Property: Could you, should you – cash in on US repossessions?

16th May 2011

Over the pond British investors can buy three or four-bedroom properties for as little as £30,000 in cities such as Detroit and Atlanta.

And you don't even have to do the legwork yourself. The Belgrave Group, based in the UK, sells foreclosed (or repossessed) homes to British buyers that its US team buys from banks. It carries out refurbishments to bring the property up to standard, oversees the legal work and finds tenants.

A US property management team then manages the tenancies.

The group claims current market conditions – record number of foreclosed properties in America, low property prices and a seemingly endless supply of tenants – offer a once in a lifetime opportunity for shrewd investors.

The extraordinary collapse of the real estate market in the US, coupled with high unemployment, has meant foreclosed properties in certain states are selling at 40% to 50% below market value (BMV), offering a significant return on investment to cash-rich investors seeking high yields and capital appreciation in the medium to long-term.

The Belgrave Group specializes in properties in Atlanta and Detroit, which have seen above average levels of foreclosure and unemployment and therefore offer some of the best deals. The typical price for a property is £30,000 to £40,000 and many, once let out, are yielding in the region of 12% to 15% net per annum.

In many cases, rents for "Section 8" tenants (those on housing support) are paid straight into the owner's account by the US Government, providing additional peace of mind to investors.

Nigel Gough, director of the Belgrave Group, says: "For the majority of investors, the ability to buy foreclosed properties in the US, however attractive, has been out of the question due to the sheer logistics of the research, conveyancing and management – great in theory but very difficult and time-consuming in practice.

"The turnkey solution we've created overcomes this issue and meets the latent demand for a property sector with exceptional yields and the prospect of very strong capital appreciation in the years ahead. The ability to buy properties at up to 50% BMV is currently generating investors net yields of up to 15%, which is very rare for such a low-risk, low capital outlay investment."

Does all this sound too good to be true? As with any investment, it's wise to proceed with caution and know what you're getting into.

Melanie Bien, director of independent mortgage broker Private Finance, suggests asking certain questions before signing on the dotted line: "Is the value of the property fair or is it over-inflated? Are tenants likely to be easy to find and if not, what will the managing firm do about it?

"If there is a glut of such properties, they might not be easy to rent," she warns, "You should assess the investment in terms of income and capital appreciation – will you get enough of both to make it worthwhile? If not, you should stick to something closer to home that may be easier to monitor and a market you understand better."

Jim Rehlaender, manager of Schroder Global Property Securities fund, said it remained positive on the outlook for the property sector and still see good value in property securities across the regions. Conditions in the underlying property markets continue to improve, and most sectors and regions are seeing only modest new supply – favourable for the supply/demand balance."

For those wondering about the ethics in buying repossessed property, Minful Money's mindful man Ken Eisold reassures: "Anyone who buys such a property is not hurting them — any more than they have been already hurt. There is ethical issues about the conditions under which foreclosures take place, however, and a lot of attention here has been given to sloppy or unscrupulous agencies.

"The real issue, I think, is risk.  The reason for so many attractive real estate sales is that the housing market has tanked.  So if you are looking to buy a place in which to live, these are great opportunities.  But as investments, beware.  It will be several years before you can hope to unload the property, and cash in on your investment.  In the meantime, you have to pay maintainence, taxes, etc — something not stressed in the offering statement."

The community seem to agree with Ken Eisold, and do not see US property as a sound investment choice, from This is Money: Bill from Aberdeen asks: "Sounds to good to be true. Why would someone pay $1000 a month in rent when they could buy the same property for just over 3 years rent?"

1 thought on “Property: Could you, should you – cash in on US repossessions?”

  1. Alan says:

    Belgrave Group / Belgrave Atlanta

    This is an account of my Detroit house purchase using the Belgrave Group http://www.belgravegroup.com Basepoint Business centre, Premier Way, Romsey SO51 9AQ Although Belgrave group still exists the company now focuses on properties in Atlanta ‘Belgrave Atlanta’ company number 08218378 http://www.belgraveatlanta.com, same trading address as Belgrave group.

    I purchased a property in Detroit from the Belgrave group.
    The contract stated that the house would be refurbished within six weeks
    sufficient to obtain a certificate of occupancy from the local city council.
    The refurbishment took much longer than six weeks, it took six months and was allegedly completed on 31/3/2010. However, the refurbishment was not completed. I have two independent witness statements verifying that conclusion. I also have extensive photographic proof of none completion. Members of the Belgrave group visited the property on a date prior to alleged completion. They did not enter the property as they were unable to obtain entry. They looked through the windows and could see work in progress. They did not visit the property when it was allegedly completed. They relied upon B&L Properties (Steve Louis) to do the work and provide proof of completion. The alleged proof was photographs of a completed refurbishment. However, the photographs were not of my house, that again has been verified by independent witnesses. The Belgrave group allege that they took Steve Louis to court for
    misappropriation of funds I understand the amount was $200,000. The fact is that the Belgrave group relied upon Steve Louis to do the work and provide proof that it was done.
    They were negligent as they did not inspect the property themselves. I was told that the property was tenanted on 15th April 2010 by Steve Louis. In fact I have conclusive proof that the property was never tenanted and that is in addition to dozens of photographs showing that it was uninhabitable. I can provide copies of these photographs on request.
    It seems that the Belgrave group may have been victims of Steve Louis B&L Properties. However, if indeed the Belgrave group took Steve Louis to court for misappropriation of funds then they will have eveidence to prove it. The evidence would consist of the following:
    date of court case, Case number, court where hearing held, the verdict.
    This information should be in the public domain and can be verified once
    the details have been provided.

    If it transpires that there was a court case as claimed it does not affect my
    contract with the Belgrave group, they will have been negligent for using him and not being vigilant.

    As a consequence of this I ended up with a property that still needed a
    complete refurbishment. I have lost a lot of money on this property. It had
    to be boarded up and refurbished again. The cost of the refurbishment was $16,945, I suffered a loss of income as the property was not available to rent and taxes still had to be paid. Belgrave Group were supposed to pay the first year taxes but they failed to do so, I had to pay $2537.76 to prevent the property from being forfeited by the city council. There was also a water bill outstanding for the period prior to my ownership.
    I had a meeting with the Belgrave group and their Solicitor Mathew Robbins of Viva Law Southampton on 31st July 2012. It was agreed that they would check the diaries of the Belgrave group and get back to me two weeks later. It is now more than seven weeks since the meeting and I have not had a response only excuses.
    Since then a repayment plan was agreed but only one payment was made. It seems that they have no intention of making any further payments.

    I am not the only victim of this company, in fact some clients have suffered
    worse consequences than myself.

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