Hi guys,
I was just looking at an investing real estate page that finds cashflow positive properties in Australia and around the world. I noticed that the properties in the US were returning between 15% and 25%? Is this true or is there a catch to this?
How easy is it to get finance in the US and will any banks let you borrow up to 95% of the value of the house if you know the returns will be high?
Thanks
Paul [biggrin]“The more practice I get, the more lucky shots I seem to hit”, Tiger Woods.
Hi Paul,
15-25% returns are gross figures. You need to look at the NET returns and evaluate the risk involved (which is quite high) I would recommened you do plenty of research before taking things further.
Do a search on “USA” in this forum. This topic has been covered many times.
Regards,
OziHi Ozi (and everyone else)
Have you bought property in the US before or done any research in this area ? Can you tell me approximately what the net return would be on a property returning 20% gross?
What are land, electricity, water rates etc like other in America?
Thanks
Paul
[suave2]Hi again,
I was just trying to think about why these properties have such large returns in comparison to Australia…What is the interest rates overseas in the United States? Why are the returns so much higher over there?
Hope someone can shed some light on this topic.
Thanks,
PaulHi Paul,
No I didn’t buy in the US, and for very good reasons. It may suit some people’s investment strategies, but not mine.
The USA is a LARGE country. Where exactly are you looking? I spent several months researching Buffalo, Rochester and Syracuse in NY State and also spent 2 weeks over there doing my due diligence on the ground, meeting contacts and inspecting properties.
Have a read of:
https://www.propertyinvesting.com/forum/topic/18955.html
What I found was plenty of 20-25% gross returning multi-unit homes, however once you factor in taxes (which are ridiculously high), property management, vacancy, maintenance (we are talking old 1900-1950 houses here, so this could be high), accounting costs, etc… you are barely cashflow positive. Given the amount of risk involved, I would rather leave my money in the bank here.
If you are serious about buying in the US, or anywhere for that matter, I would highly recommened going there in person first.
Cheers,
OziHi Paul,
I have currently 5 properties in Buffalo and a part share in one in San Antonio.There have been a few dramas with a couple of the properties with evictions and poor property management but at this point in time those issues have been dealt with.For four of the properties I dealt with a Property sourcing company run by brothers Westan and Alvin Johnson who frequent this forum there is also another gentleman who frequents this forum by the name of Chad Simmons who I also have spent some time with and would like to do business with in the future.I must make this point I have no financial interest in any of these businesses.Of the 5 properties I have in Buffalo they are generally worth around $39000 each bringing in rent of $650 per month.There are property taxes to pay each year as well as water and sewer taxes,school taxes in some cases, property management fees of 10% each month and ongoing maintenance repairs.There is no stamp duty to pay when purchasing.Finance is very,very,very difficult to obtain in Buffalo,easier to obtain in San Antonio.These are the 2 cities that I like at present but trust me there are heaps to look at.San Antonio is a beautiful city and the ongoing costs there are cheaper but the houses are more expensive you are much more likely to achieve capital growth there.All in all I’m happy with the properties I have purchased there they are certainly cash flow positive.Wishing you good luck in your endevours.[biggrin][biggrin]There are 3 types of people:1. People who make things happen.
2. People who watch what happens.
3. People who wondered what happened.Hi once again,
The last place I purchased was for $65000 it is a muti-story home in Buffalo (ie 2 units) rent $1135 per month, taxes of about $2600 per year ,water $500 per year,garbage$200 per year,management fee $1362 per year,for a rough grand total of $5000 per year in costs not counting any unforseen maintenance.With this paticular property I bought through a realestate agent,I had a building inspection done by a very fastidious guy and it came back excellent although the property was 40-50 years old it had been well maintained and had been updated with a new roof , plumbing, electrical and furnaces.I must stressed I was over there at the time and went around with the agent looking at properties (i found her excellent).I would never buy sight unseen.I’ve had the property for 3 months now with no repairs as yet touch wood.Of all my properties in Buffalo at present all are tenanted bar one as I have just evicted her for not paying rent.I have had no trouble finding a tenant for my property once it has become empty.I must also stress that you need a good property management team in the staes to invest there.[biggrin][biggrin]There are 3 types of people:1. People who make things happen.
2. People who watch what happens.
3. People who wondered what happened.Hey dare to dream,
15 to 25% gross returns are possible depending on the quality of yr long distant management over there.(as u cant just drop in to sort out problems of course)
It depends on the areas u buy in too.Many of the areas u can get huge returns in carry higher risk and higher maintenance(management etc)
(eg i have a property that is currently returning about 40% gross but is a very very high risk area)
The other issue is the ability to keep the tenant in the house.Alot of the higher return areas (generally speaking) come with high maintenance tenants in them too. And dealing with these sorts of problems over a period of time can become a real hassle.The banks will let u borrow up to around 80% on most areas and houses in the states (including the higher maintenance areas.)(even under 50K but these lenders can be very sloooooow)
But,the fees for a foreign national to borrow over 70% over there can be HuGE! so u would need to be buying under market value to make it worth while.
And if u r buying on a 70% lvr u also want to buy under market value too,as otherwise the cash on cash return may make it so it takes a while before u r getting a decent return for the outlay and effort.(of course that is very general and depends on yr strategy)
The interest rates run at anything from 6% up to 8.5% generally unless u r going for a short term hard money lend which can be up to 18%+.Yr other question regarding what return u would get on a 20%gross?
If yr talking about west new york generally speaking (if u bought an above average property) with maintenace,rates,taxes,letting fees (when tenants move out and u need to find more),etc,etc ,
u could see around 8 to 10% net return,and if managed exceptionally well up to 12.5%.maxI have propertys in wny and texas but would definately recommend
that texas has a really bright future.The place is booming!
I personally think buying for instant equity gain (on sale)is best (in my strategy)and then buy in an area where u can plan for capitol gain as well,rather than buying solely on cashflow returns from a property at market value.(as it takes a few years of positive cashflow ,not to mention the loooking after the property,before u can make up the (say15 to 20K)equity u could have made when u purchased the property)
The states is a place where their are so many opportunities to buy under market value that u really dont need to buy at market value. (due to all the overextending and (Pre)/ forclosures)We’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hi guys,
Thanks for all your replies. They have been very helpful. From what I understand Buffalo (and San Antonio) are still good places to invest if you have a good property manager and do your due diligence before buying any property. If you do all this then you are quite likely to buy an investment property under market value and with positive cashflow??
Thanks
PaulPaul,
Obtaining finance in New York as a foreign national is almost impossible. Many people have bought over in NY in the past year or two paying cash and still haven’t had success refinancing. So if you don’t mind laying down 100% deposits, go for it. It probably will be cashflow positive as you won’t have any loan establishment fees (which are high) and interest payments. This doesn’t make it a good investment though!
If I was to buy in NY, what I would be doing is buying cheap foreclosures in good areas(cash), rehabbing them, then on-selling them quickly for a quick profit. Then repeat the process. This way you wouldn’t need to worry about:
a) Finance
b) Property management
c) TenantsThe above 3 issues are the biggest ones you will face, so elimating them would reduce your risk. Also, I would buy single family homes and target owner occupiers as opposed to multi-family homes.
For this strategy to work you would either need to be be very active over there or have a trustworthy and reliable team on the ground.
Regards,
OziHi Paul,
I dont necessarily agree with everything that Ozi has said.I agree that it is nigh on impossible of getting a loan in WNY at this point in time, that is why I have used a LOC here in Australia to purchase my properties.After all costs are taken out if you have a fully tenanted property of which I almost have for all of them and after interest payments on the LOC I am making money.ie using the example of the property I mentioned previously.
US DOLLARS:
Property Cost $65000
Rent $1135 per month
Taxes,rates,property management etc $416 per month.
Interest LOC 7.57% on $65000 etc $410 per month
Therefore incoming $1135 per month
outgoings $816 per month
Rough profit in a perfect world $319 per month.This doesnt take into account maintenance repairs etc over the year.
Another example
Property cost $39000 purchased in April nil repairs as yet.Tenanted.House.
Rent $650 per month.
Expenses $250 per month (city tax,county tax,water,garbage,insurance,property management,sewer tax)
Interest @ 7.5% on $39000 $246 per month
Rough profit each month $150 per month.
Once again you need to do your due diligence over there.You need a good team on the ground.I’m actually looking at present to doing what Ozi has suggested in buying a preforeclosure or a foreclosure rehabbing it and flipping it in Buffalo or San Antonio.
[biggrin]There are 3 types of people:1. People who make things happen.
2. People who watch what happens.
3. People who wondered what happened.Sounds like yr doin well in the Buffalo, Brisbane04.Sounds like u own half of it already ,ha ha . Good on u man!!
Yes I reckon the buying ,rehabbing and flipping is also a top strategy over there if u can find/do the deals.
I am looking more at this type of strategy in Oz at the moment on some unit blocks.Its great when u dont have to tie up yr cash long term in all yr deals.We’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Brisbane,
As I stated previously, investing in the US isn’t for everyone. It may be a great strategy for some, but I’d say not for most (especially beginners!). Another thing to keep in mind is, if your NY property is vacant over winter, it is extremely difficult to find tenants during this period. Who moves home in the freezing cold? If this occurs, you will need to keep the heaters running 24/7 so the pipes don’t crack. You will be paying the gas bills.
Using a LOC to purchase outright has its risks. You are exposed to both local interest rate rises (as we are currently experiencing) and also currency exchange rate rises.
Just do your homeworks Paul and don’t rush into anything.
Cheers,
OziOzi you have raised some great points for discussion and some definite concerns to look into.
However firstly, everybody needs a place to live .(even in the winter)
Also life is not always risk free.
But i believe if u don’t take a few (calculated) risks in life ,u get to the end of yr life and say”far out i really wish i stepped out of the box and went for it more in life”,and yes sure u will make some mistakes along the way but think how y’ll feel if u do succeed!!
This is the way i would really love to live!As far as US investing is concerned its really not as scarey as it seems.
There are many people around (including this forum) who are willing to help u along on yr journey too.Of course ultimately a person has to make their own decisions and risks eventually but I believe taking opportunitys in life (eg,like investing in other countrys or just new strategies in yr home country) helps to build yr confidence and ultimately make you a bigger person.Then when the next hurdle comes into yr life down the track you are ready to tackle it & go through it with boldness.definately no disrespect meant,
LukeWe’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hi Luke,
I agree with you that everyone needs a place to live in, even in winter, but it is very difficult to rent out a place in the middle of winter over there. This is what i’ve been told by property managers.
I’m not saying “don’t invest in the US”, just emphasising the fact that this won’t suit everyone’s comfort levels. Many new comers will get sucked in by the high gross yields and buy without doing thorough due diligence. For every success story I hear from people who have bought in NY, I hear 5-6 failures. Many of these could have been avoided if they didn’t rush into things. If you are going to buy, make sure you do your homework and have a back-up plan if things go pair shaped. That is all I’m saying.
I agree that investing will always have its risks. At the end of the day, its up to the individual to work out whether the risk is worth the return.
Cheers,
OziHey guys!
Yer definately Ozie , well put ,regarding the rushing in without extensive due diligence! I agree .
ThanksWe’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hi All,
I must agree with World Changer.Investing in the USA is certainly not for novices and can be quite risky if you dont have a good management team and a good team on the ground (ie book keepers,building inspectors etc).It is a country that I enjoy investing in at present due to the good yeilds and good possibility for capital growth.Providing you have done due diligence and visited the areas you would like to invest in I cant see why it is not worthwhile looking at this market.I certainly have had my ups and downs with property there ie evictions and repairs.I would love to hear from those who have had similar difficulties or success in investing in the States.There are 3 types of people:1. People who make things happen.
2. People who watch what happens.
3. People who wondered what happened.Well I purchased 3 properties in Buffalo this year. I spent 10 days really getting to know the place and I think I bought well. That said, whilst the gross returns are very high (32%), the outgoings are equally very high leaving very little if no monthly cashflow. Don’t invest in Buffalo if you are looking for a cash cow because you are likely to be dissappointed. For me, I just wanted a house or 3 in the US to compliment my portfolio in Australia and the UK. I like the thought of being a “global” player the truth be told. It gives me an excuse to travel the world and write it off to the taxman
Anthony Hansen
http://www.f1property.com.auPrevious members post deleted
We’ve got 70 yrs on planet earth,Lets make the most of every day!
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hi There,
I know this is an old post – but having just come back from the States 2 weeks ago – my experience has been a VERY positive one.
We looked at both new residential & commercial property in certain parts of Texas & it is indeed positive cashflow – once all costs are taken into account. I have ascertained that about 11% is break even & anything above that is usually positively geared.
The properties are cheaper in America – but that is because property in Australia is expensive. Land is cheaper, labour is cheaper, building costs are cheaper – so the final package is cheaper – compared to Australia. We saw many examples of very nice 20 square new 3 bedroom 2 bathroom homes on blocks of 60×120' with 12' ceilings, polished floorboards in common areas, granite bench tops, moulded skirting boards & cornices & panelled doors – for US$160,000. That is typical – not cheap.
I do agree with many people's comments – you need to see it first hand to understand it. I don't find it scary at all – once you see it first hand & understand all the numbers. Finance is not a problem if you know the right people. America is a big place & when we Aussies hear doom & gloom in America – we often just imagine America as being one economy. IT ISN'T. Texas has the population of Australia & is like it's own little country within USA – with many of its own laws etc. It doesn't appear to have been as affected by the sub-prime meltdown as other parts of USA & still showing a moderate 3% capital growth for the year.
Would love to chat more on this with people who have also had positive experiences with investing in USA. Cheers, Li
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