Why Detroit Process of Buying in DETROIT What is SECTION 8 in Detroit? Q & A

US Government-backed under Section 8
Properties in Detroit 60% below Market Value
Outperform UK Buy to Let by over 300%!
Property is Pre-Tenanted on Purchase
Strong rental market in region
High income-to-price ratio
Hands Off, managed investment

Why DETROIT?

USA Property

Initial investment - £28,000
Annual income - £7,460
Deductions, management, property tax - £2,300
Net yield - 18.4%

One off administration cost of £1,200 to be charged by Reed & Co and Building insurance cost of £380 per year.

UK Buy to Let property

Initial investment - £224,064
Annual income - £12,996
Deductions, management, property tax - £2,377
Net yield - 4.7%

Bank Isa (Typical)

Initial investment - £10,200 (Santander)
Annual income - £510
Deductions, management, property tax - £Nil
Net yield - 5.5%

Sources: bbc.co.uk; rightrent.co.uk

Reed and Co have identified a small window of opportunity in the U.S. property market. We offer an exceptional opportunity for investors to buy real estate in the United States at discounted prices with assured rental yields of up to 18%.

Investment Summary

Property investment opportunities at well below market value
Government backed assured rental under the US HUD programme
In many cases tenant already in place
Non leveraged investment
Also qualifies for the private rental market
Freehold, Debt free title deeds
Hands off, managed investment

Reed and Co with its associated company does extensive due diligence research into each location and property it acquires. Each one fulfils the following criteria:

Potential for Income

Strong rental market in the region
Qualifies for the government-backed HUD programme
High income-to-price ratio

Competitive Pricing

Priced well below market value
This allows a non-leveraged investment

	USA Property	UK Buy to Let property	Bank Isa (Typical)
Initial investment	£28,000	£224,064	£10,200
Annual income	£7,460	£12,996	£510
Deductions, management & property tax	£2,300	£2,377	£Nil
Net yield	18.4%	4.7%	5.5%

Sources: bbc.co.uk; rightrent.co.uk

An investment on a USA Property will currently outperform UK buy to let by over 300%! This is a comparatively low-level investment with exceptionally high level returns.

Management

The properties are diligently maintained and managed by a fully accredited property management firm, Metro Property Management LLC.
The management team is located in the heart of the community, providing you with a knowledgeable and professional staff on location. They deal with tenant directly on your behalf; collect rent and oversee daily tasks associated with the properties.
Metro Property Management provides you with clear and precise updates to track your investment. Monthly statements and documents are accessible online with a click of a button. Their staff will work with you every step of the way, answering any questions you may have.

The investment provides assured monthly returns and capital growth, as well giving families much-needed homes and regenerating areas.

Exit Strategies

All investors need to have options when it comes to an exit strategy and whilst we recommend that buying in the US will provide maximum investment returns if considered as a three to five year investment vehicle, we also provide options for clients looking to sell. Our early investors have already employed a number of routes as part of their own strategies, such as:

Advertise with us through property portals to private buyers
Sell directly to your current tenant, allowing them to become homeowners
Utilise the rent to own options that we can manage on your behalf
Sell bulk units to other investors who enter the market, we often negotiate large investments in this way

Process of Buying in DETROIT

Closing Costs and Process

The title company will give you exact figures on closing costs, including outstanding property tax within 24 HOURS before deposit is paid, so you will have your exact closing costs report.
The conveyancy fees charged by the Title company is $360 which includes title insurance.
The title company carries out same function as your UK solicitor during conveyancing process:
a) They check title is clean of debt or mortgages etc
b) They make sure monies are dispersed appropriately (All payments for your property are paid in the Title companies Escrow account directly)
c) The title company is governed under the Federal Law in USA
d) The title company arranges differences in the property tax. Property tax is like council tax covers rubbish disposal, road maintenance, street lighting etc. Property tax is paid in July and December. So full amount is paid in two parts for the year.

Payment

$5,000 deposit (to title company escrow account) – This will reserve property and reserve it in your name
Balance on completion to the escrow account of the title company.
Title Company will confirm receipt of funds directly with you.
Completion can be between 5 working days and 14 days, it is a very simple and straight forward, clear process.
At completion Title Company will email you an 'Official closing statement'.
At completion you will sign 'closing statement and contract, these come in one pack called 'closing pack'.
You will then scan and email the signed pages back to the title company.
You will be sent fully signed title deed in post for your files and records.
At this stage our management team will contact you.

Management Company

The management will:

The management company will pay the rent less 10% management fee per month.
The management company offers the following on going services to you:
a) 24 hour free phone helpline for landlords
b) Full online management system (WWW.MYMETROPROPERTY.COM) where landlords can check payments, statements, bills paid, inspections. Landlord has personal login and password.
c) Complete turnkey, hands off investment with tenant
d) Landlord gives power to Management Company between them and the tenant (so there is no contact between landlord and tenant (time difference and no hassle)
e) Management company carry out an inspection of property every quarter (every three months) and landlord is updated.
f) If the management company has to replace tenant with new one, there will be no additional cost to you.
g) Management company ensure Tenants compile to the Section 8 scheme and therefore have every incentive to make sure that the property is well kept. Failure to do this means they will never get to join the Section 8 scheme again.

Tax

Management Company will introduce landlord to CPA (certified public accountant)
They will lodge your annual tax return with the IRS (Inland Revenue services) where 10% of income will be taxed in the US
Investors can offset many costs – Management Company will give full advice on this.

Exit Strategy

Reed and Co and the Management company recommends the 'Lease to Own' scheme to investors further reinforces the positive effects of maintained housing in the community. 5 years after purchasing your 40% under market value home, you can sell the property to your tenants for a pre-agreed price, normally higher than the current appraisal or market value. Your tenant will of course want to look after their property within those 5 years with the knowledge that they will own it in the mid-term. They also have to pay an agreed amount every month to you that comes off the purchase price and outstanding amount to pay after 5 years. If the tenant won't or can't complete at the 5 year point the all monies paid to investor is kept. Exit strategies are the key to any sound investment and the 'Lease to Own' scheme is a valuable and ethical strategy.
Long term hold allowing investors to gain further yields from capital appreciation.
Investors can sell to the open market or give your tenant first refusal at time of selling property
At the moment there are no mortgages available in the USA due to the recession but they are in recovery and mortgages are expected to be widely available within the next 5 years, this will then give you a wide audience for the sale and as your property has been under the Section 8 program potential buyers will want these homes as they know they have been looked after well and have been properly and regularly inspected by Section 8 program.
We will market your property on our website which is seen by thousands of investors a day in addition to which we will through our management company actively market your property in Detroit.

What is SECTION 8 in Detroit?

Detroit is the largest city in the State of Michigan and one of the most important cities for research and development in manufacture in the US, attracting over half a million high tech workers (the fourth highest figure in the US) including the 70,000 in the automobile industry. However, despite the continued government investment in the city's economy and infrastructure, a shift in urban sprawl to the suburbs and the subsequent housing crash has left the metro Detroit area seriously lacking in affordable housing.
The Detroit property market is now fighting back with the help of the Department of Housing and Urban Development scheme (HUD), better known as Section 8, plus a collaboration of city officials, business people, politicians and property investors.
President Barack Obama has himself pledged to support the regeneration of Detroit in the American Recovery and Reinvestment Act 2009.
Property investors can benefit from an ethical investment that recycles houses, turning foreclosed and uninhabitable properties back into homes for the employed, low-income sector. And with a waiting list of over 9,000 people hoping to be one of the lucky ones to live in one of the newly desirable homes, there certainly is the demand and high rental yields.
But how does the HUD/Section 8 program work? Well crucially the HUD/Section 8 and HCV (Housing Choice Vouchers) program has a 'one strike policy', unlike the UK and other parts of Europe where unruly tenants get re-housed, this does not happen under this scheme, which is a huge attraction for investors. Tenants that are evicted from the HUD scheme lose any future right to a HUD scheme home anywhere in the USA thereby securing the investment homes. Through HUD the government pays the tenant's percentage of the rent, normally 80-100%, directly to the owner's management company so investors are not reliant on collecting rents from the tenants personally.
Currently the City of Detroit has a waiting list of more than 9,200 pre-approved families with Housing Choice Vouchers (HCV) from the Section 8 program who are currently in unsuitable, emergency or temporary accommodation; some simply cannot find a suitable home. Section 8 candidates are low income families, key workers and go through very stringent checks on them before being given their housing voucher for subsidised rents. They check references for work, personal refs, bank accounts, credit checks.
All our tenants are from the HUD/Section 8 program and all our properties have been inspected and passed by the Section 8 inspectors and will be inspected once a year by them and a report will be issued to you. This gives you complete guarantee that your property is of a high standard inside and out and the tenants are of high quality. Complete guarantee that your property will be looked after by your management company, tenant and the Section 8 program.
A section 8 tenant is free to use their HCV (housing choice voucher) wherever they see fit, so they can choose the neighbourhood they wish to live in, usually choosing neighbourhoods near their workplace, friends and family. On average a Section 8 tenant stays in a property for 4.5 years. They are also a key factor in your exit strategy when you choose to sell your property as many section 8 tenants will want to purchase the property when mortgages are widely available within 3-5 years' time.

QUESTIONS AND ANSWERS ON DETROIT

What is the area like where these properties are purchased?

All our properties are situated North West of downtown Detroit. They are in well maintained residential areas with access to schools, parks and colleges. Each street has a block president who ensures that gardens and homes are kept up to standard. It is important to note that there is an exceptional level of pride by the residents of these areas.

Where the properties are situated what industries are around there?

All the properties are in residential areas and as such there is no industry in the immediate vicinity. The motor industry however is in the Dearborn area which is within a 6 mile drive of the properties. This industry is seeing a return to investment being injected into it with an upswing in employment.

Who can purchase the property i.e. individual, offshore company, US company?

The properties can be purchased by anyone and any entity i.e. individual or UK company.

What taxes do an Individual/ Offshore Co/US Co liable to in the USA?

There are very two tax liabilities to consider.

i. Income Tax on the rent received. An annual IRS return will be prepared and submitted by a local Detroit accountant provided by the management company. This will result in an income tax bill between 6-8%.

ii. Capital Gains Tax; on the subsequent sale of the property CGT of 25% will be payable.

How long does it take to purchase the property?

Within 28 days normally but can be done in one week.

How does the process work to purchase a property?

The process is lot simpler than the UK. An independent organisation called a Title Agency conducts the transaction and acts for both sides. They draw up the sale and purchase documents needed, hold all monies etc.

What guarantee that money is safe before purchase of the property?

The Title Agency holds all monies in escrow account before and during the sale process. They lodge and disperse all the necessary documents.

Who are the competitors in Detroit selling the same product?

The main one is Cicada however their properties are not in the same area or of the same quality. Our houses are two story brick built Victorian compared to the majority of competitors selling timber frame single story dwellings.

Who manages the properties?

All the properties are fully managed by Metro Property Management http://www.mymetroproperty.com This company is highly regarded in the area. They will host any site visits that investors want to take.

What is the condition of the properties purchased?

All properties are refurbished to the highest uniform standards under section 8. Annual inspection take place by the Section 8 inspectors to ensure the property is in good condition. This ensures that for years to come owners of the property do not need to spend monies to refurbish the properties and thus achieve upto 18% yields

Below is a link to see the standards of the property

http://www.youtube.com/watch?v=TjRQ1vJXkcs

Typical Refurbished Property

Recent Property Refurbishments

New roof in excellent condition, guaranteed to last.
New windows throughout the house including all 3 bedrooms and living room.
New heavy duty steel mesh security doors.
Newly installed dark brown colored carpet.
Freshly painted throughout in stylish two-toned color scheme.
New ceramic floor tile in bathroom and kitchen. Fully updated basement with new hot water tank and furnace, spacious area for washer and dryer.
Newly installed durable PEX1 plumbing throughout the home.
Completely updated electrical work including new electrical panel.