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jayhinrichs
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October 9, 2012 - 2:46 pm
Cheeves,
the deals that I see that proforma out to high returns are clearly in the Hood, and are usually boarded up and or have 70% vacancy or better, and it takes a small army to move in and turn them around..
And I mean an Army,,, One needs fortifications to surround the project IE chain link with razor wire,,, Arm security gurards, Not the national guard, Dogs ( the kind that bite)… then ones you have gotten your units rehabbed then there is the rent up phase.
And with these types of properties your running cost will be higher you need depending on the size 24 hour armed security, On site management of course.. then pray your on sight manager does not steal you blind… ETC ETC.
I compare this to the Indian or Pakistani that opens a convenience store in the HOOD,,, be it any Hood Watts, in CA, East Oakland in Nor CAL, Detroit , Memphis, Philly, Harlem, etc etc..
You walk in and they are in a bullet proof see through BOX with a bank teller slider for the money to be exchanged… Security cameras and of course they have weapons…. Same scenario with high risk multi family Ghetto properties.
Now you take other commercial type of properties that are half full or empty and yes you can see sky high proforma's on those but try to fill them.. negative cash flow kills ya. Thats not to say like Cheeves said one could not find that needle in a haystack…
Would be interesting to see the product that is the subject of this discussion…
I posted the 2 bigger commerical free websites to see what type of commercial properties are being offering nationwide.
in a seperate post however will mention them below.
http://www.loopnet.com
http://www.coaststar.com
You can surf around and see what Nice commercial looks like and nice multi and then just go to the Inner cities of the mid west and you will see really cheap units and many boarded up properties… If the last guy could not make a go of it what makes another think they are better at it… Thats the question and some are, they do turn these around but they do it with alot of work and a vested interest. Do not expect a RE broker to turn your multi around for you…
jayhinrichs
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October 9, 2012 - 1:48 pm
John,
looking at many deals, one see's the commercial agents proforma ( best case scenario) then there are actuals backed up by financial statements and tax returns for 2 or 3 years.
are you saying 17 to 25% cap rates?
In my experience the hot deals never come to market and would never come to this kind of forum or be looking for Off shore investors per se the agent listing them would already have his buyers lined up. And of course some could be off shore but most domestic… and repeat clients.
Although I do know a Russian agent here in Oregon that goes to Moscow 4 times a year and does really well,, he double ends everything..And he is selling props at 7 to 8 caps… And does very well on the commish side.
What type of properties are you speaking about,,, Multi family, Strip malls, office,,warehouse tilt ups.. Just curious what your concentrating on.
JLH
jayhinrichs
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October 9, 2012 - 2:53 am
USAinvestor,
Before one can "lodge a lien" there needs to be a trier of fact ( judge) render a judgment against the defendant. And the "plaintiff" Needs to file a court action..
We have whats called Small claims court and that is for disputes under 5 to 7500.. depending on the state. The caveot though is YOU MUST PERSONALLY attend, and no LAWYERS are allowed .
So this is were these Spruikers type property managers get away with it.. they know for 3 to 5 k your not going to be able to do anything.. The only thing you can do is file a complaint with the RE commission and threaten them with that action.
If they are licensed to begin with they will probably not want this to happen, but if they are dodgy characters. your out of luck
cost to presue this is more than you lost.
JLH
jayhinrichs
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October 9, 2012 - 2:43 am
Nigel,
sounds like the same story from the aussie marketing companies, WI posted about one of them that sold 400 plus C class properties and now has found Jesus and decided that A and B is better.
When the reality is C's are just too tough to manage and in Atlanta where this company has been buying the competiton has been intense and the only thing they can buy is the more expensive properties.. So some BS story about how they are changing tactics,,, OZ investors are too smart for this by and large.
JLH
jayhinrichs
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October 8, 2012 - 3:34 pm
Cheeves,
I am fairly certain there are those deals out there but they are in the hood,, Last guy that tried failed,
buddy of mine just bought one in Memphis, 70% vacant so if you run a proforma on it looks great on paper,
try to actually reno it and tenant it thats the other side of the coin.
Your right on the mark with your cap rates… Here in Portland and most of west coast its 5 % for A   and maybe 8% for class C and below.
Its just like the houses that people get suckered into with profroma data not actual.. Anyone who has any experience in the US buying multi or commercial will not take a profroma as the gospel. The buyers and lenders will want 2 years of running cost with tax returns to back up the profroma only Rookies and risk takers will buy on profroma data..
JLH
jayhinrichs
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October 8, 2012 - 12:01 am
Nigel good post:
I agree with you on the single family side of things I think there is no argument that we both think that TRASHFLOW houses in the US are really poor investments and extremely risky.
Here is what I see happening.
The US and OZ marketing companies and fellows had a pretty nice run at higher gross rental returns for the last 3 years or so (that can be gotten in todays market) .. NETS were never what was represented at least for the average investor. But now Even gross returns cannot be Puffed (inflated on paper).. So these companies are looking for other vehicles…
So its out of necessity that these companies are looking at buying Multi and commercial… There is plenty of Run down derelict multi and commercial to find in the US.. With the exact same proforma stats like SFR of a few years ago.
However I think its important for the members of this site to know that commercial and Multi just like any other RE investment comes in different quality and grades.. So when you buy Multi that promises a high return like you quote above these are much more RISKY investments than a Multi that is say here in Portland Or. That will return 5 to 7% Net MAX..
Or any other market in the US.
When your talking those kind of returns and the companies bringing them to you are not brokering them they are building in fee's and profit on the front end, ( No one here is a non profit from what I can see and is doing charity work)
For investors to think Hey I missed the boat on that 20% or 30% gross return US single family home but now I can buy commercial or Multi your just trading one risky property for another.
There is a reason these Multi's are available at these prices. Its because those that came before you FAILED and walked away from them… One can certainly buy these and make a go of it. But to have an investment were your pooled in with a bunch of investors you do not know and a C class investment in the US at best.. This is anything but a safe secure investment its risky just like the cheapo houses you and I do not like…
I have seen first hand much better operators than I lose big properties in Texas particular… Tax's through the roof and no zoning per se creates an environment were tenants are raided from one apartment to the other.
But there are also very good deals and up side   Just need to make sure you with a very experienced team..
The players that I know in this market, ( Multi family turn around) will put these deals together and pay a 6 to 8% pref return and then share some upside with the hopes of 10 to 12% the investors. Anything more than that are your dealing in the same asset class as I stated and you concur are cheapo houses its just slumlord Multi or slumlord Commercial..
jayhinrichs
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October 2, 2012 - 2:48 am
cheeves,
Its an issue, and all about setting expectations up front.
It was one reason I thought my TWH model would be a hit in OZ .. Payment of the exact amount on the exact same day transferred into their account monthly.
TWH has caught on now in the US.. And I have a back log of probably 30 to 40 US clients plus about 10 OZ…..
Its a problem we get a property and its gone in 2 hours…
I guess good problem to have…
JLH
jayhinrichs
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October 2, 2012 - 2:43 am
Freckle,
tipping is necessary in the US.. I bought a house up in British columbia,, and when I tipped 20% for my evening meal the waiter would follow me to the car thanking me and inviting me back
Its just what we do here.
In many states waiters only make 2 to 5 dollars an hour.. If they did not get healthy tips how are they going to pay for the rentals we own????
JLH
jayhinrichs
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October 2, 2012 - 12:20 am
Not sure if any of you saw the movie WITNESS with Harrison Ford. But it reminds me of a scene in that movie.
Harrison Ford has gone to hide out with the Amish (Pennsylvania Dutch county).. And the Bad guys are trying to find him and call the local sheriff.
Bad Guys ask the local Sheriff to just call the house were they think he is hiding out.. Local sheriff said that would be a good Idea but the AMISH have NO PHONES,
Same with our tenants by and large.. No checking accounts cash their pay checks at pay day places. deal in cash only
jayhinrichs
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September 30, 2012 - 3:05 pm
Yes I am taking some liberty,
In the states if you bounce checks too often your put in the nationwide system and you CANNOT get a checking account.
In each state we are different.. But by and large we do not accept checks for rent.. Money order or cashiers checks or cash.
I don't recommend cash as its easy to go missing and you get in the he said she said mode.
Welfare here pays electronically, but then the renter has to bring in the difference,, YOu have some 100% subsidized housing but most have to pay some amount..
So my point is if all you know is OZ and how money is transferred and your expecting the same thing in the states it will be a wake up call. And no PM can change the renting publics habits or force them to have a checking account when the bank will not give them one.
jayhinrichs
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September 30, 2012 - 12:33 pm
in no particular order
Fulton
dekalb
cobb
henry
clayton
gwinett
rockdale
then ones that are a little farther out but still considered in the metro area
Douglas
Carroll
Cherokee
Forseth
Cowetta
Takes an army and a very well capitalized team to cover all these counties. Just for informational purposes. the foreclosure sales are only 1 time a month in Georgia ( First Tuesday of the Month) So this month Its Oct. 2nd. There will be 2,000 plus properties on the sale each month in the metro area with about 500 or a little more being sold in that one day.
The trick is that in each county the Law firms that show up to cry these sales ( Auction them) have the right to show up anytime between 10 and 4pm.. Some keep fairly tight schedules others you just have to stand and wait.
So you will have multiple auctions going at the exact same time.. So to cover every property you would want to bid on a company needs 3 to 4 people at each auction..Plus Cashiers checks for each person… The big players will have 5 to 20 million in Cashiers checks ready to go that day.
So its pretty difficult to break into the flow of this, and compete against the regulars that have been doing it for years. ( and thats what I think has been labeled on this site as first generation wholesalers.. they buy at auction then flip to companies like TRR, Karina's company and a host of other turn key marketing companies. One of the reasons that you have delays in closing for instance with TRR is it can take up to 90 days before the Trustee's deed is delivered to the buyer and the process of selling can begin.. The winning bidder has equitable title but not deeded title.
So that all said its a business just like any other.. And the big players have 20 something year olds or house wifes running around with a list of what to bid on and max bid and cashiers checks to pay for them.
At last auction I had a beer at the end of the day with one company that buys 15 to 20 a month.. they had 9 people out.. One of their court house steps bidder's was 8 months pregnant,,, she bought 2 houses for them
We get our handful every month and sometimes we get lucky we got one property that slipped through the crack and while the big boys were all fighting over a couple of other properties that were going the auctioneer was late and no one bid on this one and we picked it up for a dollar over minimum bid… Right at 25k… which is about as good as it gets right now for decent area and 10 years or newer.
JLH
jayhinrichs
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September 30, 2012 - 3:24 am
Temple looks to be half way to Alabama so pretty far out of Atlanta per se.
We own Douglasville and I own a few in Carrolton which is just as far.. However they are more modest in size.
From my vantage point the farther out you are the less price per sq ft will matter.. IE its going to be price range for bd and bath.
Although to talk about houses are too expensive above 30 a foot is really amusing.. We sure got spoiled EH ( thats Canadian for ain't that so)
The quality of the homes that we are all buying can and will be replaced at 55 a foot plus the lot.. So don't let anyone tell you its a 100 a foot to replace these homes because thats just not the case.. And lots are dirt cheap Freudian slip. and will continue to be. Resale on these bigger sq ft homes will not go up exponentially with the sq ft size.. some increase yes but not dollar for dollar for a 2400 sq ft home.. Sweet spot is 1200 to 1600 both for rental and resale for these quality of homes,   at least in my opinion.. Rehab is much cheaper rents do not go up % wise per sq ft of home..
One thing is certain though there will be less pressure from the institutional buyers the farther out you go.. they concentrate on the 7 close in counties.
Thats my take on it for whatever its worth… Probably not much right:)
jayhinrichs
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September 27, 2012 - 3:13 am
Freckle,
any property that is not SFR or Multi family can be classifed as commercial.. Although I think we all kind of think of commercial as office or retail.
Not having any first hand knowledge of Steve's activities or their choice of trailer parks they are buying, its still the same philosophy,
the really nice stuff with no management issues to speak of is going to be A. hard to find B. very competitive in pricing.
There are already many huge funds that all they buy is class A parks .
However you cannot take a class C or D park and upgrade it… To do so would mean taking all the existing units out then refilling them with nicer newer units.
Or building a park from scratch.. It takes years to fill a park
2 reasons,   1. there is no decent financing for Mobile homes in a park the rates are sub prime esk. And very few lenders will touch them because of the hassle with foreclosing on them Case in Point.
My Tree farm in Oregon ( 700 acres) we had a care taker who bought his own Mobile and moved it on to the Tree Farm.
he was there maybe 6 years then left. And left the Mobile behind..   try to sell one that has to be moved is like selling a used 10 year old KIA or Yugo very tough and not going to get much money for it. Cost to dismantle and transport and then reset them will be 4 to 8k as long as your not going more than 500 miles.
So this care taker leaves and he owes 43k on the home… I call the bank and tell them to get their mobile off my property.
Long and the short of it was we bought it for 4500 cash the bank took a 90% hair cut.
Now if you own a park this can benefit you when this happens.. and it does happen. Although if you have bank financing on your park they do not like you to own the units. They will only lend on the revenue of the pad leases.
Hope this helps on the wobbly box investments.
Not to mention most Ozzies would not like the rehab and maintenance,, since these are built in factories, the parts are special size, you cannot go to home depot and find replacement parts, water heaters plumbing electrical is all different in a wobbly box.
JLH
jayhinrichs
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September 27, 2012 - 1:05 am
Thats an easy one… My new short term foreclosure fund
WI,
I think what your seeing is the stock move back to more of historic norms.. Properties just could not stay that low that long.
And of course we have talked in depth about the very large money players moving into certain markets were 6% yield is fine for them as they are counting on CG to bring their yields into the low teens.
The attraction to the US is simply such a low entry point to play… this also leads to very risky investing behavior. Which is well documented on the site here.
We need to realize up until 07 08.. If a property was neutral geared here in the states or slight negative with 20% cash down investors were flocking to them.
I was making loans in Atlanta in 06 and 07 at 75 to 90k WHOLESALE REhab added to it.. Who was to know or guess that that area and properties would devalue by 75%… Rents have stayed static basically for all these years as well.
So thats were your seeing the prices creep up as the US investor jumps back in with both feet and is trying to get better than the .05% they get in the bank..
JLH
jayhinrichs
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September 27, 2012 - 12:31 am
With mobile home parks its all about location, age, age of the mobiles that are there,, are they single wide or double wide.
Are they pit set on perminter foundations. Is there a club house etc etc.
And the death nell are ones that have a lot of vacant pad's… takes years to fill one of these.. so one has to be careful about cash flow at the time they buy them.
Premier Moblie parks sell at 5 and 6 caps… junkers or class C and D anywhere from 8 to 15 or higher cap rates.. and its that ole adage of risk reward…
Its why we call it "Trailer Trash" lowest segment of society by and large in the very low end parks.
then when people die they just leave the trailer and it cost you 2 to 4k to remove it..
Again really nice parks in nice areas are tip top investments
jayhinrichs
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September 26, 2012 - 5:12 am
Wi,
there is a difference in Trailer parks and class A manufactured housing parks.
I owned one in Portland that a sold a few years ago here are the numbes.
43 spaces… I paid 1.4 mil for it.. rents 250 a month.. I raised the rents to 400 on average and sold it 2.5 years later for 1.8.
Class A parks are some of the finest investments in all of the US… you deal in Class C and D and its ghetto just like any other low end US investment.
Texas especially with there lax zoning laws will lure folks into these investments only to lose their dough rae me.
JLH
jayhinrichs
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September 25, 2012 - 2:17 pm
since there is no financing available in the US per se… and Offshore investors pay cash.. then as long as your no buying ultra low end ghetto no hope properties… Most everything will be positive geared in a fashion. I am not an expert on NY NJ that area, so I know the west and south east.
Most stable markets with best CG of course have the lowest Positive gearing. In order from lowest to highest.
1. SF, good parts of LA ( not compton or Watts) returns 2 to 5 % positive geared if lucky. Portland and Seattle are the same. But no where near the management challenges of the Mid west south east.
2. Phoenix with the hedge funds and other big players moving in and setting the bar at 5 to 8%
3. Vegas 6 to 8
4. ATlanta 6 to 10 if lucky these days. Parts of Florida
Then anything higher than that I would not divulge as I do not want a flood of competition LOL
CG will be best in CA. Vegas, Phoenix… Basically anything Higher end in any of these markets if you pick off a good one you have a chance of CG… Low end sub 30k all in houses anywhere in the country really are just Trashflow houses.. And I am very opinionated here only appropriate for those living within 30 to 60 minutes of the properties whether they have mangers or not.. very management intensive.
So I was bothered putting this together but its a start anyone else care to share? We need to save this Forum from boredom and obscruity.
jayhinrichs
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September 24, 2012 - 2:17 pm
Peter,
Not sure,
from my perspective the market has changed a lot..
Maybe the US does not look as attractive for SFR rentals as it once did…
Although there will always be the C and D class to go after with a hope and a prayer that you receive your rent.
the A and B's there is stiff competition and returns are sub 10% Net and probably gross in some areas.
choose wisely for CG.
the US buyer has come back and I know that could be a reason the US guys are basically gone from this site. They have so much US business that the time and effort in establishing off shore investors probably is not worth it to them at this point. I know thats true with Alex and a few others I know well.
With my TWH model I have a backlog of at least 20 investors.. And half a dozen or more off shore that would like to explore what we do, Just can't keep up with the demand, and I need to give inventory to my Super fund ( IRA consultants) here in the states that brought me to the dance and started with me out of the gate.
You factor these sale pressures in with the fact that we are highly choosy of what we buy since we own it long term and have to pay for the running cost, as opposed to house flippers that once they close they are down the road.. Big difference I can tell you when its coming out of OUR pocket for maintenance and vacancy rather than the investor.
This is why I have started my Short term foreclosure fund.. We deliver better Net yields than anyone can get basically taking the risk of buying a house and they leverage on my 35 years of experience of who to do business with and who not to. Plus we are nimble we serve a very large base of Wholesalers nationwide… I see this growing and our TWH model will end in 24 months or so.. We just will not be able to buy the QUALITY that we want in OUR portfolio and be able to return the investor the net returns we have been doing month in and month out.
Your seeing this with the post WI made about Vincent all of a sudden wanting to up grade their pricing and product… So the 450 investors made a mistake investing with him as he admits and now they should invest with him in much higher priced properties…. Well this is for 2 reasons C class is no class and investor have a very difficult time.. So there is a need to upgrade ones game… And 2 prices are higher from his suppliers its as simple as that.
Ok there is some fodder,
JLH
jayhinrichs
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September 24, 2012 - 3:38 am
WI,
Big funds will want to achieve their 6 to 8% return… and will back into that with regard to purchase price…
so if at the price's one was paying for properties a year or so ago and were Making a Realistic 10 to 12% net.
then hedge funds can pay about double what they sold for a year ago and then will stop or look for other markets or other asset class's like apartments, commercial is still very much in the toilet with the exception of the very best areas.
I think what you will see from Hedge funds is they will dump their C class or B's that have been managed into C's.
These companies are just like the rest of us thinking CG…
In my mind and what I have set my investments up for is that if I sell at 6% caps based on gross rents we are going to be fine.. We make some money my investors make 12 to 15% NET NET with no risk.. and everyone is happy.
Those Like you point out WI that are buying C D properties there is really no up side for them and if they exit they will lose money, thats a given.
JLH
PS this forum has gotten pretty dull here last 2 weeks other than my two articles I don't think there has been anything new posted in a month or so… Save how to set up a bank account. Which is important yet not really riviting stuff.
jayhinrichs
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September 21, 2012 - 2:39 pm
Kyler
Good point one can buy a 10 to 30k house in many parts of merica own it free and clear.. Get free medical by just using the emergency room as your everyday doctor ( emergency rooms cannot refuse ANYONE service… Yes you stand in line but you will eventually get seen if you do not expire whilst standing in line.
Food is food pretty much nation wide and the US has the cheapest food outlets anywhere in the world we have these dollar stores were nothing is more than a dollar… YOu will eat a lot of canned and boxed food but you can survive.
Or move out into the boonies and live off the land… Property generally will be much more expensive though