Forum Replies Created
Rj is very experienced.. We are working on a TWH hybrid for moving forward he realizes what I did 2 years ago we need to own these and not flip them.. and have our investors come in as our partners so 95% of the investors get better deals by far than they can on their own (WI your kind of the exception to the RULE you reside in that 5%
),, and takes out the huge risk of management and Picking the right property… RJ did do well in Henry but flipped most of the houses instead of keeping them all… But no one had a funding mechanism to do this 2 years ago thats what made my model so unique.. WE could keep some equity albeit 50% still make some cash flow but give our investors the bulk of the cash flow with little to no risk for our investors…Andrew Waite is from NZ and owns the private investor magazine he is closely tied to Professionals REalty of OZ and has been instrumental in Professionals getting a foot hold here in the states.. They also love our TWH model for the safety aspect.
Andrew Featured our company in the center spread of his mag earlier this year… As the Hybrid Model no one can match vis a vi the risk of turn key.
Atlanta will be interesting I am just glad I play in 5 sandbox's I would not want to be 100% Atlanta right now.
Like, I like to say, I saw this coming in Feb and April and posted as much… Its just finally come to roost now.. A lot of foreclosure regulars thought it was an anomaly but thats not the case these big players are here until there is no more inventory that can be bought at 6 to 7 % net Yields.
On another note… The bidding last month was crazy… ONe of my friends from Oregon who has jumped on the band wagon. bought 16 homes last auctions and got totally caught up in the bidding and bought some really crappy neighborhoods… He is whinning right now..houses he thought he could rehab for 7 to 10 are running 25k plus.. He just bought low end cheap against my advice and now he is hurting… But he borrowed expensive money he had to put out. So you get caught up in it instead of say hey these are no deals I am going to put my marbles back in the box and play another day… He had to spend…Just like the Hedge funds… And RJ is right on point these guys are going to end up with some really ugly situations.
You heard it here first… 2 to 3 years from now its going to be the hedge funds we are buying wholesale deals from, When they realize just how hard it is to manage a very large SFR portfolio that you paid top dollar for and bought in less than desireable areas.
Another reason why I started my very short term foreclosure fund.. We can give a great return be in and out of these deals in 6 months or less and not take the risks and give better Net yields than any one is going to get trying to go through al the brain drain of buying a rental in the states… One needs to constantly keep up with markets and whats working
I was standing next to rj at the auction he referring too. He and I are friends along with John chin and Andre waite
These comments are conclusions we have all come to…
There you go truer words were never spoken and dgirl is being kind inner city anywhere USA is no an appropriate investment for out of area investors Foriegn or domestic
WI SAH,
Happy to share,, the real issue here is that this is the first time in American investing history that large ( what we call institutional money) has ever entered the SFR game.
As the article stated traditionally buying these types of properties for rentals would be Mum and Pop business, with of course investors from all over the world wanting to get there little piece of America, and the 100 or so turnkey providers nationwide that make a business out of it… The Turnkey guys do come and go… Many try it and many leave the space as the article says its very hard and difficult to manage these properties at any kind of scale and far more expensive than other types of Real Estate investments that the Hedge Funds would have typically invested in… However with Commercial in the tank and much of commercial beyond Salvage the Big players are moving into the space.. I mean Colony is HUGE multi billion dollar company out of SOCAL and they invest in a huge array of business… My business partner from Napa used Colony to help him take Berigner Wines public they raised 220 million for that transaction.
I was fortunate enough 6 or 7 years ago to have Breakfast with the Senior VP and was talking about the SFR space and his comment was too small of money and like herding cats…( No interest we could not deploy enough money to make it worth our while) So fast forward and here they are buying units by the hundreds… I have had long talks with Bryan Granum who runs Blackstones SFR group,,, same thing they would never have looked at this 3 years ago.
I think they are a little late.. Because despite what you may see written they really are trying for 12% cap.. but will settle for 6 to 8% net… I have no doubt they hit some 12 caps but the portfolio with the mass they are buying will settle into that 6 to 8 and if it performs at that they will be happy….
So based on this activity in Atlanta, Pheniox, SOCAL, NorCAL, some of Eastern FLorida, this is where they are concentrating their buying activities…
In my mind they will drive prices right up to the point that unless you have mass like they do most of the single investors buying will be more of local in nature that want to own rentals long term.. those looking for returns that are much higher than Historical norms will need to choose very wisely.
This is not to say deals still can't be made in these markets they certainly can, its just going to be much harder and the prices are defiantly going to and have risen.
At the end of the day all of us that were buying for the last 2 years and have our portfolios set really see this is a great thing for us… I have no doubt I could bundle my Atlanta homes right now and sell to Colony,, I mean all my TWH homes are completely rehabbed 100% occupied and are generating 9 caps for my investors without my investors ever having to do anything but pick a home off of the net and wire me funds. They get their monthly interest check same day every month and exact same amount… For the Hedge fund to come in and by my block of 50 homes that are all set up I am thinking they will pay a premium as opposed to having to acquire these one at a time rehab get tenants etc..
TWH exits at a 8 cap and my investors yield will be close to 20% for them NET NET and of course in our equity share model we will do quite well also… So for me its a double edge sword.. Would I like to continue in Atlanta yes and I will however at my 2 to 4 houses I sneak out a month, those 2 to 4 though are smokin deals and we work very hard for them… Could I go buy 20 to 50 yes but I would be competing price wise with the Hedge funds and that would take all the fun out of it.
so thats my assessment of Atlanta today. And any market hedge funds are penetrating.
As for WI's questions about rent.. I believe that the article is using a little hyperbole and in talking with buddies of mine in the bizz the house they show in the article is really a 950 to 1100 rent… 1500 plus in Atlanta is a much better house and even for us in the bizz purchase price and rehab would have us in a house that rents that high more in the 150k range and certainly by the time it got through the gauntlet of, Bidding services, 1st gen, wholesaler, OZ marketing company the price would be up there. Although set this type up on a 6 to 8 Cap if you can get that high and they probably have the best CG potential for sure.
AGain I have no practical knowledge of affairs in OZ.. This transaction is so wrong on so many levels.
Would a solicitor not check title before having you execute.
In the States a Good Real Estate agent would have prevented this as well. They would have made sure title was clear or what you bargained for before releasing deposits.
Its ironic.. those that bank in the US say our banking system is archaic.. It sounds like your real estate transaction flow is a little the same. In the states you would know in 1 to 2 hours what is owed on a house.. And if you did not have a title co do it for you for free. You can go to county records and pull it up on the Microfiche machine in a matter of mintues.
Sounds like this is going to work out, Like the other poster said go get you deposit back.. And count yourself lucky. I know moving is a hassle but it sounds like this is a bad deal. Unless of course the lender is going to take a 450k short sale which in OZ from what I hear is probably not likely.
Thanks for sharing got to watch out world wide.
Not being from your country,
So I am just throwing darts here, However it seems to me the Seller has some real liability to you on a personal level,
IN the States this would be fraud not to disclose such a major contractual issue.
However for 200 dollars you could have a title co pull title and have found out about this secondary lien in 24 hours.
I hope you put no cash up front and your only out the monthly payments as at least you got the benefit of use of the property.
If you put a chunk of cash down then this is a real bad scenario.
If the property was worth 1.7 in 2010 and they were selling it to you for 1.0 maybe it was too good to be true.. As I did not think your market devalued to the same extent we did in the states.. Were this value compression was common and even worse in many areas.
How much cash did you give them up front?
Amazing: is all I can say…
I guess it show how tenuous it can be to own property from that far away then have it not live up to your expectations.. One just gravitates back to the only contact they know.
I would file complaints with Government agencies,, especially ones in your country, Followed by the Department of Real Estate in the States you bought in.. Along with the FBI.. this is clear cut fraud embezzlement etc.
Demetruis Mathis was just sentenced to prison in Mississippi for taking 25k from a Norwegian investor.
One thing that virtually no companies do in the US and its a law in every state is to provide a Property disclosure document prior to settlement.. I bet the only people that have received those are ones that bought threw licensed RE Brokers. Anyone buying through a service or marketing company my bet is they did not receive one. This fact will give you legal standing, and if you had bought threw a licnesed RE broker you would now be bringing suit against their E and O insurance carrier and probably got all your money back.
JLH
Kyler,
Atlanta keeps going like it is and I will be selling to the herd… The hedge funds are very tough competition. but the way the auctions go there NO one can corner the market. Now these hedge fund types they are pretty smart dudes all Ivy league trained Wharton , Harvard Stanford etc etc… And they are concentrating on markets they think will go up in value.
1. Atlanta
2. Phoenix
3. California
4. vegas ( not so much as an investment but they like to go their to party)
I think they will take a pretty steep learning curve in Atlanta… I don't think the houses will rise much above 100 to 125k.. new construction will compete with those and everything being equal new construciton will crush existing Stock.. This is one of the reasons I personally did not like Texas because the price point was double or triple Atlanta..No real room to move in Texas new construction does and will Keep the Texas values static for the next 5 to 10 years and maybe forever.. Too much cheap land and the least restrictive zoning codes in the US.
CA is probably the best play of all,,,, If you know exactly were to buy, Some of CA will flounder other parts could do really well on the rebound.
You will see on my salutation that I have put together a foreclosure fund… This is going well and is intended to do mezzanine financing for ist Gen wholesalers or Turnkey companies…
All my years lending to these guys based here in the states I have a stable of half dozen or so of the most successful and ones that have internal capital, we are just helping them leverage,, As prices rise and my TWH model starts to fade as I can't get the properties for a good enough price… I will find myself back in the finance game. Only I have developed a new strategy that I think is really quite beneficial to both ourselves and our clients….
JLH
Nigel and precise
I have been preaching this same mantra about cheap houses for the last year and a half.. 980 some posts worth.
Precise,
In older established neighborhoods what you describe as rehab is my standard.
First thing I do is new sewer line from the house to the street… All new pex plumbing.. Up grade the electric box if needed.
new roof.. Although sometimes I will do an overlay.. But only one. All new fixtures sockets electrical plates. And plumbing fixtures. And why will some people ask.. Well because our tenants in the states are complainers, And so you want everything that is mechanical to work so your not getting killed with survice calls…Its not as bad for me since I own them all and my service guy works for me so everything is at cost.. but if your relying on a PM Service calls will make or break your investment if you honestly track them… Most people after a few years have no clue as to what they are putting into the rentals they don't want to look for fear of having a stroke:)
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JLH
WI
I do believe the stock that I have bought and I am thinking you bought will come back pretty easy to the 90 to 110k range. And most of my properties all in with my TWH model are at 40 to 65k. with an average of about 50k.. Sq FT is not a huge factor with resale,, its location and monthly payment for those buying starter homes.
builders that are in the business will build for about 50 a foot plus the lot… But lots are super cheap, I bought 7 half acre lots for under 5k each a few months back and this is in a neighborhood that had 350k houses that are now about 225 to 250k. In one of the best sections of Henry county,,, I think buying lots RIGHT NOW is one of the best investments anyone could do in Atlanta,, I would not be chasing the rentals up into the 80 to 100k range.
The houses that you and I bought are really built as cheap as possbile.. vinyl, cheapest cabinets. counter tops carpets siding etc. They look OK but thats it.
We build in Oregon for about 65 a foot.. But thats Hardyplank siding Not vinyl, Granite counters custom cabinets upgraded flooring.. 9 foot ceilings,, Not the 7 and 8 you see in Atlanta 30 year Arch roof etc etc.. The only upgrade is Aircondioning in the south of course is standard.. ITs an option in Oregon. And our building permits cost 25 to 35k per lot.. That includes sewer and water tap park fee transportation fee plan check fee etc etc. In the south building permits rarely run over 5k.
There is nice new construction now that is selling in ATlanta burbs in the neighborhoods that you and I invested in. these homes are priced at 99 to 119k.. My partner there is building a few at that 119k.
I do not think these houses we are buying will peak much above the 100k for the reasons above. buyers will buy new way before they buy a house thats been used as a rental..
I think this is one thing Most Off shore investors do not realize… To sell retail you need a retail rehab not the rental rehabs that are common.. Big difference… I plan on putting about 5 to 10k into my homes if I am going to retail. them.. New cabinets granite surfaces Stainless applilances upgraded fixtures throughout etc etc.. ( although owning the Hardwaresupercenter.com) I get all those below cost. So I save a good 1k or better per house just on hardware and plumbing and lighting.
Hope that explains my thought process.
JLH
WI,
I would venture to guess that these are the reasons for change in Tactics
1. these C class properties by and large are not performing anywhere near the representations that were made and I would bet quite a few are just total losers vacant trashed and no hope.
2. As has been well documented the better inventory in Atlanta the wholesale prices have just about doubled and their is fierce competition now from US investment companies with virtually unlimited resources and happy to make 6 to 8% yields and are banking on CG. Even 12% gross yields are going to be a thing of the past on houses you want to own..
3. To get inventory this company needs to go to the other end of the spectrum.. However I have no doubt there is still significant mark up in the properties you mentioned, the Nicer properties in ATL like these that you list are bidding at 60 to 70k at auction.. most take 15 to 25k to make rent ready. So probably 40 to 60k in profits to be split between all the parties, Auction Buyer, the next generation wholesaler, then the OZ marketing company and if there is a US counter part.
In Atlanta you can still find the diamond in the rough if your off shore investor.. And guys like us that buy at court house steps can buy our 3 to 4 a month However it takes a team of people and a lot of work to buy at the court house steps. YOu have 6 different attorney firms Crying sales at the same time and 40 to 60 people all milling about wanting to bid. YOu have private investors. YOu have bidding services that bid for the Marketing companies, YOu have Marketing companies that bid for themselves. You have the hedge funds. I saw one Chinese group spend I would say 1.5 million in one county last Tuesday..
Keeps going like this I am going to be a seller far sooner than the 3 to 5 years I had previously thought.
JLH
Ryan
Just missed you in Atlanta I was there at the auction on tuesday. What a zoo.
On the nicer inventory the hedge fund buyers were bidding properties up 20 to 40k per property higher than we paid for thom 6 months ago just like Pheniox, actually one of the Pheniox bidding services was at one of the counties I visited.
Premier is a high pressure boiler room operation, that is very good not sure it's good for the retail client though they sell mentoring packages for up to 40k and that's just to mentor a person on how to buy a rental.
Ryan
Good reply. Doesit frustrate you competing with non licensed companies
My fund is up and running concentrating on west coast
Ried introduced me to a so called money raiser in new York or Boston and this guy was just out to make a few biucks providing an off the shelf ppm.
Keep up the good work… Inventory is going to be an ongoing issue for marketing companies in oz
Oz investors have pretty hi expectations of returns and in certain markets these are eroding fast.
You ever been to premiers operation they are really good at what they do:)
Happy Hunting:
Try to follow Karina's advice and buy as new as you can afford.
As a rule I have not bought anything older than 1990 in Atlanta and 75% or more are 2000 and newer.
55 miles out of Atlanta is a pretty long way way and in most instances is probably not considered Metro Atlanta.
thats an awful long commute for anyone working in Town.. 100 miles a day or so.. So please keep that in mind as well.
I think the sweet spot is 20 to 30 miles out of down town.
JLH
Tash,
I think your missing Karina's point she does live and work in Atlanta, but is Australian I believe.. Same with the TRR folks.
There are far worse characters out there than these 2… No one is perfect in this business my self included.
I do agree with you whole heartily about buying prime over sub prime…
And to many West Coast investors ( of which I am one) anything not West Coast or NY or Boston is Sub prime no matter were it is.. Just because the prices are so low. Those top shelf markets you describe above though are worse than OZ for cash flow… one must put 50% or more down just to be neutral Geared.. Average sale price in SF is probably in the 750k range. In silicon valley cities like Cupertino its 1 mil.. Palo Alto 1.2 to 1.5 and so on and so forth.. But rents do not go up exponentially with the price of the property.. Its a completely different kettle of fish.
And I defiantly agree with you on Projected returns that are represented by every turnkey company… These are all projections and not actuals so there is no way to predict ones return.. And key elements are left out or grossly under stated.
This is Where Cheeves and I have a meeting of the minds. Once you have a history of owning these properties for many years you get to know the numbers.. And for the OZ investor if they have to travel to the states just to over see there property heck that is half of a years income on one property..
We had this discussion before buying one or 2 props in US and having to travel there and check on them you will never even get to 10% return. because of travel costs.
Atlanta is nice but it would not be a travel destination more than once for me if I was coming to the US for holiday… Much nicer places to visit and a lot of variety, And Texas you can just forget that god forsaken place.. its flat hot humid and there is monster storms there LOL>
JLH
here is what has happened in Atlanta in my ever it to be humble opinion
1. Values plummeted to un reasonably low prices in the panic.. Those like WI who jumped in are going to benefit. My company TWH is going to benefit and so will all those who pulled the trigger earlier and saw value and moved to purchase as long as they bought the right properties in the right areas and did not get ripped off on the purchase., I was shouting from the roof tops 18 months ago… And at that I purchased just at 45 homes at the incredible prices so my TWH clients are very pleased as we start in a year or so to sell and take profit.
2. With the prices so low some of the larger Wholesalers pulled out of the market they were able to secure institutional investments which allows them to keep the properties and not have to flip them to regenerate cash.. So supply side went way down. One of the largest foreclosure buyers in Atlanta cut off all their on shore and off shore marketing folks last June.. I was in their office in meetings with the head of that department and he was retooling himself. I brought one of my buddies down from Portland and he is averaging 6 to 10 homes a month at auction in 7 counties and keeping them all.
3. US hedgefunds and other very wealthy types have moved into the market and are bidding properties way up.. they set a 6 to 8% Cap rate.. and at that they can pay far more than we all enjoyed a year ago. this started in Vegas and Phoenix about 6 to 8 months ago.
4. Foreclosures and subprime have had 3 to 4 years to move through the market and it had to slow sometime. that sometime is upon us in certain markets… Atlanta does not have the same Robo signing issues as West coast. so foreclosures get prosecuted fairly quickly. 60 days start to finish.
So yes if you have the mind set of 15% net returns in Atlanta that ship has sailed, and if you still want to buy there and get sucked into as Karina kindly calls older inner Atlanta ( which is really just a Ghetto like Detroit) you will find yourself with a house that will be a money pit..
I started buying building lots, These are shovel ready last year… And got some really smokin deals… I think this is a great play.. NOtice how your seeing guys LIke Nigel all of a sudden talk about new construction, well its going to come back and its starting a little sooner than one might have thought. And that will be my next play in Atlanta is building new homes.
So for me once I can lock in a nice profit and that is coming real quick in Atlanta if not already here I am selling, can;t make a profit without selling… Once new construction starts in Atlanta the used stock will not be nearly as saleable as it is today.
Remember you heard it here first. lesson learned if you can take profit take it.
JLH
5.
NIgel
Agreed… New construction in the right markets is finally coming back.
Even Atlanta..
this has always been my issue with Texas used stock.
The question is it better to buy TExas were values by and large held, ( although there are still deals in foreclosures other wise you would not have turnkey guys offering them as we all know there are profit layers involved so not all TExas property held value any of the turnkey stuff comes from foreclosures and then is marked up)…And because new construction can be built so cheap it competes with used stock and buyers will buy new over used all day long.. Especially since they will not be neighborhoods full of rentals… Just simple logic that one.
Or is it better to buy markets like Atlanta Vegas Pheniox California in areas were values dropped 50% and more and we hope that values will return to somewhat of a norm.
In Texas values have to Appreciate above the Highs Since most cash flow Texas homes are 75 to 125k at least once bought through the rehabber and marketing companies were these other markets got into the 30's to 50's. With the same rents…
Then the other issue with Texas and your correct you can build new there very cheap and new sells…
Now not saying people should run out and buy new construction for rentals… But if your talking about helping builders that could be a good play as long as the builders can be run through a very exhaustive credit background and banking critera.
Is very common in the states for builders to bankrupt one company and just start up another LLC and move on down the road. VEry common. And a lot of them could not help it they got caught with inventory in 08 that could not be sold.
Lots of issues to work through when your helping finance builders. And I am an expert having done so many thousand of rehab and NEW construction loans.
You have to fully under stand the mechanics lien laws of each state. So many builders are using draws from new projects to pay for homes already built and sold.. Bad investment in new construction scheme is a fast ticket to loose all your money guaranteed. So investors must do an amount of Due Diligence far and away more in depth than just buying a rental be it cheap or costly.
Google Dan Doyle Honolulu Hawaii he raised money from investors for Texas and Mississippi new construction. And ended up being arrested by the FBI.. And this is just one of hundreds.
Good luck with the new construction,
Slowachiever
I love the comment "insruance broker turned financial advisor" that is so true here in the US.
they sell you life insurance, Annuities, one product after the other.. really high commissions with residuals.
I just presented my TWH model to a group of them.. And spent 5 days on a cruise ship with them. These guys focus on one thing and that is what the parent company will allow them to sell.. Just like if you go to a Toyota dealer, he is going to sell you a Toyota and not tell you how great a Range Rover is. LOL
I think there is opportunity in the commercial end its just you need to be sharp sharp sharp… there is a reason these projects failed and they are avaliable to be bought again, someone failed at running them.
Now to be fair and balanced.
Many a good project went like this.
Most commercial paper in the US was written at 5 year calls.. Everyone buying up this stuff in 04 05.. with no care or thought that the lender would not extend the loan again.
GFC hits banks will not extend and want to be paid off… No other lenders are lending Owner has an operating business but cannot come up with the millions to pay the loan bank ends up foreclosing not because of lack of payment because the balloon payment. So yes there are those deals out there.
There are also many many commercial deals especially in Texas that have no hope.. One needs to only drive through texas and see out lying areas were the downtown commercial is all boarded because someone built a new walmart at the edge of town and every business moved.
And when we look at values of Reits remember these are paper gains no one sold anything to create the gains. Rubber meets the road on a liquidation.
JLH
),, and takes out the huge risk of management and Picking the right property… RJ did do well in Henry but flipped most of the houses instead of keeping them all… But no one had a funding mechanism to do this 2 years ago thats what made my model so unique.. WE could keep some equity albeit 50% still make some cash flow but give our investors the bulk of the cash flow with little to no risk for our investors…
