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To start with the first question – I would also agree that paying $1.300 to set up an LLC sounds very high, filing fees in most states are usually just a few hundred although there might be exceptions that I am not aware of.
We have helped some of our clients who wanted to take the "DIY" approach and form the LLC themselves, and we can send them a "vanilla" Operating agreement that is good enough for the basic functions such as opening bank accounts etc, although it doesn't provide any further protection or guidance.
You do need the operating agreement (as far as I am aware) no matter how many members and managers you have, it forms the basis of the company.Getting an EIN as mentioned is very easy, there is a dedicated number for people from outside the US and without either ITIN# or a SS#, so although it can be a pain with the time difference for you guys, it can be done:-)
It can be beneficial sometimes to be incorporated in the state where you do business, especially when dealing with utility companies etc, although it won't have any impact for tax reasons etc.
If you would like to have one of the operating agreements, please just email me.
HOA fees will impact your bottom line, in many of our nicer communities you can be looking at paying $300-$400 per month, so it will eat into your cash flow significantly – as has been pointed out, you also want to make sure it's either owner occupied or at least make sure that the HOA is in good shape.
Also, many of the HOA's will have restrictions on rentals and even on resales (who you resell to, although they're not exactly pick right now) so that is something to factor in.
The upside is most of the time you have less maintenance (no exterior work) and also it can be more secure to own v. a single family if the property is vacant,and many of the communities have on-site lettings- and management companies.
I tend to disagree with many of the foreign investors here, and I see land as an EXCELLENT play right now.
While it is entirely true that buying land TODAY won't make you "instant" fortunes, as reselling the property immediately for a profit most likely won't work, new construction is difficult (even though as Jay said, it can be done), and there's no income.However, if you look at the "path of growth" as mentioned above, there are some fantastic opportunities to acquire part of- or entire subdivisions, with all utilities already in place. It's really important to look at what is already there – you might be able to buy a parcel for a knock-down price (I'm talking paying like 5K for a parcel that was 100K+) but if there's no services to the lot, you're talking maybe 30-35K before you have a usable lot.
Many areas have seen land values plummet so low, that in my opinion, they can't go much further. If you look at the GOOD PARTS of Cape Coral, FL, just as an example, you'll see how far values have fallen. True, many lots in CC, Lehigh Acres, Ocala and God-knows-where don't have much of a value (and probably never really did…) as they're miles away from anything, but there are also so many good buys.
You can also look at buying as previous poster said – find a subdivision that is 60-70% built out with new homes, then move in and try to buy the remaining lots in the community. This sets you up very nicely for the future, where you can either:
a) Sell to a builder when the market picks up, or
b) Build new homes youself -more work, but more $$$ tooAlso, land doesn't come with tenants, maintenance, high carrying costs etc…
If I understand you correctly, you are being offered to buy additional apartments/commercial units at the actual cost of construction, rather than current market value.
If that is the case – and you can "verify" the construction cost as being the actual cost and not an inflated cost, it sounds like a no-brainer to me.While previous posters are correct that growth in Tokyo is non-existent and rental yields passable at best, you need to keep in mind that most builders (at least here in the U.S.) have a construction margin of 25-30% at least, which means you should be able to "flip" your unit at completion (or maybe even off-plan) as you are buying at a significant discount, or if you choose to rent it out, your yields will very comfortably be in the double digits.
I would probably also look a bit more at the contract and the payment schedule – are you required to pay most/all the money upfront – in that case, the builder is most likely using your money to fund part of the construction. Is there a restriction on the use and/or resale of the unit?
It's something I would look more into – although I don't claim to be an expert on Japanese real estate
Nathan is right, there's a lot of opportunities out there in Michigan (especially Metro Detroit) to earn very high returns.
However, as I have pointed out in other threads, and a huge number of people also have done, we always factor in maintenance costs etc, and you also have to very careful who you deal with.Like Nathan also mentioned, most companies up there are just looking to make some quick money off foreign investors, and there's no longevity to it. The Section 8 program is what makes investing in MI so attractive, especially with the low purchase prices.
We have similar deals with monthly rents around $750-$800 that we can sell for $35-$37K fully rehabbed, although most of our focus these days is on more short term investments, and more aggressive management of the client's funds, as it generates higher returns without the risk of management etc.
Sorry to go off topic, what my point really is, is that IF you are looking for turn key properties and your only concern is cash flow rather than growth (all of the US right now??) then Detroit is something you should consider – again, just make sure to check the area.
The UK is something different I believe, I'm not an expert there although I'm sure the financing makes it very appealing, it's something I wish we could do for our foreign investors, although it might be a few years still.
Portpirate, I do have info on it, but forum rules won't let me put too much on a public forum, and I don't really know too well how to use the "profile" on here – can you shoot me an email on [email protected] and I'll send it back out to you?
KC Homes,
You make some valid points – we do exactly that for our investors, we buy homes, rehab them, and resell them to local home buyers rather than to investors.The market times vary widely as far as 2011 is concerned for us – from just days up to 6-7 months.
Financing is harder than it was back in the day, appraisals is the biggest thing to overcome for us as they tend to be VERY conservative these days!The saving grace for us is the FHA (first time buyer) loans, 99% of our buyers are FHA, bring 3% down – the requirements seems to change almost daily when it comes to what credit they need and other things the banks look at, but it has allowed us to keep our money turning over every few months.
We do most of our deals in the Midwest, I'd be interested in seeing some opportunities in KC as well if anything comes up.
I am not surprised at all at what Property_scout is reporting.
We have supplied properties to many Australian- and international "buyers agents" and many of them (although not all) are looking to mark up the price to make huge profits, on top of any commission they were due.
As you can see on some American/international agencies websites, they're now offering to bring an "International buyer", which is really saying, pay our fees and we'll get you more money than your house is worth.Getting the property from the source is greatin theory although I'd need to second Nigel's comment right above mine that it's a minefield, a deal might look great on the surface but once you dig deeper into it, that particular block might be a "warzone", the property has liens on it, bad roof, poor management – any of a number of things. Unless you have a person on the ground, or someone with a competent team, it's a can of worms trying to do it from 10.000 miles away.
With rentals you always need to be so careful, we are trying to stay away from the highest yielding ones now after seeing some issues with management etc, and I'm just not entirely comfortable buying homes anymore for $30-$35K that on paper brings you a return of 15-18%, once you have a few months of unpaid rent, the yield drops significantly and maintenance also tends to be more costly with those types of tenants.
We are going down another route with most of our investors, something we have done for years and consistently got returns out of, although we still do rental properties in select areas of the country, where we have a very string network of people working with- or for us.
I think it’s been pointed out before (by Jay) that Western NY and Buffalo in particular got so bad when it comes to foreign investors getting ripped off that they actually had to put new legislation in place to prevent the “flipping” of property up there.
We are a US based firm and we spent time investigating the markets up there for suitability both for our high-yielding program as well as our program that is aimed at higher returns thru rehab/resale, and we didn’t find it suitable for either.
I can’t comment on specific companies, but with all the great opportunities across the country, I’d probably be very careful to stick my own $$$ in Western NY – like someone said just on here, the 20% net that’s being promoted is very far from the truth.
I just wanted to comment on what Alex Francs said above, as especially points 1 & 4 really echo what I have posted in many other places on here.
First of all, you need to know who you’re working with. There are literally hundreds of “experts” out there, I’m not just talking about the new companies coming up in Australia almost every week, but also companies across the U.S. who love it when a foreign buyer comes to town. What Jay mentioned above happens a lot, we might be buying at x and selling at y after rehab, but by the time all the middle men have added their slice of the profit, the price to the end buyer has been hugely inflated.
Don’t be afraid to ask frank questions of the seller, and try to find out HOW CLOSE are you actually going to be to the “original seller”, will there be a lot of middle men, or do you get the best deal?
Also try to find out what they have done in the past, and how well they have delivered. If all they give you is a vague answer, or claim that they never have had a deal go south, then I’d be careful.
We have been in the business for a long time, and I’m the first one to admit that we have had deals that didn’t work out perfect, but we will always do what we can to minimise risk, and to assist the investors when something doesn’t work out.It’s been said before, but it’s the easiest thing in the world to be supportive pre-sale, and when everything is running smoothly, it’s when things aren’t going well, you’re going to need your partner there. (Sounded a bit more like Dr. Phil than intended – it was just meant as a piece of real estate advise)…
Number four – yes, right on the money!
We get so many people coming thru that wants to see every single deal although they haven’t decided what they want to achieve, and how they want to get there – and no matter how good we are at our jobs, we can’t decide that for you.We have several different programs, but they’re only right for a certain group of people.
Decide what you want – cash flow vs. growth, low- vs high risk, long vs short term. D
Don’t focus on the areas – you can achieve all of them in one city if you wanted to, focus on the end goal first, then you can find your way there, using your own research and reputable professionals if you choose.Mick,
Congrats on the successful rehab, we do the same thing (hope this won’t get deleted!) together with investors from Australia and beyond. We source the deals, make no money upfront, and share in the profits at the back end. We have done so successfully for many years, across the country.What is important to point out, and I’m sure both Jay and Mick will agree, that when you buy for 50K and add 20K worth of rehab, you don’t have 70K home, but more likely a 100-110K home, and I don’t see the issue with that at all – I do see an issue when homes are “flipped” for that kind of profit with no work done to them though.
Doing rehabs and then selling them in the local market to a home buyer (like we do) I think is a very ethical way of doing business, we make money on the sale, the investor makes money on the sale, our contractors make money on the rehab, and the end buyer gets a home he/she will really enjoy, and it’s also in my opinion a very safe investment.
Hello,
One of our title companies can help you, as it’s a very simple process as long as you have all your paperwork in order.
We don’t however serve all states, which state is this for?I would say the same thing again, there's no way a 10 year guarantee is legitimate. For us as an American firm it's illegal to guarantee any type of return unless it can be backed up by a third party, so I find it highly unlikely that a ten year guarantee makes sense. How would they get a bank etc to underwrite it? Maybe it would work if the funds were put into an escrow account with YOUR lawyer/trust, but how likely is that to be the case…. A good property doesn't need a guarantee like that.
Next point is about the buy back options – there were a lot of scams with them in the past.
Someone sells you a house/piece of land for 30K today, and you're told that "company C" has an option to buy it for a high price, say 50K in 3 years time. However, guess what – when that day comes, Company C chooses not to exercise their option (as they are controlled by the initial seller, hint hint) so you're still stuck with the property.As for warranties, we usually pay for one year of home warranty when we sell a property, although there are also arrangements like the one mentioned earlier where the seller agrees to remedy any faults within a specified time.
krefter – I can't help you too much with regards to the SMSF, we've had Australian buyers buying both residential (rental) properties, as well as land lots using their Superfunds (but thru a US LLC) although I can't tell you what they had to do to comly with the regulations.
Very true also about not looking at "if this is a place you want to live in" – most likely, if you're in a position to buy a portfolio of 40K homes, you're not in a position where you'd need to, or want to, live in one of them yourself. But the point is, like you said, that there are plenty of people that are willing to live like that.
I think previous poster (Rob) pretty much nailed it, and I think I remember I've made a number of similar comment on similar threads. As some of you probably know by now, I also have an interest in US property – I am the CEO of a U.S. based asset manager that sell a lot of properties to foreign investors, and we work with a number of both direct investors as well as agents from Australia. I've done this since I was 18 years old, so I'd like to think I've got a decent idea of what's happening:-)
We operate nationwide in buying bulk portfolios, and some of the properties will be rehabbed for rental, and those are the ones we sell, with a cash flow, to investors. I have my "favorites" across the country, although to avoid being branded as an advertisement, I won't go too much into detail.
The point I wanted to make is, you can't really select one area over another using a "blanket" statement – which is something I see done time and time again by "buyers agents" both in Australia and outside. They'll say stuff like "we only sell Buffalo cause unemployment is low, but we won't do Indianapolis cause unemployment in Indiana is higher than in the 90's" and any similar statements like that, without (in many cases) never even been to visit the place more than once, and with very little knowledge about what's actually happening.
In it's simplest form – would I take West Palm Beach over Toledo? Sure I would… But would I take a house in one of the worst areas of Palm Beach County (Pahookee, Belle Glade) over a house in one of the nicest streets in Toledo? No, I don't think so.
I have visited Australia three times – and I've been told many times over that Sydney is maybe the nicest place in the world, and that might well be true – it's awesome. But it doesn't mean that there weren't times when we were travelling around Sydney, that I didn't feel a little bit "on edge". That is the same for our American cities as well.
You can absolutely look at the macro statistics – is there a large employer moving to the area, is there general growth in population, are they predicting growth in property values/birth rates/immigrant arrivals etc, as that will affect the GENERAL area that you're looking at.
Then you need to look at YOUR specific target property (like Rob also pointed out, not trying to steal your light here…) and it's IMMEDIATE surroundings. Are there boarded up homes there, where is the boundary between school districts (hugely important in low- middle class areas, as the kids aren't likely to be in Private schools, and public school districts vary hugely between different suburbs) is there a bus route (yeah, we use them (I think..) especially in low- income areas) and the list goes on….
What type of tenant is it, how was he screened, how are the payments made, who is managing the property?
You'll be shocked to hear that Detroit is one of our most successful cities to date. No, not the "$1000 homes" Detroit, but the "North of 9 Mile, working for a living, trying to clean up the image of this city" Detroit, where properties can be bought for a low price, be rented Section 8 to a GOOD tenant, and you can get ALL the insurances you would normally buy. That's a free tip from me – if you can't insure it, it's probably in the hood.
Another one is Indianapolis – but then again – IN POCKETS, it's a great opportunity. In other areas, it's just as bad, if not worse, than downtown Detroit. We can go all day, and discuss these different cities.
So my advise there is look at the MICRO aspects – who are you using for the purchase, who will manage the property, what type of rental is it – and go from there…
My second point I wanted to make, and this might be counter intuitive – but once YOU have found something that fits your parameters, and you are in a position to afford to do so – buy it!
The simple fact is (and kill me if I'm wrong…) but you'll never find a "sure thing". There's always going to be one or two things about a deal that you're not comfortable with. Whatever that might be – either try and fix it, or if it's something outside your control, decide wheter you can live with that or not.
If you will lose sleep over it, move on, if you can live with it – go ahead and do the deal.I just see a lot of people who get so caught up studying everything from Governments plans for the future, to the predicted future of the Dollar and really ANYTHING, related or un related to the actual investment, that they get so worked out from it that they never make the purchase. I don't mean to sound like a salesman, but if you find something that fits all you need, why wait?
So to sum it up (if you're still here – thanks!) decide EXACTLY what you want (cash flow vs growth prospect) how you want to do it (pay an Australian firm vs free research) what price range, how long you want to hold it, and then work out who you are as an investor. At the end of the day, neither me, nor any Australian agent can know what you really want and desire, although once you have figured that out for yourself, we're all more than happy to help.
I would still say there's plenty of opportunity in Florida land – although I wouldn't recommend either:
– buying in Lehigh Acres, or any of the inland communities
– Borrowing money to pay for the land, unless you had enough income to pay off the interestHowever, a place like Cape Coral has a lot of opportunity, if you're buying in the right areas. Many lots in Cape Coral were far higher than the pricesmentioned earlier – a lot of them were up in the 400K range a few years ago, and aare now selling (on the MLS, I'm not talkingabout foreign buyers getting ripped off) for 10% of that. These would all be lost with canal access, which would take you out into the Gulf, I'm not talking about inferior lots in the middle of nothing.
Cape Coral is huge so there are also many lots that have no value, like Jay pointed out, that will probably sell for 5-6K today, and still do so in 10 years time, but if you buy something on the water, in a DEVELOPED area (tip: If you have no neighbours, you probably bought wrong) I don't think you can lose money in the long run.
I have never dealt with the 4-5K lots so I can't really tell if they'll go any further down, but I guess the bottom for everything is $1 right now! There are also other communities across the country where pricesfell really far (part of the Poconos, Arkansas etc) which also present some strong opportunities IF you buy a "serviced" lot (infrastructure) where prices are a bit lower than Cape Coral also.
My 2 cents would tell me that ANY type of guarantee like that – buy back, long term rental, capital growth, just isn't something to rely on. A good enough product doesn't need any "guarantees" like that, while a poor product is never going to come good on them.
What we do, is we sell the homes turn-key, and we offer management thru our local partners, but we'd never be able to guarantee you the future performance. That's not to say we're not confident you will do very well with us:-)
Land is a fantastic investment, you have multiple exit strategies (building, selling to a builder, agriculture, off-plan sales) and very low holding costs, but as rightfully pointed out by Jay, you don't get any income from it and it is also not as liquid as some other investments. I think we'll see though over a 7-10 year period that the investors buying land now, will be the ones who will have made the most money.
We have a lot of experience in residential land lots in communities across the country, and are always interested in new ventures.
I would have to agree with Ian and Steve, although you can (after some time) learn to do your own tax returns etc, it's always advisable to speak to an accountant or tax strategist upfront, to make sure you get your structure correct.
As you might also know, there's very few people out there who can "legally" advise you, even if we think we know the answer:-)Brennan,
I can really only answer your first question – I am not sure if you're looking for a business account or a personal one..For a personal one, yes a passport and a U.S. address where they can send your visa card, pin etc should be enough, although they'll most likely ask you to sign a form (the name escapes me now) to either a) give them your ITIN (tax ID) number or b) state that you don't have one, which means you will be subject to witholding etc.
For a business account, you will also need your LLC incorporation docs (most likely you need to be registered in CA to open an account there) and also something to show that you are able to sign on behalf of the company, you also need to show the EIN number etc, and also an address in the state.
You also need to make some initial deposits.
The whole process should only take an hour or less, although it'll most likely be a week or two before you get the cards etc thru in the mail.Hi AngieB,
thanks for your feedback, and it looks like a lot more investors (both Australian and others) have really started to take a liking to Indy, we've put quite a few investors in there in the last 12 months from Australia.
As has been pointed out by others, it does have a few really bad areas but in general it is very stable, and we do a number of deals on behalf of our investors there every month, focused on strong cash flow in areas that also are likely to hold good value.
