Forum Replies Created
Niklas,
I know some UK guys that are buying in Bulgaria. You need to be very careful in resort beach type areas as occupancy levels are seasonal and cash flow calcs need to allow for this.
They recommend Sofia where you can get new build 3-4 bedroom houses rather than apartments on 100% finance (if you set up a local company which costs about $7,000 and includes stamp duty and closing costs on first purchase) pre-let with corporate tenants paying 10% yields. Sofia is expected to show significant capital growth in the next five years as it catches up with the rest of the EU.
Some Uk guys are going out and buying large renovators dirt cheap of locals wanting to cash in where they will directly employ local contractors to renovate to former glory, not recommended if you live in OZ. This is more of a hobby than an investment.
Niklas, the web site listed didn’t give numbers so not possible to compare the deal to the ones these guys are doing. What are the net yields and what finance is available ?
The biggest complaint coming out of there is that the documentation is not in English or Australian and will need trusted translation, the legal system is quite different from the Westminster system and the locals tend to overcharge foreign investors.
I looked at in very generally but didn’t go ahead as the finance was pretty ordinary from memory. Things have actually deteriorated up there in recent years but I am still monitoring Port Morseby and trying to pick the bottom. If you could get decent finance commercial property in POM leased to mineral or energy company might be worth looking into. There are some big projects coming to PNG and they might help the general standard of living up there but most expats that work up there don’t rate it high. Might be a buyers market now who knows.
Ozi,
I bought a house off of one of the guys up there that I met early on in the piece who is now selling to ozzies. I bought the house as a risk reduction strategy (so I thought) so that if my other team didn’t perform I could fall back on him. The house was a poor performer right from day one and I have since sold it but with interest,runnimng costs and clsoing costs I made an overall loss on the deal and as you say it never stacked up to the ‘projections”.
I bought it at a 30% yield which to me was nothing flash as I had another property at that time that was achieving 34% (and still is) so I think I got out of it relatively unscathed and learned a lesson the easy way.
The biggest problem was vacancy, evictions and ongoing repairs even though I bought it as a “remodelled” rent ready. He says the problem was property management even though I used his recommended property manager. I accept total responsibility for getting into the deal and don’t have any hard feelings towards the guy as he didn’t have a gun to my head when I bought it. If I knew then, what I know now I wouldn’t have bought it but that’s life.
I have many other investments up there that are performing far better than this believe it or not 60% yields with fully rehabbed property in good areas is possible but I do believe that at the end of the day some investors will be disappointed with the actual net returns they achieve as opposed to projected.
Ah good old Lihir island I have fond memories of building the gold processing plant with Sundays spent going to the outer islands on a long boat with some nice fresh fish and cold SP lager for lunch, I think they have cleared the mudslide on the conveyor runs or will shortly you will be gald to know
Foundation, interesting that you are investing in PNG I am expecting a job offer to work on a major project in Queensalnd that will be supplied from PNG. Although I will take the job the project itself will not get the green light until July and if it does it is significant. Oil Search shares are also going gangbusters at the moment and I have recently been up to check on progress of new oil fields there is certainly a lot of activity up there asscoaited with energy and mineral developments but the country is still very risky. I actually looked into property up there in Port Morseby but didn’t take it far although if this project goes ahead that might change.
Doby I know a UK guy who specailiese in buying land or property in risky area he bought land in Iraq the week after the war ended very cheap and sold it a few months later for a gain.
Hi Deb,
If you are buying at those returns the properties must be fully rehabbed and the work just done and they must be in the good end of town. If they have not been fully rehabbed don’t buy them as the ongoing maintenance will kill the deal.
You can get fully rehabbed properties with current city inspection certificates with 25% returns in good areas with descent tenants anything less just aint worth the bother. Also you must see sales comparisons that justify the price before you buy, buying on yield alone can take your attention away from what the property is actually worth or buy subject to finance and an independent valuation will be part of the deal anyway.
If all of that stacks up and there is no reason why it shouldn’t then it is definitely worth a look. If the properties are in WNY and you need any further info drop me an email or PM.
One other difference is that US foreclosures tend to sell well under market value quite often the bank only want what is owed on the property not its market value ie they want to clear there liability only. In OZ mortgagee sales tend to sell nearer market value. They say that at any point in time 4% of the properties on the US market are foreclosures and in the US that is a lot of houses.
As Kiwiduvet and Westan say chances are you will change significantly from your original team and this will be based on performance which means that you have to use them to experience there capabilities. You might not even be completely satisfied with your current team but they are the best that you can find and there track record is okay.
As mentioned above never ever trust a realtor as there objective is to sell houses, I work exclusively with one but I would never buy based on his recommendation. He still recommends houses to me that my guy wont touch either because they need to much work are in marginal areas or would be hard to resell.
Rikky, yes I am buying foreclosures.
WASP, if you target foreclosure properties that are in the section 8 range then you know that you will get that rent as a minimum. Or target properties that home owners will buy and you dont need to deal with tennat or take rent into consideration.
It takes time to get finance for foreclosures and normally at least 6 months before you can get a loan at the after repaired value.
Resiwealth,
The big site is http://www.realtor.com
look up Sperlings best places for info by post code.
Pick your area and stick to it.
You should go out there and check it out before you buy anything.
Yes I heard all about these horror stories that Lisa mentioned from another perspective. This group dealt with some other contacts of mine up in Us and talk about a trail of destruction some of the stories flying around are pretty scary. Apparently certain people are under investigation by the attorney general and a lot of people have at the very least wasted there time.. This is not good for lending creditability and we have worked very hard to distinguish ourselves as being a professional operation that is adding value to the local community and have went to considerable length to distance ourselves from any of the questionable operators up there.
I also know Tish and can tell you that they do work with a select few foreign investors and there loan products are very good depending on your strategy. Not all investors have to do the prepayment system. Tish also knows most of the shonky operators who are working with ozzies and will not work with any of them. They are also very fussy on property condition and I know for a fact that they have a lot of trouble accepting the conditions of any of the rent ready properties that ozzies are buying.
So I would say this is just another chapter on ways to get stung in WNY book. It really is a case of buyer beware up there.
The problem with the suggestion by reecenas to post the names of suspect operators is that this could be illegal to do and some persons idea of shonky may not be the same as the next.
Rik,
Points 1 and 2 are my personal experience. This was a one off buy that I got from a guy that was not my usual source I had met him up there and believed him to be trustworthy he would probably still say that it was a good house and it was the property management that was no good. I don’t have that house any more and got out of it even stephens a free lesson you might say others have not been so lucky. The only reason I bought from him was that my first source had went quiet (don’t use him anymore for property sourcing either although his property management is very good) and this one looked good the numbers stacked up and he convinced me he was doing me a special price and if he was going to sell it to other ozzies it would be at a higher price yeh yeh yeh….
The other points are experiences of other ozzie and UK investors that I personally know some bought off the same guy and some bought off others.
There are even worse stories than this that I have heard second hand that I cant vouch for them so didn’t mention them here.
There are some fantastic operators up there but unfortunately there is a down side and questionable operators where investors are buying on projected rents and the yield looks good but the reality is that they have lots of vacancies, bad payment, <edited> property management, questionable expenses and poor condition property in below average areas.
SO best y’all stick to Texas.
World Changer,
Never been there but I can vouch for there whiskey I love the Jack Daniels and that is a good solid employer and I will keep buying it, house prices in major metro areas have only started to appreciate noticeably in the last quarter ie second quarter 2005 at about 8-9%.
From what I have seen over time buying foreclosures and pre-foreclosures with established US teams in Texas has to be the way to go. They do it bigger in Texas.
Rikky,
Here are some bad stories about Buffalo that I can vouch for:
70% vacancy rate and when its not vacant the tennat doesn’t pay rent
3 evictions in the same house in three months
Property manager absconded with rent
Lenders wont lend and the value is less than you can get if you sell it
Property purcahsed with liens
Falsified bills for non existing materail and services
Property bought for 22K worth nothing cost to demolish clear site and get city onside 14k
Insurance wont cover as the property is being used as a day care centre
Best you invest in Texas or like far safer, the economic fundamentals are also there. You are on the right track.
Rikky,
I have got +ve cash flow out of investment properties in WNY. Ozi figures are accurate though and yes water usage along with lawn care and snow clearing are an extra cost to be added to his list. Fortunately my property manager doesn’t charge the 1 months letting fee. We use a local lender who is far cheaper than the quoted rates on this thread. I have used three different teams and ended up working with one. Of the other two one was okay but couldn’t provide enough deals and the other was a complete disaster. My advice is that the property must be in good condition and preferably recently renovated and have a gross yield of 25% to be worth your while.
Another strategy that is working well for ozzies is to buy up market property in very trendy areas of the city. You can get them and do things like convert the attic into another unit and get a gross yield of 25-30% and with the larger value purchase your holding costs are proportionally less and you only need to worry about one roof etc.
I also know other investors that are doing very well with there buy and hold investments up there and some that have bought complete lemons.
You need to allow $1,000 per year for maintenance. If you don’t spend it then it is a bonus.
I know a lender up there who says the she is very concerned about a lot of ozzie investors buying poorly this includes so called ozzie gurus and they have portfolios that they dont even know if they are occupied or vacant. This lender is now very nervous about ozzies and aint taking any more on.
To do well you need to be able to identify the right property and that is just the same as any other market. This is the difficult part to do from afar as many are now finding out. It is very difficult to find a good property manger they are worth there weight in gold.
I am doing a combination of buy and hold and buy, renovate and sell. I am not involved in any referral fees or the like. My view is that prices will rise significantly in the next 5 years.
Piggy, good advice you have to act like a local when buying property up there and the prices are very low compared with oz, NZ, UK and even other parts of US. I have sold houses to other UK and Oz investors and always send them a list of comparable sales with my sales package and my price is always lower than the average comparable.
I also have a good contact who gives me the price that the property should be listed on the MLS. The only reason not to list is that you pay 6% commission to the realtor so best to sell privately if you can. My buyers apart from one who bought cash also get subject to finance in the contract and the lender will commission an independent valuation. The valuation is very important when you are a foreign national although they say they don’t discriminate they do.
I also intend to sell houses to local residents and they will be marketed on the MLS.
This year
Bought 5
Sold 1
Under contract to sell 3
<advertising>
Have contract to buy 1 hopefully settle this year
Hope to make an offer on 1 tommorow
A very busy year
Wilandel, I seen the story and he certainly talked the market down. Are we not just simply seeing the reality now that the property cycle changed direction some time ago in Sydney and now the price drops will ripple out just as the growth did. The guys that swear by the property cycle are saying that everything that is happening now is predictable and we will see more and more media doom and gloom reports negative consumer sentiment and the one group that will be actively buying houses will be those that are on a life cycle where they are buying because it supports the stage of life they are at eg first home, upgrading, downgrading, moving etc. History tends to repeat itself and they say that interest rates are not a driver either so if rates don’t go up we will still have a slump. Me personally I am watching and waiting the ozzie housing market and doing other things at the moment.
