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Stu good points vis a vi PDX land development politics.
I would agree that any property that is not targeting for future development like my property is in the catagory you describe.
Last April Portland Metro and the state ratifed the 50 year and 100 year Urban reserves and Rural Reserves. The Urban Reserves are ear marked for development starting in 2015. Matter of fact the property right across the st. was brought in the UGB in this latest round and is long range planned for Industrial and commercial.
Each city in the metro area by state law has to show 20 years of residental land avalaible for growth. And when one looks at a map of Hillsboro you will see that the town can only grow N. and S. The southern property has been brought in thats whats called the Sisters property. The ONLY residental expansion in the next 10 years will be North and our parcel is the very next one to come in.
It is IN the URBAN RESERVE and that is were by state law development will go. Also this parcel not being surrounded by existing development does not create the normal NIMBY attitudes. Evergreen the major east west road is slated for expansion and growth in the next 5 years as part of Washington County transportation plan. And Jackson School RD. Just had a 10 million dollar overpass built to allow traffic to flow off and on the freeway.
This property is not an If its a When. Metro learned its lesson last go around bringing in a bunch of land that could not be serviced and never was developed or never will be ( Damascus) for lack of infrastructure. Our property has main line Sewer Water power and transportation.
This project has no bearing on what happens in the downtown PDX Urban setting.
As for Intel, That company has single handily kept Oregon alive. They are building the New Fab 5 right down the st. from us 3 billion to buld it. Put 4,000 people to work. and will employee 2,000 full time. Without Intel Oregon would be in really really sad shape.
As a matter of fact one of my new constructions is being shown today to an Intel engineer that just transferred from Dallis TX. There is going to be a nice rebound in Washington county as Intel brings in these new jobs.
Roger Pollock at Buena Vista homes bought this same dirt for 7 million in 04… The only reason we got it is because of the meltdown of 07 08 09… If you remember he sold out and went to Mexico. he was the 3rd largest builder in the Metro area at the time.
Interested to hear your powers to be feedback once they get all the facts about whats happend with the Urban Reserves and Rural Reserves and once they study where and what can actually be developed.
By the way as you know PDX Metro has been hell on Walmart. They just won't let them in for big box stores. With this down turn a bunch of commercial closed as you know and Wal mart very quielty bought 19 smaller super market type stores and plans to open mimi wall marts all accross the metro area.
I know my Haggens in Murray hill closed and Wal mart bought them.
Red flag goes up for me in Atlanta when you hear of companies saying that they have the properties rented in a week or have a waiting list.
Anyone can do that. However you will take a huge risk in placing a bad tenant.
So this investor just lost one year or more of any kind of return if you look at the numbers. and deduct non performing asset with trashed home as well… Most deductables on Rentals is 5k and if its less your paying far more than standard insurance rates and that will factor into your holding cost.
Now as anyone who follows my post knows we retain ownership of the homes through a Morgage participation so we take responsibility for these types of issues on the financial side and our investor is never affected they always get their return each month. Its that invest well sleep well theory, I can't imagine someone sitting in Aussie making a what was probably a 200k investment only to be hearing these types of things from a property manager that has no vested interest. that has got to be frightning for sure.
That being said it takes us anywhere from day 1 which is very lucky to 45 days to fill a vacancy. On average we will get 4 to 7 applications before we take a tenant. Once we have a tenant we keep them at all cost. And we can do that because we own the house and are very very responsive to their needs.. No property manager can do what we do for our tenant pool, Unless the property manager is going to come out of his or her own pocket to do the things we do for tenant retention. This whole business starts and ends with tenant placement and retention. Anyone can fly over to Atlanta bid on foreclosures. buy one fix it up and flick it to a property manager. Thats easy , its the next 5 to 10 years that is the hard part and crucial to success.
Reading between the lines of whats happening in atlanta is there is a lot of buying going on, great buys, however a whole heck of a lot of rental stock being put on the market at the same time. Then add pressure from investors to the property manager to get a tenant in the house and get it cash flowing and now you have the above mentioned scenerios playing out.
There is an absorbtion issue with rentals just like there is selling new construction. Only rentals are worse you get 50% of your portfolio in trouble now your really not sleeping nights. The 2 properties that are having problems could be months away from getting a decent tenant again.
And or the properties in the first place were not in a the best location.. Although as Alex says it can happen to anyone.
I was in a very Nice town of Atlanta closing a few transactions last summer and asked my closing attorney why it was so hot in his office…….." He said Aircondioning Units were stolen the night before"
Next thing that I am going to get rich on is coming up with a cheap way to put Condenser units on the Roof:) then put a lojac on them.
So bottom line can you make 12 to 15% Noi from these rentals Absolutly in a perfect world, Do we live in a perfect world NO, Crap happens tenants are tenants.
Stu. Property is. http://Www.americanrealestateinvesting.com
5.5 mil option price. We are looking for a few equity partners. This property will sell north of 30 million in 5 to 7 years
Let me know what you think
what specifically do you put in your reports and what typically do you charge.
I would think this could be very cheap insurance.
And a way to get a second opinion prior to settling on a property.
I was thinking about doing something like this, More on a Metro perspective. Take anyone of the popular metro areas and dissect them into Green yellow and Red areas so that the Off shore investor could get a quick snap shot of what areas in any metroplex to avoid straight away and those areas to concentrate their efforts on. Seems it would save a huge amount of due diligence time on their part and give a second opinion.
sounds like our service is more of a home inspection type of thing, which of course is good insurance.
whats needed is a fully amortized product, Where 100% of the cash flow pays off the property, then the borrower has a free and clear property with no balloon payment. They do not get cash flow up front and may be negative but pay of the property very quickly. This is what most US investors do
beware the balloon payments have a clear exit before entering,
Alex and I both went through some troubling time when refi's did not happen.
You will have lenders in the states that will "Loan to OWN" another words they hope you can't pay them off they then foreclose and your wiped out.
I was at a meeting to day IN SF and the Chineese agent was all but saying thats what they do. They hope to get the property back.
on the other hand I as a lender just want to be paid off I would never make a loan to own transaction
do you take outside land deals for your web site I have 1 here in PDX and one in Atlanta I would like you to look at
From my point of view, texas has no real up side as market remains level, and if you can get the same rents on a house in other markets that got crushed and the entry point is 50% of texas, seems to me that if you had a hiccup in texas, which when Oil is down so it Texas the market has peaked and you risk some pretty good deflation, Where as other markets of the country the deflation has already hit and there really is only upside.
house that rent for 900 and cost 40 or 50k in Atlanta have bottomed out there is no arguing that point.
House’s that cost 100k in texas and rent for 900 could move down very easily and certainly will not move up in any significant manner as new construction homes easily compete with the rental stock and what are homeowners going to buy a nice brand new home or some house thats been a rental for 5 years. Americans have a real affinity for new construction.
You factor in the one of the highest property tax rates in the country, Foundation issues with the clay soil and there are certainly risk’s involved.
I have one client that sold 30 of his rentals in texas as they constantly made no money. And there is a pretty famous US investor from LA Bruce Norris who talks about the same problems in Texas.
And its a myth the market did not go down…. I am working with a client that works for Intel and transferred to Portland, He bought 4 years ago and to sell he sold for substantially less than he paid. property did not drop 50% but it sold for 30% less than he paid for it 4 years ago. And being an Intel engineer I am sure it was a good area.
JLH
I would think Steve would just send you one for free since you gave him a good plug.
I know I take the contrarian view, however as a country it does us no good to have investors come here with these completly unrealistic expectations, and remember house flipppers do one thing, they flip for profit and as much as the market will bare.
Not all but most of the Aussie based ones will want money on both sides of the deal . they will want money from the US wholesaler and then want money from the Aussie buyer for the privlage. And of course everyone is entitle to a profit, its just when I see some of the deals come through my desk the profits are just gouging, and I am talking about US wholesalers selling to US folks. so I know it happens to foreigners as well.
Problem is those that made the leap bought the dogs they just kind of go away as they are embarrassed and they do not share their problem investments.
The few US guys on this site we all get private emails from folks asking for some sort of assistance. And of course we try but you cannot do anything for someone that has bought a war zone slumlord peice of crap property that was suppose to return them 20% because the nice Aussie company that may or may not have ever seen the property told them so.
Now there are good Aussie companies, but there are far to many that have no quams about sticking you with a lemon and laughing all the way to the bank of that I am certain
The absolutly most risky US real estate investment is the Super high cap rate multi family properties in the bigger mid west cities of the US.
Talking about a city in Tennesse is most likly talking about Memphis, and if you drive around memphis you will see 50% or better of the apartment complexes big and small boarded up, waiting for the next group of investors to come in and make a run at their cash cow 30% cap multi property. Only to have it boarded it up after they have lost hundreds of thousands and then the next group comes in. And its a never ending cycle.
For those on this Forum these super high cap rates are extemely risky and I can flat guarantee the only people that can make these work are ones that do it for a living and live with in miles of the properties. Have their own in house management that are employees and have full time security guards at the property.
Fact. over 50% of single family homes in Memphis are rentals. So the better renter goes for a SFR the worse renters end up in apartments. No one chooses to live in apartments in these areas they are forced there by income standards and usually super bad credit criminal backrgrounds. The high cap rate apartment is a constant turn over property as people come and go. A one year tenant would be long term.
Yes they can work but you need to run them like a prison literally. Duplex's not so much we buy some duplex's. but anything that is 10 untis and up and you have this sociodemographic living in units that are 20 feet apart, your talking major work.
Best play for these is to buy one fix it get it rented and then flip it to the new guy who see 's star's and thinks they will get this super high cap…. then in 2 years it will be boarded up again.
Cheeves, I agree for the US resident or one that can borrow at these historically low rates.
I am personally locking up a 2.9% LOC on my personal residence. Can use it like a check book to come in and out of deals.
One thing I want to comment on and based on all the years 35 plus that I have been buying tax sale properties, developing sub divisions building homes, and of course buying courthouse step foreclosures.
there is a new Pardigm happening in the states.
Sure we had this huge bust and yes houses are far less than replacement cost in many markets and that does not include any cost of the land and the SDC's or building permits.
Whats happening now is foreclosures are Mortgage based Correct??? Tax sales see very few homes actually get sold, Lots and lots of land gets sold through tax sales ( and there are companies that make a nice living buying the odd tax sale properties all throughout the US there are certain US counties which I have mentioned before that have Millions of platted parcels and thousands go to sale every year) but very few homes unless they are Inner city war zone type stuff.
So fast forward 5 years. I would say 80% of the non owner occ homes being bought throughout the US are being bought for cash and or quasi owner financing, You have some guys selling rentals with 50% down and carry 50% as basic owner carry back. The 50% down usually pays back the seller 100% or close to of what they paid for the property in the first place and the other 50% carry back is profit. Very common say in Kansas city I see that a lot there.
So we get through our mortgage crisis, lending rates now are at all time lows with All TIME high underwriting standards. I don't know about you but the last 8 New construction homes I sold here in Oregon 7 were for cash or at least 20% down only one got an FHA 3% down loan. So this new crop of investor is paying cash, ERGO the crash in non owner occ prices as its cash and carry and there is a price point people will let go to pay cash for a property sweet spot under 100k.
How does our housing stock look in 5 years. Huge amounts of it are owned free and clear so those are not going to foreclose as there is no debt or lender. The Owner occ's that are buying today at lows with big down payments next to nothing interest rates and those loans will have a much lower % of failure than the older higher interest over value paper that is getting foreclosed today.
Builders will start to come back into the market as they do not have to compete with bank owned…. If underwriting guidelines stay the same which they probably will for some time we as a nation will have far less home owner ship and much more of life long rental population.
So these deals will not last forever the US is going to be much stronger the Foriegners are pumping billions a year into our real estate all with no debt. In my opinoin values on non owner occ will turn to cap rate values. With nicer homes having lower caps and war zone junk higher caps.
What you will then see is a whole new crop of foreclosre activity that will manifest itself into TAX SALE's.. B/C those same homes that are being let go by the millions that are management nightmares that people US and foreign are buying for these unrealistic cap rates cannot be sustained and those who paid cash for them will tire and finally just stop paying tax's and let them go. I know I personally have let about 10 homes go for tax's in the last 5 years. 5 in Detroit, 2 in memphis, 1 in Washington and 2 in CA….These were homes as a lender that In Foreclosed on and were beyond salvage. And there are mainstream lenders doing the same. This is what creates blighted boarded up blocks of homes predominatly in the upper mid west.
Cheeves whats your thought's ?
Brendan,
I just reread your second post and if you have to scrimp and can't afford steve's course not sure what it cost but most book hawkers charge 500 bucks or so. You have absolutly no business buying a rental property in the US… You are risking your families financial future.
Only buy a US property once you can pay cash and you have at least an additional 15 to 20k liquid ( not borrowed money) set aside to handle the unforseen.
If you go down the path your talking about and do it yourself and are going to trust a property sourcing company and then some 3rd party vendor property manager your going to put yourself in some financial distress of that I can virtually guarantee.
The property investment business in the US is not a Game its a business and its a tough one. We have well over 400 doors in our portfolio and to run them right and not be slum lords and we do not pay any management fees and we maintain them ourselves and even with these new price points ( much lower than 7 years ago) 14 to 15% is what we can expect.
So how are you going to get the same return. I get better deals on my houses by probably 20 % or better, as I am going direct No middle men taking fee's no paying up front to Some property provider. I pay no management fee's no upcharge on maintenance no letting fees. You are going to pay all of those. Limited travel, no big attornies fee's we do our own LLC's etc etc.
Do not get caught up in the Hype…
Save more money get better capitolized so you do not endanger your family you always want to be able to buy those Christmas presents.
From what your saying I would think your far to under capitolized to even think of investing in the US. Unless you did it with a managed program that assures that you will never have a capitol call for vacancy maintenance repairs etc.
One the biggest issues I see with the selling of our investment properties is the gross understating of actual operating expenses or running expenses and the completely unrealistic expectations about vacancy rates.
Its much like mutual fund investing and picking your own stock… Most novice stock pickers do poorly trying to pick that one stock.
Same with trying to pick that just so right US rental.Not to mention the trip and set up cost will cost you at least 20% of your capitol on hand and money you need to borrow.
One benefit coming out of the US real estate bust is the majority of properties that are non owner occ. being sold to investors are being sold for cash. So our nation the US is going to look completely different in 5 years time.
All these foreclsoures will have flushed out a new breed of cash investor will not have any debt on the property and foreclosures will be a fraction of what they are today.
Now Tax sales will sky rocket in the cheapy war zone crappy neighborhoods that a lot of the turn key guys work in because the cash investor will get tired of pouring money down the drain on the cash cow us rental that became a cash pitt. And will let these houses go for tax's instead of whats happening to day where they are being let go for failure to pay the mortgage payments.
The idea of borrowing on your personal residence in AUssie to leverage up and buy US properties especially cheapy homes that are really hard to manage and DO NOT perform as advertised anywhere close, in my mind is highly risky, I think you will see article in your local papers of Aussies losing their homes and or having really bad financial problems because the CASH FLOW rentals they thought they were buying do not cash flow and actually cost money each month.
so there you go you borrow 100k against your personal residence get caught up with some cheapie properties that have no real value unless sold by a high powered marketing company your bleeding every month, this scenario I guarantee has played out and will continue for the trusting Aussie who really does not understand the difference between " investment grade" and Truly Fully Managed" and buy a rental from some turn key company that at best has marked up the property so much that they can give you a one year "guarantee on rent and repairs" once that guarantee is over is when you will see the real world, and the higher the return the greater the risk and the almost certainty that your going to take a major loss over time.
I mean seriously do you think any major players or wall street companies are buying 30k houses in Detroit because they return 20 to 25% net returns as advertised or any other super cheap house in some rust belt town.
INVESTMENT GRADE US properties trade at 3 to 7 caps max… These are properties that insurance companies loan on Hedge funds buy REITS buy… You can get into some higher returns if you have a great management team that has an equity interest in the property but no way can you get these kind of returns as advertised if your doing it on your own and counting on a property manager in the single family space… You may do it 1 year but not going to happen over long haul.
So since if you agree with me that 15% plus returns are not sustainable over the long haul then you had better have bought a quality property that has a chance of apprecaiting, and I think we all know that most of the cheapy properties are just cash flow based and have no up side..
then once you factor in your TRUE cost what it cost you to fly to the states and other set up costs…
So bottom line in my mind someone with the scenario you pose is making a very very risky move borrowing high interest money to enter the US market to buy one cheap house. very risky
Ian,
The scenario you describe was an insider job, And it sounds ( of course I do not know all the details) that your operating agreement was flawed at the inception.
f the transfers of title from your LLC to his took place with a closing attorney or title co. The SOP's are to review the LLC documents and operating agreement which calls out who can sign and transfer, encumber etc for the LLC. If your manager had those rights then the transfer can legally be done from the eyes of a closing company, and any dispute between you the investor and your manager would be a civil action which is what you did to get your properties back, And its just fortunate that he or she did not subsiquently sell them once transfered or encumbered them. And I suspect there is probably a little more to the story as to why this manager would do this unless he was just setting you up from the incpetion of the deal.
What we typically do with our LLC's is we establish in the operating agreement who can transfer title and can sign for the LLC. In addition we have a caveot that there needs to be an authorization signed by a certain number of the members allowing any transfer then the Managing member for expediance sake can sign for the LLC. A corporate resolution if you would.
Also as stated above in the US all someone really needs to do is get ahold of a notary stamp and they can forge documents and record them… A Notary in the States is not like one in other coutries, Like I bought property in British Columbia and went to a Notary to sign some documents and they are just like attornies they want to reivew all your supporting documents before they will stamp the doc's. Notary's in the states just check you ID and if match's the name on the doc your good to go. With the exception of CA which requries the thumb print in the Notary's Book. If there is a fraud the cops go to that thumb print,
This is also one of the reasons its near impossible for a foriegner to get a mortgage loan in the US for non owner occuppied properties establishing true ID's and such.
One last thought Ian if you unwound those deals for 3k legal fee's thats pretty amazing I would think most US attornies would have thought that to be a 10 to 20k case.
I am thinking of putting together a little Insider booklet type document for basic due diligence at a nomial price say 50 bucks or something, that would come from a neutral 3rd party it would give the Aussie a basic list of questions to ask their promotor RE agent closing attorney.
My other thought was to put together a Due Diligence service on markets in the US. And certain cities. I get private e mails all the time from folks asking about this neighborhood and that one in the big cities. I can usually answer those quickly and at least prevent someone from buying a property in a war zone that the nice promoter would like to sell them.
If anyone reads this I would be interested to know if anyone would see any value in this type of service.
Ian I just reread your post when you say you sign affidavits removing this person as managing member and filed with the court house. This would lead me to beleive that this person transfered the title without benefit of title insurance and just prepared the deeds himself and notorized them and recorded them ( which again anyone can do) The country recorder just records whats presented they do not look for validity of the deeds or documents other than to make sure they are filled out correctly from a function standpoint. If a title company closed this transaction and wrote title insurance and missed the recorded documents IE they were recorded prior to transfer then you have an issue with the title co or closing attorney.
May I step in here I know what your getting at.
And Alex that is why the Truewholesale model rocks for the Aussies because they not only have equity they hold the Mortgage over the property and it cannot be sold with out them releasing it all the while getting their monthly income with no cash calls or down side risk.
In my lending days of the 80's in San Francisico we had many crooks that would try to manipulate RE transactions through fraudulant transfers and recorded mortgages. As well as others who would place a poisen pill on the property. IE they would have a relative hold a mortgage over their property in case they got in some big lawsuit and their property was attached. The property could be liquidated by court order but the mortgage would have to be paid. Now there are statutorial time limits. You cannot just put a mortgage on a property 5 days before a judgement comes down to attach it the judge will throw that out.
Also It really takes a criminal mind to think of deeding your free and clear properties out from under you with phony deeds….
ANd Yes to who ever is reading this its very possible to do. One would just need to steal a notoary stamp or get a not so swift notoary to notorize a deed that was a forgery…Then any individual in the country can walk right down to the recorders office and record said instrument as long as it was filled out right. You have then done what is called "clouded the title" Then to make maters worse you now have stolen the ownership and now you take it to a lender and do a cash out refi pull out the money and walk. It can happen and I have personally seen it happen in all place the SF bay area, that is why they require fingerprints in CA in the notoray books when you sign any deed that transfirs title. There was a borrower that did this to the tune of 30 million dollars but thats another story.Now when you buy a property if you do not get title insurance then your on your own. If you found out this had happened to you you would then need to get a ( yes Lawyer) and file a Liz pendance against the property and a suit would run through the court system and of course if this happend it would be prudent to call the cops as well, as this is fraud and theft and some other bad things.
With the liz pendance filed no closing attoreny will close the deal or title co. So no transfer or loans could be made on the property. And at the end of the day and a lot of expense the theif that did this would end up in jail. and the judge would ( quiet your title) and the judge records a deed clearing all claims.
With title insurance if you had this scenario happen they would step up and handle all the legal ramifications payoff what needed to be paid and then go after the culprit very vigerously. Thats why its important to know not who the attorney is or closing company but WHO is WRITING THE TITLE INSURANCE. you want one of the MAJORS.. First AMERICAN, STEWART, THE FIDELITY FAMILY… Not some po dunk company you never heard from. Any half a brain RE agent can help you with this.
However thats a good point brought up what happens when I buy these free and clear properties how do I protect them.. And in practice if you buy them free and clear you can by all means put any kind or size of mortgage on them as you wish. This certainly would keep the theif from hitting yours.
At the end of the day most theifs are way to stupid to know the ins and outs of title work and the like.
Buy your real estate get title insurance when you buy it protects you for forgery and fraud. No need to get to hung up on LLC unless you need it to get a checking account. And unless you have millions of dollars worth of properties there is no reason to be worried. worse case they take your 30k rental house from you. No need to spend thousands a year protecting that small asset. A Umbrella policy if you have 500k or more in property is a good Idea thats what we have is a 5 mil umbrella that cost us maybe 1500 a year. And that covers each of our 400 properties like a blanket.
Good subject have not talked about us Title fraud in a few years. the case I mentioned in The SF Bay AREA was famous and I was in the middle of it. I dealt with all the title underwriters uncovering this fraud. At the end of the day the lenders all got their money but no interest . The Fruadster got 9 years at the Big Q if ya'll know that prision its San Quinten sites right on the SF Bay just North of the Golden Gate. And the title company went out of bizz. The Title cos lobbied CA laws and got a law passed that any documents that transfer title the Notoray has to get finger prints. So if you buy something in CA or Sell and your notoray wants a finger print you will know why, Because I bust this guy and sent him to jail.
lawsjs wrote:My sister on LV foreclosures gets 50% down 8% I/O – as a buyers agent her clients net 16%+ so thats OK. However, I just got refi'd on a comm building 4.15% 30y 70% L/V – Wachovia. Trick was on the comm building they wanted evidence of 6 months payments in seasoned money up front… Having passed that test (which even I was surprised I could) I am now being 'offered' finance on my other buildings…. Back to the future??? My sisters stuff is hard money private lenders – with their own criterium, you may fit you may not, but the figures are indicative of a 'trust' of RE investment. I am pretty excited with a bank giving me very good terms. I have quality stuff and they personally (as in the loans officer) inspect the buildings, as well as everything else – but its good. If _I_ can get 'real' finance, then the property boom is about to commence…
Residential is a totally different kettle of fish. It will filter down there eventually when they work out how to protect themselves.I submit this is the difference between owning an investment grade property that is commercial. different rules for Commercial.
I would think to get this deal you had great equity, the good fico as you describe and fantastic cash flow and a property that was precieved to be investment grade, not some <moderator: delete language> inner city detriot 20k rental with its 30% a year return There is plenty of US financing for investment grade properties or those that have TRUE large equity positions.
Nigel Kibel wrote:Yes very interesting. It shows that what goes down does not come back up straight away. I deal in Texas because it is a very stable housing market. I think some of the markets mentioned will come up eventually. The question is to you want to invest or speculateThis is a very good question, invest in a place like texas that really never moves up or down as any surge in demand causes builders to just build new construction for what the exisiting stock sells for, therefor never any real apprecaition unless you hold 10 to 20 years. Property tax's are a killer to cash flow.
Or invest where markets were crushed and replacement value far an exceeds the purchase price of the existing stock. And given the 2 markets rents are about the same for quality of home and size.
Which is better one market that can clearly rise again. Or the other market that never moves much…
60,000 dollar question for this evening. thoughts?? EH
Good post. I think anyone reading this will understand now why the promise's of 20% return are just numbers on paper and cannot be acheived over time.
Even though the property has a tenant thats just the start of the 3 T's Tenants, Trash, Toilets … Tenants stay on average 12 to 18 months so as you own these properties there are going to be on going expenses. and from what I see these are not discussed or accounted for in the proforma's.
when the poster talk's about 9200 HVC this means that there are 9200 on a waiting list. Not 9200 families running around with a the gold ticket HVC voucher just looking for that great rental to alight on to.
It is reasonable to expect 30 days or more to find a QUALITY tenant. You need to run your screenings on them. They need to give notice… I mean tenants are not driving around in their moving van with all their possession's ready to move on a moments notice. And if they are its usually one you would not like.
Any way you slice it. Someone is going to make a profit selling you a turn key house. Either they disclose it by charging a buying fee. Or they are buying them fixing them then flipping them to the cash flow investor. Their profit is in the sales price. If I was a betting man which I am not I think the scenario for these 35 to 40k homes goes like this.
Bought for 5 to 10k max from bank
rehab 5 to 15k Max
flipping profit 7500 to 20k and or as much as one can make that is the goal of a house flipper is to make as much as they can make on the flip. When dealing with marketing companies that are Aussie based Aussie run. What typically happens is they charge the buyer a fee like is being discussed above. and then they get an equal fee from the wholesaler (US property provider)
In my loan days it was not uncommon to see on the settlement statements up to 4 or more companies that made referrals all making 2k to 10k each. At the end of the day there is usually North of 10k and average of 15 to 20k per property being paid out to these middlemen.Property management I could not agree more with the statement that there is not a lot of money in it.
The only way property management company can stay alive is to charge letting fee's And remember most properties will be relet every 12 to 18 months and your going to pay a months rent for that new tenant then your going to pay a make ready fee. IE clean carpet paint where needed plus tax's and insurance utls while it sits vacant 1 to 2 months per rental cycle. And of course non of this non cash flow time is accounted for when deducing net ROI…
So its good to get others to validate what I have been saying on this board for a year or so…
Buy better product….. returns are 8 to 10% in most cases if you factor in ALL running expenses Vacancy factors and proper reserve's. If you do better thats great. Over time unless you live there and manage these properties PERSONALLY that is the only way they can acheive anything north of 12%. I mean I know we have 500 of these in our portolios and undermanagement in 4 different markets and we do not charge a monthly management fee or letting fee's. Thats the only way you get to the 15% north return that we do is we do it all truly in house and do not charge ourselves. If we charged ourselves to manage our homes we would be under 10%
I was talking to another US wholesaler of good repute yesterday. and he was saying that there is a crew out of NZ selling in AZ and they are marking the properties up 30 to 50k over market value each and over what they pay for them.
I guess we can look at it 2 ways…..
The investor is getting totally screwed or they are setting new highs for comps.
At the end of the day this is just another false market when this company runs its course your going to have NZ investors in houses they will never be able to sell for what they have in them. And for sure they are not making any great monthly returns because they are paying to much for them and rents are not going to bail out a bad buy up front.
I still do not understand with all the info on the internet and the access to reputable Real Estate brokers why anyone would not figure out that the nice company doing this for me is making a killing.
OH come on. what horse crap…..
just call a spade a spade <moderator: delete personal comment>. who falls for this bunk anyways
Residential is a totally different kettle of fish. It will filter down there eventually when they work out how to protect themselves.
