount is located in the marketing materials for that development.
- I’m not familiar with HOA, what is that and how much would I need to pay?
Home Owners Association (HOA) covers community’s amenities and pays for maintaining community common areas. This is very popular in the US and allows for a better family-focused community with extra amenities helping attract the best tenants.
- Can I manage the property myself?
You can manage the property yourself, however, if you choose to manage the property the rent assurance is voided. We do not recommend trying to self-manage your investment when living outside the country as this is the most important part of ensuring an on-going, prosperous return.
- Can I rent it to anyone and can I live there myself?
The tenant screening process is extremely important in making sure that a qualified tenant is placed in the property. The property management company has a designated leasing department that handles all leasing as well as lease renewals on your property. You may live in the property if you choose but, you will need to receive a green card or visa if you do not have US citizenship. Additionally, the rent assurance agreement will be voided if you decide to live in the home.
- Do I need insurance, and how much is that?
Yes, the property will need to be insured for natural disasters, fires, etc. Our company will facilitate this making sure you get the best possible rate and coverage; the amount varies based on the location of your property.
- Is there finance available, and how would I get that?
Yes, we offer financing on our properties. Utilizing our preferred lenders you are able to achieve 50-60% leverage on your investment as long as you meet the personal requirements set by the lender.
- Are there any limitations for overseas investors looking to purchase?
The US does not impose limitations on foreign investors purchasing real estate.
- Can I sell my unit at any time?
Yes, you are able to sell your property at any time. Our property management company is vertically integrated with a complete real estate brokerage allowing us to help facilitate the sale of your property quickly through multiple channels.
- Armchair investment: An investment where the owner sits back and see’s their investment work for them without have to do any substantial amount of work.
- Amortization: Repayment of debt in installments.
- Capital Gain: The profit earned from the sale of a house.
- Cash flow: The net operating income of a property minus debt servicing.
- Closing (or Settlement): The formal process of transferring title from seller to buyer and the payment from buyer to seller. The transfer is usually conducted at the offices of the closing attorney, escrow, or title company.
- Closing Costs: Fee’s associated with completing a real estate transaction, often equal to about 1% of the home’s value.
- Earnest Money Deposit (EMD): Funds paid by the buyer(s) of a property to secure the purchase. It is the deposit you will have to pay at the time of selection, allowing you to proceed with your due diligence.
- Fannie Mae/Freddie Mac: These are the former government lenders with foreclosures on their books. They are often looking at selling for discount prices.
- Foreclosure: A process where a mortgage holder forfeits the title to their home to their lender because they have defaulted on their loan.
- Private Lender: A lender who will lend to foreigner investors when US banks will not. They will charge higher fees at a higher interest rate than the local banks.
- Gross Yield: The annual return from a property before expenses, usually expressed as a percentage of the purchase price.
- HUD Statement (HUD-1): A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form gives a picture of the closing transaction and provides each party with a complete list of incoming and outgoing funds.
- Leverage: The use of borrowed funds to increase purchasing power.
- LLC: A limited liability company, the preferred investment vehicle for a foreign investor.
- Loan to Value Ratio (LTV): The amount, expressed as a percentage that a lender is prepared to loan against a property. In the case of a $200,000 Single-Family home, a LTV of 60% would see the lender loan $120,000 leaving the borrower to come up with the remaining $80,000.
- Net Income: Gross income minus expenses.
- Net Yield: The annual return from a property after the deduction of taxes, insurance, management fees and other costs expressed as a percentage of the total purchase price. It is net income divided by total purchase price expressed as a percentage.
- Short Sale: A sale in which a lender agrees to sell the property for less than the outstanding value of the mortgage against it.
- Title Company: A firm that examines land titles to make sure that they are free of liens or other encumbrances.
- Title insurance: a policy issued by a title company guaranteeing clean and unencumbered tittle. This is a recommended protection mechanism for the purchase of property in the US.
- Turnkey: A house with a tenant signed to with no renovation required.
- Rehab: Is the renovation and development of a property to get it up to rental standard.
- EIN: Employer identification number. It is a number that identifies taxpayers who are required to file various business tax returns.
- ITIN: International Tax Identification Number. It exists for the purpose of assisting foreign nationals in complying with federal reporting or filing requirements.
- Tax Certificate: A certificate of claim against property that has a lien placed upon it as a result of unpaid property taxes. Tax lien certificates are generally sold to investors by most counties and municipalities in the United States through an auction process. Subsequent to a winning bid made by an investor for a specific tax lien certificate, a lien is placed on the property and a certificate is issued to the investor detailing the outstanding taxes and penalties on the property.
- Registered Agent: Receives important legal and tax documents on behalf of your LLC. This is a valuable service that we provide for our international investors, free of charge.
- Notice to Vacate: A document addressed to the tenant to vacate the property.
- Title deed: A legal deed or document constituting evidence of a right to ownership of a property.
- Form 1040NR: A form that must be filed with the IRS by a non-resident who is conducting a business or investing in the US.
- Foreclosure: A foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank repossessed the home. These homes are usually not for sale until the entire foreclosure process is complete and the bank lists the home in the local Multiple Listing Service (MLS).
- Short Sale: A home that is listed for sale at a price lower than the amount owed on the mortgage. Homeowners hope to sell their home as a short sale to avoid penalties associated with going into foreclosure.
- Lien: A lien is a legal claim or a hold on some type of property. A lien usually exists in situations like second mortgages, loans against a vehicle title, or money loaned against any other substantial item owned by a borrower. It may keep the borrower from selling the property, or at least keep him or her from transferring title of the property. Any property that carries a lien can be forced into sale by the lender in order to collect what is owed if the loan is in default. If the borrower decides to sell the property, the lien holder must be paid before the title will be cleared for transfer to the buyer.
- Escrow Account: It is a legal trust account used as a temporary pass through account held by a third party during the process of a transaction between two parties.
- Realtor: Licensed Real Estate Agent.
- IRS: The IRS is the U.S. government agency responsible for tax collection and tax law enforcement.
- Transfer Tax: It is a tax on the passing of title to property from one person (or entity) to another. It is essentially a transaction fee imposed on the transfer of title to property.
- Closing: Settlement of a property.
- HOA: Home Owners Association
2800 Livernois Rd., Ste. D220
Troy, MI 48083
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