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jayhinrichs
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June 8, 2012 - 1:59 am
I want some of that 40%
Do tell
jayhinrichs
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June 8, 2012 - 1:48 am
WI
Fine minds think alike
Appreciate you giving you point of view I believe the points are taken more seriously by a fellow countryman with experience
As well as a dash of reality, for every investor that started in the uUS with your methodical approach, there are 5 or 10 that just make the leap believing the promotors be it Aussie or US will take care of everything and investor will have to only put in minimum effort
Jlh
jayhinrichs
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June 6, 2012 - 7:47 pm
My point is not should I or should I not invest!
It’s the way these guys are structuring this.
You cannot buy a single hotel room in the US.
This ia a limited partnership tenant in common set up
Other red flag is the materials would infer that these projects can be built prior to sewer water and county approvals this HIGHLY suspect as being false
jayhinrichs
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June 5, 2012 - 3:33 pm
This is why I know so much about Lehiegh, and coral, I visited there in the early 80's.
And my dad was one of the larger land developers in N. CA.
Same theory as Lehiegh.. sell to those who want to retire in 10 to 30 years….
In SOCAL you can find their versions of lehigh out in the inland empire and High desert, when 2 million lots were platted between 1915 and 1930,,, they still exist on paper.
JLH
jayhinrichs
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June 5, 2012 - 3:30 pm
Cheeves
when we flew the client up from LA to Norcal usually 30 people or so… on the bus drive over to our project,,, our driver would point out the Negative nancy because they were already starting on the drive over.
We would do the old Vadilium Hook… Walk up grab them by the elbow pull them aside tell them nicely we did not think this was for them and there is your ride back to the airport your going know..
So we had 2 buses coming over… A town car for the ones that were going back before they even saw anything… this worked well.
We would sell 10 to 20 properties in one weekend….
Of course this was land, and my dad owned it all, so we were also the bank… lots were 5 to 15k… 1k down we financed the balance… Good land sales men could make 2 to 3 sales a weekend and make a few thousand a week,,, this in the early 80's..
This is why I never attended college got my RE license at 18 and was making 4 to 6k a month my first year… Never thought I had ever seen that much money in my life and what would I do with it all…
Well 5 airplanes later hundreds of houses and other investments its all gone somewhere.
Just happy to have come throught he GFC still very well intack… I know my bank loves me…
JLH
jayhinrichs
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June 5, 2012 - 1:57 pm
You go get em Alex,
It really boils down to ADVERTISEMENTS for huge rental Yields… and those who want to beleive.. then it comes down to reality and the tween never meet.
JLH
jayhinrichs
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June 5, 2012 - 4:06 am
leonard wrote:
Hullo lawsjs and all readers. I don't consider that I have been ripped off as such but there are some providers out there that do it more effectively than others. For myself I would never deal with the same agency again or recommend them but I would with some of those I have mentioned in this response. Read and heed.
I purchased a property in Michigan and my comments only apply to my experience there. So think about the cost of a property. A $35K property with buying fees may cost you over $6000.00 extra equating to $41,000.00 for a $35,000 property through one agent. For that amount you can likely get a better property through an agent that does not charge fees for that same amount.  Think also about the cost of setting up an LLC. I paid $450. I have seen amounts up to $800 and as low as $50. So what is fair? Why the difference?Think also of the vacancy time on your new property.Some sites advise against buying an untenanted property on the open market. LISTEN TO THEM. I proceeded to purchase one such property and after paying over 6000 USD for the privilege. I was immediately forgotten for 2 weeks until I asked what was going on. I was then offered properties that had little relation to what I had told the agency that I wanted and was required to offer more than the asking price to stand a chance of being successful with a bid. I only had first option on a few properties and the rest were on a first bid submitted basis. I bid unsuccessfully on 14 properties between April and November 2011. Some bids were not even submitted on claims that the computers were down and my emails had been missed, another was withdrawn and in the end I was placing bids on multiple properties and waiting for up to 2 weeks for advice on whether the bid had been accepted and generally that they were not. There were a number of occasions when I had to contact the agency to see what was happening as there was a continuous lack of communication lasting up to 2 weeks and only restored after my contact. I was successful with a bid on a turnkey property but after reading the management agreement I passed it in as the agreement amounted to all care and no responsibility. I was astounded that any one could ever accept it. I didn’t but the agent didn’t seem to have a problem with it.

When I was finally successful with a bid on a property that required rehab the rehab did not start for 2 weeks after settlement and 2 weeks later it was ready for rent. Over this 4 week period the property was not listed for rent and it took another 6 weeks to find a tenant. One thing you aren’t told when purchasing an untenanted property is that it may take up to 3 mths (or maybe more) to find a tenant (in the good weather) come winter I expect that it may take longer so look at the return on your investment with an untenanted property and the ongoing maintenance and management fees on that property. All of a sudden that 20% roi is heading towards –ve territory. You have outlayed the cash. The bank is happy, the agent is happy, the management company is happy as they are still charging you fees and your cashflow is now in the –ve territory. Prior to finding a tenant my property has cost me over 46000 USD. I have just sent another $1500.00 across as there is still no cashflow and there are ongoing costs associated with holding the property . I could have purchased a comparable or better refurbished and tenanted property for less than that with no vacancy and instant cashflow and a lot less stress.Section 8 vs private tenants? I own a number of investment properties in Australia and from experience there are house proud people on low incomes and there are pigs on higher incomes so it is really a matter of the agent vetting the applicant effectively so I don’t see a problem with Section 8 any more than private especially considering the consequences of a Section 8 tenant losing the privilege if they do not perform to standards. The bottom line is only buy tenanted properties (turnkey) from agents that do not charge fees. There are a few; Property 4 Peanuts, Detroit Wealth and US prime that I am aware of (check them out I may be wrong). Management agencies charge up to four weeks rent to place a tenant so consider vacancies after the end of the initial tenancy and how long it will take to get a new tenant. I found a website that claims ‘the city of Detroit has a waiting list of more than 9200 pre approved families with Housing Choice Vouchers (HCV) who are currently in unsuitable emergency or temporary accommodation, some simply cannot find a suitable home’. The property manager I am with was proud that they had obtained a tenant after ‘only’ 42 days. As I was concerned at the prolonged vacancy I spoke with another agency, Metro Detroit Rental Experts and they claimed to be able to provide a tenant in 1-2 weeks so it is a matter of either having an active property manager or one who just lists the property and sits back and waits.(Taking your money in the meantime)I had considerable correspondence with one of the directors of Detroit Wealth (Mark Ijlal) and Metro Detroit Rental Experts (Chris Shaw) (both dealing with international investors) and I have reproduced some of their responses to my situation much of which was volunteered and not solicited. I have not used the services of either organisation but I would seriously consider it in the future based on their advice with no pressure for business. Please read on for some really good advice from Mark and Chris which I feel reinforces what I have attempted to relay here. Good luck with your investing.In summary my $33,000.00 property has cost me in excess of $48,000.00 and all indications are that I am fortunate to have a tenant.Should you want any further information you can contact me personally on email: g’[email protected]. Unsolicited advice from local Detroit agencies This information consists of that provided to me during correspondence with Detroit Wealth and Metro Detroit Rental Experts and relates to all the questions and experiences I had during my foray into the US property market. There are a lot of people getting less than favourable service and I believe that their advice is invaluable.The content of the advice conflicts with a lot of the advice you may find on various websites. The strongest advice I can give is to NOT buy untenanted properties on the open market.Detroit Wealth advice: never buy a property unless it already has a tenant inside OR if there is no way of doing it then make it a part of your contract that their fee (case in point over $6000 fee) is not getting to them till the property is closed, rehabbed and tenanted. Once people get paid, their motivation level drop to zero. Sad but true. They are on to the next sale instead of sitting and making sure that the property is delivered per promised: repaired and tenanted. I hear this every single day and actually have heard that story for 11 years now since I have been investing in Detroit foreclosures. That is why when I started Detroit Wealth – I decided that I will not sell, even though I have to sit on these properties for may be one more month than needed, any property which does not have a tenant in. We have 7 properties coming out of repairs in the next week. Every single one of them tenanted. The 2 I did last week on Piedmont and Coyle – both tenanted already and I have not even sold Coyle yet but the tenant is already in at $900 per month. To me personally, it is just so cool to be able to talk to an investor who is not here physically and know that they will have no surprises after they buy, that it is all done and done right. Very old school thinking but I am an old guy and it seems to work for me.I paid $450.00 for an LLC I have seen amounts up to $800 on some sites Response: $450 for forming the LLC is a complete joke. It cost $50 to form an LLC and it takes around 3 minutes to do so so making $400 from a client that you are selling a property and making money on that is just unbelievable. I know companies who are charging $700 to setup a Michigan LLC. We form LLC's for all our our clients in Michigan and they just pay State of Michigan fees which is $50.   Do not buy South of 8 Mile Rd Response: Warren, Grosse Pointe, Eastpointe, Harperwoods, Oak Park, Redford, Southfield and many more smaller cities circle the city of Detroit. You could be driving on 8 Mile Road and on one side of the road is Grosse Pointe and the other side of the road is Detroit. Same with Warren. Detroit is a very big city and like all big cities it has good areas where families want to live and less than desirable areas where nothing is going on for many many years. All of our properties are on West Side of Detroit. Why? First our office is in West Side of Detroit so we can keep a close eye on our client's portfolio and our tenants like the idea that their property management company is right around the corner. Second, Darrick is a third generation Detroitter (I moved here 16 years ago but grew up in Pakistan and lived there for 25 years) and he knows the City of Detroit in and out as his grandfather and his dad both lived and raised families in Detroit. I choose to buy properties in good areas in Detroit because I don’t outsource property management. Darrick owns Metro Detroit Rental Experts 100% and I have no stake in it but he is my partner in Detroit Wealth and we always thought that if somebody were to trust us enough to send us money from thousands of miles away then we have to repay that trust back and keep the management business and do it in house so we can make sure that these properties are being managed the right way. Trust me it is a pennies business. There are no dollars in it. 10% of rent collected is $85 per property but we need an office, staff to answer phones, internet advertising, tenant placement specialists to go out and rent these properties out – it is pain in the rear end business but something that we feel is the most important part of our business and hence we keep it in house and trust our own people to do it.
If you need help in finding a tenant for your current Detroit property – let me know. We get 30 to 40 leads per day for both Section 8 and non-Section 8 tenants and Darrick's company Metro Detroit Rental Experts (http://www.MetroDetroitRentalExperts) does tenant placement for many property investing companies both in USA and from overseas. No point in keeping a good property empty when so many families in Detroit are looking for good affordable housing. Some providers are claiming costs to set up a bank account which I had difficulty with and even HSBC in Australia doesn't make it easy to open a US bank account. What does it cost and how difficult is it to set up a bank account for a non resident? Response: There is no cost to setup a bank account in US. Setting up a bank account is a pain in the rear end. I agree on that completely. If you visit US – than it is easy. Otherwise hard. But getting an ITIN number just requires filling out W7 form and mailing it to IRS along with a copy of your passport OR you can ask for the ITIN number when you file your first tax return in US. The IRS needs a 'reason' to give out a ITIN and ownerhip of USA property qualifies as a legitimate reason. Either way no cost unless you want to hire a company to fill out a W7 form for you which is really an easy form to do.  Professional/buying fees As far as hidden fees as concerned – I have never liked it when a business charges me those. So I don’t do it either. Whatever it is – it is right here in black and white. Bluntness is not the best marketing strategy but it seems to work for me.   Let me know if you want to connect you with my tenant placement team. They charge first month rent as tenant placement fee and then 10% every month of the collected rent. Pretty customary fees but they do have 6 full time tenant placement specialists who do nothing all day but show prospective tenants properties all around Detroit.   I hope these responses help you with your decision to invest. There are issues here that don’t appear to have been raised on other blogs.

Ugh:
first comment when they say there is 9200 waiting on hud vouchers,,, it has absolutly nothing to do with suitable housing there is far more housing in detroit than there is tenants thats a fact……The city county only metars out so many vouchers a year, as funds allow has nothing to do with the housing stock and everything to do with money avalaible for the program.. So those wishing to get their rent subsidies sign up and wait there turn…
second: I am sure the audinace by now has figured out the RISK REWARD Ratios in places like Detroit…. Again nothing to do with the houses per se and everything to do with the neighborhoods, and sociodemographics of the tenant base.
throw in some huge amount of less than honorable PM types and turn key types and your investment by and large will never ever be what you want and will never get above VR and your expenses are always going to be past VNE…These by and large will be huge negative geared properties until such time as the investor finally figures out they made a mistake and just stop paying any tax's etc and let the property go back to the city for back tax's since the OZ is paying cash no lender to worry about.. NExt set of US wholesalers will buy these houses for 500 to 2k each at tax sale and the cycle will repeat to unsuspecting foriegn investors…
Sad but true especially in the areas of detroit that those in the know know not to invest in, big black hole and that is not a fruedian slip.
JLH
jayhinrichs
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June 5, 2012 - 2:38 am
In Oregon by law you are suppose to store the possesions of the dearly departed tenant… Me I haul them to the dump and will take the risk…..
Most of the south and mid west is pretty straight forward on evictions… California is the one where you can have real issues.. It can take you 6 months to a year to evict…
Also in CA and NYC there is Rent control… I don't think I have seen that mentioned here on this forum…
But in SF Berkley NYC there is rent control… Also in CA in Mobile parks there is rent control…
Rent control means that the city or county can fix the rents for years and you can never raise them.. Until you change the use or the original person living there moves.
So case in point.
One of my employees was raised in Manhatten,, Single mother raising a child.. She had a rent controlled building where her rent was fixed at 2200 a month…. for the last 20 plus years… once they moved and they were no longer there for 24 months the owner of the building was able to put it back on the market for free market rent. and it rented at 14k per month….
You can not sub let either has to be original owner and backed up by tax returns.
JLH
jayhinrichs
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June 5, 2012 - 12:20 am
righty O
jayhinrichs
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June 4, 2012 - 11:53 pm
Emma
Mexican Time share guys are the ultimate in close on the spot salesmen,,, Most from the Crimeshare business in CA and other parts of the US.
YOu want to learn hardcore selling just sit down and have a Cerveza with these boys and girls.
JLH
jayhinrichs
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June 4, 2012 - 1:41 pm
Just google,
Real Estate option agreement… in the google us .com
many examples will pop up
jayhinrichs
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June 4, 2012 - 3:40 am
simple wrote:
Home prices drop despite rate cut
by: LISA ALLEN
From: The Australian
June 01, 2012 10:47AM
AN aggressive interest rate cut failed to halt a 1.4 per cent plunge in capital city residential values in May, according to researcher RP Data-Rismark.
For the year, residential values dropped 5.3 per cent, with Melbourne contributing the worst performance, given its property prices dropped 2.7 per cent in May. Darwin dwelling values slid 2.4 per cent.
Apartment prices fared better than houses and the premium market suffered more than most.
"Premium dwelling values have fallen by 6.1 per cent over the 12 months ending April 2012 while dwelling values at the affordable end of the spectrum are down by just 1.5 per cent,'' Tim Lawless, senior economist with RP Data, said.
"Unit values across the combined capitals increased in May and they are up 1.3 per cent over the first five months of the year."
Sydney property prices slumped 1.2 per cent in May to record a median dwelling price of $555,000.
Of the capitals, Adelaide was the best performer with a 1.2 per cent increase in prices to a median of $370,000.
The trend in house prices suggested there was more room for the Reserve Bank of Australia to cut interest rates, Mr Lawless said.
these drops in values are hardly anything to worry about short term,,
Try living here in the states and seeing your home drop in Value 50 to 80% like what happned in some areas.
Even the best areas prices dropped 30%..
From what I understand of your country you have supply demand issues that preclude huge market swings…
You could have stagflation or just stagnation,,,, but if you have no land to build on and increasing population values should hold a little and not crash..
Question is what is the income to value ratio…. Are the high Aussie prices from Equity roll ups.. and if equity roll ups stop buying IE one that bought a house 20 years ago for 100 thats worth 500k sells uses there 400k as downpayment to buy 800k.
this is what fueled US, and of course NO money down liar loans. in the mid west and east coast,,, where prices were 150k and under as the average price… so payments are akin to rent.
Can Aussie wages support new homeowners buying houses at 500k… ???
JLH
jayhinrichs
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June 4, 2012 - 3:27 am
hey can someone summerize in a few paragraphs what this massland deal is.
here in the US options on RE are very basic first grade type of transactions.. the forms are right on the Real Estate websites that can be downloaded for a few dollars ( like 2.00)
I am sure there is more to this.
Maybe its this guy using all your small dollars to crate enough cash to leverage some deals then pay you out of profits of the transaction…
very curious to learn more…
JLH
jayhinrichs
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June 4, 2012 - 3:17 am
these happen every day in the US… within the confines of small investor groups and tightly held consortiums..
One can use a LLC and just have 5 or 10 members of the LLC and which is governed by the operating agreement IE purpose and how your going to run the transaction,,, One or more members are the managing members and have the responsiblity to the partnership.
the other vehicle we use is a PPM Private Placement memorandum… same theory little different structure.
Nothing criminal as long as all is disclosed.
I would think you OZZIES could benefit from this form of Investing in the US… Appoint a manager that actually knows the US intead of trying to DIY. could have merrit.
JLH
jayhinrichs
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June 3, 2012 - 5:46 pm
What we see here in the US vis a vi real estate investing,
Is just the total lack of regard for the investors safety,,, be it an Aussie Spruiker who has probably got spruiked himself by some US Spruiker its a whole big Spruiking world out there from what I can see…
I think by and large sites like this have done a pretty good service allow contrarion posts to allow potential OS investors time to pause and maybe check things out a little bit, as oppoossed to thinking hey whats 40k for a house in the states Not much..
I am sure and the end of the day no matter your means no one likes to throw 40k plus away. Plus all the heart ache and aggrivation that goes along with it.
JLH
jayhinrichs
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June 3, 2012 - 5:42 pm
Patanga wrote:
On the up side most of the information people learn at these courses is very relevant and helpful in regards to learning and getting started. In terms of whether the courses are value for money is more a question of how much well placed time and effort one can realistically invest compared to results.
On the down side the presenters should be made by law to not make huge wealth claims and they should also be made to disclose the percentage of students that spend thousands on the courses and either do nothing because they quickly realise it's not quite as simple to get started, or the numbers in terms of dollars required and cost of mistakes are too big, risky and or daunting.
The introductory hype surrounding these courses usually gives nubies a rose coloured perception of what they are going to achieve and I know of people who have lost their life savings when jumping into the market after doing courses that promise much. Take the rose coloured glasses off, be realistic and take a hard look at yourself before signing up is my advice. If your personality or track record does not lend itself to these kinds of ventures then you might be better off keeping your hard earnt money. It's a matter of buyer be ware and Do Not expect a magic wand wind fall result just because one has parted with a thousands of dollars and done a property or share trading course. Be parepared to put in lots and lots of hard yards after the training and be prepared to lose as well. It's a jungle out there.
Well said:
Education of real estate stock trading day trading all the other type of quote passive investments is just huge business world wide.. And make no mistake the educators make their money at these seminars.. And of course its how they make their living they are entitle to make a living…
No difference really than signing up for Some MLM type program… where only the top 1% of any MLM pyramid makes 95% of the money… If you get to that top its a great place… MLM makes their money on the ones that come and go spend few hundred to 1k bucks realize they cannot sell enough lotions potions or pills and fade to something else.
RE is the same way,,, here in the states its the no money down hawkers that really get them to flock in…And yes people do get started and do succeed.. but thats only a couple out of 100… So just know your odds. And what your tenacity level is your level for Risk. etc etc.
jayhinrichs
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June 3, 2012 - 5:28 pm
Alex SC wrote:
alanls wrote:
Propert4peanuts and The Foreign property Shop
For anybody contemplating purchasing an American property through http://www.property4peanuts.com
an The Foreign Property shop you should be aware of my experiences with the company's.
It should also be noted that they have applied to companies house to have
property4peanuts and 'The Foreign Property shop' struck off.
Investors should also be aware that they have created another company
called http://www.valueproperty.info to sell American property.
I purchased a property in Atlanta from them late 2009 and made the final payment
in February 2010. They were contracted to refurbish the property and provide me
with a clean title. It is over sixteen months since I paid for the property and
I still do not have the title. The title records are in the public domain and are
easily verified. The alleged refurbishment took over a year, far longer than
anticipated. I have asked for proof that the refurbishment was done but none has
been provided. I had photographs taken recently and it is clear that some of the
work that was supposed to be done was not done. They allegedly found a tenant for
the property however the tenant only stayed for two months then moved out for no
apparent reason. The property was then empty and a vagrant moved in
and the property was damamaged, I have photos.
I am in an inteollerable position as I am unable to do anything with the property
as I am still not the legal owner. It remains damaged and unmanaged.
Not only have they taken my money but not delivered a clean title, local
taxes are due on the property which need to be paid, if they are not paid the property
can be seized by the council and sold at auction for a knock down price.
I also purchased a property from them in Detroit. Although I have the title it
was not clean, taxes are owed for the year before I purchased it. The contract states
that outstanding taxes will be paid by the seller. I also have concerns over the
refurbishment, I have asked for proof that it was done but no documentation has
been provided. In fact there is no supporting documentation for either house
despite my numerous requests.
This is a brief overview of the situation. I have masses of supporting evidence
and much of it is documents that are in the public domain and beyond dispute.
To summarise, I have paid for a house but did not get the title. The property is damaged
but I am unable to do anything about it. There are outstanding taxes on both
properties, neither has clean title. Both properties are in breach of contract.
The people behind the companies are still trading but trying to close the old
companies and start new ones. I doubt if I am the only victim of these companies.
These companies need to be exposed in the public interest.
Hit me with private message I think you got something here to go after who did you send the funds to.
If this was not done through a title company , or Lawyers escrow account.
Talk soon
Alex,   let me know if your helping this guy….
If no deed has been transferred then he has an Equatable interest but no interest that is defendable.
The sellers the agents and closing attornies need to be contacted.
So many red flags.
1 year to do reno…
Also FYI it takes a few years 3 to 5 in most states to lose your property for non payment of RE tax's you cannot lose it year one.
Now given whats going on here it probably already has back tax's
<moderator: delete personal comment> This is totally unacceptable and unprofessional for any one in the business.
If you want to send me an e mail with the address we can do some quick research for you and get to the bottom of who owns it and the other types of things… I don't want to duplicate efforts with Alex, but happy to help if you need.
JLH
[email protected]
jayhinrichs
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June 3, 2012 - 4:20 pm
Emma,
stratigic default only applies to OWNER occuppied loans at the time of Purchase of the OWNER occuppied home… If someone bought a home in any state for a rental the Purchase Money clause has no power of law.. and a bank can sue on the note and go for a deficniency.
Just like any junior lender who is wiped out in foreclosure can come back and sue on the note as a wiped out Junior this is starting to happen all over the place..
YOu have investors buying these wiped out juniors for 1 Cents on the dollar triaging them to see if debtor has any assets. and starting to sue these people to collect…. The only releif from these types of litigation is a full chapter 7 bankruptcy… This is why BK attornies tell you to list everyone and everything you may have come into contact with financially so no one can chase you at a later date.
There is an art to chasing bad debt… the key being to not put to much pressure on in the beginning get your judgements.. then be patient let them restablish this is exactly what the IRS does. Also how bad credit card debt is handled bought and sold.
As for prices: that is one question my clients ask how long can you keep buying at these prices that make your fully managed model work. My answer has been depending on market 1 to 5 years and some markets forever.
Metro Atlanta pops back to a 90 to 120k market ( which is were is should be) then guess what I am a seller, we have all made a nice return.. And my investors never had to do one thing other than wire in their purchase funds and check there account every month to make sure the exact same payment each and every month has been deposited on the 15th… In almost all cases my clients will have never travelled to see the property they hold the mortgage over or even care too. This true sit at home and collect money saves them thousands upon thousands in travel fee's time stress dealing with managers all the other bull pucky that owners go through,,, "you just leave the driving to us" to the young USA guys on this site they may not recognize that tag line and the Ozzie's may not either… It was Greyhound buses tag line for many years….Sit back relax and leave the driving to US.
so Like I stated for all those that could decipher a good deal when they saw it vis a vi quality of neighborhood construction tenant price to rental ratio and invested in the US over the last 24 months your going to be very happy, Those that got spruieked well nothing we can do for those bad investments as bad investments are simply bad investments anywhere in the world.
Just Brain Storming here but if I had a Portfolio like WI;s here is what I would do. AS she admitted she has about 600k invested in Metro Atlanta and works it like a small business and is doing well because she is diligent to the extreme and has the time and energy and know how to stay on top of things ( this is a big deal a lot of folks are caught up in their jobs daily lives and just do not have the time or inclination to stay right on top of things) and being a day in time away and as such its a huge deal in my mind. Not much control you can exercise from the other side of the world….
Anywho..
If the market recovers like we all hope its going too, it will top out in metro Atlanta at about 90 to maybe 140 for the assets of the kind that we have bought and what I see posted by WI… The reason they will stop there is there is huge amounts of buildable lots that have been bought by builders in these areas for basically nothing 1 to 5k per lot shovel ready, I know I have bought a bunch ( in preperation for opening our vertical construction arm in 2015.
So contruction cost in the South are very low… These homes are built with the absolute cheapest materials and finishes you can buy in the US… And these guys build them QUICK 60 to 90 days highly effiecent.. And building permits are very low. Here in Oregon my average building permit is 35k for instance,,, parts of CA double that.
So these builders are going to be able to come in and build for 50 to 60 dollars a foot the same homes that WI and my company own…I know they can do this because I build in Oregon for 55 to 60 per Sq Ft. better quality than Atlanta right now today, but does not include permit or land…. I pay 50 to 100k for lots in my market today down from 100 to 200k…..
So you got the big production builders sitting on 100's of lots if not thousands… Little to no dirt cost.. And they will slam up 1500 foot houses for 75 to 90k all in and market them at 109 to 149k… You are seeing this today in this market. I bought a few in one sub last december where I bought the foreclosures at the mid 40's mark and the exact same floor plans of new constructin there were 9 being built were 99 to 119k…
So yes WI in my mind has analysed the cost to replace ratios and so have we and others and I think we are all going to do very well… Others like the one poster who bought 4 from TRR and 2 were not performing will not do as well, because they will have a hard time ever getting out of the negative gear situation they got into year one if they are realistic about rolling losses forward.. but I think if they bought in the right spots they will recoup their capital and some equity.
On to my suggestion and what My personal exit stratigy would be.
I would stratigically sell off taking my profits,,, And with those profits I would move into the next higher asset class that is much easier to manage than single families… I would be looking at rolling into Class A multi,,, be it apartments or Mobile home parks on the west coast. And or industrial work storage type facilities, you know the ones were the carpet people need storage and have an office in the front… These are super easy to manage and need very little maintenance as oppossed to single families.
I would look to take my profit and generate 8% on it, in a perfect world I would be able to roll these up in one big escrow and 1031 tax deffered exchange… Lock in long term debt at good rates on the class A multi. My 8% cash on Cash would generate some pretty nice cash flow depending on the size of the portfolio we end up with over the next 5 years. we just surpassed 130 doors June 1… And looking for another 200 this year… So if we can keep cherry picking them, have our great partners on the ground we end up with a pretty happy crew… Investor client that gets long term predictable cash flow with never a bad day,,,My partners are earning equity instead of flipping houses ( and kicking themselves in the rear years down the line for selling away the best deals in the last 30 years) and my self being the mad scientist putting this all together and watching my team work… Its a lot of fun I can tell you from my side… Its truly a win win for all parties no one is running away with the lions share of profits and we ALL stay in the deal… This is what any institutional and or bigger player is always looking for when we do our larger deals. They want to know how we are staying in till the end and that we get paid when they get paid.
its really only this house flipping scenerio that investors are fine with who ever is selling them a house to make profit and have no trailing risk…
JLH
Anyway brainstorming over….
I suppose with the OZ investor it would be just cash out come home say hey aint it great and buy CD's at 5% which if we had 5 to 7% CD's I would be doing the same thing.
JLH
jayhinrichs
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@jayhinrichs
Join Date: 2011
Post Count: 1,177
June 3, 2012 - 1:05 pm
WHOA WHOA,,,,,,
Not so easy my friends in OZ,,,, this is some misleading info and not all together true as a whole for the US.. Let me explain a little in detail.
1. Walking away from a Mortgage handing in the keys:
     a. There are only 12 states in the US that this is legal, and these are whats called purchase money states. And walking away from a mortgage can only be done on homes where said loan mortgage deed of trust what ever debt intrument was used was the debt instrument that was created at the time of the ORIGINAL purchase of the homes ERGO "Purchase Money Deed of Trust"
        Off the top of my head WA< OR> CA>AZ>NV come to mind as states you can legally do this…and as I said there are 8 others.
2. The balance of the states have the rigth to come after you just like they do in OZ for any loss's.. NOw because we have had millions of foreclosures this rarely happens except in a few states.. One of those states being Texas,, just google foreclosure deficiancies in Texas and you will see many articles about how Texas lenders will hound and persue deficiancies.
These are called DUAL ACTION states. the foreclosure is a Dual action it allows possession of the property and a money judgement. Sometimes in a two step process.
3. In dual action states where I personally forclosed on one of my borrowers if I thought they had money I invoked the second action which is a simple court action showing property worth X loan of Y and debtor owes me 100k… Slam of the gavel and I have a 100k judgement,, that in most cases is not worth much more than toilet paper,,, But what I do with them is they last 10 years I never try to collect straight away… I will hold this judgement for 9 years then chase the people down and swoop in and garnish their wages attach their accounts etc etc. In the first 5 years these debtors are pretty smart they will not have anything in their name then as things get out of site out of mind they start to open accounts get back to work.. So the next time we shake hands is usually when I just cleaned out their bank accounts down to zero and they are freaking out, because they can't make any payments and all very legal on my end…. At that point we have a come to Jesus meeting I give them back some cash so they can continue on in their lives and they start paying me monthly,,, Unless they go underground again,,, I can then rerecord my judgement and its good for another 10 years.. We do this with dead beat tenants as well… I have a couple companies that specialize in these collections I will sell these judgements off for 20 cents on the dollar or little less.
4. The other nasty surpise some of the folks are going to get, ( and there was a moritorium on this for the last few years but thas being lifted and it does not apply to non owner occuppied loans) Banks will send whats called a 1099C… discharge of debt tot eh debtor and IRS… So for whatever big loss the bank took they are writing off the loss off their tax's and the 1099C comes to the person who walked away as ORDINARY INCOME.. the only way a debtor gets out of this is at the time they reicieve the 1099 they can prove they are insolvent.. IE by going through BK proceedings or filling out another IRS specific code which the number escapes me this morning.
So yes in theory people can and do walk away but in certain states your targeted and will be treated just like its apparnat they do in OZ…..
So for the purchase money states CA NV AZ, you can see why there have been so many stratigics, it was totally legal with no repercussions but its not that way nationwide.
As for those of you who are using vendor financing in every state in the Union you can be sued on the Note for the defaulting amount and reicieve a Judgement against the signer of the note and If these people selling on vendor financing are getting you to sign personally,,, which I always do… then you can end up with a personal judgement.
Does this judgement mean much to you sitting in OZ,,, probably not… Although there are Law firms in the states and one of my buddies at my country club actually has a practice that this is all he does is chase non soverign money judgements to what ever country the debtor may reside…
In practice at the dollar amounts you folks are buying at I think the dollars are too low for anyone to expend energy to chase you,,, but if you had a bunch of these or 200 to 1 million or more of debt and judgement against you I think you could be looking at someone pursuing those dollar amounts if they thought they had anything they could attach.
Hope that clears this up…
Also on the guy that continually refied those were all second loans he will have 1099C debt releif issues for sure. but as screwed up as the banks are he may or may not get the 1099C…. depends on lender.
JLH
jayhinrichs
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@jayhinrichs
Join Date: 2011
Post Count: 1,177
June 1, 2012 - 6:37 pm
Javidan,
I look at it just like the stock market.
YOu had all the brokers making money as our market went to 15k… then as everyone panic sold it down to 6k the brokers made fee;s selling.
Then the smart money jumped in at 6k and rode it back up to were its at now basically 12k… Brokers made it on all sides going up and down.
There are plenty of funds that got wiped out
Now they are retooling and buying back at the bottom is how I see it..
The question will become can they manage these stand alone assets in bulk… thats the question.
JLH