Hi everyone, hope you are all well!!
Have been looking at all the US hype at the moment, and saw the 21st century Property Direct USA DVD – essentially they appear to be offerning 'pre-screened' properties that are turn key – that is, already rehabbed and tenanted with a 10 year rental guarantee and a buyback option at the end of the term. Something about this smells really bad to me, but I was wondering if anyone had made a purchase via this company (this is one of Jamie McIntyre's babies) or had any dealings with 21st Century and was happy to share their experiences, good, bad, and the ugly!
They are offering full rental management and you can choose to go on tours with them to purchase in Arizona and a couple of other places in the US. However, one thing I found very disturbing was on the DVD they also were talking about buying vacant land as a possible CGT play in the future. I would have thought that the excess of land over there would make this strategy a no go?!?! Your thoughts, anyone?
Here is the website if you are just looking to learn a bit more on what is on offer:
http://www.21stcenturyusproperty.com/land in the path of progress for the long term investor if bought in the right markets will out perform by far any rental properties you could buy. That is were the biggest profits in Amercian RE are made, definatly not buying rentals.
However one needs to be able to buy and hold and feed, no income or cash flow, however if you buy right you could make 10 to 20X return, and you will never do that buying single family rentals.
My 2 cents would tell me that ANY type of guarantee like that – buy back, long term rental, capital growth, just isn't something to rely on. A good enough product doesn't need any "guarantees" like that, while a poor product is never going to come good on them.
What we do, is we sell the homes turn-key, and we offer management thru our local partners, but we'd never be able to guarantee you the future performance. That's not to say we're not confident you will do very well with us:-)
Land is a fantastic investment, you have multiple exit strategies (building, selling to a builder, agriculture, off-plan sales) and very low holding costs, but as rightfully pointed out by Jay, you don't get any income from it and it is also not as liquid as some other investments. I think we'll see though over a 7-10 year period that the investors buying land now, will be the ones who will have made the most money.
We have a lot of experience in residential land lots in communities across the country, and are always interested in new ventures.
were would you look at buying vacant land.
I saw some in Florida (around Leigh High acres area) for $4000 a block. I know land there is plentyful but $4000, cant go back much further ?Lehigh and Coral Gables was the original land speculation play in the US
developers in the 50's platted about 1 MILLION lots. That is why the market went up and then crashed, These lots sold in the 50's 60's 70's 80's 90's for 3 to 15k each,
the craze times of 2003 to 2007 they got up to 50 to 90k. Only to fall right back to their true value 4 to 15k.
Its supply and demand also there is major infrastructure issues with these areas. In the know US investors are not keen on this area for that reason. Wholesale flippers that sell to foriegners love it, they make a nice 20k to 30k profit per deal but very few keep them long term.
There will no doubt be moritoriums on building in the future as the roads will be overwhelmed, Its already been 50 years its going to be another 100 to 200 years to absorb these and fix the infrastructure issues.
When I say path of progress I am talking about lands that are AG zoned now and will come into City limits of big cities over the next 10 years. specifically west coast CA OR WA. with some desert cities showing some promise, But there is going to be water issues long term in the desert areas. Now that could bode well for appreciation if new building is limited.
Just for an example look at this website and this is for Informational purposes only we are not soliciting any Foreign investors.
http://www.americanrealestateinvesting.com
110 acre site. Adjacent to a town of 100k that only has 40 acres of buildable lands left in the city limits. SUPPLY DEMAND.
This is a property that I have a 15 year option on with a purchase price of 5.5 million. When it comes into the city it will have a value of 30 to 50 million plus. I have personally invested over 500k in cash into this property and carrying costs are 120k a year So at the end of the day I will have invested about1.5 mil in cash over ten years With the returns of 20 to 30 million Net to my partner and I. So 750k over 10 years personally will return me 10 million minimum and could be double that. However thats our business we build houses, we buy and sell subdivisions and we own a LOT of rentals for cash flow.
Cannot buy 1 million worth of rentals in the US and even come close to this return. Rentals net (if you look at true numbers ) about 10% return annually. And then lets say they double in 10 years which if you buy the right areas are a distinct possbility, That would be a return of 3million on 1 mil over the same time frame, Not even close to the same return.. but still great don't get me wrong.
but it gives you an idea of what we look for. In the way of land in the path of progress, Also buying finished lots like HIGH INCOME advocates is a great investment as well. Easy double to triple your money in 3 to 7 years.
With our site you will see Intels big facilities within 3 miles, they are under construction of a new FAB plant 3 billion to build and will employ and additonal 2k full time jobs. And that adds to 16k jobs already there, Fujitsu, Genentech, techtronics, NIKE world headquarters all with in 5 miles of this site. This is true path of progress and what one wants to look for.
These deals are far more scarce than rentals of course and the building community here in the states will in almost every instance beat any foriegn investor to the deal, Unless the investor alignes themself with a company that is acquiring these kind of assets.
I have to agree that land in the US has a different value than land in Australia. A parcel may look cheap by our standards, but if there is no scarcity then it's unlikely to appreciate much in value.
In regards to Fort Myers, Leehigh etc… values have dropped massively after speculation drove them artificially high.
Remember too that vacant land does not generate an income, and the LVRs are usually lower (if you can borrow at all).
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
No chance to borrow on Lehiegh bare land unless your direct relative is going to lend to you
IE Mom or Dad.Many thanks for all your thoughts, I appreciate your comments as it makes me relaise that the more I learn, the more it is I need to know….
I couldn't have worded it better myself, LLCW
I would still say there's plenty of opportunity in Florida land – although I wouldn't recommend either:
– buying in Lehigh Acres, or any of the inland communities
– Borrowing money to pay for the land, unless you had enough income to pay off the interestHowever, a place like Cape Coral has a lot of opportunity, if you're buying in the right areas. Many lots in Cape Coral were far higher than the pricesmentioned earlier – a lot of them were up in the 400K range a few years ago, and aare now selling (on the MLS, I'm not talkingabout foreign buyers getting ripped off) for 10% of that. These would all be lost with canal access, which would take you out into the Gulf, I'm not talking about inferior lots in the middle of nothing.
Cape Coral is huge so there are also many lots that have no value, like Jay pointed out, that will probably sell for 5-6K today, and still do so in 10 years time, but if you buy something on the water, in a DEVELOPED area (tip: If you have no neighbours, you probably bought wrong) I don't think you can lose money in the long run.
I have never dealt with the 4-5K lots so I can't really tell if they'll go any further down, but I guess the bottom for everything is $1 right now! There are also other communities across the country where pricesfell really far (part of the Poconos, Arkansas etc) which also present some strong opportunities IF you buy a "serviced" lot (infrastructure) where prices are a bit lower than Cape Coral also.
My practice focuses on Lee County, ie..Cape Coral, Ft. Myers, Lehigh Acres. Buying land in Lehigh is worthless right now unless you have money to put down and forget about for about 10 years.
Cape Coral gulf-access lots are better to buy, however a bit pricier. Land in general in Florida is flat right now and probably will be for a couple of years.
If you have $50k to $70k to spend, buy a single family home in SW Lehigh. If you have $70k to $100k to spend, buy in Cape Coral, preferably the south end.
If you have $100k to $150k to spend, buy in South Cape or South Ft. Myers a rental home. Your ROI will be less than 10% but if you get say 8%, your upside has much more potential than those homes that are ROI'ing at 10-13%. Personal preference.
If you have $200k to spend, do Ft. Myers rehab / flip or rental… For this, I would recommend visiting and getting a team together. We are one of the only firms personally and professionally doing rehabs in Ft. Myers with investors. We are working on our 7th home right now. Go to our website to see a video of a recent one. I will post a "before" video of a home we just bought last week.
Things to watch out for in Florida:
- Shady brokers
- Rental Guarantees ….come on, really????
- Chinese Drywall
- Seller Financing
- Tax Deeds
CHEEVES
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeCheevesFinancial wrote:Things to watch out for in Florida:
- Shady brokers
- Rental Guarantees ….come on, really????
- Chinese Drywall
- Seller Financing
- Tax Deeds
CHEEVES
Thanks for the heads-up cheeves. Are you able to explain why Seller Financing and Tax Deeds are something to watch out for? I just listened to a podcast with Steve McKnight interviewing Aran Dunlap. Aran appears to have done very well out of pursuing both these. Is it perhaps because he is mitigating the risk of these with due diligence or other methods? Or are they just bad and that is the end of it?
Thanks for your help,
EVI would like to know if you can borrow money in the US through a SMSF and be ATO compliant in Australia? I have been and met real estate buyers and bankers in Florida – but they cannot give me advice for Aust and this is so new for SMSF's that accountants over here (in Aus) are uncertain. I rang the ATO hotline and the consultant just read off the website and said he could not see where it said you can't. Not quite enough reassurance for me. ATO is very unforgiving on non compliance!
Who has done this and is sure about it?
GK
Getting back to the original question on 10 year rental guarantees. I would like to see the fine print. Really the best genuine guarantee I have seen is a 12 month Seller's guarantee, where something has been put into an escrow account, or even more straight forward a Section 8 tenant at the beginning of their 12 month lease. Now that is more or less guaranteed. As for the rest, buyer beware!
Yes, there are great turn-key properties available with 12 month tenants in place and good nett returns of 16%+, but unless someone is willing to escrow that money, which I doubt they will, then I would not believe in the 10 year guarantee.
Furthermore, on the subject of guarantees I would also look at, and I do for my clients, what sort of guarantees the Seller is willing to provide on any defects that may be found in the property between exchange and settlement and for a period (say 3 months) after purchase. Buyer' s protection and location are probably (not necessarily in that order) the 2 most important things when buying in the US.
LLCW wrote:Hi everyone, hope you are all well!!Have been looking at all the US hype at the moment, and saw the 21st century Property Direct USA DVD – essentially they appear to be offerning 'pre-screened' properties that are turn key – that is, already rehabbed and tenanted with a 10 year rental guarantee and a buyback option at the end of the term. Something about this smells really bad to me, but I was wondering if anyone had made a purchase via this company (this is one of Jamie McIntyre's babies) or had any dealings with 21st Century and was happy to share their experiences, good, bad, and the ugly!
They are offering full rental management and you can choose to go on tours with them to purchase in Arizona and a couple of other places in the US. However, one thing I found very disturbing was on the DVD they also were talking about buying vacant land as a possible CGT play in the future. I would have thought that the excess of land over there would make this strategy a no go?!?! Your thoughts, anyone?
Here is the website if you are just looking to learn a bit more on what is on offer:
http://www.21stcenturyusproperty.com/It would be interesting to know where this guarantee comes from, the guarantee is only as good as the solvency of the entity/person who issues it!
I would say the same thing again, there's no way a 10 year guarantee is legitimate. For us as an American firm it's illegal to guarantee any type of return unless it can be backed up by a third party, so I find it highly unlikely that a ten year guarantee makes sense. How would they get a bank etc to underwrite it? Maybe it would work if the funds were put into an escrow account with YOUR lawyer/trust, but how likely is that to be the case…. A good property doesn't need a guarantee like that.
Next point is about the buy back options – there were a lot of scams with them in the past.
Someone sells you a house/piece of land for 30K today, and you're told that "company C" has an option to buy it for a high price, say 50K in 3 years time. However, guess what – when that day comes, Company C chooses not to exercise their option (as they are controlled by the initial seller, hint hint) so you're still stuck with the property.As for warranties, we usually pay for one year of home warranty when we sell a property, although there are also arrangements like the one mentioned earlier where the seller agrees to remedy any faults within a specified time.
Anyone can make a guarantee based on a triple net lease type arrangement without being illegal, if your guaranteeing a set return on investment you are selling a security and as such have to register with the SCC. If one is willing to spend the 75k to 100k to register your product that can be done, unregistered PPM's are limited to qualified investors and some non qualifed. a qualified investor has a net worth of 1mil or more and or makes 250k a year.
doubtful these folks giving you a rental guarantee are doing that, more likely they are just giving you a document saying they guarantee rent, and if they are strong enough financially maybe they can, but like what has been posted I would question that with a high degreee of circumspect.
One other point of fact that needs to be addressed is that section 8 is not necessarily a sure thing, although 95% of the time or better it is. However a section 8 tenant can lose their voucher at anytime during the lease and be able to walk away. They loose their vouchers by not declaring income, and when the IRS correlates the tax returns to the SS #'s and see's a 1099 from an employer from someone on Section 8 and they have had income to disqualify them they are immediately kicked out of the program and will in most cases not be able to pay rent and then just up and leave or leave you with an eviction situation. Not commen but does happen and has happened to us over the years.
Having done literally thousands of acquasition and rehab loans. and knowing the majority of the homes that are being bought and sold for rentals, Most of them even after an exhaustive rehab will not stand up to a full house inspection, heck even knew construction homes a good house inspector will find defects.
You need to be a little open minded here, and make sure the major systems, foundation, roof, electrical, plumbing are sound.
In some instance's we will buy a home warrnety for 350 bucks a year that covers major items and is subject to a 50.00 service call, although these rascals will try to wiggle out of the repairs need to have a firm hand on them, and I recommend only going with a top flight company like First American etc.
Anyways what investors need to realize is that its not the first 3 months or 6 months you need to worry about its year 2 or 3. None of us are buying these homes to hold for 1 year or less, and there is always going to be at least 1k to 2k a year in maintanence if your going to keep them in top shape, and or when renters leave, there is very few instances that a renter moves and you are not going to spend at least 1k to 2k getting ready for the next tenant. This is the number I see that is not accounted for in the % returns that are quoted by the turn key operators.
If any one disagrees with me on this point I would be interested in debating this issue.
You always pay for a rental guarantee in the purchase price or it is not legitimate.
Much better to put strategies in place to reduce your risk of vacancy ie. buy in the right area – check out current vacancy data, crime rates, employment trending etc. Price your rent accordingly (we have seen on so many occasions, sellers putting in a tenant on a high rent, marketing the property with extraordinary yields and the tenant leaves three months later).
USpropertydirect wrote:You always pay for a rental guarantee in the purchase price or it is not legitimate. Much better to put strategies in place to reduce your risk of vacancy ie. buy in the right area – check out current vacancy data, crime rates, employment trending etc. Price your rent accordingly (we have seen on so many occasions, sellers putting in a tenant on a high rent, marketing the property with extraordinary yields and the tenant leaves three months later).YA THINK!!!!! THIS IS WHAT HAPPENS MORE TIMES THAN NOT WHEN YOUR DEALING WITH COMPANIES PROMISING THE HIGHEST RETURNS. THEY ARE NOT SUSTAINABLE.
IE Mom or Dad.
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