Forum Replies Created
well we are on the love you side of the equation
All very good advice
welcome to the world of Real Estate in the US…
If it becomes a situation like the US were millions of homes are under water or worth less than the mortgage the banks will have to come up with a program…Unless folks in OZ by and large have enough cash reserves to pay off a property that is underwater.
Same can be said of the poster children of the US market same era.
1. Rochester NY
2. Dayton OHio
3. Youngstown Ohio
4. really anything Ohio
5. Detroit
etc etc
Cheeves,,
I have posted these same comments now for a year,,, virtually verbatim
One of the major issues with the OZ investor is many of them have leveraged there OZ property be it investment or personal residence to buy in the US… they pay about 7% interest on this.
So they are buying in the states looking for those 15% net yeilds and again who gives a good darn about Gross Gross just is not used here in the states…Its net net net…. Who cares if you gross 20 and only net 0 were does that get you.
so any way… Thats the reality for a lot of these investors if they thought for one minute they would only get a 7 to 9% return they would just stay home and would not come to our sand box to play.
I have seen that in my TWH model other than the doctors from Perth I have not had one investor from OZ interested in 9% WITH EQUITY on top… Don't think they get that part… Its always the same thats great and I will invest with you if you give me 15%
don't get me wrong I enjoy this banter… but there are going to be some sad faces when the historic numbers flush out.
None of these people buying SFR's have any historical data to go on like a commerical property…. Your buying a empty house that needs work and is not rented.
I do beleive the there are some that will get above 10% espcially some of the early Atlanta folks…
However your spot on with Detroit and the really high intensity management areas… Never going to happen in a thousand years. period. Not at what these people are paying for them… My Detroit boys that I run with never pay more than 2k for a home put maybe 5 to 7k into it then rent it they can absorb the issues.. But the turn key buyer paying 25 to 50k they are sunk before they start.
And its like some of the poster that bought through TRR in Atlanta who have a pretty good rep…. But still it takes them months to rehab which should only be 2 weeks outside and months to tennant most of their clients are hugely negative geared first year and then the real management issue happen… in years 2 and 3… Even though these are nicer homes that inner city there are still issues with PM , stealing , tenants etc etc..
I like to say look at this nice foreclosure with the before pic's and most of these were owner occ… How can a 5 year old home need 15k in work because thats just how they live imagine them as tenants.. takes an iron fist.
Good post.
Alex call me
I mentioned Cairo in case anyone has been there,,,,One just fell over on top of another you talk about Abject filth holy moly is N. Africa ever dirty and ikey.
Even in San Francisco you have Sec 8 we called them the Projects…These were mid to high rise Cairo style apartment complex’s which were as you describe above Alex drug infested gang banger areas…
1. Candlestick point – Hunters point
2. McClaren Park
3. South of Market (these are the ones OJ Simpson was raised in)
but its all subsidy housing from some source and the exact same environment… Go 5 blocks over and the house’s start at a million bucks.
JLH
I think they were artificially too low to begin with….
Emma
Not sure what our talking about,,, all the turn Key spruikers that put no maintenance reserves in their numbers or some really low number that is not reality
Are you saying even after a reno there is on going maintenance costs with our US rentals… And that if they are in areas with 4 seasons it could even be more than one would expect.
And that rain and humidity are tough on houses…. IS this what your saying????
I Know here in Oregon were we have no real humitidy but lots of rain.. Houses need annual maintenance even if they are new builds.
This is global warming…
the Pacific Northwest just gets more temperate.. We are having 70 to 80 degree days now…
Thunder storms on the other side of the Cascade range.
Some fools Tied 300 party balloons together and a couple lawn chairs below and launched from Bend Or destined for Montana.
They made it about 30 miles East when a Pop up thunder storm appeared right over them and brought them to the ground they were lucky to not be killed.
we get occasional T storms here but no Twisters with them… Just thunder lighting and heavy rainfall or hail.
There was a big one that put the Lanceair airplane manufactorer out of bizzness 6 or 7 years. Ago they have 40 brand new 600k airplanes on the ramp at Bend Or.. facility and a huge thunderstorm with golf ball size hail damaged everyone of those aircraft it was a huge problem and the company never recovered and was then bought by Cessna and shipped to kansas… Its the Cessna Corvallis for those interested in aviation.
One of the funds I know that just entered the Atlanta market.. Was targeting properties at 75k to 125k at the auctions…
happy with 6 to 8% net returns or a little less…And the quality of tenant should be better although rents do not grow exponentially with value.
Otherwise we would all be buying 1 million dollar houses And renting them for 10 to 15k a month… In our market a Million dollar house will rent about 5k… So unless its corporate housing thats about the top your going to get for rent in our area.
SF NY etc those numbers double and triple easily.
Section 8 is different in each state.
Here in Oregon there is very little of it.
I recall a funny story:
I am down in Gulf Shores MS… with my Oregon Banker looking at a 300 unit apartment that got blasted by katrina.. The ocean surge brought standing water 7 feet deep in all the down stairs units… The entire complex was vacant.
So my banker as this question to the RE broker showing it to us.
He ask’s ” what % of these units are or were rented on HUD Sec 8″
Answer: the broker is a little puzzled and in his nice southern Drawl says well 100% … My banker and I just looked at each other.
In Oregon you may have 5 to 10% Sec 8 at the max same with better parts of CA…Now I am sure it was not 100% but I bet it was 50 or better.
4 months to settle a home is a really long time…. I can see 2 reasons for this.
1. they were buying it as a short sale and it took that long for the bank to process then they flipped it to you….
2. bought at sherrif sale and had to wait that long for the deed…
YOu need to be very careful with insurance if you settled in Dec and only just got it rented… And you have a standard policy you were without insurance after 2 months… If a house is vacant more than 60 days the policy needs to be amended and extra money needs to be spent… Vacant homes that linger that long with no one in them are VERY high risk for Vandals.
kyler, I do not think many banks are going to go into the PM bizz with their inventory,
but they are rehabbing houses more and holding tighter on price on the nicer inventory,,, that means the 200 to over a million in our market…
Its these new hedgefund type investors that are going to take a stab at larger portfolios… I got another call this week from a rep of one they want to buy 500 to 1000 homes in bundles… thats my exact thought and conversation how are you possibly going to manage that many homes all at once it would take an army to do it correctly.
Mango,
If your talking about the US authorities helping you with a refund for appliances that is not going to happen.
The only ave you would have is Small claims court. and you need to be personally present no Attornies allowed in Small claims.
Its just like Judge Judy if you guys get that show… plantif and defendant telling their stories…In your case the guy would probably not show.. and you would get a judgement… but whats that worth in all likely hood NOthing
unless you can collect in OZ…And reading the tea leaves it appears to me OZ business people hid behind company names or corporate names… Then just disband them at will with no personal exposure then start up a new compnay and do it all over.. is this correct?
Freckle wrote:Anyway back on topic…Some months ago I ran across a graph that showed Chinese power consumption had suddenly gone off a cliff. I postulated that China’s economy hadn’t soft or hard landed but may have simply crashed (comparatively not literally if power production was a proxy for economic activity).
It appears that assessment might not be too far from the truth if this ZH article is anything to go by.
http://www.zerohedge.com/news/turns-out-china-lying-about-everything
Turns Out China IS Lying About Everything
Record-setting mountains of excess coal have accumulated at the country’s biggest storage areas because power plants are burning less coal in the face of tumbling electricity demand. But local and provincial government officials have forced plant managers not to report to Beijing the full extent of the slowdown, power sector executives said.
Chinese lying say its not so
I think that one can infer from this that China is in bigger trouble than many realise and if it’s as bad as I think it is then Australian resources are in for a rough ride.
If you only lost the cost of appliances count your self very lucky and move on… not worth any more effort.
contact me if you have any more troubles in Atlanta we will check the property out for you if its in an area we work
Yes I think your already seeing prices rise in certain markets,,,,
And yes, it will be interesting to see were the rental market shakes out in these areas that are seeing what was traditionally homeowner stock going into the rental pool…Alex has touched on that.
For TWH we base are model on consertive rent numbers… For instance many of the homes I see in Metro Atlanta that others market and speculate on rent at 1000 and more… We rent today for 850 to 950… I like being under market it allows me to cherry pick tenants alot like Emma talks about… As well as retain them… We can operate successfully if rents dropped another 30%.. We would not be making any cash flow, and since we self manage we do not have management fee’s to absorb or lease up fees etc etc… And our model is set to perk along at a 7 to 9% return vis a vi rental income….. So we are really conservative and positioned well in the case of a rent reversal.
My point is the OZ investor that borrows at 7% or so on their personal residence in OZ Plus LLC fees tax returns and all the other what we call soft cost add up to another 1% or 2%… So to be positive geared in any fashion that mitigates the risk… Most OZ investor want to make 12 to 15% NET and 20% or higher gross and thats what gets advertised over there… So my point is if rents fall or are never what was represented US investments can become slight positive to big negative gear…
Then you take the case of some of the folks that really run into problems like the Gentlemen who was on the TV show there and he has a large number at risk… Not only no income but loss of capital.. And of course I have no way of knowing if this was just after tax cash he had…. Or if he borrowed against his home to buy the Detroit and Youngstown properties.. But you can see where someone could get in a pretty big mess.. US investment is a total loss and there is still debt on the home in OZ… And then if the Home in OZ drops in value at all which I am hearing is happening next thing you know any equity or cushion is gone and your upside down on your house like so many americans….. Then the banks get skittish like they did here and it can be a cascading effect
To add to Kyler's comment.
Banks are also working with the bigger institutional investors that Alex and I have been talking about packaging up 100 to 500 homes, that will all be used as rentals… So many of the shadow inventory will never see the open market… It will be sold.. and used as rentals… Just like all of us Little guys are doing. The danger for the smaller investor in certain very popular markets, is when these institutional guys get their properties on the market they are looking at 4 to 8% returns and happy as a Clam, So in certain areas there could be price wars in a negative manner for rents…. Supply Demand… So its definatly something to keep in mind. If I was an Ozzie and I have borrowed against my home in OZ and need to make a certain spread thats a very dangerous scheme in my mind… Add that to buying the wrong property to begin with and I can see a lot of pain coming the way of the OZ investor that has no real cash and is just leveraging equity.
Market has bottomed… On the retail side its really starting to take off in most markets.. And then you have Vegas that has that Robo signing bill so Its an anomoly and stay tuned for what happens there.
JLH
One needs to be a licensed RE broker to manage property legally in ATlanta… So first steps is to see if this person or company is licensed… If so file a complaint with the Department of Real Estate they will be to his office in a matter of days…
If the property is in an area we service we will go check it out for you and give an assessment pro bono.
