Hey All,

After numerous conversations with international and National  clients the last few weeks, we are looking at viable exit strategies with the USA properties down the road. I am not sold on the 5 year return that a lot of other investors are speaking about.  I am also concerned about us turning retail areas into glorified rental markets. This is a big concern for me, as I see some international clients thinking in 5 to 10 years they can sell these deals that they are purchasing capturing appreciation. My first concern is that Americans in general  do not move to rental areas. This could change with the new nicer rental homes that we and other companies are now dealing with. Again, this is purely speculation for down the road.

So if one is buying for buy and hold  ( cash flow ) and not really concerned about future appreciation, this should not interest them. If one is looking at being able to sell in 10 – 12 or 15 years, this could be a viable option.  Again, this is just my opinion, but I am not sold on appreciation coming back in 5 to 7 years. The USA is going through some problems that are new for us. I do see us as a strong resilient nation, and expect things to come back to a reasonable pricing point.  To me, this 5 to 7 year plan is more of a marketing strategy for the sales teams. When they say buy now and in 5 years, the market will rebound. Again, I am not saying anyone is wrong, I am  just saying I am not sold on this concept.  At least not for the markets I have been to, which include all USA investment markets except Texas ( I have not been there).

Just some background information: the phrase 'lease option" in the USA. Again, to me this is really a false phrase (just a marketing ploy). We as a property management company use it to hopefully bring in a better tenant. Besides putting some extra cash in your pocket as the investor with a slightly larger down payment, I don't see this set up as a win-win situation. Investors might win with extra cash, but tenants are not being taken care of. Yes, the tenants are the most important factor ( besides property management for investors in today's real estate market). Our property management company sets most leases options ( rentals )  for our  tenants. I know in the beginning very few will buy. Not to sound repetitive, but this is more for our marketing end to keep properties filled.

Now again in the end this will really come down to each individual  investors  game plan or  investment strategy when they get started. This below is what we are looking at in the markets, in which we buy and sell homes. Again, these are for cash buyers only. One cannot truly owner finance an existing property with financing on that property. Some people will do this (sub lease and creative financing)  but I think they are playing in a gray area where loans can be called "due".

Our thinking is for cash deals only.

Let's start off talking about the advantages of owner financing. Everyone has this high expectation that in 5 years or so the homes they are purchasing today in the U.S. will be able to be sold at this high retail price. The only true way to do this is to Owner Finance the property. You can sell the home to a buyer at tomorrow's value today (Which is a risk for the back end buyer).  

Here is the way that it should be done to give you, as the owner, the most security as possible. You would do owner financing for the person looking to purchase your home (current renter). This is done just like any other Real Estate closing, It will be done through an attorney. You would want to set this up in the beginning, the buyer will be paying a a balloon note. This can be set up we are thinking on a 8 – 10 – 12 year mortgage note.

This will put them in a position to where they need to refinance to pay off the investor. Secondly, every home should have a deed in lieu signed at closing, This will circumvent any costly foreclosure fees and the lengthy time that is involved. If the buyer does go into default, it is a $30.00 fee to file the deed in lieu and the home is returned to you. Now keep in mind, that when you do owner financing, the buyer is now responsible for the taxes, insurance and any HOA's. You will be named as the insured on the insurance policy. This is another advantage of doing the owner financing, as everyone knows property values in the US have fallen greatly, most of your retail neighborhoods have fallen victim to this and have started turning into rental areas. Rental neighborhoods will take much longer to recover. By doing owner financing you and other investors are actually helping to prevent these neighborhoods from turning into rental areas and bring the home values back up, or at the very least keep the values in the area sustained. Of course, you can only owner finance if you yourself or company own the property free and clear. This is a major benefit for you the owner, the home buyer, and the actual neighborhood.

Again this is our company looking at viable options for getting out of properties a few years from now. Looking for some feedback and comments .

Sincerely
Alex
[email protected]
Skype Alex Franks 2002  Charlotte NC USA 

Hi Alex

can you define what a "Rental Area" is?? 

I understand you are buying in areas of Atlanta such as LIthonia, (  I was have not purchased any thing there in a bit).there are so many subdivisions, older cheaper properties that I would not touch, also nice big homes in good subdivisions with great facilities. I am told many foreclosures in this area, yet I am renting a property in this area for $1300 per month, big home, brick face, excellent subdivision….  So are you saying this will not sell? I picked this up for $48,000 and looking at comparable sales they are around $85-90,000 today.( I would not be surprised to see all these comps are homes being sold to investors both international and National clients.  Most of these homes would not qualify to be sold to  buyers. Being banks wont lend on properties that need rehab. So I would make an educated guess that  the majority of these homes are deals investors paid  for from wholesalers ( turn key deals )Which would also make them rentals.

Also realistically wholesalers, foreign investors would not be purchasing expensive homes simply because the return would be hopeless. ( Not saying it is hopeless just giving my opinion to what I see here happening. It would be foolish to jump into the US and purchase a property with no cashflow and as per your comment  (  Sorry for any confusion that is not what I was saying that their is not cash flow.  Cash flow is great, better then it has been  in years . I am saying for  investors looking for an exit strategy- who knows when US recovery will actually happen.  Also saying the majority of the rental homes to even be considered for retail will need $10 to 15k to get to that level in the future.With or with out appreciation down the road. All we are trying to do is look at options to secure long term cash flow , while having a possible exit strategy.

Would be interested in your comments. 

As always love to talk real estate and thank you for the follow up..

Alex

Thanks

WI