Forum Replies Created
Mihovi,
I think most of the readers of this forum have heard about all I know about what to look out for and my personal opinions on investing in the US whether anyone agrees or not its just my personal experience and opinions that I share.
Greed factor as it relates to yields is a big issue I see with Aussies.. they want and expect some pretty large numbers that while achievable in instances are not the norm over the mean.
And I think we see that coming out in some of the post that tell both sides,,, for every Richard Davis that posts or the young lady with the Pheniox debacle… there are literally hundreds out there that have or will walk away from their US cash flow 30% turnkey collect your money in your arm chair watching TV investment of a life time
Then there are those that really work at it and are doing well,,, Although I would guess after a 5 year run that most will net if they figure in ALL expenses travel LLC’s etc just like you would for any business.. their returns will be under 10% net with very many of them negative geared and or very small returns.
I know this for a fact… We run a very very tight ship,, buy at the best prices rehab for less than anyone hiring a contractor.. And we produce a realistic 9% and we reach that for the investor by all these metrics and we do not have to pay any property management.
So based on history not in blue sky best case scenarios this is were we land and were we can be comfortable. Its Risk vs return… Risk is hugely mitigated to next to nothing and return is above average plus equity…
I will venture to guess our model will out perform at least 80 to 90% of the people that go it on their own from out of country over a 5 year time span… But hey in 5 years we can all compare notes. At least that’s the feedback we get from our US investors virtaully all of them have tried turn key on their own and have come to us for safe consistent cash flow…
Most investors in the US have no clue as to how much they really make on their rentals, US investors by and large are not nearly as detailed as what I see in the Aussie, another words they would never describe a yield as 12.54%… They would say we are making around 12 or so…
Even the big hedge fund players coming into the market right now,,, talk about 7 to 8% nets. and these are Harvard educated multi billion dollar players that have fully analyzed the market,,, How some johnny come lately turn key resller wholesaler can post a flyer on the web and claim double those figures is just again wishful thinking and those that are more greedy or risk adverse or nieve chase those deals.
JLH
emma171 wrote:Mick – wow… staging furniture – a higher end market than I'm used to … However – if this is you… do this.. PUT SOME BIG STICKERS ON EVERY ITEM SAYING THIS ITEM IS MONITORED BY A GPS TRACKING DEVICE….Next – put cages on the a/c units if they get taken (although if Phoenix is like Vegas they are roof mounted and not so much of a concern) and if you REALLY are paranoid – nanny cams work brilliantly or fake cameras etc.
Sounds crazy but they all work… I am very lucky I suppose in that we are normally working and then someone moves in immediately – to date we have only had 1 a/c go in 3 years of foreclosures but that is touch wood etc.
Thieves in any country are looking for easy targets use all those silly at the time sounding neighborhood watch type things and they will just find an easier target.
All I can tell you about is that you just DON'T want to consider a claim on anything small.
Emma are you insinuating that our theives here in the US are not the brightest bulb in the lamp or the sharpest tool in the shed
and can be easily fooled by these things
One of my earlier borrowers in Detroit first thing he did was paint the copper Grey,,, when the theives got in a dark basement at night the pipes looked like galvanized and they would leave them alone
depending on portfolio size I would consider not getting insurance at all. depending on the value of the house.
so lets say.
If you bought one of the cheapy houses sub 20k… whats the use in insuring it…. your not going to make a claim for theft or vandilism… I have had 2 houses burn down in all my years as a lender and owner.. and thats well over 3,000 doors.
Liability is not a big issue here your Aussies not US citizens no one is going to chase you to sue you in Aussie,, Better setting up individual LLC 's for each property, they only cost 50 bucks in most states to create and file. And a single property LLC should be just a cheap tax filing with one of the tax services here in the states maybe 50 bucks as well.
Since most of us would never make a 5 to 10k claim anyways.. and most houses never fully burn down.. And this demographic of tenant has NO money to SUE anyone… An attorney is not going to take it on a contigency because there is NO insurance to go after just a single entity LLC with a foriegn owner your teflon at that point, Just like John Gotti
think about it.
Next year as we surpass 350 units in the TWH model we will have a modified insurance model. that will save us 75% of what we pay today,,, Since we have investor as the Beneficaries we have to carry it for thier benefit…
At 350 doors,,, at say 600 a year… thats 17,500 per month… in the next year we will be 600 to 700 homes. So anything less than a complete fire each month and we are saving money… I would venture to guess we will have less than one fire a year at a portfolio that is 500 doors or more…
And your very correct if you start making all sorts of claims for vandilism and theft that will hit us ( its not if its when) we are saving huge money every month to pay for these items….
We will of course have liablity insurance but that will be very minor expense compared to full insurance..
So:
If your buying cheapies in the Hood why insure them at all…. If your buying a lot of higher end minimize your insurance maximize your deductables because your not going to make claims anyways…
And unless your paying an awful lot if you house is vacant more than 60 days insurance will not pay… Make sure you read the fine print..
I would get it in writing from the agent exactly what your insurable date milestones are so your aware.
JLH
worldinvestor wrote:jayhinrichs wrote:I think one of the important aspects of this conversation as it relates to WI is that she has sufficient MASS or SCALE… I think she mentioned that she has 8 properties to date, So probably a 400 to 500k investment on her and her husbands part…. As well as based on what she has shared she has bought in the easier to manage areas of Atlanta and did not go for the cheapest thing on the market, And this is a big AND,,, last year is not this year in the market, All those who were trying to time the bottom well you missed it by and large at least in the Metro ATlanta market…WI I and others timed it well just because they made a decision to proceed… So WI has again by what she has stated on the forum 8k to 12k coming in monthly gross ( if everyone pays) and or more. With this kind of financial commitment and investment you have the scalability to run this as a little business… And here is my point I bet WI spends a pretty good amount of her month e mailing skyping and other management duties managing her managers. And running her small rental business… I doubt seriously that she just sits in her easy chair collecting her rents as is portrayed buy the Turn Key companies And yes if they have to travel to Atlanta 1 or 2 times a year for the 5 to 10k a year that would cost, its just the cost of doing business. so you add in those cost to Property management, vacancy when and if she will have any,, and on going repairs… TAx's insurance. etc etc. And its a nice cash flowing business, but it is a business and needs to be treated as one. Where this model goes Squirrly is for the investor that buys 1 or 2 properties.. There is no scale and no mass.. So fixed expenses travel expenses they cut into the return in an inordinate % of gross rents… if you have one property and you pay 5k to come and look at it before you buy it. there went year one 50% of your rental yeilds.. add in other costs and your brake even or negative geared year one. So I think the comparison to the TWH model for the smaller investor the one that would like to dip their toe… Is pretty easy,,, No need to come view your Note purchase as you do not own the property just the debt with equity, NO closing costs or any other fee expect the purchase of the note… And thats kind of how it goes in our market here in the US. I have only had 1 client actually physically visit there Note purchase out of over 5 million dollars worth of note sales in the last 12 months… I mean the CPA and doctors from Perth invested with us specifically because they did not have the time to spend 2 weeks running around the US…. At the end of the day of course the US welcomes the OZ investor and love it that they are coming here and spending money on properties hotels food rental cars… Airline tickets.. Although Qauntas probably gets the lions share of those fees. Anyway something to think about.I started investing in US about 12 months ago and I was initially looking at purchasing 10-15 properties, however as a fellow investor mentioned I have been spoilt with the great deals I secured at $35,000-50,000 and now most of the deals/properties that fit my criteria are more like $60,000-70,000 where 20% gross return will be very difficult to achieve. I am sure there are still plenty of great deals — just harder to find and with the Aus$ falling back will just add further pressure.
I agree for this to work you need to be buying multiple properties, its a numbers game.
You are correct Jay my investment in US is around $500K approximately $62,000 per property (fully rehabbed & associated costs/fees), I do not sit back watching the money flow in, though at the moment I am enjoying a healthy bank balance in US, just a shame I am having problems trying to work out the best way to bring the money back to Oz…. JFrom my experience anyone purchasing multiple properties in US will benefit if they are involved at all levels from researching structures that will reduce exposure but also ways to reduce tax in US, ie setting up loans against each property. Its also taken time to source an accountant and almost 12 months to understand what he is talking about, that’s another story. If you are not prepared to be proactive be prepared to get burnt.
Property management I am finding is another beast, no surprises here, I always knew this would be a challenge. Clearly it is early days, absolutely not easy from OZ, however I believe I am having some little wins here and there. I think the key is to get involved from ensuring you understand rental statements, request invoices for all costs and ensure they are itemised. If I need to I also contact the Operations Manager and keep him in the loop via emails. It is work for sure, I email/phone regularly but I have the time and it really is the only way I know how to do things — as us Ozzies say "Keep the B….ards Honest".
Cheers, WI
WI thanks for sharing,, thats about what I was figuring on your out lay for the props and such…And as you say you stay on them daily to weekly you will mitigate a lot of what goes on…. My point is for everyone that is up for the task like yourselves there are others that are sold this product with the mind set that the PM will just take care of everything and the rentals work like AUssie rentals. And nothing can be further from the truth, as you have shared with the group…
AGain thanks for sharing your business with the group,,,, I refer to you as a business owner not an investor.. Your running a nice little business here in the states.
Alex SC wrote:jayhinrichs wrote:I think one of the important aspects of this conversation as it relates to WI is that she has sufficient MASS or SCALE… I think she mentioned that she has 8 properties to date, So probably a 400 to 500k investment on her and her husbands part…. As well as based on what she has shared she has bought in the easier to manage areas of Atlanta and did not go for the cheapest thing on the market, And this is a big AND,,, last year is not this year in the market, All those who were trying to time the bottom well you missed it by and large at least in the Metro ATlanta market…WI I and others timed it well just because they made a decision to proceed… So WI has again by what she has stated on the forum 8k to 12k coming in monthly gross ( if everyone pays) and or more. With this kind of financial commitment and investment you have the scalability to run this as a little business… And here is my point I bet WI spends a pretty good amount of her month e mailing skyping and other management duties managing her managers. And running her small rental business… I doubt seriously that she just sits in her easy chair collecting her rents as is portrayed buy the Turn Key companies And yes if they have to travel to Atlanta 1 or 2 times a year for the 5 to 10k a year that would cost, its just the cost of doing business. so you add in those cost to Property management, vacancy when and if she will have any,, and on going repairs… TAx's insurance. etc etc. And its a nice cash flowing business, but it is a business and needs to be treated as one. Where this model goes Squirrly is for the investor that buys 1 or 2 properties.. There is no scale and no mass.. So fixed expenses travel expenses they cut into the return in an inordinate % of gross rents… if you have one property and you pay 5k to come and look at it before you buy it. there went year one 50% of your rental yeilds.. add in other costs and your brake even or negative geared year one. So I think the comparison to the TWH model for the smaller investor the one that would like to dip their toe… Is pretty easy,,, No need to come view your Note purchase as you do not own the property just the debt with equity, NO closing costs or any other fee expect the purchase of the note… And thats kind of how it goes in our market here in the US. I have only had 1 client actually physically visit there Note purchase out of over 5 million dollars worth of note sales in the last 12 months… I mean the CPA and doctors from Perth invested with us specifically because they did not have the time to spend 2 weeks running around the US…. At the end of the day of course the US welcomes the OZ investor and love it that they are coming here and spending money on properties hotels food rental cars… Airline tickets.. Although Qauntas probably gets the lions share of those fees. Anyway something to think about.Real estate is just like the simple game of monopol . The concept of owning the whole block. The new SC property management company we are going to use has 2200 units under his company. Now even for them it is a numbers game so the more homes the more potential income. To off set any losses ….
Alex your new manager I think I met him one time,, I was making an offer on 300 homes that one family owns there in Charlotte and he managed them… This guy would literally talk your ear off then your arm and your legs if you let him,,,, But knew his stuff.
