Forum Replies Created
Aussies you must read this…..most of you have no clue as to how the market was 7 to 20 years ago this will give you some light and what you can expect.
NOw from a word from the wise and I am not going to say the almighty up high… however if you get an offer to sell your property and ti has a tidy profit …………………….Sell baby Sell…………In the states you want to be a seller when there is pent updemand like wwhats coming down the picke… pick of ff yoru gains then look at your next deal
If I had followed my own adive in 2006 You very nice folks would have never met me on this site… YOu would have met me but in the nicest hotels and bars and resturants of your fine county drinking the top dollar shiraz'a and penfolds.
I have to be honest with you I actually had that converstation with my partners. In 06 we had Oh 50 mil plus in properteis of various types. and 30 mill out in hard money loans. If we would have just called all our loans and sold all our property and took 3 years off we woud have been MILLIONS ahead. but we did not and we are not….. So know we are just income averageing we are snagging every great deal we can get our handles on.
zgmen can help you I have looked at his deal and they seem like solid cash flow deals.
One thing you will not have to risk is he UGLY us tenant that tears the crap out of your house.
Japanese are much more civilized in these regards.
at least thats what perception to a west caost US investor would be… I think its an option for you an dyou should check out zgmen and see if it makes sense for you
worldinvestor wrote:Hi All
I like to look at what some companies are selling property for in Atlanta. Fairburn is an area that I would target, this property seems to tick most of the boxes for me.
Look at the purchase price
http://www.trulia.com/homes/Georgia/Fairburn/sold/21832138-464-Berkshire-Pl-Fairburn-GA-30213
Look at the sale price, nice earner for this group …….
WI
Not real familar with that particular area but seems to be a SMOKIN deal
worldinvestor wrote:zmagen wrote:Alex SC wrote:I would just continue purchasing foreclosures in Atlanta, there are other markets that do interest me, however I feel I need to stick to one area to reduce the risk/challenges. Great advice ….Don't quite follow – I get the logistics bit, but how exactly does putting all your eggs in the one city basket reduce the risk by anything? In my view it vastly increases risk – unless I'm missing something in this equation? (assuming you'd do your DD wherever you may invest, wouldn't spreading your investments geographically reduce your risk far more?)
In my playground Oz, I invest in all States, I follow the cycles and I think this is a great strategy to reduce risk and it has worked very well for me.
WI,
This is very common in the RE sale industry,,, Agents tend to specialize in a focused market.. And Atlanta Metro Plex is just so huge its not realistic to think any 1 agent will be versed in all areas..
I remember in my early years of selling real estate I was living in a county North of San Francisco, that had a population of 50k and the towns were 2 to 5k each and were 5 to 10 miles apart.. Clearlake " largest lake in N. California " sat in the middle of the county,, and most realtors only new 1 maybe 2 towns… I knew the whole county, and sold the entire county. I also bought tax foreclosures where ever they would present themselves so I got to know every square inch of that county… I had agents in my office if you did not want to buy say in Lakeport, they would just refer you off to another agent, I never let anyone go away,, But I liked to drive and I was young then.
Same is especially true in Atlanta , and the same could be said for any big Metro Plex.. Your not going to get many RE agents that work the San fernando valley,,,, ( Valley Girls) to sell homes in Temecula for instance. Or SF Bay area agents that work Marin county to sell San Jose.. <moderator: delete advertising>
JLH
worldinvestor wrote:"The bidding wars seen in such places as Seattle aren’t found everywhere. In metropolitan areas including Atlanta and California’s Riverside and San Bernardino counties, housing remains weak as high unemployment and falling prices deter first-time and move-up homebuyers"
Can not agree with this, in particular Atlanta, currently we are seeing 18 + cash offers on one property and well above asking price. If that is not going to drive the market north I don't know what will.
Getting back to the topic "Building Lots", has anyone mentioned the tax implications while holding??
May be a good play for those who can jump in and hold and understand what they are buying, but educating yourself on what is worth buying would be another hurdle for the Aussie investor.
I like buying houses at 30% of build costs, its a win/win, cashflow and eventually with new builds will see the growth.
WI
AND I LIKE BUYING LOTS AT 15 TO 20% OF BUILD COST AND THE LAND WAS FREE… I THINK THEY ARE ALL GOOD INVESTMENTS OVER TIME.
WI
When I was doing loans in Detroit ……..the rehabbers there had security guards on each job and all personal coming on the job had to be signed in. It was their position that a majority of thefts were inside jobs
Pat,
No you can demo a house, If it has asbesto’s in it like most old houses have your going to spend thousands on asbesto’s abatement.
theives will steal most of anything of value before you can part a house out thats just a fact.
You can certainly leave a lot vacant , my point is it has no value…
No one is going to pay any money for vacant lots in the these areas…. Habitat for Humanity or some church group that is no profit may pay a token for a lot if they are going to build a new home for their program…
What we try to do if faced with one that has to come down is to get the fire department to burn it down for practice.. thats free.
In Detroit the night either before or after Halloween can’t remember now what they call it something like devils night. The local Youth will set 300 to 500 vacant homes ablaze that one night alone.
JLH
Pat,
the land under very low priced houses in the US has negative value.. Its worth nothing and you can be charged with demolishing the house and hauling it to the dump. So take that thought right out of your head.
what Alex and I are talking about are shovel ready lots in areas were if one was to build a home you could sell it for north of 125k.
And Alex I think instead of me stealing your ideas its more like fine minds think a like… Although its pretty much a no brainer for us in the US that are in the business, that buying lots that are shovel ready that cost 60 to 80k 5 years ago and we can pick them up from banks in bulk for under 5k each is a pretty nifty investment.
And Pat there are plenty of areas in the US were the land under the homes is more valuable than the home, Or IE it cost less to build the home than to buy the lot.
The SF Bay Area, specifically San Francisco down through Silicon valley this is the rule on 90% of the properties there and has been since about 1984…. In 1986 I bought a tear down house for 765,000 on a 60×110 lot in Palo Alto.. Then spent 350k building my personal residence…
However to go into the older parts of the inner cities or since your all so familar with Rochester NY I will use that as an example. Investors are buying houses for 5 to 20k per house…. then spending the same to get them rent ready… So 20 to 40k total all in for a rental…
The land underneath these homes has Zero value and will never have any value, as these areas just keep deteriorating. And the builders will build if they are going to build new, they will find new attractive areas to create new subdivisions…Very few places in the US are land constrained, thats why Texas properties pretty much just stay level in value… Land prices are very low have been low and builders build new to compete with existing and do it very well.
The play in Atlanta suburbs for us. Is like the lots I bought at Lake Iris… half acre estate lots great big homes built there that sold at the peak for just under 400k and anyone familar with Atlanta know that 400k today or 5 years ago bought you a pretty great house. These lots sold new for 80k or so. And we picked up the last 7 bank owned lots for 34k total for all the lots…. I think this is a no brainer and one we will make some pretty good money on in 3 to 5 years as building comes back.. Now I am looking at this package of 300 lots that I can pick up for 400k or a little less…. Some good lots some are No value.. but its interesting none the less.
WI.
B’s. Some plus some minus,
jbelmore wrote:Jay Do you have to have a view on rent growth and inflation?The US is such a big market you have to look at regions then metroplex's and each will be different when it comes to rent growth… SF Bay Area Portland Oregon are the best rental markets in the country.
Under your scenario are rents stabile or growing with inflation or falling as renters leave the rental market and become owners?
In my markets rents have been very stable for the last 10 years…I do not factor in any rent increases and have margins big enough that if we had rental rates compress we still are OK. when buyers come back into the market prices will have risen they are rising right now in select markets, over bidding multiple offers etc… We will take profit at that point,, When retail folks are buying I am a Seller.
Vacancy rates are so high won't it take a long time for demand for shovel ready lots to return? more than three or five years?In the sandbox we play in our vacancy rates are less than 5%, and we provide a superior rental experince by and large since we own the houses and do not rely on PM to run them for us.. This gives more attention to the renters and keeps them in place longer.
Again in certain markets the shovel ready lots are already in High demand, Here in Portland Or. were I live shovel ready lots are sold within days of hitting the market if they hit the market at all and prices are 50k to 200k per lot.. In the south East , and Atlanta particular there is new construction going on right now, Of course not to the extent it used to be.. But when you buy a shovel ready lot that originally sold for 60k and bought it for 5k.. You lower your end price accordingly and you still make profit and give a great deal to the buyer.
You'd need to pick your location carefully. If confidence returns won't US inflation rise? So would bank rates rise to be more like Australia or be held artificially low to keep the dollar low leading to high inflation?
Fed has promised to keep rates were they are for 2 more years then who knows where they will go… Up is really the only place they can go… And in the long run these low rates have help stabalize those that have bought at the low of the market with really cheap interest… Just like Bufffet said. Your defaults are going to be next to nothing in the coming years once all this toxic stuff clears out… Just think about all the foriegn investments 95% of you are paying cash… You may be leveraging your Aussie asset but to us you pay cash and there is no debt on your US property, So no way you can lose it in foreclosure.. Sure there are going to be alot of foriegn ivnestors that bought in very poor locations, they will just walk away from their homes, and the next group of buyers that wants to give it a go on the super low end will enter.My point is if by holding a rental property you get even better cashflow why would you want to sell and bank the capital gain?
At some point you have to sell to realize a gain… And investors like to cycle their money, from my perspective we just look at other avenues to create cash flow,,, buying debt…Partnering with builders for new construction, different asset class's like commercial or Multi family.
In answer to your question do aussie investors ever speculate on land the answer is yes of course. But to borrow at 6 per cent and with exchange rate risk to speculate on overseas land would be a big call! Regards David
From my point of view to borrow on your Aussie asset at 6% to try and make the yeild spread in the US is a risky play, it is one of the major contributors to the US meltdown,,, US investor leveraging up and biting off way more than they could chew one property does not perform another one tanks next thing you know its a falling knife…. What happens if your US asset does not perform as advertised… And I certianly know that from what I have seen… with Aussie investors buying in the what I call super low priced rental markets the mortality rate over time is going to be very high… So they will have borrowed against there home and their US asset which looked great on paper but is in the Hood or some really poor performing metroplex, just starts to suck money, at a point you either do not have the money to keep the asset up and running or your losing so much that you just walk away… And there your left with debt on your Aussie property that you still need to debt service or pay off.
If I was playing that leverage game I would only buy Higher end assets,,, like we talk about A B C type that have realistic returns. The first rule of investing in the US is capital preservation, yields is second, furture equity 3rd.
Our US clients look for
#1. Safety. IE no risk of cash flow interruptions
#2. Realistic yields. Very happy at 7 to 10%
#3. Equity kicker is gravy on top
All of our clients are taking funds that are making less than 1% in the bank and investing for greater yields however they do not want to take o. The management risks they just want predictable cash. We make an average of 30k per house at the exit and do our equity share our clients returns will be 12 to 16%. Net. Net yield with no risk for a bad day or month or year, no horror stories…
If. USA investor could get 7% in the bank like Aussies can that’s where 90% of USA cash would reside…
The reason I am buying land is that I am picking up shovel ready lots ( that means they are buildable now no improvements needed) for 1k to 5k per lot… This package I am looking at is 300 lots for 400k… cost to build just the utilities is 4 to 5 million.
The big public builders Lennar,,, DR Horton, Pulte and others have been buying these lots over the last 4 years… for pennys on the dollar.. .they are income averaging because they are also stuck with lots that they paid huge dollars for.
Now Horton I know first hand always paid market prices…. they would use local front men to option lots. then take them down as they had demand.. So they did not get stuck owning hundreds of thousands of lots they paid too much money for. Centex now they bought lots and had problems because they were in them too deep… Lennar ended up buying Centex. And I personally bought 14 lots from a developer here in Portland that Centex failed to exercise their option.. They had a contract for 195k per lot and I ended buying them for 105k per lot, and built out the 14 homes they sold for 350k to 400k.. We build for about 65 to 70 dollars a sq ft. all in here in our market.. thats builder grade no upgrades although its far better than builder grade in the South east.. Like what WI and I are buying, the Vinyl village houses. We have 9 foot ceilings, Hardee plank siding. 30 year comp roofs.
Granite counter tops Stainless appliances, Nice upgraded laminate flooring Not that cheap stuff they use in the south east. Up graded cabinets. Oil bronzed plumbing fixtures, plus full landscaping front and back with sprinklers and nice size trex deck. Oh and big windows and plenty of them not the little windows….. In GA they build the houses as cheap as you can build a house period, and those are the ones we are all buying… So you take cost to build the lot 25k plus say 10k for the dirt … Cost to build those vinyl houses is about 55 a foot, So your still north of 100k to build them.. And we are picking them up for 60 to 80k… still a good deal and under replacement values.So my long range plan is this:
I am buying cash flow rentals in my TWH model,, IE: have bought just over 100 this in the last 9 months. And will accelerate that to 20 to 30 a month for the next 6 months then move that up to 50 a month as I bring on other markets… At the same time I am buying these lots that are just too good of a deal to pass up on…
There is going to come a day and its going to be in the next 24 months to 36 months that cash flow rentals for the Net YEILDS we like to make will not be there in any great number… And we will start to sell off our houses to those that will pay us our profit and I am not looking for huge profits if we can sell and make 20 to 30k a house we will be fine….
What will happen is that new construction will take off again in some meaning full way.. And I will be sitting on 500 plus lots that I paid next to nothing for IE 1 to 5k per…. and our profits on the new constructions sales will be very good.
At least thats the thought.
I am buying lots right now in Oregon for 50 to 125k per…. And building homes and selling them for 199 to 350k per.
In atlanta were I have bought these lots at like I said 1 to 5k per lot… I will be happy to build new homes and sell them at 125 to 150k per home… Very achievable and very profitable.
Texas:
Its not that I would not buy in Texas I would and may: my only caveot is that one needs to be very careful up front checking on property tax's…And one needs to be cognizant that in Texas its very easy to build new… The market there did not erode as bad as other areas but it also does not rise because new construction is always chasing exisiting stock.
I still think at the end of the day what we called finished lots IE shovel ready, that one can pick up for 5k and maybe be in including tax burden in 5 years for 7k,,, and that same lot cost 25k or more to develop IE streets and roads.. that is a good play.
JLH
Mick
Scratch that last comment I thought you were commenting on the 1000 dollar HOA issue.
The tradesmen issue is best handled by making complaints to the contractors board. Department of real estate and the District attorney… Definalty do not hire a lawyer… Can't collect from dead beats your best bet is to get him thrown in Jail or fined or something of that nature..
An attorney will just take more of this investors money and there will be no way to recover it.
Mick,
1000 dollars is something no one in the states would go LEGAL on…
We have small claims court, and that is a great venue but the investor has to be there persoanlly and NO attornies are allowed to be there…
Time is a tickin for the net yeilds that have been enjoyed in these certain markets…
Foriegn investor had a free run there for a few years now we are going to get back to a more normal market..
IE US investors jumping in now that they feel the world is not going to end.
And class A , class B and Class C denotes airspace in the aviation world here in the states as well……Mainly around the larger metro airports….And there is a few more letter designations also.
WI
A B C grade is used in the commercial real estate world here in the US.
Office buildiings are either class A Class B or Class C
So sometimes we will reference SFR’s the same way.
Class A would be a house and neighborhood you would personally live in,, dollar value is not the determining factor its, quality of neighborhood schools and crime or lack thereof.
Class B is typically what your buying in Atlanta in the better subdivisions.
Class C or lower is Non owner occuppied ares of town and or the Hood.
Lawsjs
We have no hood in Portland. It’s a fact. Not to confuse our market with San Fran peninsula which is priced well above the highest priced Sydney homes
this is exactly what I do we made a business out of it…
I will talk to the odd tenant, but thats rare,,, I do view each house I buy at the time we buy and after rehab.
But when your rehabber and your PM are your PARTNERS life is just sooooo much better than trying to heard cats which is what it seems like when your trusting people that are not in your direct control to take care of your investments.
At least thats my take on it after owning 100's of rentals over the years and trying to either hire staff or hire vendors… The Equity partner is the only way to go for me… And the 90% of their equity comes when we sell…. So everyone is on board for the length of the ride…
And because we are in 5 markets and growing for me to make my goals of 20 a month its only 4 a month per team in each city which is easily attainable. Like Atlanta right now is darn tough…. If I had all my eggs in the Atlanta basket we could no way be getting the volume we need…
At the end of the day when I was making hard money loans I had it cranked up to 40 to 50 a month and each of those were to rehabbers.. So we were directly involved in that kind of volume… So instead of selling the hosues off we keep them… And just let our investors come along for a PASSIVE income ride that they never have to loose sleep over… Its a wonderful thing.
JLH
I’ve always been a kind of go for the Gusto guy…
So we have closed on 76 homes since May and have another 20 some in escrow…. If I am going to do this I want 1,000 plus doors.
going to start looking at some multi to help with those numbers.
Jay
