Forum Replies Created
Can anyone point me in the right direction for unsecured cash out finance in the US at good interest rates? My properties are in Atlanta and Dallas Texas.
Thank you!
John
Hi Brent
You've got a lot of questions there. I'm a genuine purchaser of property in the US not a seller. So I consider my opinion completely independent.
You've got to get yourself up to speed with the markets. I've put a post on here about free data and reports on the us markets. This will save you hours.
After completing the research, I've come up with some top markets – Texas, Kansas City, Memphis and Atlanta. No to narrow it down further needs a trusted party on the ground. Fees for this service range enormously – I've seen between $3-7k per property but it is a way of reducing your risk. To reduce your risk further but turn-key with a tenant placed on closing.
Look for properties no older than built in 2000.
Most service companies (there are plenty on the net) set up LLCs for a fee. Don't pay more than $500 per LLC. I buy one property per LLC. It protects your assets. Most experts agree with this strategy.
Re finance. It's loosening up. You can get higher LVRs than 50%. It is possible to get 70% at 5.5% interest in places like texas and georgia but it's rare. It will become more common. Some finance brokers ask for exclusivity for 3 years. You need to weigh this up. Make sure you look for non-recourse and no member's guarantee finance.
Don't know about vendor finance – sorry.
Watch out for c corps. They apparently are a real hassle. Everything I've read says llc's.
You can buy property through a SMSF. A lot of service providers do that.
Phoenix is ok, but I've given you my personal preferences above.
Don't be tempted by high cash return properties at $30k. They often have high vacancies which actually reduces their returns considerably and higher tenant and maintenance costs. You'll usually buy yourself a head ache there. My personal strategy is to buy better quality properties in good locations but higher LVRs.
Property management is critical. As is buying in landlord friendly states. You need to be able to kick out tenants quickly who aren't paying their rent. Sounds cruel but if you're borrowing money, the bank doesn't show any mercy if you can't pay.
Hope this helps you. My knowledge has been hard won over 18 months.
I'm going to the US in May on a buying spree. Might see you over there.
All the best.
Big John
OK- data buffs – I've got some more sources:
Tax friendly states:
http://www.money-zine.com/Financial-Planning/Tax-Shelter/Tax-Friendly-States/
CNN Forecasts on Prices next two years 300 markets:
http://cgi.money.cnn.com/tools/homepricedata/
Stats on areas
http://quickfacts.census.gov/qfd/index.html
Housing starts
http://www.nahb.org/generic.aspx?sectionID=819&genericContentID=45409&channelID=311
May seem obvious source of data, but, this has some great stats on employment trends.
http://www.bls.gov/lau/home.htm
Jobs create people inflows which drive demand for housing. The beauty of this resources is that has trend data which is very useful for narrowing down areas to invest.
Big John
I have no experience of his coaching but his books are excellent and are rapidly changing my life. Since picking up my first of his books two months ago, I've now read 5 and have another two to go.
As a result of his books, I have set my sights on goals that only months before I thought were a pipe dream. Very shortly, I'll achieve my dreams of not working as a PAYE employee five years before I considered it was possible.
As a note, his Rich Dad Poor Dad is probably his most famous but his worst book. Maybe that's the book that have led others to say his stuff is vague. His more recent stuff is much better.
Another tip – you can get most of his books as Big W for under $10.
Unpopular opinion judging by the other responses but that's my honest opinion.
Big John
Totally agree. I'm a believer in both. You need to be informed to ensure that the advise you receive is consistent with the data.
Regards
Big John
Hi Freckle
I appreciate you sharing your thoughts.
"Traders always get in trouble when they price real estate “as a commodity.” And that is the ongoing issue for today’s chastened buyers: too much product looks no better than that— commodity"
Can you explain this a little more please?
Re interest rates – they have to go up in the US at some stage. However, the interest rates for borrowing for foreigners is currently very high. My strategy is to finance over 30 years, with the first 5 years fixed and refinance in 6 to 12 months when credit markets have loosened further.
Regards
Big John
Sorry about that – typo – http://www.city-data.com/
Big John
Can be large tracts of vacant properties. Shootings. Drugs. etc.
Thanks All. I am right for tax returns but what about someone who can give advice on structuring your affairs to minimise tax? The people I've been referred to so far charge an arm and a leg.
Thank you.
Big John
I've thought about this deeply. I'm an economist (completing my PhD) and have struggled to find a reason not to invest in the US. I've now bought 5 properties.
To date, I can see a few benefits:
1. Significant positive cash flow in a lot of areas
2. Turnkey, tenanted properties no more than 50% of their price at peak
3. Economic fundamental is place that indicate the US economic recovery has commenced
4. Historic high AUD against USD, which has the potential to reverse over the medium term. If it reverses to historical trend then their is potential to make 20-25% in exchange profit.
5. Credit now available to leverage. There is a possibility of refinancing as credit becomes more available to increase profit margins.
Now the down side. Let's look at what happened in the GFC. That's our best indicator of what would happen if the "US went broke".
1. Property prices dramatically reduced. This could erode the value of your property portfolio. The glass half full view is that if you have available capital you can buy more cash flow positive properties at lower prices and higher returns. If you're able to keep repaying your loans, then you can still make good cash flow. My opinion is that the down turn has bottomed out and the recovery is underway in some markets.
2. Banks stopped lending. This led to very high rental demand. A good thing if you're a land lord.
3. When people couldn't afford to rent, the govt paid the bill under Section 8 agreements. This put a floor under yields.
What is likely to happen as lending is more available.
1. Prices of homes will increase as more people buy more property.
2. Rental demand will decrease, as more people choose to buy rather than rent. Rents would decrease and so too yields, in this scenario.
Remember that there is the strategy or refinancing at lower interest costs to prop up margins in the short term when this occurs.
However, when the recovery happens, there will be a point where it will make sense to cash in to realise your profits and invest somewhere else. Doing your five formulas regularly that steve outlines in his books will tell you when it's time to look elsewhere.
Hope this is useful.
Big John
I currently have 5 properties in the US and would like to buy another 30 in March.
Deals like this seem too good to be true. I must admit I've been very tempted. My advice is to get the property address and google it. There is a leading us web site which gives crime stats and rates local schools.
Also consider how old the property is. It's likely to be very old stock and the chance of large maintenance bills is higher. Also these types of properties usually expect higher vacancy rates and problems with tenants paying.
If you've got 10-15k, I would buy a turn key property in a better location using other people's money to leverage. There are more than half a dozen companies who offer this service for a fee.
A lesson I've learned is to make sure the property is tenanted before closing.
Good luck.
John
