British investors unable to afford buy-to-let properties in the UK are buying ultra-cheap repossessed US homes in a bid to profit from rent guarantee schemes and possible long-term capital appreciation when the American economy recovers.
The homes are selling for as little as £20,000 in cities such as Detroit, where the combination of long-term unemployment and the credit crunch has led to house price falls of 70% since 2006, with few signs of any imminent recovery.
We had money in premium bonds and savings in this country, getting almost no returns, and we couldn't afford to buy an investment property here. Then we heard about buying in the US, says Lynn Duggan, a clinical co-ordinator from New Malden in Surrey. At first we were wary and we spoke to some US legal contacts. We were attracted by the principle of a government-guaranteed rental scheme which, if it does what it claims, will cover the purchase price of the home in seven years.
Duggan bought a four-bedroom Detroit home for £30,000 cash in the autumn, paying an initial £3,000 deposit and the rest 14 days later. Under a US federal housing and urban development scheme, rent for some low-income tenants is paid directly to landlords – and this is what British investors are relying on to achieve high yields.