Aussies Buying UP US Homes for Renovation and Renting

Posted on October 30, 2010

Six or seven years ago when the housing market first began to slide, my brother and his wife wanted to sell two modest residential properties in Newport, RI.  Tired of east coast traffic and attendant gridlock, they were moving inland.  They imagined the naval personnel that dominated the area would snap them up.  Surprise.  A realestate group from Australia bought the house in the prime location but the one that needed the most work.  Location, location, location was not lost on them.

When I read the following, I realized that the Aussies have been here for quite some time now and that their unfailing faith in our ability to once again be prosperous is a comfort.

Australians swoop in on U.S. foreclosures bought this home in the Memphis, Tenn., neighborhood of Parkway Village for $60,000 in cash and rent it for $925 a month. After expenses, they are pocketing nearly $700 a month. By Steve Hargreaves, senior writerOctober 29, 2010: 11:54 AM ET

MEMPHIS, Tenn. ( — On a recent Wednesday night, my wife and I found ourselves in an otherwise empty Beale Street bar surrounded by a group of Australian men.

“You guys from here?” they asked cheerily. “You like the area? What do you do for work?”

My USA Property Founder Andrew Allen, who is Australian, has sold almost 300 homes to other Australians. He owns eight U.S. homes.

Despite the boozy surroundings, what could have been mistaken for friendly banter was actually research. The Australians were on a real estate tour of American cities, sussing them out before pulling the trigger on the latest trend in this hard-hit sector: snapping up foreclosed homes, renovating them, then renting them out.

“America represents an opportunity, and Australians have just jumped all over it,” said Andrew Allen, founder of My USA Property, who was leading the tour.

Allen’s firm, which has an office in Orlando, Fla., brokers deals between Australians and real estate professionals in the United States.

The real estate pros who find the foreclosed homes also fix them up and then manage them as rentals. The Australians provide the capital and — hopefully — collect the profits.

The properties come delivered with a clear title and a building inspector’s report. The firm has arranged nearly 300 deals in the last two years in 14 U.S. cities, mostly in the Southeast and Midwest.

Allen, an Australian himself, owns eight properties in the United States. He hopes to have 30 within the next five years.

“The beauty is, the U.S. economy will recover one day,” he said. “You guys have hit a rough patch, but we know you’ll be back with flying colors.”

It’s all about natural resources. It’s not just the hurting American economy that makes these deals so sweet. It’s largely the complex interplay of the global economy.

The Australians are riding a commodity-driven export boom. China, workshop to the world, is gobbling up ever more metal and fossil fuel, much of which comes from Australia. Among Australia’s top commodity exports are coal, iron ore and gold.

Unemployment in Australia is just 5.1%. Home prices, which did not fall, average $500,000. Plus, the Australian dollar is at near record highs, equal in value to its U.S. counterpart.

That means Australians have lots of cash. In many cases, Allen said his investors are taking out home equity loans to buy U.S. property. That may strike many as an all-too-familiar and risky proposition, but Allen believes it’s safe. He says stricter banking regulations and a rising population will keep his country immune from a housing downturn.

A closer look at the deal. The deals themselves seem solid, at least on paper.

Jim Reedy, owner of the Memphis-based property management firm Reedy and Company, said a recent sale he put together for an Australian on a $68,000 house looked something like this: [for remainder of article, look here].

Note:  No doubt we will be hearing many such tales of foreign investment before this current economic crisis runs its course.