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Interesting post:
Caveat I have not read Steve's offering in detail so if I was reading between the lines. Looks like Steve is raising money for a US private non traded REIT that will then begin or has been buying commercial properties in the US.
Steve is thinking the commercial investments are where the SFR's were 3 years ago. And Freckle is still negative on the US economy on a macro scale.
There is opportunity in all of these arena's. The trick is knowing WHEN and WHERE to invest. One can buy commercial properties all over America for next to nothing and in 10 years time they will still be worth next to nothing.. Just like buying SFR's in the Ghetto's of the big US cities they will never be worth more than 5k to 20k ever.
I have a friend from the Bay Area ( San Francisco) that is pretty astute investor he likes Phoenix and timed the sale of his SFR's very well ( sold out in 07 and 08)… Lately he has been buying small strip centers that are 70 to 100% vacant. So for the short term he is not getting any cash flow, but there is no way to know if this is 1 to 5 years before they bounce back. He if he is right and they do bounce back he will have some nice gains, if not well nothing ventured.
If you take Retail and Office space in the best markets of the US you can still find 8 to 10 caps.. However anything above 10% returns is total speculation in my mind. An investor will have to buy something that is not performing now and turn it around or hope that the Micro market bounce's back.
Its one of the great things about the SFR's as long as your buying something half way decent people need a place to live, Business if they can't make it won't open and those that own these types of properties just sit there with vacant units.
I personally own 2 commercial buildings here in Oregon,, and have seen it first hand. Both of these units have taken me years to get tenants, and I still have vacancies… One property I am turning the offices into apartments.
Bottom line in my mind is you need some pretty astute leaders to pull off buying commercial IE retail Office industrial in areas were they are selling at huge discounts to replacement costs. Thinking that the strengthening in the market will just turn them around. And will generate 15 to 20% cap rates…And there is intense competition from the big players for the best markets were the market will bounce back just matter of time.
I have no doubt this can be done but it will need to be done in the very best markets we have to offer, and in those markets there is competition as I stated above, but plenty of room for new investors.
There is one project here in Portland were I live called Amber Glen,, it is about 250 acres and has already been developed out with streets and was to be an office retail complex. The Retail has done fairly well, the office is terrible, Big Reit from NY bought it all about 3 years ago for about 1/4 of a Billion,,, They are now in talks with the City to start tearing down Office buildings that are 5 years old and never were rented out and converting to Residential. I doubt this hedge fund will ever make a profit on this deal much less 10 to 20% annual returns. And the big hub bub when they bought 5 years ago is they could not go wrong because they were buying for less than replacement value.
So I wish Steve the best, and I am sure he will have some winners but he will also have some that don't pan out. Just like the rest of us that speculate on the markets.
Lastly if the US economy implodes I will be the first one to tell anyone who will listen that the FRECKLE predicted this long ago
We are starting to work on a few funds but we are taking different approach and setting them up ultra short term with nice returns that over a years period of time will out perform owning rentals be it commercial or residential.. We are very excited about this.
Jay Hinrichs
Well I think this is where I chim in and say " told you so" 4 to 5 months ago…
I think all good advice and opinions in this thread… I will say though that some of my most profitable years in Foreclosure buying were the mid 2000's in a very hot sellers market.
There are still deals just NO low hanging fruit which is what a typical OZ investor that needs to analysis fly over here and then make a decision was used to doing… Houses just don't wait that long.
I have been Picking up some multi as well… Subject Too deals… However again you talk about PM issues, buy lower end apartments in the cash flow markets… They are far harder to manage than single's.. And great for Cheeves and I who are on site and can watch them… Private investors need to be very careful. turn over in Apts is annual for 75% of the units.. So if you have a PM doing their normal thing your cash flow gets crushed.
July was our best buying month in Atlanta we got 5 props that we love in the areas we work.. And at the older prices… I am considering flipping them… AS WI says things just jumped 20k per door there this last 45 days. Court house steps saw craziness in the AUG. auction…..
What does everyone think about this new format…. Where is the major titles @ Like Offshore investing …. REno's… etc etc.
llovehouses,
Can I surmize that you had real Cash equity in your home so that a drop of 100k leaves you with a value over your mortgage???
Are Ozzies at this time finding themselves "underwater" vis a vis what they owe and what the property is worth like whats has transpired in the US…
Once our decline started and then feed on itself,,, the US expierenced the "stratigic foreclosure" those who chose to walk from thier homes even though they could afford the MTG payment… the rationale being I owe 500k on this house thats worth now half of that… I can rent for half of my payments and because I am in a state that does not allow defiency judgements ( I am out of here the bank can have it) this was a huge issue in Vegas and Phoenix as well as California.
What is a banks recourse in AU to a borrower that just decides to stop paying and moves say to Georgia to start a RE spruiking company ( Just kidding) but not really…..
