Buyers Guide to California – Education drives prices and rents

CALIFORNIA

“California, Here we come” Phantom Planet

(click for an awesome Indie rock song from 2002)

We are super excited to kick off our “Buyer’s Guide to U.S. Real Estate” series, where we go in-depth into the main U.S. states for property investment purchases, starting with California!

We also have a surprise guest at the end of the month (see bottom of article)!

What’s not to love about the Bohemian vibes of San Francisco, the technology center-of-the-universe in Palo Alto, wineries in Napa, food in Yountville, golf in Steinbeck country, the quaint and exclusive Montecito, and year around perfect weather in San Diego.  

And finally, Los Angeles – Beverly Hills, Hollywood, Venice Beach, Santa Monica, Bel Air, Pasadena, Orange County – it’s almost endless. 

It’s no surprise that California is a favourite investment destination for our clients, both Overseas Expats and Foreign Nationals, primarily from: the U.K., Canada, Australia, Mexico, China, Hong Kong, Singapore, Philippines, Indonesia, Australia, France, UAE, Germany to name a few.

Want Home Value Appreciation and Rental Income Growth?

Education is key!

Job market growth is certainly a key driver for price appreciation and is normally driven by the new business formation in the area, but popularity as a living destination is driven by things like safety, cost of living, ease of transportation and quality of education, especially for families with young children.   

“Popularity as a living destination” in turn drives demand, home value appreciation, and strong growth in rental income. 

Why is Education important?

In this week’s report, we will take a deep dive into Education – an important (if not the most important) factor for overseas property investors in determining where your next home purchase will be in the U.S.

With Foreign National buyers, in particular, the objective of owning real estate to earn income almost always comes down to “could I live there one day”?   

In Asia, where owning property is ingrained in their culture, it’s common to purchase an investment property “in anticipation” of sending their child to college. They could even live there during or after they graduate, and the price appreciation could even pay for college if they sell the property. Or, if the child decides to get a job in the U.S., they can stay in the apartment as a post-graduation gift to build up their credit or even rent it out to earn income. 

Which are the top high schools in California?

We look at the top 50 high schools in California, both public and private, ranked by average SAT and ACT scores. As you can see, the SAT scores will range from 1300-1500. To get into a top 25 U.S. university, the SAT scores should be at least 1400 as a reference, so these schools are all great.

Why high schools?

Many new immigrants or returning expats will choose to live in areas where there are good schools and a higher population of similar background families (the latter we will investigate next week). High schools are a very important decision since it will determine their experience during these formative years between 14-18 years old but also potential college choices. 

“Popularity as a living destination” drives demand, home value appreciation, and strong growth in rental income. 

Schools with the highest SAT/ACT scores

– Public: Lynbrook High School, San Jose

– Avg SAT 1450 / ACT 33

– Private: The Nueva School in Hillsborough & Basis Independent in San Jose

– Avg SAT 1510 / ACT 34 for both

Household Income, Home Prices, and Rental Yield

We also look at the Median Household Income, Average Home Prices, and Rental yield in each city. When moving to a new city, aside from the quality of education, most will look at how expensive it will be to live there, own a home, and potential rental income potential. 

It’s probably no surprise cities like Palo Alto, San Diego, San Jose, Los Angeles, and others will have higher home prices, but we also look at a rough gauge of affordability which is a “Home Price to Income Ratio,” which tends to be where most immigrant buyers choose as their base.

Cities with the highest Median Income

– $250,000+ per annum income

– Cities: Piedmont, Hillsborough, Los Altos

– Neighbouring schools: Piedmont High School, Los Altos High

Cities with the highest Home Prices

– $2,000,000+ home price

– Cities: Piedmont, Palo Alto, Hillsborough, Ross, Atherton, Los Alto, Saratoga, San Marino

– Neighbouring schools: Piedmont High School, Los Altos High, Palo Alto High, Henry Gunn, Aragon High, Nueva School, Crystal Springs Uplands, The Branson School, Menlo High, Pinewood School, San Marino High

Highest Rental Yield

>5% gross yield: Riverside
>4% gross yield: Lo Jolla, San Diego, San Jose, Fresno, Irvine, San Clarita

– Neighbouring schools: Riverside STEM Academy, Canyon Crest Academy, Torrey Pines High, Westview High, Del Norte High, The Bishops School, La Jolla Country Day School, Francis Parker School, The Harder School, Basis Independent, Bellamine College Prep, Notre Dame High, University High Fresno, University High Irvine, Woodbridge High, Arnold Beckham High, TVT Community Day School, Academy of the Canyons

America Mortgage Concierge Program

We launched this free service last month to connect potential home buyers with our approved panel of realtors in each major U.S. city, which only focuses on overseas buyers. If you would like to learn more, please contact james.morales@americamortgages.com.

Our surprise guests!

At the end of August, we will be hosting a webinar with our California partner, who will present a “Guide to California Real Estate” along with a panel of the top realtors in Los Angeles, Orange County, and Bay Area to give you a real “on the ground”feel for all the points we discussed above and more.   

Stay tuned…this is going to be amazing! 

Sources: Niche, City-Data, US News, OECD data, US Census Bureau and respective school websites

Rising interest rates are a good thing for U.S. Real Estate Investors

Looking for passive income? Now is the time to strike!
Rising interest rates are a good thing for U.S. Real Estate Investors

Are you an overseas non-resident investor looking to purchase property in the U.S. but are thinking twice because of the increase in interest rates? Let’s break it down.

Let’s face it, interest rates are high, but if you are looking for passive income and long-term investment, we know now is the time to strike. 

When interest rates are high, it is actually more beneficial to residential rental property owners because the demand for rental homes and apartments increases as many people that once were looking will not be able to qualify for a mortgage. Individuals and families who have put off their house hunting will need a place to live. When this happens, the rental demand skyrockets, and – this is the sign you’ve been looking for –the opportunity for real estate investors looking to purchase rental property is here!

What makes American Mortgages loans unique is the rate can be fixed for 30 years regardless of the borrower’s age. Your rate today will be the same 30 years for now, but the rent you will receive will likely be significantly more! Want an even better yield? Try our 10 year fixed interest only loan program that converts to a 30 year fixed without a rate adjustment. Total tenure of 40 years!

As a foreign national or U.S. expat investor, there are a few things to consider when you want to purchase a property in the U.S. There is no denying that the interest rates have increased, but if you are looking at real estate investment, you have to consider its long-term benefits – mainly building equity and wealth, property cash flow, and rental yield.

Build Equity and Wealth

Did you know that real estate remains a wealth-building tool for the majority of moguls? An estimated 90% of millionaires were created through real estate investing. Most High-Net-Worth individuals in the U.S. or around the globe invest in real estate in some form or the other.

As you pay a property mortgage, you build equity—an asset that’s part of your net worth. As you build equity, you have the leverage to buy more properties which in turn will increase your cash flow and wealth even more. America Mortgages has no limitation on the number of mortgages one investor can have. Portfolio loans are also available.

Why Rental Yield is so Important

Rental prices are soaring in many parts of the U.S. According to Government consumer price data, the average rent that the typical Americans actually pay rose 4.8% over the past year – a higher than the average rate of increase. According to Redfin, the average monthly rent rose to $1,985 in November – an increase of 6.8% monthly and 20.5% annually. The median rent nationwide in May reached $2,000 monthly, according to Redfin.

If you are keen to invest in U.S. real estate but have not found a property yet, AM Concierge ‘Property finder’ services can help you secure your dream home. Once you have purchased the property and your tenants are in place, your rental should run on autopilot. Our America Mortgages loan officer are with you for the long run. In the event rates change, special rate promotions or new loan programs, you’ll know first.

Real Estate Cash flow

How do real estate investors get so much cash flow? You probably read a million times that “real estate is a classic wealth-building technique.” Most investments don’t provide cash flow. Take, for example, stocks -you invest and leave without accessing them until you sell them. However, when you put resources into buy and hold real estate, you bring in cash flow monthly when you have tenants paying rent. The difference between the rent collected and your expenses is your income. You can utilize it to cover your bills, save for the future, or even make a greater real estate portfolio. Passive income is the income you can survive with, regardless of whether your other investments work out or not.

Now is the time to strike while the iron is hot. If you are still on the fence about investing in U.S. real estate, speak to our mortgage specialist to discover your options. 100% of our clients are living abroad. This is all we do, and no one does it better. hello@americamortgages.com

www.americamortgages.com

Top 10 Best Places to Buy a House in the U.S. for Price Appreciation

Top 10 Best Places to Buy a House in the U.S. for Price Appreciation
Whether you're a foreign national or U.S. expat looking for an overseas investment property, buying real estate in the U.S. can be a wise and lucrative financial decision. However, in a country so vast, diverse, and spread out, choosing the best location can be a daunting task.

Whether you’re a foreign national or U.S. expat looking for an overseas investment property, buying real estate in the U.S. can be a wise and lucrative financial decision. However, in a country so vast, diverse, and spread out, choosing the best location can be a daunting task.

Luckily, a recent SmartAsset study examined home prices in over 400 U.S. metropolitan areas since 1997 and ranked them based on price stability and home value growth. The following are the top 10 best places to buy a house in the U.S. if you’re looking for the best return on your investment.  

1. Austin-Round Rock-Georgetown, Texas

The Austin-Round Rock-Georgetown Metropolitan area, also known as Greater Austin, is situated on the edge of the American South in Central Texas. The region is home to a number of major universities and boasts a diverse economy fuelled by software, semiconductors, education, and government services. 

  • Price Change — 368%
  • Population — 2,173,808
  • Median Age — 35
  • Median Household Income — $80,852
  • Median Value of Owner-Occupied Housing Units — $303,300

2. Boulder, Colorado

Boulder, Colorado, sits in the Boulder Valley, where the Great Plains and the Rocky Mountains meet. The city has a temperate climate, with most days of the year being sunny. Top employers include the University of Colorado at Boulder, IBM Corporation, Google, and Ball Corporation.

  • Price Change — 277%
  • Population — 108,777
  • Median Age — 28.8 
  • Median Household Income — $72,279
  • Median Value of Owner-Occupied Housing Units — $736,000

3. Midland, Texas

Midland, Texas, is a major producer of oil and natural gas and had the lowest unemployment rate in the United States, according to a 2014 report. The city is located in the plains of West Texas and has a semi-arid climate with cool to mild winters and hot summers.

  • Price Change — 266%
  • Population — 141,194
  • Median Age — 31.4
  • Median Household Income — $83,616
  • Median Value of Owner-Occupied Housing Units — $238,000

4. Odessa, Texas 

Odessa, Texas, ranked as the third-fastest-growing small city in the United States in a 2014 Forbes article. The city is the former home of the Bush family and is primarily fueled by the oil industry, with its economy rising and falling with the price of crude oil.

  • Price Change — 247%
  • Population — 122,630
  • Median Age — 30.4
  • Median Household Income — $63,829
  • Median Value of Owner-Occupied Housing Units — $159,700

5. Fort Collins, Colorado

Fort Collins, Colorado, is a mid-sized college town with an economy based on a mix of service-related business and manufacturing. High-tech companies like Hewlett Packard, Intel, and Microsoft all have offices in Fort Collins due to the resources of the Colorado State University research facilities.

  • Price Change — 242%
  • Population — 166,069
  • Median Age — 29.9
  • Median Household Income — $70,528
  • Median Value of Owner-Occupied Housing Units — $398,800

6. Rapid City, South Dakota

Rapid City, South Dakota, is home to many famous attractions, and Mount Rushmore is located in the nearby Black Hills. Rapid City’s largest sector is government services, with tourism and finance, and investment companies also making up a large part of the city’s economy.

  • Price Change — 231%
  • Population — 76,541
  • Median Age — 37.2
  • Median Household Income — $53,760
  • Median Value of Owner-Occupied Housing Units — $194,100

7. Dallas-Plano-Irving, Texas

Dallas-Plano-Irving, Texas, is one of North America’s largest business centers and is home to a diverse metropolitan economy. The region has an expanding light rail transit system that spans over 90 miles and 60 stations. 300 corporations, including 24 Fortune 500 companies, are headquartered here.

  • Price Change — 228%
  • Population — 4,997,015
  • Median Age — 34.9
  • Median Household Income — $74,251
  • Median Value of Owner-Occupied Housing Units — $254,300

8. Houston-The Woodlands-Sugar Land, Texas

Houston-The Woodlands-Sugar Land, Texas is also known as Greater Houston. It is the fifth-most populous metropolitan area in the United States and ranked first in employment growth in 2017. It has routinely been categorized as one of the top 10 best places to do business in the United States. 

  • Price Change — 221%
  • Population — 6,979,613
  • Median Age — 34.5
  • Median Household Income — $69,328
  • Median Value of Owner-Occupied Housing Units — $208,100

9. Kennewick-Richland, Washington

Kennewick-Richland, Washington’s economy is based on the Hanford Nuclear Reservation and agriculture. Three nearby rivers provide enough water for growing wheat, its most common product, and its semi-arid climate allows grapes to grow in its many wineries. 

  • Price Change — 217%
  • Population — 294,396
  • Median Age — 34.1
  • Median Household Income — $70,545
  • Median Value of Owner-Occupied Housing Units — $246,700

10. San Angelo, Texas 

San Angelo, Texas, has been routinely ranked as one of the best small cities for business and employment. For a city of its size, San Angelo has a diverse economy. Oil fields to the west employ many local residents, and the city boasts a strong agricultural industry.

  • Price Change — 214%
  • Population — 100,509
  • Median Age — 34
  • Median Household Income — $55,682
  • Median Value of Owner-Occupied Housing Units — $143,300

At America Mortgages, 100% of our clients are either Foreign Nationals or U.S. Expats. We understand the intricacies and complexities of this type of lending for our borrowers. It’s as simple as that. Providing competitive pricing with the assurance that your loan will close is our only focus, and no one does it better. Ready to begin your journey? Speak to us to find out more! hello@americamortgages.com

www.americamortgages.com

The ‘Debt-To-Income (DTI) Ratio’ determines your qualifying ability.

mortgage broker

The debt-to-income (DTI) ratio equals your total fixed monthly debts divided by your total monthly gross income.

DTI is essential for mortgage lenders to determine the applicant’s financial capacity of paying off the borrowed money in time. Several studies suggest that borrowers with a high DTI ratio are likely to struggle more in making the monthly installments. In this case, the breakeven point is 43, which means this is the highest ratio that a lender will still approve for a mortgage. However, some lenders may consider up to 50% DTI too.

All mortgage lenders check the front-end and back-end ratios to determine the DTI. The front-end ratio covers the house-related debts, including home loans, homeowners’ insurance, property taxes, and other expenses. On the other hand, the back-end ratio mostly includes the bills and debts on your credit cards.

The ideal front-end and back-end ratios should be lower than 28% and 36%, respectively. However, a loan approval does not solely depend on this ratio. Mortgage lenders will also take your credit score, percentage of down payment, assets, and a few other things into consideration. If these figures turn out well, you can get a loan with a slightly higher DTI.

Regular household expenses will not be considered as debts. Some other big expenses that will be exempted are healthcare costs, child support, and insurance premiums.

What does ‘Principal’ mean in a mortgage?

mortgage broker

Principal refers to the initial mortgage amount taken against the property you mortgaged. When you obtain a mortgage, it comes in two parts — principal and interest. The principal is the amount that you borrow from the lender, and the interest is a percentage of that principal amount charged by the lender as the cost of borrowing that money. When repaying, you have to pay both the principal and the interest.

For example: if you borrow $300,000 from a lender to buy a house, the principal of your loan is $300,000. At a 3% of annual interest rate, it will add $750 of interest balance per month to the principal balance. If you repay $10,000 as a monthly installment, the lender will cut off $750 as interest, and the rest $9,250 will pay off the principal balance. So, after one month, your loan principal will be 290,750. With each monthly installment, the principal balance will be reduced.

If you find it difficult to calculate the balance principal, interest percentage, and other fees, check the loan’s monthly statement. Our lenders will provide you a breakdown of all the numbers. It will show how much of the monthly installment goes toward paying off the principal balance and interest.

A bigger loan comes with a bigger interest rate. One way to avoid paying extra money is to pay off the loan faster by making additional payments with every monthly installment. Doing so in the case of adjustable-rate mortgages will save you plenty of money.

With America Mortgages, you can get anything between $150,000 and $5,000,000 and a choice from various paying off options.