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I'm not sure how large an area you are talking about….or how many or how large the holes are…but you could patch the holes with regular concrete mix first. Allow that to cure and harder…then clean & prep the rest of the concrete with a pressure washer. Not sure this product is available in your market but I've used Quikcrete Concrete Resurfacer on a bunch of projects with good results. You can do it yourself in small sections. I've used this product for driveways, patios and sidewalks all with good results here in Atlanta, GA USA. Here's a video link to give you an idea: http://youtu.be/nIEll-lmsQE
With the advent of Ipads and the like, it's such an easy thing to walk through a rental, if you are the tenant, and shoot a video with all of the issues or damages. This should be second nature for renters…..as soon as you rent the place, walk through and video EVERYTHING. A picture or video is worth a 1,000 words. You seem pretty bright mosaid, so I'm not sure why you didn't document everything especially when you first realized that you had a problem. Hate it for you but hopefully you're back in your own home now!
It's actually worked so well for us that we created a business model around it and now create shared housing around the metro atlanta area market. We also have been taking in empty investor homes and doubling or tripling the net return by renting the rooms and furnishing the common areas as shared space. It's an effort to rent/manage but the returns make up for it….plus the increase in paper wealth when applying a cap rate against net rents. We are looking to move into other US cities as well….Happy Investing!
Sure you can buy a house for a dollar……Detroit has plenty of them and wholesalers there buy them and flip them back out for fat profits. Real estate is fun and there are tons of profitable strategies but P.T. Barnum once said "a sucker is born every minute" or words to that effect. There is much to be learned just from reading through this forum. Happy investing!
LOL – I think Jay and I speak the same language. Even in these challenging times, there is plenty of money & wealth to be created in real estate. it's all about finding the right niche and riding that wave. I've found mine and am loving the returns….although it's much harder to turn a 3/2 into a 4/2 with 4 separate renters…but it WORKS!
No matter where you are in the world, why would you put that much into a property for so little return?? I'm with Freckle – you're paying for this advice? I once invested a ton into an area that was a "sure" thing houses we were buying for $50k were headed to $250k shortly when a government facility was converted to mixed use. It's been about 8 years and the mixed use development is just now going out for bid. Lesson learned – always buy it for what it is today and any appreciation is a bonus! I buy now and do deals strictly on cashflow and what I can rent the rooms for. That model works for me. I would run away from your deal in a second unless you are just bent on owning a marginally productive property.
It's great that you are beginning to look at real estate investing at such a young age. Just be very cautious with your borrowing and debt. Very challenging times are ahead of us and what something is "worth" truly becomes what a cash buyer is willing to pay for it. You don't want to be so leveraged that your house of cards comes crashing down. Debt honestly scares me and I prefer all cash or to partner with other cash investors. The real money in my market isn't made in owning the property, it's partnering with those who know how to get it done and can return double digit returns, (10% to 30%) per deal. We create shared housing and you may want to consider doing that even with the property in which you currently reside. Maybe you take in a renter or two and see how that goes…..then buy the next property to live in and back-fill the space in the old place with a shared housing renter. Just a thought. Maybe you build-out what we call an in-law suite in the basement level of the next place…makes a prime rental when you move onto the next place. Granted, I'm from across the pond so no idea where my idea has any merit in your part of the world but I would think that it does.
I recently got laughed out of a local real estate investors group when I mentioned that a recent cash partner of mine had gotten over 30% return on a $30k US investment in just under 6 months. The real return was actually a little over 40% in 6 months. We partnered to buy a very low end townhouse unit I had found…it was a 2bed/2bath and I converted the living room to a 3rd bedroom. We bought it for $15k cash and spent $15k on repairs. We created shared housing out it and got $1,500 a month in gross rents. Bear in mind that we rent rooms as shared housing so we furnish the common areas and include basic utils in our rentals. Once the rents were stable, we sold it to a passive investor for $55k. My agreement with cash partners is 10% plus half the profit on the sale so he took home $3k in interest and $11k in profit share. Our back-end buyer purchased a property worth about $80k based on cash-flow and we guaranteed him a 10% cash-on-cash return for 18 months. If it doesn't perform, we have to make up the difference out of our own pockets. I let them laugh…the only laughing my partners are doing is laughing all the way to the bank! The cost structure in Australian wouldn't allow for my model to work but I'm certain that shared housing works in almost any market. Housing options in the US is very limited for renters with credit or income challenges so the market for shared housing is huge here and likely will be for another 10 years.
Keep reading and learning….I do the same every day! all the best. Andy
Our general rule of thumb with cracking brick is to get an engineer to take a look if the cracks are through more than 3 bricks and doesn't follow the mortar lines. Very slight cracking is pretty normal on a 20 year old brick home. In the states, particularly my market in Atlanta, we had an issue with builders covered over building debris rather than carting it off and eventually homes were built over top of the debris. This led to settling issues and sinkholes later on. Unless the cracking is through the bricks, I wouldn't be concerned about it. Good luck with the house! Andy
Atlanta still has tons of deals but not a lot on the FMLS/MLS listing side of things unless you're looking at Clayton County & South Dekalb which the hedge funds have pretty much avoided, although lately, even they have started buying both of these areas. The better buys will be found through wholesalers and -off-market deals. Yes, the property will be market up but do you really care if the numbers work? I don't! Granted, our model is different by creating shared housing and we get better returns so we can pay more. It's very misleading to see a property that sold in 2007 for $140k available today for $50k. It's alluring to say the least but if you can't rent it and keep it rented & cashflowing, it isn't worth much to me. This is the problem with a lot of what you find in Atlanta. In every market, it all comes down to having someone decent with boots on the ground in whatever market you are investing in. If your investing approach lacks this crucial piece, stay home or you are sure to lose!
It doesn't hurt to have a licensed buyers agent send you email tickles of properties meeting your criteria. The whole bit about the standard of duty they will give you written above in this string, is a bit much. Finding good, honest, dependable people is difficult in any market, licensed or not. Most are hungry and about the commission with ZERO service after the sale. Case in point, I'm partnered with an investor right now who bought a 3/2 a couple of years ago that has marginally performed with about a 2 to 3% return or less when you factor in the vacancy between tenants. The licensed agent made the commission and then a cut of the initial repairs before passing it off to a property manager. Disgusted, the investor was preparing to sell and contacted us to handle make-ready repairs as we also are a well known contractor in our market. He figured he'd sell and at least get some of his money back on a currency play. Instead, we converted the property to shared housing. We created a 4th bedroom at the terrace level which was always there but no one else bothered to do anything with it. Paint & carpet has finished that space out. With 2 rooms rented within the 1st two weeks of our getting the property, our gross & net rents are both more than he was taking in previously. With this approach, our investor has a renewed interest in buying atlanta real estate again and he should . Using a 10% cap rate, the property he put $140k into using a buyers agent two years ago was worth about $60k based solely on cash flow performance. Market rate right now for similar properties in the condition his was when we arrived on the scene is about $100k. Fully rented, the property will produce about $1,500 net a month or 3 times what he was taking in before. It also gives us a "worth" of $180k again using a 10% cap rate against net rents. Granted, this assumes that we will keep all 4 rooms rented throughout the year. We honestly don't get a ton of turn over with shared housing tenants and the space usually fills immediately or within 30 days with maybe a room repaint at worst.
Everyone has their own take on how to evaluate a deal. For me, it is purely net caps against net rents. I've seen way too many pro-forma deals with pie in the sky predictions. The deals look rosey with the $950 rent that never materializes or the 80% return cash-on-cash on a totally leveraged deals that kills you when it doesn't rent at all and now you get the added insult of having to carry it out of pocket every month! It took me over 20 years to create the model I now use so effectively. We'll keep you posted on the property referenced above but it should be completely rented up in the next couple of weeks. Here's a marketing video we use for it: http://youtu.be/CG0C6RzRuW0
It's pretty basic….if you are thinking of a builder and your potential bank or lender says "we won't deal with them", that's a pretty huge warning to go elsewhere. Here in the states we often have local building boards, I wonder if similar things exists over there? I'd start by checking with some local real estate agents and see what kind of builder referrals you can get. It would be a good idea to get references on the builder and go see some things they built 5 or 10 years ago to see how they held up. New construction in metro Atlanta can be pretty rough….my group ends up fixing a lot of things that were done right the first time at construction. People here think an inspection process or the building codes inspector will make SURE the house is up to snuff…doesn't always work that way. If you go with a builder, it might be a good idea to hire an independent inspector to walk the property as it is being built. You may have to ante up some more $$$ to correct or improve things as you go along but it will be money well spent. A huge issue in Atlanta is poor flashing at windows & doors, a cheap or no caulk on trim. That short-cut becomes our bread & butter a few years later in repairs. Luck!
It comes with the territory I guess. I often get it as a triple wammy….I'm a life-long contractor so I always get calls for free advice on projects and most often, projects gone bad! I love the client who had our bid originally, used it to get a lower bid from someone else and then calls us back in to straighten out what the first chap did….nice! With these, I usually take the original bid price and just double it. No decent contractor wants to come back behind someone else and from experience, these are never good projects anyway. I get quite a few investors who want me to tour their property, tell them what they need to do to get it rented and what the costs will be. I do this once and only once for free…unless they sign on with me. As an active investor in my market, I've stopped touring around in a marked vehicle to avoid poaching. I've been at property viewings and had others want me to serve as their tourguide. Like some of you, I get the let me buy you coffee so we can talk about my issue for free. I don't have time for that kind of thing. I will usually still give most anyone 30 minutes of my time. The classic call for me is usually, I saw your video online and would like to know the exact address please! I bet you would is usually my standard response.
In property management, we get almost everyone wanting to pay 8% which is ridiculous, we get 20% and will drop to 15% on multiple properties but remember this is for shared housing where we are usually dealing with 3 or more tenants. The percentage seems high until one gets the results. On properties purchased in partnership with us, we don't earn anything unless the property nets 10% annually. If it's short, we reach into our pockets to make it right.
The broker business is so cut-throat here in the state that I imaging it's the same over there. People want the advice and time and then go elsewhere or to a family member. I'm not sure there is any tried and true way to weed people out. On my end, I value the time of others and am prepared to pay for value. Really enjoying the forum and look forward to sharing!
Fort Myers is a great area. You might want to check with econohomes and see if they are doing anything with foreigners. I only know of one lender who does those kinds of loans and his group only works in AZ or Phoenix market. You may want to try and find a local community bank. The big name banks are awful to try and do business with. Most of my foreign partners have opened accounts here in atlanta with Fidelity Bank. You may want to try pooling funds with relatives and the sort…some of the wholesalers are able to offer financing but you pay for in the purchase price of the asset. Enjoy yourself and let us know how it goes! Andy
This is an old string but Atlanta never really dried up. Many have opinions as to which market is "best" Vegas never made any sense to me and still doesn't but to each her own. There are still great deals to be had IF and only IF you have a good team on the ground to work with. Our model is different as we create shared housing and avoid the whole rent-evict-repair-rerent cycle the atlanta rentals have become. I once owned or controlled over 300 single family homes in metro Atlanta and it became an absolute nightmare for me. From that experience, I switched to shared housing where we market the rooms as separate rentals. It works for us and we get much better net rents, less turn-over and much less repairs & repaints….plus the house is never vacant so theft is zero. I know Atlanta very well so it makes sense for me to continue working here. We now partner with investors who are stuck with empty or non-performing rentals and get them turned around with our shared housing model. Andy
Nigel is right, you have to have boots on the ground or you are wasting time & resources. Combining your funds with groups active in specific markets is the way to go. Atlanta has been what we call a "high& best" offer city for awhile now. The REO listing agents play that game even if yours is the only offer. Not long ago I went after a 25k listing in stone mountain. It needed $25k in repairs but worked for my shared housing program. It had over 35 offers and sold for about $58k. That's typical of what's going on with MLS or FMLS listings today. You'll have better luck with wholesalers provided you do your due diligence!
In some US inner-city market, like SW atlanta for instance, it's next to impossible to get a landlord policy for theft coverage. It has been like that for several years…you can get vandalism coverage but not a true landlord policy. It's probably the same in places like kansas city, memphis, st louis and the like, areas with high crime and a total disregard for property. I actually saw a group of 9 "men" carrying various parts of a house down the street one day in southwest atlanta. We generally stay out of those areas and usually only buy homes where the systems remain intact. We have had good experience with Farmers Insurance over the years but make sure you ready your policies closely for the exclusions and limitations of coverages.
Jay – where was that property? was it mold ridden? is that why you had to take it back to the studs?? Andy
It's great to share and learn from many of the writers here. We each have something to contribute and hopefully something to learn….and earn. Much of this is perspective and experience. The hedge funds have no doubt pushed up values in the markets in which they operate. In Atlanta, they have actually been over-paying at the foreclosure sales and outbidding one another. Why you ask? Simple…they have raised the funds and they need to deploy them. They cannot perform proper due diligence on most of their buys and their model is one of renting and cashing out with appreciation in 5 years. But there might not be any appreciation at all in some of those markets…then what? I don't know really. I do know that in Atlanta, the funds are running into the same problems as everyone else….finding and keeping good tenants. My group creates shared housing. It works for us and produces better results than traditional single family rentals. We have been approached by a couple of the hedge fund groups to come in and work to create a similar program for them. I believe they are starting to recognize the flaws in their model which is which they are starting to create derivatives to get out it and, I agree with you, that if this comes to pass, it will eventually crash. However, that will just create another opportunity for savvy investors to partner and get great deals. It has always been my view that investing in single family homes is a Mom & Pop business that cannot be cookie cuttered. That's the reason Warren Buffett talks about buying 100,000s of single family homes and why he isn't doing so directly. There's no way to do it. If our Atlanta market crashes again, all that will be lost is the 16% gains we've experience mostly based on the hedge fund buys and groups like ours will continue doing what we do.
If an asset continues to produce double digit returns, do you really care about it's market value? No, you shouldn't. There are a lot of different investment approaches in the US: some are selling notes, some wholesaling, some collecting a fee to simply be your guide, some partnering and so on. Finding market savvy partners with boots on the ground in the markets you choose to invest in will be the key to your success. We get asked all the time about appreciation and, for us, the simple answer is, it's just a bonus if you get it. US investors before the crash were all about appreciation. I only buy based on what I can do with the property today and how it will cashflow. Our backend buyers are purchasing a renovated & rented asset with a guaranteed 10% return for 18 months. That's good enough for those who want to actually be passive owners. Our front-end partners are happy with a fixed return, in a short period, with a slice of the profits. If we can turn their money 2 or 3 times a year, then they can do better with this model than most anything else. Smart investors will diversify with a mix of investment routes….some notes, some partnering and some owning.
There are still many bargains to be had in our Atlanta market and others across the US….you have to know where to look and have the ability to turn them & keep them rented. Otherwise, you just bought an anchor not an asset.
To Kimberly – where did you buy these? all the best! Andy
Well put Jayman, in all my years in US investing, I've never heard of anyone buying an investment property in Detroit and doing well with it. At the height of things in Atlanta, I had groups trying to get me to take my team to Detroit and I refused to do so. I visited a couple of times and wasn't impressed. The key to investing anywhere, at least for me, is a simple question of whether or not I would sleep there. If not, i voted with my shoes and move in a different direction. I love Atlanta but am biased because I live here. I also favor Orlando florida and parts of the tampa area. Investing in the inner city only makes sense if there is something different either happening or about to happen in the area that will be a catalyst for change in a positive direction. Like the 400 acres redevelopment project coming in Atlanta. Cities leading the US in murders isn't a good place to park your funds…..despite any hype to the contrary. Only people who have made money in Detroit are the wholesalers selling off properties! That has been the case for about 8 years now.
For most foreign and domestic US investors, as Jeff so aptly puts, the reality between what could be and what IS are vastly different things. Andy
I don't know values in your part of the world but a 6% yield really isn't bad for most people. Most of our stuff does 10% to 20% but it's a different program with shared housing. Most smaller investors are best served by buying something in their immediate are so they can keep an eye on it. One of my friends did well for 30 some years just buying properties that were on his way to & from home on his commute to work. He'd notice when a light was out and pop by to take a look so his tenants paid better and performed better because they knew he was about. Even if you have a professional manager involved be cognizant of the fees involved and cautious of churning….prop companies in the states are known for dropping a tenant in and not worrying about how long they will be there because they take 1st month rent on any replacements. Look for some sort of performance warranty. We guaranty our renters for 6 months….if they don't perform, we replace them at no cost. Again, our model is pretty unique.
If you're really interested in the unit, spring for some money on a home inspection. Not sure if they do due diligence over there but here, usually you write a contract with a kick-out clause for inspection issues. You usually get 5 to 7 days to have an inspection done at your cost but this gives an idea of the property's true condition. Just make sure you find a qualified inspection from some of your fellow investors. Try not to us an inspector recommended by the listing agent as they tend to favor inspectors who go light on the property review…remember, the listing agent wants a sale and a commission check! LUCK!
Joel – nice reply, you obviously know your stuff. I've spent several decades investing in the US and live here….if you have a good team, boots on the ground, you can still do very well here with 7% to 20% annual returns depending on who you are alligning with and what you are buying. Avoid groups who are spread amongst too many cities…no one can be an expert on many markets as it requires localized knowledge. Average prices have bumped up 16% this year in Atlanta but, similar to Phoenix and others, you have to look hard at the numbers to see why. Most of the increase is due to the bidding wars between the hedge funds who are buying up major investment cities. My guess is that when the dusts settles, most of these funds will go bust as the single family rental business has always been a Mom & Pop type business and can't be cookie cuttered like a McDonalds. Some of the hedge funds are already beginning to realize that their model doesn't work and are running into the same problems: evictions, vacancies and repairs!
There's never been a better time to buy in the states than the last couple of years. Just find a group and a model that makes sense to work with! Happy to network. Andy
I don't know the tax issues over in Australia but as a life long investor in the US, I completely switched to renting rooms in a shared housing concept back in '09. The headaches of renting to families in my market wasn't worth the paltry returns and eviction costs. We partner with other investors to now buy off-market properties, fix them up enough to rent, furnish the shared area and rent the rooms separately. It works very well in the metro Atlanta market. Our investors do well with 10% returns and we make out nicely as well! You will minimize vacancy, minimize repairs & repaints, minimize legal costs and maximize the returns. It can be a headache initially getting the property rented and stable but the returns make it worth the effort!
