Gavin,

We have a new member Mahovi on the forum he is working Detroit,,, I bet he will have one of his people do a drive by for you snap a pic and give you the real scoop..As a courtesy.

If you want to send me a private E mail I will have one of my Ohio assets look at youngstown for you…

Just to be clear I will do these at no charge… If there is work to be done or evictions etc… I just refer you to a PM that I know can handle it and they will expect compensation… I tried this with another forum reader on thier Phoenix disaster and for whatever reason my kindness interpreted from this owner as I would hire a PM and do the evictions board ups etc all for free…. No PM is going to work for free. But drive by and snap shot to give you an initial assessment we can do as a courtesy.

Not sure what you paid for these properties but I would not put another dime into them and I would dump them for whatever you can get… If your buying from a Aussie company through a US wholesaler and paid 12k for the house that means they paid 1 to 3k max for the house and it really has no functional value at all… do not pay tax's do not pay insurance do not put another dime into these   you may want to try to put them on http://www.bid4assets.com  this is where all the low end properties are traded… Only offer a quit claim deed to a buyer and there you go.

This e mail from Gavin is just the poster story of why its so risky buying properties in this manner,,, you have an Aussie company that is not there trusting a wholesaler that they may or may have never met anywhere but on the internet… Kind of like internet dating,, you can come up with a bunch of frogs instead of prince's….  Just Highly Highly risky in my mind… And I am not saying all companies are like this of course… but there certainly seem to be only a hand full that have credibility.. And those you do not hear about because things go fairly smooth… I bet Net yields are not what they are advertised but you do not have these wipe outs either, and what appears to be total negligence and fruad.

JLH

Kyler,,

Here is were I have got to chime in on reality for our friends in OZ….

And please do not take this personally this is just from my experince.

What you talk about is great with these great returns….. And  I have no axe to grind .. I would like them however to buy hardware and rehab supplies from us…

The ugly truth is you will make your money and move on to greener pastures.. there is very few folks that can and work the hood for many years they get burned out… See Alex comments about getting out of property management because of the thankless non profit event it is in the US.

And our friends in OZ they are thinking long term investments 5 to 15 years… Its like resturants,,, rarely does a resturant in the US make it more than 10 years in one location thats a fact… Same with turn key guys.. I will bet you right now 10,000.00 cash that I will put into an irrvocable escrow  you put your 10k as well ….  that your not living or doing business in KC 10 years from now….If your still in the hood you take my 10k if your gone or out of bizzness I take your 10k and go on a cruise.

so that becomes the major problem these folks like and trust you invest with you you make your money and profits and the last place on earth you want to live is KC… I mean really who the hell wants to live there if they have choices… You will be on to Forida, California, NY , vegas anywhere but KC…Of course unless you marry some hottie from there that won't let you leave.. then all bets are off…  We all get invited to the wedding and I will pay 2k of my 10k for booze at said wedding.

Having loaned to over 75 different turn key companies from 2002 until 2008 GFC, I can count on one hand who is still in business… And those that are are my partners in TWH….

All these turn key guys are the new versions…

Alex and I are the old dogs… and we have had to reinvent ourselves…Of course I am a much older dog than Alex… but hey I have a lot of respect for one of my old borrowers who made sure I was paid back!!!! And Alex and his partner Kevin did that… Most did not… they just went on to selling cars or starting companies selling to the brits and Aussies.. the new easy target unfortunatly.

However I think we have done a nice job telling both sides of the story here..

If someone is a regular on this site an still buys 25k house when it all blows up its not like they did not have intel to make a decision one way or the other…. Greed wins out—- 25% returns on a proforma is like a drug… can't help themselves and want in the worse way to beleive It  is better than 10% so lets go for that even though your chances of losing all your money are exponentially greater than they can even imagine…..

JLH

Other than my little Tee t Tee on subject too equity skimming scheme’s I think the modirators have treated me fairly.

Not that I think they were not right taking down my comments on that scheme….

The socio demographic realities as they relate to different parts of the US and owning rental properties are really really critical to the financial health of the investor…

And when an investor just has no clue as to these realities until its too late,, I thinks its germane to include this in the conversations so one knows….

One needs to be aware of the dangers of rough and bad neighborhoods be they in LA, Detroit,, SF Bay Area, Washington DC, NY,
MIami,, any big city metro plex…

A person especially a foreigner needs to be on their toes.. And then to invest in the toughest neighborhoods because of some sales pitch and because its cheap one needs to be doubly careful and leave those to the professional full time investor.. at least in my mind.

I know it happened to me once on a trip to Europe.

I get of the plane at Paris,,, 11 hour flight from Seattle, jet lagged,, and when I step to the taxi line I just hoped in the first van I saw.. Not thinking…. after about 5 mintues I am thinking hey were is the meter… And why is this guy taking out a GPS to find one of the finest hotels in Paris…. And driving like a bat out of hell…130 140klicks…. I kept a keen eye on the GPS and could tell we were headed in the right direction… ( ya know us newer pilots that fly glass thats all we use anymore) we get to the hotel and I just out and tell my wife to head in .. I tell the guy I have no Euros and go inside.. to the concierge…. They tell me this is no cabby,,, I had already figured that out and that I am lucky I did not get robbed…. So I refused to pay cabby comes in and here we are in this top end hotel arguing…. At the end of the day concierge said if the cops come I will get in trouble because I should have know better than get in a fake cab its my fault.. We settled on half fare.. And from this day on I really check cabbies when I travel.

So same thing,,, Drive into Compton or Watts by accident at 10 pm and your not from their and the wrong socio demographic and you stand a good chance of getting car jacked at an intersection… Same with any big inner city in the US…. New Orleans is particular dangerous if you wonder 3 blocks out of the Quarter…One of my buddies who has lived in New Orleans all his life, has gotten robbed numerous times at gun point….

The very unfortunate case of the Aussie investor working on his Detroit property only to get shot…..etc etc.

I am sure crime happens in OZ but just not to the degree it happens in our ethnic neighborhoods,

Mihovi,

the reason you only got one response here,,, is that Detroit is well known in Au…

The great britian spruiekers hit it real hard though..

From my point of view from being on this site about a year…

In the beginning it was all about Net and gross yeilds.

Now I think these investors are starting to balance those yields with Risk assessement… Even though these properties are far less than anything they usually buy in AU… its still after tax money they are using and no one wants to lose 30 to 40k…on a property,

The reality is they lose far more than that if they buy a lemon…. Because the off shore investor will usually rehab it more than once thinking its an anomoly until they figure out,, the hood is the hood and there is no place for out of area investors in these areas.

This is one of the reasons the prices have crashed so badly in Detroit… and other tough markets… I made at least 200 loans in Detroit to LA buyers from 04 to 07…. average loan HARD MONEY was 50 to 70k houses apprasing at 100 to 120k… they would refi these loans pull a few thousand out ( that they were suppose to keep for reserves) and if the buyer broker even on cash flow that was great if they made a 100 per month net per house that was over the top….. Well these buyers never made anything and they walked by the thousands, and those exact same houses are the ones that the Ist Gen wholesaler is buying in Detroit for 1k to 10k max… rehabbing sticking a tenant in for 800 a month and the cycle continues. same cycle different buyer… At the end of the day… there is no consistancy in the returns and its not sustainable over any length of time… Now thats general of Detroit there are better areas.. but anyone flogging 25 to 40k all in houses my statement you can take to the bank and I challenge anyone to to refute a word of what I describing above.

debralawson wrote:

wow you guys surely are scaring me off this buy into the US idea, thats ok I think a business may be the way to go. We run 2 here and have a few ideas for a retail outlet we want to set up, I think we look at setting that up there perhaps? Any thoughts on setting up a business there, or is that a whole new thread..

Debra,

I think the point is that one must balance return to risk…. High return High risk neighborhoods are for those that work it everyday.

by and large the US investor learned this lesson in the last go round with these houses… thousands of LA and NY and other area investors poored into Detroit for all the same reasons I see on this site…." buy a home for the price of a car" 20% returns sit in your easy chair and collect your money… ONly to have the expeirinces that are described above by Mohavi, of having a Detroit totally stripped… The difference between him and you is he is first generation wholesaler who can have this happen then as he admits sell to some other out of area investor and make 8k profit…. Most buyers from turn key guys are paying top of the market. an trashed and stripped house cannot be recovered financially you will lose those dollars…

there are hundreds of thousands of homes and places to invest in the US were it is much safer and your home will have a less than 5% chance of getting stripped or trashed as compared to a 70 to 100% chance in any of the low end neighborhoods in any of the big mid western cities…

Alex,,, Kyler,,, ME,,,and any of the others who have dealt in these neighborhoods and or with these tenants have had the same thing happen to us personally,,, We are just willing to share the stories,,, How is a property selling company from OZ going to make sales if they are telling the ugly truth.. they don'e they just tell you all the great things and greed takes over greed in teh way of net or gross rental returns.

over 50% of all small business that open in the US fail by year 2 thats a fact… competition is stiff and ferrce….especially in the food business… hard to compete with the chinese resturant who hires no employees its all family and barely pays income tax's that sort of thing.

If you target your returns on rentals in the US in a conversvative manner and realistic returns 8 to 10% you will find decent properties,, that should work for you over time… It just seems like a sport here where one person post ( hey I am getting 12.9% and another says 14.9%) etc etc…. US investors rarely look at return first.. Its a componant but its CAPITAL preservation and future value that drives the US investor… And to that end by and large they US investor has left the HOOD… The low end cheapy rentals as described by Kyler and others and certainly Detroit, Fort Wayne, Rochester, bad parts of Memphis etc etc.
I have one turn key guy I do business with in LA that was just up at my Portland office its taken him 3 years to pay back all his investors he put into the Frayser area of Memphis… He now only buys homes that at wholesale cost 50 to 60k in memphis and then reno and profit on top they come out close to 100k.. rents for 900… that kind of thing.. but you get the rent and you do not get stripped houses by and large still have to cage the condenser units virtually anywhere now in America…..

So the formula is:

Rate of return net or gross is directly related to Risk of Capital preservation forget cash flow… Cash flow is a bonus in these bottom end markets…..

One point that you can get independant verification of the problem we all face is Insurance…… Most insurance policies drop coverage if the house has been vacant more than 30 days…. If you want complete coverage on a vacant house just ask your agent to quote you and you will see the big difference in premiums and alot of them will not go more than 60 days regardless…
those are the guys that know the risks from the ground up…

As our portfolio grows past 300 units we will start to self insure… We will only buy liablity insurance…. We would have to have a home burn down about every 30 days to make sense of keeping fire insurance…Just fyi.

JLH

Lawsjs,

I think you can go to the american consulate in OZ and get docs notarized ?

One of my clients lost a house in N. Portland to a grow operation…

I had the security interest on it and numerous other properties so even though that house was destroyed I came out OK..

Seems like their business plan was not thought threw well enough if the reno appliances and such all of a sudden became too much.

I assume she bought something that the zoning allowed such a use,,, Your bigger issues in Portland are other fee’s associated with the city.

Portland is a great food town, and a lot of start up resturants do well,,, however there is fierce competition from Food carts all around the city hard to compete when they are cooking out of trailer or RV and producing Gourmet food for hot dog stand prices… 7 bucks and under for full meals.

Squatters is a very big issue on the West coast especially California… You can get some one out of a house in portland in 45 days for 400 to 600 dollars as long as you do everything right… You do one part of the eviction wrong,, and the tenant will call for a trial.. And then you need an attorney blah blah balh, and the attorney the tenant gets will just plea bargin with you to pay a little less than what your attorney will cost.. Its a racket for sure…. Cash for Keys is the only way to go in a squatter situation..

There are people in CA that follow the foreclosure lists and move into a home wait for the person who bought it at the sale to show up… Demand 2k to move and off they go to the next one its a cottage industry there.. Temps are such that you do not need heat in SoCAL.

If you think about it tenants call and order utils.. so they are not in the landlords name…. Its an issue… Some Jurisdictions now requrie a copy of deed and notorized written permission to turn on utls if your not the owner. Of course Notary in the US is not Notary in CA or AU.

guarantee in the US is a red flag, and is very dangerous for the seller… if deal goes south,,, first thing the attorney representing the buyer will do is Sue the seller for selling an unregistered security….but then again Bernie Madoffs was selling registered securities:)

There have been far to many investors burned in the US rental game and its becoming a focus of authorities here in the states.

Even for Turn Key operators to give out proformas showing returns will end up biting them in a litigation scenerio… As investors relied on those to make and investment and when the 18% net becomes 5% or more negative gear…. problems arise…Not to mention the horror stories of complete loss of capital…

If I have learned anyting on this site its the fuzzy logic that is used to determine NET Yeilds….And to most US investors Net yeilds are defined as taxable income before depreciation….. So all write offs are included….

Turn Key companies define net yeild as rent minus taxs insurance and PM…. thats just half the story in reality….

JLH

Not sure what hardware is for your Japan properties but we just sent a package to Singapore

Still have to deal with the tenant if their section 8 or not…. Section 8 by and large only pays a portion of the rent… You will get folks that have 100% vochers. then there are some that only get 50% and its up to the PM or property owner to collect the other 50%.

95% or more section 8 in the US is single women with dependants…..

this goes to the whole social aspect of which Freckle has been talking about…. a Huge amount of US citizens that are raised by their mothers and grandmothers with no father influence…. In the Hispanic families if they are in the Barrio its usually because daddy got shot dead in a gang land type thing… In the African american its just that the men on the lower end of the social scale are like rolling stones where ever they lay there hat is there home…. Very common for one women to have 4 or 5 kids all different baby dadys.. and that is your section 8 tenant…. by and large.

so the danger in collecting rent comes when you confront these unstable situations and some relative or boyfriend is there which creates conflict….. Now the white trash in the US is no better… Just check out Swat of KC you can see that first hand… they tend to be tweakers and theifs…

so if you go to study prision populations in the southeast they will be 90% black… In CA.. Hispanic Black about 45 45 with white making up the difference and the whites are usually the skin heads…. then throw in some Nasty Asian gangs members and you have a pretty motely crew.

In our prisions in Oregon were Oregon is 92% white 6 % Hispanic and 1% Asian and Indian the rest Black Samoian etc.  Our prisions are dominated by White supremist skin head types and or just low life white trash tweakers… All the same hard to collect rent from any of these dudes.

JLH