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If I had $400k to invest….I'm not sure I'd be doing it in Australia or be happy with 6% return. Just me. I'd diversify or at least look at several options abroad. The west coast of the US, parts of FL or Atlanta where I am. You can buy a renovated & rented unit for $60k to $80k with a net rent of 10% or take a little more risk and earn 10% plus a split of profits on purchases of $40k to $60k US. There are several other posters here with properties in Kansas City, Orlando and Portland….all worth a look. There is another poster doing some interesting things in Japan with good returns. If I can't double my money every couple of years, I'm not very happy! Happy to network. Andy
The recent stake of the NYSE and DOW hitting new highs of 15,000 – I remember it being a huge deal when it hit 3,000 back in 1991 I think. Lot's of people have been back buying stock on margins again. It gives pause that the market will correct and I'm thinking we'll see some of that this winter or early spring. US banks are starting to lend again and we are actually seeing some new houses going up around parts of metro Atlanta…usually in the northern more affluent areas like Cobb & north fulton. My business in shared housing is flourishing…we can't even begin to keep up with the demand. Fortunately, our business will do well in good & bad times. I do expect some sort of correction and when it comes, it will continue to be global. There are still tons of opportunities for creating income and wealth….and real estate is the number one place to do it. My family made a fortune in real estate during the last US depression and I am poised to do it again for myself and partners.
I can't for the life of me imagining collecting weekly rents unless I lived in the unit. I have a few renters that I let pay bi-weekly at a slightly higher rent. With over 400 doors in the program now, it's tough enough running around town collecting what we've got. Fortunately, most of these units are with private homeowners where we just rented a room, two or three in their homes. We have just started pursuing multi-family units like this tri-plex being offered for about $60k….shared housing will turn this one into a real performer. Plus, the hedge funds stay away from multi family but it's perfect for shared housing:
https://www.youtube.com/watch?v=I77d2n8Hmtc (open market listing)
Engel – The model will work even in the worst parts of KC as I used it here in SW Atlanta which has the same kinds of tenants. I actually started my program there in 2008 to get around all of the damages, vandalism & evictions I started running into. We rarely do anything in those kinds of areas today but I am starting to look at the Ft Mac area of Atlanta again as there is a 488 acre redevelopment coming that way. In terms of renovations, everything I do in investing is geared towards shared housing. On the renovations, we stick to more expensive ceiling fans, nickel hardware, nicer faucets & hand sprayers in the showers, 6-panel doors & solid flooring where we can. My guess is that you would be doing the same things for a retail buyer in KC as you would for a renter. Most times, we can reuse carpet with a good cleaning. If I were in KC, I would take a spin into some of the newer housing near the churches to get a feel for what your renters will be comparing you against. Nothing I do is geared to a retail buyer as the properties are worth more and sell for more as rented & performing investment properties than they would retail. We sell them off with a 10% net rent guaranty and that pretty much determines the sales price. The units can always be taken to full retail with granite countertops and the works at the appropriate time. I'll spend a little more on hardware, lights, faucets and use designer paints to pull it all together. Accent walls make a huge difference and the renters notice.
There are other advantages. We keep control over and often furnish the common areas of the house. We'll put $1k or $2k into the rehab budget for used furniture, depending on the size of the unit. My Mom always said once you sit in it..it's used! If we rented the house outright, we lose access over it. With shared housing, we can key in and see what's going on at any point in time……and we do so. We let all of our renters know that we'll be by at random times to keep everyone on their toes. Some of the nicest looking/sounding renters turn out to be the biggest druggies or drunks. We have almost none of that.
You'd be surprised at the quality of many of our renters: lawyers (no jokes), nurses, executives, sales reps, a ton of divorced people with destroyed credit. The apartment communities won't rent to those with bad credit but we take the time to look at the cause. Every walk of life is renting from us…..and most of our rents are $750+ some as high as $2,500 (private terrace in gated community) with most falling in the $500 to $750 range. These all includes utilities with a cap ceiling depending on the size of the house. Most of our renters appreciate an all inclusive rate and any overages are now split pro-rata among the occupants….they are in a much better position to police util usage than I am. You have to have a cap to kill the free rider problem or renters wasting utils because they feel like they are paying for it.
You won't see shared housing sweeping the nation…so what! It's filling our pockets, keeping our units filled at over market rents, minimizing our expenses and getting double digit returns. I'm sure you can find someone in KC to partner with to develop this. Not sure how many units you have there now but try switching one of to this and let me know how it goes. I am eyeing Memphis as another market for us and Phoenix is already in the works. You'd be amazed at the number of non-performing investment properties that investors are bringing to us now. I'm seeing properties in metro Atlanta that haven't been rented in years. It's probably the same in most markets. Whatever your model, know it well and have boots on the ground!
Is anyone doing shared housing in Australia? I would think it would work there….it's interesting that rents are quoted there by the week. Is it collected that way too? That would be a huge headache I would think!
Yes, we rent the rooms separately to different people. All of the tenants are thoroughly screened & vetted and we try to match them by personality & lifestyles. It's pretty common around university towns. I started switching everything I do to shared housing back in 2007 but I've been doing it off and on since college years in the late 80's. It's a tougher thing to set up but the returns speak for themselves. I love that fact that there is always rent being paid by someone in the house and I avoid all of the vandalism & theft that can occur with an empty house. The rents in the house in the above example went from $900 as a single family to $2,300 as shared housing (gross rents) The net rent now is almost double what the property grossed before – when it was actually rented. I think you have been buying 2/1s or 3/1s in your market? I think if memory serves me correctly. It can work with shared baths. I've had 3 different rents in a 3/1 although I favor at least two baths.
I've been in Atlanta for over 20 years and know my market very well. I tend to hunt and land deals that the venture capital & hedge funds avoid or off-market deals that they can't source. I'm pretty sure my model will work in other markets. Bear in mind that these aren't the "boarding" houses that Freckle might allude to. The US economy has very serious cracks, no doubt there at all. Those of us with the fortitude to do something different will profit very well. A 2bed/2ba property we are buying for about $30k with $10k in renovations will rent for about $1,300 gross a month and nets $550/mo after utils and all expenses. Our front end partner will see an obscene return on it when we sell it off to a passive investor for about $60k and gets a guaranteed 10% return for 18 months. If it doesn't hit, we reach in our pockets and pay him back. We are doing this on a small scale and it seems to be working well. Happy to chat and compare note! Andy
The above video link isn't working anymore but you'd have to have more money than brains to buy anything in Detroit…..now if they discover oil there…..you might have something then. Outside of that developing, you'd be pouring money down a rathole. It doesn't matter where you are investing anywhere in the world, if you aren't in your local market, only invest in markets that have lots of government jobs, universities, hospitals, transportation networks and decent infrastructure…certainly not in a bankrupt city! The west coast of the US has some good opportunities, parts of FL and Atlanta. There are others…I actually think there are good opportunities everywhere, you just have to be in the know and the now to get them!
Sorry for your loss Richard – I'll look forward to your future posts.
You might want to consider partnering with some with cash in your market and use you contractor expertise to buy & flip properties where you are located. Doing anything at a distance is difficult at best. You might find a program like ours where you can network and still make money in real estate without more than an investment of time on your part. Just depends on what you are trying to do. Find a niche, as we have in atlanta and you can still turn profits that will make you the envy of most of the posters here. Wholesaling isn't the easiest thing to do these days anyway and, as Freckle implies, probably would only work in a US market. Keep networking! Andy
You definitely got some great advise across the board from the group. You've got a great job which is going to be tough to replicate in the current economic climate. Take a look at your life goals and what you are trying to accomplish while you are here. It's all over in the blink of an eye. Money is important but so is enjoying your life. I am blessed to do what I like to do but took a huge cut in income to leaves corporate america nearly 14 years ago. Real estate investing is fun and profitable if done with the right approach and the right team on the ground wherever you end up doing it. Again, you can come back to this group for advise in your area. have fun and happy investing! Once your wife is working again, you'll have more flexibility and hopefully the two of you can come up with a plan together. A long term approach to investing will make the most sense.
First off, you've saved up over $100k on a $60k annual salary….that's awesome. 2nd, you're here getting advice. 3rd, you're never too far along with any broker to sever ties and move on. Erase that thought from your mindset. She works for you…not you for her. A good mortgage broker for investment property should own some of their own…ask if she does and how she is doing with it. Same is true for real estate agents. Here in the states, every agent now is an ïnvestment"or foreclosure expert but very few of them own any properties. It amazes me how many investors buy homes from these kinds of people all on pro-forma basis that never matches the end reality. If the current broker doesn't own property – chuck her. Would you buy a mercedes from someone riding a bike? Probably not!
Scan you market, got to some real estate investment meetings in your area, get educated but don't get stuck in paralysis by analysis which afflicts many you will meet in such groups. Network with other investors or here to find solid agents, mortgage brokers and financial advisors….there are some excellent ones here. Realize that free advise is often worth less than you paid for it so be discerning.
What are your goals? I don't like leverage personally but what do you want to achieve? Do you really want to own property or are you looking to build wealth? Sometimes, there are better returns to be had by NOT owning the property. Every model is different.
I wish we had the tenant bond here in the states. Owner financing can makes sense on a couple of levels. I have alot of partners here who offer owner financing as a short term option. The tenants put up extra cash as "option" money – usually $5 or $10k that gives them to option to buy the property within a certain time frame usually a year or two. Some will give them a credit of some amount for each month they pay the rent on time. 99% of the time they never actually buy the property. My one friend has multiple renters who have ended up paying multiple option fees but never bought the property. It just boosted his returns.
Just check into the laws in your area to be certain this approach is legal. I doubt the tenants will be any cleaner for you but the option money will make it less painful to clean up after them. In GA, it's super easy to foreclose if you do use owner financing, which again usually works out to just be rent. If you decide to go with owner financing as opposed to options, make sure you determine how hard it will be to foreclose on them and the costs of doing so before entering into any agreements with them. LUCK!
I think it comes down to knowing your market. In the US, I can usually pick up a very cheap condo or townhome that was a poorly producing investment property bc either the management was awful OR the owners had no idea what they were doing. My favorite buy is the 2/2 townhome with a oversized living room or extra sunroom. I turn that into a 3rd bedroom and make money. I just took a 2bed unit that was hardly ever rented at $400 a month US turned it into a 3bed/2ba and got $1,700 a month before expenses which netted $850/mo or more than twice what the old investor got. WE do this kind of thing every month these days.
I rarely would buy a studio or 1/1 for my model they just don't work unless it's a vacation type property I can rent and also use some. However, you know this project and if it's positively geared appreciation is a bonus. If you know you can keep it rented, I say go for it. i'm doing deals where the rents are paying for the unit in 4 years times and that works for me!
In the US we have – The Servicemen's Civil Relief Act – (SCRA) allows-a-service-member or dependent to lawfully terminate a pre-active duty lease under certain circumstances. If your lease contains a clause charging damages for such a termination, you may have to pay this amount. The leased premises must be used for dwelling, professional, business, agricultural or similar purposes by the member or the member and his dependents. The lease must be entered into prior to entry into military service and the member must currently be in military service. The lease must be executed by or on behalf of the service member or dependent. I've had military members in my shared housing and usually put a clause in that lets them out of the lease with 30 days notice. That gives me time to get a replacement. It wouldn't suprise me if Australia has something similar.
Another reason to do shared housing – only one room goes vacant and you have rent coming in on the other rooms.
I've honestly never heard of anyone charging this way. It is usually a percentage of the monthly rent here in the states…somewhere between 8 & 10% is typical. Do you have a contract with them. You should….and it should all be spelled out there for you. I'm in the states so not sure about fortnight but I think it means every 2 weeks. Looks like they are running around 8.5%. Here in the US, rents are mostly by the month. Everything I do is shared housing so I am dealing with usually 3 to 5 tenants at each property per month and we usually charged 15% to 20% of monthly rentroll to manage….but bear in mind that it's 4 times the work to deal with multiple tenants. Try to check with some others in your area and call some real estate agents and see if they have any recommendations for you. LUCK!
Sorry all, the comment above was meant to post to a much older thread about wholesaler mark-ups and not for here. Not sure how that happened. The hedge funds will fail both at the rental game and the appreciation game..at least in my humble opinion. Some already know it or there would be no reason to reach out to me to see how our model works. We are so small at this point and just in metro Atlanta so how would they even hear of us? They are looking to fix the problem that they already realize they have. Their opportunity is their curse…..they have so much money to move into properties that they are over paying in a lot of markets and buying into deals that will never cashflow. No group can handle buying 2,000 properties in one city in one month. I believe that a ton of these properties will start hitting the market in droves in about 5 years. Just a guess on my part. I think their only way out will be to package their holdings into derivatives and cash out that way. I think Freckle wrote about this last month. For my model, appreciation is just a bonus to us and our investors. For the hedgefunds, it's essential to their success and won't be realized. It will be very interesting to see how all of this plays out.
Key to success now is finding your niche – as Jay apparently has with new construction in his market. Deals in my market are often going for over list price now. With shared housing, I can pay more for them as long as they will rent and cashflow. I think there is a market for flippers who buy trashed homes, complete all system repairs & market to 1st time home buyers using a renovation loan to complete paint & carpet using the 203 program. Not my niche but I am certain it will work, especially in Atlanta where a lot of the cheaper homes are in marginal neighborhoods but have easy access to the interstate.
Time! I need more hours to run through all of the deals that come my way these days. I create shared housing in my market and have more renters coming at me than there is time to place. I really could use another 12 hours in the day in order to balance biz & family better!
We JV with our investor partners all of the time and it works out well for all parties but we are almost always using cash. Better returns are produced by leveraging and our partners appreciate the returns for passive activity. What is it that you are looking to do?
A good property manager is worth their weight in gold any day. If you are a nice person, especially if you are friends with the renter, you definitely need someone neutral and detached from the situation. Otherwise, you will be prone to giving the renter a break or renting for less than market rent. I manage a ton of my own properties because I have been doing so for over 25 years now but I now do it with the twist of not disclosing that I am the owner. It works much better that way and I can paint the owner to be a real jerk if I need to in order to get the true skinny or the rent paid. In markets where I am not present, I hire and pay a manager 10%. I usually work the leasing remotely myself as I shoot video of most of what I own and can screen tenants over the phone. I give my local manager a % of 1st month recent based on how many times they had to show it before it rented. If you are able to keep your money & your heart separate at all times, you might be ok trying it yourself if you are local and on the scene. Otherwise, save yourself the headaches and get a PM.
Old but worth a couple of comments. We all grumble about mark-ups on wholesale property but if the numbers work – who cares? I buy from tons of wholesalers and I don't mind paying their mark-ups because they same me the headaches of making offers on listed properties that end up selling either in packages to hedge fund buyers or go for double the listing price…either way, a complete waste of time for me. If the deal makes sense, I don't care what they paid for it. It's all about the numbers. Zillow and the like can give you a snapshot as to "value" but you'd better served to value anything in terms of cap rate applied against net rents. At least that is how I value every deal. I've been in my metro Atlanta market for nearly 25 years now and value my network of wholesalers and happily pay them for their deals. You should too but do your homework….what is it rented for and what's the net return….not pro forma but actual!
Financing rental properties will come down to your network and will vary from market to market. Most of my investors are all cash, as am I. We are now able to offer 50% financing at good rates on rented and cashflowing properties in and around Atlanta. The lender we use bases the loan strictly on a quick appraisal and the net rents from the property. Because we only do shared housing, our investors not only get better returns but now better financing. If you are trying to find financing, there is nothing wrong with seller offered terms….just read it all thoroughly. Definitely network with individuals here and in the market you are investing in. Happy investing!
A problem for many investors is simply comparing the various real estate investment groups that are out here. I think the key to it is seeking a group offering the most security and a model where their real payout is based on their continued performance. I've personally been involved in various types of real estate investing over the years here in the US. The model I use today produces very good results and our partners get a secured 10% per deal before we earn anything. They also take a 50% split on the backend when the renovated & rented property is sold off to passive investors who get some equity and a 10% net return guaranteed for 18 months. All funds are held by a licensed GA attorney in escrow and the front-end investor can either go on title as an owner or, with our foreign partners, be secured as a 1st lienholder.
The biggest problem I have seen with US operators, and again not all of them, is that at best they are usually just wholesalers offering "rent ready" properties. Once that sale is made, the seller has no incentive to perform any further and you run the risk of being stuck with a property that will never rent. I just spoke with someone who bought a couple of properties in Detroit that never rented…great way to lose $100k. With our model, we only make the greatest return only if the property is sold after it has fully rented. The model minimizes risk and maximizes returns while forcing us to earn our money by performance. I like that! We don't earn any commissions at all on front-end purchases. Every model is different but I would be looking for something like ours where the seller has some incentive to perform after the initial sale. Happy Investing!
