Emma,

This is SOPS (standard operating procedures) in the credit challenged mid west and deep south…

We do some of it on the West coast…

The risk you run is fixing the credit these people can be really tough, I have had these drag on for more than a year and never come to fruition.
they keep dinging their credit even though your working with them;

But yes this is a good way to retail a house.

JLH

In the US… we have whats called bonus depreciation

It was enacted to stimulate certain industries… You can get it on vehicles if its for your business.

So those aircraft I was able to year one right off 75% of the purchase price off of my gross income.. And in those years when my lending company was doing 40 to 60 loans a month we were making some fairly large cash income… So on the one plane year one I took 300k write off on my gross annual income the other one I bought a year later and wrote of 200k or so.

so being in the highest income bracket.. the first plane I put 20k down ( which is still hard to beleive) and saved 120k in cash income tax I would have paid the government that year.. for a net cash savings of 100k.

then you had the GOZONE in the Deep south it was the Katrina hurricane bonus deprecation… that allow one to write off 50% of a New construction house.. AS long as your in the business which I clearly am. I bought 11 of those over the 3 year period.. about 2.5 million worth… And wrote off 1,200,000 over those 3 years so with the aircraft and the go zone.. I paid less than 10% in total tax on income greater than 7 figures for a 3 year period.  You do need to recapture the depreciation once you sell though..

If it werent for the bonus depreciation the aircraft industry would be on its ear..

JLH

buy to Let mortgages for the GB buyer is nothing more than owner financing.

goes like this.

wholesaler buys property for 5k puts 10k into ….

GB Spruiker  sells to unsuspecting GB investor for 60k… 30k down and owner finance 30k… Profit of 15k is made just on the down payment and GB Spruiker and US wholesaler split profits in some manner.

30k private mortgage is recorded GB client pays whatever interest rate say 6 to 9%… its all gravey for the seller… Some of the sellers will then sell this paper in the secondary market.. All though very tough to sell any MI paper or OH paper to any note investor for some discount.. profit to the GB spruiker and US wholesaler will be 30k or better per transaction.

With the exception of Dallas and I do not know this first hand only what Cash Cow investments has conveyed, there is NO bank financing for SFR rentals in the US for foriegners and very difficult for US citizens.  And the Dallas financing is from a local commercial bank that holds the paper according to my communications with Texas Cash cow.
There is no bank in MI that is going to lend on rentals in MI by and large… Especially to out of area borrowers.

there is financing for the locals that live there.. However 99% of mid western banks have already been through the out of area borrower and changed their policies years ago after facing so many defaults because of the intrinsic risks that are in rentals.
so they will only loan to those that can prove they live within 100 miles of their rentals.  The other issue you have is most mortgage lenders will not do a loan under 50k…Again because the super low priced properties by definition are basically in the hood and have a huge default rate.

Being a NMLS licensed Mortgage banker I get the industry journals that are not avalaible to the public.. And beleive me the banks know where the foreclosure cluster are and they are not stupid… they do need to make a certain amount of loans for the CRA minimums. but those are to homeowners and ones that can qaulifiy for FHA….

For this simple reason the lack of liquidity has caused the prices to crash… Just think about it.

What would an Automobile be worth in the US if everyone had to PAY CASH…. If there was no leasing no financing for 7 to 10 years for that SUV. Not sure how it is in OZ… but we would be just like any other 3rd world country that requires cash for all items.
We would be riding scooters and horses.

I have not financed a car in 20 years but when I was 18 to 35 I certainly did….

Same with Aircraft…if all airplanes had to be paid for in cash we would still be riding the railroads… Most people do not understand that there are huge leasing companies that actually own the aircraft.. far to much capital to tie up.

I bought not one but 2 aircraft in the last 10 years one for 430k,, and put 5% down.. and one for 275k and put 10% down.. but I wanted state of the art.. If I had to pay cash I would have only bought something for probably 100 to 150k and that would not have gotten me the latest and greatest.  I think I mentioned these to you they were 2004 Cirrus SR 22's….Plus the hanger for 250k so almost 1 million for my partner and I to fly to our projects in 30 minutes instead of 2 hour car rides… And or for me to visit clients in SF or LA in 3 hours to 5 hours  instead of slogging through the airport…. then you have the movers and shakers that do this in jets and thats a whole nother financial dynamic all together…I had a deposit on the Cirrus Jet.. but let it go. Getting too old to be safe flying the JET as you know from you past Jets are a whole nother world…

Ergo where we are in America… Cars cost more than many homes and auto sales are doing great.

houses are just coming back..

JLH

Mahovi

I remember back in my Detroit lending days it was the first time I saw the following:

1. Glass bricks on the basement windows so they could not be entered easily but let light through

2. Paint copper pipes grey to simulate Galvanized pipes fools some of the crack heads coming in at night looking for easy pickings.

3. Rehab contractor had armed Security guard on premisis during rehabs, All workers had to show ID and log in… Alot of times its the rehab workers that come back at night and steal… ( they know right were new things have been put in)

4. Property managers office Barb wired and bullit proof glass  ( office was just south of 8 mile) little slide drawer to shove rent through.

5. And of course Glock 9mm in the shoulder harness of the owner of the PM company and any of his management that had to go deal with tenants and houses.

The issue with Jeremy Burgess type of operation is they will sell anyone anything in any area with no regard to wether its a proper investment they do the opposite they market these properties as safe cash flow investments.. And again not all of Detroit is like this but there is a HUGE swath of it that is….And of course the OZ spruikers are no angels either they are out and out financial physcopaths they could care less if their Fellow OZ investor lose's their hard earned money.. They just want the fee's on both sides of the transaction,,, Like I have said I have been approached by a bunch of these guys… NOT ONE MENTION OF THE QUIALY OF PROPERTY OR NEIGHBORHOOD IT WAS ALL ABOUT I NEED TO MAKE X AND CAN YOU PROVIDE ME PRODUCT.

One in particular wanted me to source Atlanta properties for 2o to 25k all in including rehab and a profit for our company  and they were going to sell to OZ investors for 40 to 50k to OZ investors. 20k all in in Atlanta is the Hood… 50 to 80k or higher all in   in atlanta is an investment you have half a chance with.

It really boils down to these guys attacking the greed factor in the Investor… US investors by and large think something is wrong if the returns are much over 10%  Alex can attest to this… Bottom line is there will be Millions upon millions lost by OZ and GB investors who venture into the Hood not knowing what they are doing and its in any big US city period.

One last comment,,, About two years ago before I knew of this Off shore investment phenom of buying US rentals… I had this one lady contact me and I was giving her real advice about US investing.. And when I mentioned 7 to 10% true net returns she just laughed and said I am going to detroit I can get 25% or better there,, Like its investing it in the bank or something… I just shook my head and thought there goes another lamb to the wolves.

JLH

I can only relate my dealings with Jeremy lent him money on two houses he did not repay. Would not communicate unless pushed to the limit by going semi public…

I think you feedback is very good…. And I know some of the better players there in Detroit that have gravitated to land contracts… Land contracts have about a 50% mortality rate IE they stop paying within 24 to 36 months… but then you just sell again.

key is to not have your house trashed while you wait for another land contract buyer

Richard,

with one google search,,, I found the wholesaler who this Andrew used,,, its Jeremy Burgess…who is Canadian… so he was the seller of this property… And he has a big profile in Detroit…Your property is on his website and on the Net…

I did 2 deals with this guy ( loaned him money to buy foreclosures) and he stiffed us… Bad actor as well.

his company is Detroit urban wholesalers 

Just use goggle and you will find all sorts of info on him… Also check out the http://www.ripoffreport.com in the US… thats also a good place to air your grievance's there will be people on that site that will give you ideas. And file complaints against him at the BB.

At first blush as I look at this property and its been 5 years since I left that market,, but its south of 8 mile and south of 6 mile… I will let Mahovi chime in since he is currently working Detroit…. When I was lending in Detroit our general theme was to do nothing south of 8mile….

At the time you bought it I think you paid about the going rate,,, the Issue is location and what I keep preaching on this web site these inner city investments are NOT appropriate for out of area investors….Americans or foriegners in my humble opinion. I am not preaching to Richard just making a statement for the audiance. As the deal was presented to you I could see why you moved on it… Although again when you look at the proforma they put together, They have no vacancy factor and they have on going mainteance at 50 a month…. These are huge red flags and just  fantasy numbers… As well as looking at the house the rent is probably over stated as well…

So there is no mystery here in my mind.

Andrew Allen runs around the internet and approach's US wholesalers.. He does not care about who they are he just wants product… he then puts up his web site in OZ  claims to be an expert in US property,, and when you look at how he structures the deal he is taking a consulting fee on top of what you paid the Seller…. Now he is definatly selling RE without a RE license based on his representation to you,,, the actual transactional details could be differrent but the representations he is making are clearly engaged in the sale of Real Estate for profit.. And he does not own the real Estate if he owns it personally then no license is needed.  And on Andrews materials he states he is based in OZ…

One needs to do a simple chain of title search to see if Jeremy Burgess did indeed own this property or if he was just flipping it… But with Jeremy's high profile I am sure he has that base covered….

so from Burgess's stance  OZ middle man brings him a buyer… He probably also paid Andrew a fee as well… So I would think Andrew made 7 to 10k on this deal.. I think Burgess probably bought the home for 5k or less as is.. And thats all its worth today as a board up… Even if you fix it up I doubt you will be able to sell it for more than 20 to 25k to anyone who knows anything about the area…And it sounds like the rehab was done on this one.. And it was Jeremy no doubt who brought in the Manager.. And or the PM works for Jeremy in some capactiy…

bottom line on this one.

If you bought the house and it was rehabbed and a tenant moved in….then there is no cause of action…. If the property manager ran off with the rent money as you state,,, that is the only one you have an action against.. Other than Andrew if you can tye him into representations that he would look after the property for years to come after you bought it….If they had an appraisal you might have a case for apprasial fraud BUT ONLY IF YOU ENGAGED THE APPRAISER AND PAID THE APPRAISER.

So you ran into the OZ Spruiker who found  a wholesaler in Detroit who could not give two hoots if you have a bad experince.. and who has been doing this for years…And the property manager was a theif, you need to file a complaint with the DA for theft,,, The attorney General in MI for consumer protection actions against Detroit Urban wholesalers, and the Department of REal estate against Detroit Urban and Andrew and the property manager theif….

These all need to be done in the jurisdiction where the offense occured and need to be done in writing.

I would start a web site and blog about these two companies and would not give a crap about any liable or other wise,, Especially from Burgess he can't touch you in OZ…

I will now look at Youngstown.

JLH

emma,

LLC is so over blown both with US investors and others… Rental properties and tenants are just not a litiguous bunch….

The cost of maintaining the LLC would be better spent buying an umbrella insurance policy that you go through with a fine tooth comb and that will give you all the protection you need.. You get sued turn it over to the insurance company,, and let them fight it out Not many tenants have the funds to go up against insurance company and there is not an Attorney in the US or the planet that would take on that type of client on contingency… 35 years 1000 plus properteis owned managed sold,,, never once have I had a suit from a tenant…. the liablity if there is any comes when you sell a property, and there is a lack of disclosures or you withhold information that you should have known… But then you should be using a US real Estate broker that has Eand O insurance that will step in and protect the seller.  I am thinking the OZ investor needs the LLC simply to get a ITIN number if its necessary for that then its necessary,, However you can file your own LLC agreement in many states for $50 bucks.

Another by product by the way of the TWH model… Absolutly no liablity on the investors side no need for LLC and all those costs.

The transactions that we did with the doctors group,,, they bought the mortgages in their super fund name… we send wires each month to the super fund end of story,,, No big expense for them on the accounting side…Not that I intended TWH to have this convience and safety factor just a by product…. our US investors love it.

At the end of the Day one of my early mentors  ( he owned a Jet boat engine manufacotring company in LA sold it and made a big bundle)) And he gave me my first 3 bounces in a Cessna 310 when I had never landed a twin before))) 

ITS ABOUT WRITE ON'S I COULD CARE ABOUT WRITE OFF'S I WANT ALL THE WRITE ON'S I CAN GET and to this day I always use that stratigey,, write off s are nice but write on;s are much better.

JLH

Kyler you get enough A’s and B’s you will have a 3.5 or Better GPA and C’s will be a thing of the past for you

Its our version of TurnKey investments…

If you got a minute just go to my website and check it out.

I looked at Florida, since I never lent money there in my hard money days ( because of the foreclosure rules) and lucky I didn’t because the deals I looked at were 250k homes in Lehigh, that wanted 125k loans…. And we Know were those ended up… Court house steps for 25 to 40k a pop I would have taken a huge hit.

For now our model only works in the better cash flow markets we are going to start an equity fund. For west coast purchases… Targeting mainly the chinese.. they don’t care about cash flow ( like the brazilians) they want higher end SF Bay Area and LA San Diego type properties at 300 to 600k each… and may or may not rent them…. they like 1 flight non stops… I had a group in 2 weeks ago that had 500k on their debit card thats how they are getting their cash out of china.

Last time I was in Miami there was something like 11 years of inventory in the high rise condo market…Sounds like that has changed.. Vegas still has great deals in the condo market.. 1.2 mil penthouses cookin off at 500k or so… which I am sure is less than replacement costs.

JLH

http://www.truewholesalehouses.com

Your statement is right on the mark,,, with the addition of the US investor has come out of hibernation as well…

We are closing 15 to 20 plus TWH sales each month in our 4 markets and keep expanding… And we are just one of 100S US companies transacting with only US investors….

worm has turned for the better…

Only bump could be shadow inventory,,, however thats mitigated with whats happening in the bigger market players the Hedge funds are jumping into our pond…

The largest wholesaler in Atlanta Key properties just cut off all their Us and foriegn resellers.. they are now keeping every property they buy just like my TWH model… Equity share with the big institutional investors… And its really not that much money 10 million… but it goes along way in Atlanta when your buying houses at auction for 10 to 30k each… they tend to play in a sand box that has to many cat do do 's in it for me.. and most of the in the know Atlanta investors…