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Sorry Rosa, some of us here are experts when it comes to inner city investing….we've been doing it for years…sometimes successfully and sometimes not. Like you, my goal is to share and also learn in the process. Whether you make your $35k/yr or $1 million, no one wants to go through what you went through. I'm glad Precise paid you something but if they didn't, your threat of a lawsuit or an actual one is just a waste of time & money. Even if you somehow get a judgment which you probably won't, you would never collect on it. I am a lawyer and I've got a small box of paper judgments in my office that are worthless. The advice provided isn't just for you, as you aren't likely to listen to it anyway, but for others who read these posts. If we can somehow save some other unsuspecting investor from losing their shirts then our time and efforts are well spent. Jay has 1,000s of deals under his belt and so do I…..engelo is very active in the market you got burned in. My intent isn't to throw stones at you at all. You probably have funds to try again at least and hopefully will make the right connect here to do so. Some other sucker will probably buy the gem you are now dumping. Others have not been so lucky as i have seen people lose their life savings investing in places like Detroit, memphis, philly, st louis…..some of these people bought packages of 5 or 10 homes at a time all based on pro-formas of what the place would rent for…some marketers pre-paid the 1st years mortgages in advance to boost the returns…..and the property crashed the following year when rents never came in but payments came due. Glad you shared your experience and good for you for sticking with it. i bought my first two properties with no money down and no real income as a college student and made $80k flipping them out. The rules have changed some but the fundamentals remain the same…know your market & your model and/or partner with people boots on the ground who do……happy Investing
Property management in the US is nothing at all like you would expect in OZ…same with the tenants. Any house in any major american city under $30k is a ghetto or hood property by very definition. There's money to be made in those areas….even complete cesspools like Detroit & Flint BUT in order to do so you MUST have someone boots on the ground in that market. I ran mostly in the hood market in metro atlanta for many years and LIVED there for 5 years…and yes…we pounded on doors and worse to collect the rents or evict tenants. At this level of rental, there are very, very VERY few good tenants. Many will prefer to buy a new widescreen tv or rims over paying rent on time…..and most know how to work the system to be able to live as close to free as possible. I owned or controlled over 300 homes at one point and it became such a headache for little return that I gradually sold off and exited the lower end markets. Today, I am gradually going back into some lower end areas with a completely different model that gives us control over the property with higher rents and less vacancy. Remember the Siren's song and be very cautious about going into ghetto neighborhoods without a solid & reliable partner. Realize that what you are thinking about doing is very risky and the return had better be huge in order to even consider it…..and you'd be better advised to stay away from anything in the US advertised as rent-ready! Heed this or become the next Rosa. The best managers in the hood are unlicensed street level operators…but pay them well…at least 10% and a bonus based on successful collection at 6 months or 12 months……I see some pro formas touting 6% management fees….best of luck with that…no one will do much for $40 US a month. And….if you fire your PM and your new rep tells you the tenant paid months of rent in cash…or better yet paid in advance…ask for a receipt! You'll never see one because the payments were never made…..but you'll be thinking the old PM stole your money. If you paid rent in cash wouldn't you ask for a receipt?
As to class actions or any legal action in the US for that matter….once you get with the lawyers, you've pretty much already lost. Lawyers win….owners lose! Our new model is shared housing as you may have seen me write elsewhere. We avoid costly evictions, we avoid vacancy and major repairs or retrofits and we maximize rents and returns. Anything we sell off comes with a 10% net guaranty for 18 months….strongest offer in the states. It's a great time to own in the US just look to partner with operators boots on the ground and a reason for you to succeed. The model has to make sense not just promises or stay away from it. You can make great money with low-end stuff…it just has to be the right stuff and it might be in Fort Edward NY or Fort Wayne, indiana but it probably won't be major US inner city…at least not unless you catch a transitioning part of town. If jay and I couldn't do it with very large operations…how do you expect to? Happy Investing
Hi Erik, I don't know much about the notes business but you'll encounter some here who do. Happy to network….
Do you Aussies have a federally mandated lease or lease form? Is that what RTA is?
We currently have a similar rush on oil towns in the Dakotas in the US. Without the oil, there's nothing there and there's a rush of builders throwing up hotel/condo deals. It's like the college towns….even if the mine or oil/gas project is successful, every 5 years or so, they'll build something newer and the rents for you unit will decline with age. It's one of those niches where the real money is made by the promoters and not by the ultimate owners. I agree with mattsa…..take a good look at the surrounding area before you invest and make sure there are other things about the local area & economy that make it a viable option if the mine goes bust. Happy Investing!
We had those honor boxes where I grew up as well….used to buy our milk that way. It's amazing to me what people will steal. I was in a home in a very nice neighborhood in SW atlanta the other looking at a great house. Some idiot stole about 20' of copper plumbing and the spigot at the basement shower….of course the water must have been on so it flooded the basement area. Nothing like several thousand in damages for $10 at the scrapper. The sad irony is that, in talking to the neighbors, the theft was done by a squatter left in place by the failed landlord after he was told the place had been foreclosed. Perfectly good condensor sits in the backyard and the coils are still in the furnace…brand new appliances upstairs in the kitchen but this widget steals $10 worth of copper!
Most inner city areas are full of this…and the bad guys have cars so even offices and churches in stockbridge aren't safe anymore. You really have to READ your insurance policies to see in ADVANCE what will or won't be covered. Most of those policies get read when a claim occurs and that's too late!
Very well put! Knowing your market is key to success and not knowing it is the path to failure. I too expect rate to move north here in the states and abroad. A lot of investors are signing into ARMs which just make me nervous. I would rather pay a higher rate and lock it now as rates are certainly going north. Kate, you might want to look at plowing your profits into other markets, even foreign ones like the US. Just look at the returns and weight the options. Happy Investing!
Congrats on finding a financing source and working towards getting it closed. I can't imagine any US lender doing a $20k loan…most have a $50k minimum as with anything less, I don't think they are making any money on it. We do have a couple of private lenders who will finance 50% on our renovated & rented shared housing products and will finance foreign buyers for these. We can buy down the rate so it's a win-win all around. We have a nice 5bed/3ba minutes from downtown atlanta kicking out $21,600 in nets rents that will sell for $150k US. Both lenders like that we do shared housing which minimizes the risks on lending and we cover a 10% net return for 18 months. Let us know how the project works out for you! Happy investing
I can't pretend to well educated in high finance or the high jinx of wall street but I thoroughly understand how to find, repair, rent and turn properties. Blackstone and the other hedge funds have run headfirst into what I said all along….residential single family home investing is a Mom & Pop business. Now that they have purchased 100,000s of homes across the US, they are fast realizing this. The tenants stink and they are at least 6 months or more behind in processing what they have even bought. It's the problem with having billions of dollars that you HAVE to invest. They probably will process these properties into some sort of derivative and get out that way…but, in the interim, they are searching for a solution. They can't rent and manage these properties…..and DUH…..wonder why? They want good credit tenants……good luck with that one! Anyone with good credit is buying…they aren't renting. The reasons for their failure is partially why my model is producing such great results. We offer affordable housing with all utilities included and could care a less about credit scores. We treat people like people…..not numbers and, in doing so, produce pretty incredible results. The problem with wall street is that it has never been in touch with main street…..and those are the people that create our profits in real estate. An MBA is a great tool…..but the hedge funds are finding that their pro forma predicting 100% returns in 5 years is likely to be a loser….unless they can keep buying at the same rate they have been which boosted our atlanta market almost 20% last year. I watched some of what they bought and just shook my head. Jay, Engel and I will all be around in 4 years when much of what they bought comes back to the street.
All of this might make for a Wolf sequel! For those of us who know how to do this….there has never been a better time to invest in real estate…..just have a model that works!
I've been a life-long contractor in the states…4th generation actually….and I've done a few deals over the years where I essentially partnered with a hamstrung owner who needed to sell but needed the repairs completed in order make the best sale. I have usually done these as a simple joint venture and we would usually agree on the "as-is" price the property would sell for then draw up a contract for repairs. The JV agreement would stipulate how we would be splitting the profits on the sale which was usually 40% for me….60% for them. I've done a few of these and never had any issues although in one case, I did file a lien against the property to protect my interests. I am based in the states and doing a JV like this has become more commonplace for investors as well. It's a great way to leverage what you know how to do and profit with investing more than the cost of repairs. Happy Investing
My .01 worth – having over $2million in secured debt would scare the crap out of me. If I am reading this correctly, combined you have $200k in available funds annually. I'd be looking for deals I could get into with the cash that I had coming in. Be very cautious with the borrowing right now. How much in savings do you have right now? You may want to broaden your horizons somewhat and take a peak at what some of us are doing in the states. In your market, you can't really do anything without borrowing. In the states, a $30k to $100k investment in a rented & managed property can do pretty well….ours do 10%. If you get on the front end of things, you can see even higher secured returns. There are lots of options for you. As others have mentioned, you may wish to consider a commerical property…..if you do, you might want to create a shared office where you break the building up and rent to smaller professional tenants. I loved shared housing and office space as it gives me max in rents & min in risks….I love that and the returns are phenomenal! Happy investing
I'm sure Canada is like any other market – if you are in the know, you can make money. I haven't been there in years but I would think anything decent would be way too expensive to make any sense. I'd be looking to your neighbor to the south…..USA to make decent returns. There are several us who are very active in the states so there are several models for you to take a look. What kind of returns are you looking for? Do you want to be active or passive? Are you planning to return to Canda at some point…when? Happy investing!
The beautiful thing about real estate investing is that there are so many different paths that can be pursued succcessfully…….the key is finding a niche that works for you and sticking with it. Reading through this thread, you can pick up on strategies that works in 2006 that wouldn't work in today's markets. Over the years, many of us were able to buy negatively geared properties that continued to appreciate in value in a hot market, ultimately providing a positive return. Today, I view appreciation as simply a bonus….don't count on it and if the property doesn't cashflow, I'm simply moving on to something else. Finding the thorn on a rosebush, is and has always been the best way to buy real estate. It still is. Find a property where value and rents and can be enhanced with simple improvements like updating, adding new countertops, light fixtures, designer paints or converting space to an additional bedroom….my all time favorite as with my shared housing program, it's all about rents and cashflow.
We recently took over an Aussie's investment property in Atlanta. He paid $140k for it 4 years ago and saw about a 3% return on it over that period. He rented it out through a manager and ended up with 3 awful renters over that period. Each renter either ended up breaking their lease, getting evicted or causing significant damages. In the states, we don't have a tenant bonding program like you do. After accounting for vacancy costs & repairs costs, his true return was less than 2%. In frustration, he brought the property to us to repair with a plan to just dump out of it and recoup his capital. We suggested he try a shared housing concept using our MyRENTEDroom program. He agreed to give us 90 days to turn the property around. His net rent, not accounting for vacancy & tenant damages, was about $500 a month….when it was rented! We finished off an area in the basement, turning the house from a 3bed/2ba into a 4bed/2ba. Over the next 60 days, we rented each of these rooms on a 6-month lease at $650 for the master, $550 for corner bedroom, $500 for smaller bedroom & $600 for the formerly unused space in the basement. The net rent, after utilities and expenses, has grown to $1,500 a month. With a 10% cap rate, which is our expected return, rented the old way, his $140k property was worth about $60k ($500 x 12 /.10) but grows to $180k with our program ($1500 x 12 / .10) I understand that shared housing might not be allowed in your market….check into it an see…..but it works here in the US and the results speak for themselves. He went from a gross 4% return on investment to a net 12% return using a shared housing model. Here's a marketing video we used for one of the rooms: http://youtu.be/CG0C6RzRuW0
He will now sell this property to an investor seeking passive income for around $170k to free up capital which he will reinvest with us to buy foreclosed houses around metro Atlanta. We will then make repairs and rent them as shared housing before selling the off to passive investors. You can create a similar model in your part of the world if you wish. He will create a 10% return plus half the profits on the sale to create an expected 15% to 30% return over 6 to 12 months. Remember, these results are achieved for us using our shared housing model. The passive investors can be financed up to 50% and they are guaranteed a 10% net return for 18 months which creates a steady line of back-end buyers for us.
Look to be diversified in your real estate investing activities. The returns to be had in shared housing make it worth a look. I'd look for investment partners & models where the marketers are actually involved in the model….not just collecting fees on sales. Our model is successful because I really don't make much money until my group sells the renovated & rented property. Look for models where you are secured either on title or as a lienholder otherwise, you are at the mercy of your investment partner. I'd also be very cautious with the mining town deals…..if the oil, gold or gas goes bust….where are you? Who will buy it from you and at what price? Fun stuff……happy investing!
Why PM the name….put it right out here so it will educate others. I am actually with Catalyst on this one….unless you feel you lack willpower – I'd take the trip and get a little free education in the process. The smarter you get about investing, the better decisions you'll be able to make even with the use of a financial advisor. Let us know how it goes! There are plenty of knowledgeable people here in the forums so network away!
The Atlanta market is doing very well. My contracting company does a ton of repairs for local real estate agents and houses listed in the north fulton, east cobb & smyrna/vinings area are selling quickly….and closing. Alot of the homes we work on in north fulton are in the $500k to $750k range and the deals are closing….often with financing. Can't tell you about other parts of the country but Atlanta is doing well. Retail chains failing isn't just about the economy as much as it is about service, selection and online sales ripping into them. JC Penny was something 60 years ago….today….no one shops there. The Sears/Kmart combo has had similar problems. It's still a great time to buy in the US….just have a solid plan and a good team. If for some reason things do crash, it will be worldwide and those rightly positioned with rented and performing properties should do just fine. It's anothe reason I love shared housing….it's affordable and it keeps producing revenue!
From what I have heard, a ton of Aussies have jumped into this North Dakota nonsense. Some will make some money I suppose but it doesn't make long-term sense to do these kinds of deals. Black gold is an interesting thing and there are lots of places in the US that boomed and busted over time when the oil ran out. I wish those investors well but I would think the only way to get a good return there would be to flip it out to someone else.
What works in one part of the world, may not in another part. A 10% return in the US is about unheard of except in pro formas….at least in Atlanta where my group works. We are able to offer investor partners a 10% return guaranteed for 18 months on rented and renovated housing. Examine each model and seller or investor partners carefully to understand the pitfalls & returns of each. You'll find a more realistic return for many US investors to be in the 3% range and many bank on appreciation to ramp up expected returns. As Jay mentioned….appreciation is just a bonus…if you get it…super but don't count on it. We are able to offer bank & private lender financing on our rented properties which usually sell for $65k to $120k and our lenders will usually go 50% on these. I don't know what lenders are doing in other markets but this is in greater Atlanta. Lenders like our product because we only do shared housing so we have constant revenue, minimal vacancy and maximum return. Whatever you do in the US, make sure you have a solid team with boots on the ground as it will mean the difference between success and failure. In some cases, like ours, you could be a front end investor partners and earn 10% plus half of the profits when it sells which translates into a return north of 20%. With our model, it makes more sense to NOT own real estate….at least not for very long. It took me over 20 years to arrive at this conclusion but the returns speak for themselves. Happy Investing!
Joey, you're being offered a ton of good advice here. It's great to have goals…truly is….but why 5 properties…….why not 20….why not just ONE! Better yet, partner with an experienced investor in your area as cheap labor. Like everything else in life, you will learn by doing and there is no better way to do so than on someone else's dime. If you can swallow this, assemble a good team of lender, agent, contractor and insurance agent and plan for just one property. Decide whether you will keep it as a rental or flip it.. Selling it off will free up cash for the next deal. There are more failures than successes in real estate investing….the losers limp to the sidelines and you never hear from them. I once had a lawyer friend who decide to become an investor. He bought 5 properties through a wholesaler who also did the remodel work. The work all had tobe redone, the properties were over appraised and the rents never created positive cashflow…..all ended up in foreclosure. Every month in the states, I buy properties from once bright-eyed first time investors who got in over their heads. I'm a 4th generation investor/contractor with over 2,000 slips in my 26 years at this. I love investing and rehabbing properties and am pretty good at it…..but even I lost a ton in 2010 & 2011. Alligning yourself with good people and gaining real experience is key. If you were in the states, I would encourage you to find a flip with very light cosmetic rehab – paint, flooring & fixtures. Something to get your feet wet. I salute your confidence and pray that you avoid Little big Horn….Custard was very confident as well….at least for a bit. As you find properties, try to bounce them off the gang around here. all the best! Andy
Hard to say what you've done at this point with the information provided. What's the 3rd investment property? what's the cashflow on each of these units? You might want to inquire with each of your current lenders what kind of deals they can offer you to consolidate all of the loans with one lender. You can sometimes do that in the states with minimal costs. You have some excellent brokers responding here who can probably help you directly so its worth contacting them. I hate debt and hate bankers even more. These are all short term loans and what if the market tanks when they mature? Then, you are stuck with no way to refinance. Too my way of thinking, you are already too highly leveraged and shouldn't even be thinking of taking on a 4th property….especially with not much in cash reserves. Doing so usually leads to trouble.
You might also want to consider raising private money for future investing. That's what I do. We pay our front-end partners 10% and half the profits on properties we purchase which we then renovate and rent as shared housing…before selling them off to passive investors. The model works well and our front-end partners are secure and averaging 20% to 30% per deal. We created a referral network to attract new investors by which we split our profits with referral partners 50/50. It's a win-win model and while we don't make a ton of money per deal, it brings us a steady supply of funds. The referral partners are able to monetize their social network and the investors can't earn these kinds of returns anywhere else. Granted the properties we purchase in the state are a ton cheaper than what you are looking at but the principles are the same. Just be very careful that you have your bases fully covered on the properties you already own before you bite off more. Have you thought about consolidating the other loans and paying off the $164k loan? Happy New Year and happy investing! Andy
All great point Jay. Our foreign partners do get frustrated by getting rents after the 21st of the month. Many of our tenants do pay by check now but our bank usually holds the funds for 5 to 10 business days…even though I believe by law they aren't supposed to hold that long. I think 5 days is pretty standard now. The longer time appears to be for a couple of specific banks who are having issues. Some of my renters want to & do pay electronically but it's rare. Alot of our renters have damaged credit. When we did more work inner city, almost everyone paid in cash or money orders…..which we still have to confirm were legit…you'd be amazed at how many phony money orders we got in those days. We don't work with that type of clientele these days. Most of our rents today are pretty solid and just wanting to save money by renting affordable housing. It's a win-win for everyone.
We don't do boarding housing or "SRO" (single room occupancy) housing…our concept is shared housing where the tenant gets a private room but gets to shared the rest of common areas. All utilities are included and we usually furnish the common areas for renters use. In most areas, we are limited to no more than 4 unrelated people living in a home. Happy Investing! Andy
