Forum Replies Created
Alex, The play really is to take all these foreign investor that have an appitited for these low end highmaintenance rentals kind of like (kim kardasian) pool them all up into a 504 D and go ahead and invest in the hood, it where they want to be anyway.
However with you as general partner and in charge of performance and day to day maybe thats one way the OZ investor can buy the low end stuff and have it managed professional and have a change of collecting their rent.
Just a thought
JLH
As a matter of fact, as a pilot with many hours of flying around the US ( more than 1000) in my Cirrus Sr 22 I can catogorically state that you will not by flying down to the US but that you will be flying up or North to the US.
When we are in the states we call it flying down under. which in our mind means down or south to OZ.
A bunch of my buddies fly for US carriers out of SF down to Sydny et al. And When i was last in LA. And actually Alex and his crew were at the same venue, I had the privalage of watching a quantas A 380 approach and land, that was quite a site for a pilot like me.
I would have loved to be an airline pilot but just not the right age. In the US we have the most freedom to fly small aircraft than anywhere in the world its a true privalage, we can fly from airport ot airport with no tax or other burden like Europe.
Even when I fly to Canada a few times a year to go fishing, Once I contact Vancouver Center and check in then Kamloops Radio for landing instructions I end up with a 120 dollar bill mailed to me in the states. The when I go to the Kamloops weather station and get a breifing, depart on Kamloops radio swith to center ( Vancouver) then on to Seattle approach. I will get another bill from Nav can for 150 bucks, just to use their system. In the states this would be all free.
The states hands down has the best system in the world . Free movement through the controlled airspace. No charge to shoot ILS or NDB approachs or 'GPS approaches. We have it lucky thats for sure.
Good info, although I seriously doubt many of the homes that investors are buying will sell North of 300k.
Canada withholds 25% of your proceeds no matter the price, I learned that the hard way, I paid cash for a 500k home up in Kelowna BC back in 01.. kept it 2 years sold it, and the closing attorney sent 25% to the Canadian Gov. I had to file a tax return and finally got my money back after 9 months. They kept 25%of my gain which was not a lot since I sold it after owning it a short time. However I had plans for the 125k they kept.
This 300k rule for 99% of the investors on this site will never come into play. Not only are the prices so much lower, the majority of the low end rentals will never sell for what people are paying for them
JLH
Todd,
It does to you and me because we have experince with both the good the bad and the ugly, Like the Clint Eastwood movie.
Also the Off Shore investor especially from OZ can get 7% or better risk free with their money in the bank in their country,
With that in mind they are looking to leverage and make money on the spread. So a realistic 8 to Maybe 12% Net over the course of a 5 year investment is not that appealing to them.To the US investor its extremely appealing. 90% of my clients already own 1 to 5 rentals and are burned out on managing the managers. If you look at my testimonials on my web site you will see a few of them.
JLH
Todd,
This is EXACTLY what my company does…. If you go to my web site you will will see how the model is layed out.
I use a different scheme though, As partnering with people on the deed can be a very sticky situation down the line. One if they have a problem or if some reason you had a problem… One answer to that is to put together a 504 Reg D offering. for this activity.
My Scheme is more of a commercial transaction something that say a Donald Trump would do with one of the big Investment bankers.I am a NMLS licensed Mortgage Banker with 30 plus years experince in Lending and a fairly large single family portfolio owner at least by the standards on this web site. So I have married the 2 into what I humbly beleive is the safest vehicle for investing in single family homes in the states, and I know I am the only one in the states that sets up the transactions as such. There are few people that under stand both sides of the transactions like I do. Having made well over 2,000 hard money loans in the Fix and flip space to most of the successful turn key guys of the mid 2000's. In my peak we were doing 50 to 60 a month. When the rate and term refi died. The turn Key companies then went looking for cash buyers. That led to OFF shore investors. And US investors in their IRA's…
It also was one of the factors that caused massive deflation in the single family rental space. NO FINANCING. Majority 70% or better were being done by cash and Cash talks finanacing Walks.
I can tell you from personal experince that my program is so popular with US investors there will be no need to go off shore. One the Off shore investor really does not appreciate the Risk factors here in the states by and large so they are not willing to what in their mind is give up any % ROI in exchange for greatly reduced risk, These investor are just going to have to experince it on their own. And the ones that do fine or can tolarate the risk and the amount of time and effort it takes to successfully manage ones property at the end of the day will just accept what they make.
The Off Shore investor who is thinking these investments once set at 18 to 20% net will just roll on year after year are going to become disenchanted and will most likely suffer Capital loss's on a pretty large scale,
I have done 200 plus loans in Detroit back in the day and enjoyed my time there, In all honesty I got out in time before price crunched I was loaning in 04 05 06 when properties were apprasiaing at 100 to 150. And now they are half or more of that and as you know once a street or block starts to turn bad your in trouble with your investment.
I think most folks on this site agree that they should be buying in the burbs and pay more for a better quality home if they are going to venture to Michigan.
I will put my web site on here for you to check out hopefully it won't get deleted http://www.truewholesalehouses.com
Best,
JLH
DHCP
just to make a few observations on your line of thinking,
Your lawyer and CPA are not going to do anything for you when your house is sitting vacant and has just been trashed and vandalized. Your property manager is going to call you with the bad news and come up with bids to fix it.
In these single family transactions involving so little money Attorneys and CPA's are just not used here in the states it just drives up your costs and what are they going to do for you anyway.
Any good Real Estate agent can take care of the purchase and sale agreement. Its not very technical or difficult. And the accounting is the same way, There seems to be an inordinate reliance on those 2 professions from OZ investors. When US investors would rarely if ever use them for these little deals. The CPA you would use for tax returns, and basic run through the numbers but thats it. Lawyer only as a closing attorney in the states that use them. But they do not comment on the deal and again the paper work is dead simple.
Now Risk , your so far off base on your assessment of risk as to be a danger to the public in my opinon. There is HUGE risk owning rentals in the US. And its not from getting sued for a slip fall or some tenant issue, Its monetary, you can mitigate that with the most important member of your team and thats property management, and that is the key as you state. And the trick.
Any good property manager has to be making money to stay in business and you want them making money, you want the best. To do that they need to charge letting fee their monthly and mark up for maintenance. If they don't they are not really making much money and its thankless job. Beleive me we have hundreds of houses in our portfolio and tenant issues suck and they can suck the life out of a property manager, dealing with them and then dealing with some out of area owner who expects the impossible as normal… Now if your property manager is also your property provider this can get mitigated because they are making a 5 to 20k profit when they sell you the house. So they can do the management for less money.I think the base issue with a lot of these homes in the upper mid west is that they are 30 to 60 years old.
And the tenant's are rough on them period.Here is how I rehab houses for our program because I own them and have to maintain them.
1. new sewer from the st. to the house. ONe of the major issues with tenants is clogged sewer if your sewer line is 20 or 30 years old it will fail.
2. New plumbing old plumbing has bad water pressure and if there is copper your inviting theft.
3. New electrical if it has not been updated in the last 10 years or so.
4. New roof if it is over 10 years old.
5. redo hardwood whenever able, if its rough paint it. Limit carpet as much as possible.
6. Basic paint job on interior if exterior is fine, I do not spend the money just making it look nice as I am not trying to create a perfect looking house for a potential investor I am creating a funcational house for a tenant that is going to be much rougher on a house than most owners. Save the fancy paint and cabinets for when you want to sell.
I agree on insurance. there is more profit just taking 20k than you would ever see rebuilding in these neighborhoods. And the lots as stated are worthless liablities.
Property managers by and large if they are small time 100 unit or so. Can only make money 3 ways letting fee, monthly charge and mark up for repairs. Now if a property manager is also selling you the house then they are making 5 to 15k profit on the flip and can factor that in, but as a buyer your going to pay for it either coming into the transaction or maintaning it.
I submit that the reason you are seeing people talk about ROI less than 18 to 15% is because thats reality in most instances and much worse probably 50% of the time, there are only so many perfect scenerios out there.
If you jump up in asset class you will have much less headaches but your returns are 8 to 10 generally and thats great, for a house that actually may have some retail value down the road.
Morning Dan hope your having a good fall, My 49ers snuck one out there on your lions, Been a long time since we both had teams to cheer for.
No I do not pay utilities. My experince has been if houses are too large and your dealing with tenants on a budget ( which most are) the price to heat or cool the house is an issue.
Therefore the target sq ft size of rental for me is 1200 to 1500 sq ft… We like 4bds when we can get them. However I would not buy a really large 2500 sq foot or bigger home for rental just because its a good deal, More expensive in all facets to own and operate and your not going to get that much more in rent to make up for it again is my experince in Detroit Chicago and Indy.
Suh is from Portland Ore were I live by the by he is a nasty dude, us Oregonians by and large are laid back earthy types.
Tag line for Portland is: Keep Portland Weird thats the prodominate bumper sticker.Risk reward is what it’s all about
From what I see from OZ investors they have a very high risk tolerance, IE chasing the sky high rental returns that can only happen in a perfect world or in ones dreams
At the end of the day most investments will be positively geared but no where near quoted rates of return
Then there will be the unfortunate ones that get duped into really poor choices
Buy for quality expect lower returns and sleep well
To much stock put into the head lines
"CNN says this market is one of the 10 best
AOL say this is one of the 10 worst markets.
From my prospective the foreclosure crisis is thus.
1. sub prime IE interest rates over 10% to home owners who bought with teaser rates.
2. Investors who either like KC posted have Arms that adjusted up, or decided that they had negative equity and walked.
3. Investor nightmares with property management, IE vacancy, repair costs, and down right incompetant inept and criminal management companies.
Its easy to pick the stratigic default markets
1. Florida
2. Vegas
3. Pheniox
4. Central CA and the inland empireIf you do some research you will see that these areas make up fully 50% or better of the foreclosure problems.
Then you add into the mix low end rentals that become cash bleeders and folks walk from them IE
1. Detroit
2. Much of Ohio
3. Parts of Memphis
4. Inner Atlanta ( which by the way was the poster child for mortgage fraud)
5. St. Luis and KC along with Indy, cleveland , pittsburgThen you have stagnet markets:
Dallas and most of Texas.
And other non popular states for investors Like WS MN, ND SD , OK etc etc.Fast forward to the West coast.
Parts of CA cratered as bad as anywhere where other markets held up or never fell and prices are still in the stratosphere vis other parts of the country. Still going to pay 1 million dollars for a little 1500 sq ft rancher in Palo Alto. My home that I bought there in 1983 for 170k ( which was huge money then) just sold for a little over 1.4 mil. look it up 684 Encina Grande Palo Alto CA.
Our market here in Oregon has done OK as long as you were not High end which in this market was 700 to 2 mil. Anything in the multi millions lost 50% plus in value if you had to sell. but average prices only fell maybe 10% and things are rebounding.
However its like OZ….. Net cash flow is 2 to 4% if your lucky… CA in the better areas is negative.Most of the rentals I bought in the mid 2000's on the west coast were negatively geared and I am suffering through them now.
So happy hunting, and heres to finding that happy medium of quality home at a price point that makes sense.
JLH
sands69 wrote:Hi everyone,As newbies to the property investing game, my husband and I are looking at the U.S to start our portfolio, I was wondering if anyone could outline from their U.S investing experience which states are the ones to look out for or to steer clear of. There are plenty of bargains from the research we've seen, but how do you guarantee that you're not buying in an area that will not bring a positive cashflow in the future or that the foreclosure deals are not worth the asking price?
Any advice would be greatly appreciated.
sandie
Throw a dart
at the map.You will get all sorts of opinions from those who represent certain cities that they work in. It really all boils down to your team that you develop.
And the most important fact and the one that is the most glossed over.
The majority of rentals in the US that are under 100k are management intensive… cost far more to run and maintain than the folks selling them will let on about, and in certain areas have no hope of any capital growth.
In my mind if I was going it alone and thats anyone who is buying a property and going to hire a property manager that is a thrid party vendor.
I would be looking at the high end of the market and 5 to 8% NET returns. This will get you in quality neighborhoods that have a chance of appreciating.
There is a simple reason you have low priced rentals 20k to 60k that make claims of 15% net. they come with HIGH RISK over the course of ownership, I do not care what turn Key company is promising…. Its just the demographic of the tenant base and no one can control that to a degree of certainty whats going to happen to your property…. Over the course of many years.
Good luck in ferriting out the wheat from the chaf as we say….
Scott,
some probably think I am putting up Cr@p and others probably apprecaite the heads up to the risk's involved in lending and or residential real estate investment property in the US>
I know I have sure learned a lot.
Especially the perspective of OZ investors that are not experinced in owning and running rentals. The US poses challenges in the low end rental markets that are akin to 3rd world countries and really probably worse because the tenants have RIGHTS……
I really do not expect to do any business with OZ investors as I have more US demand than I have product for. I see my contributions here more as charity, If I can keep one person from losing all their hard earned money following the advice of some nepherious property seller in the states and or really search's out quality folks then i think I have provided a service.
Now the topics have gotten into lending and I am dead certain I know more about lending in the states than 99% of any of the contributors on this site. Lending your private funds in the US can be very rewarding or you can completely get taken, just like getting talked into buying those choice properties in Rochester or downtown Detroit or any other war zone in any other big city in the US.
What happened in the US was the CRA rules the banks had to play by…. Its called Red Lining, IE they will not loan in certain areas. Well most of these areas tend to be minority, Black, Hispanic, etc…. Clinton really pushed for the CRA Community reinvestment… Banks had to make a certain amount of loans in these neighborhoods Knowing full well that they were going to take loss's….
Well the loss;s happened in the form of millions of foreclosures the banks basically have given up and dumped these properties for ( as well advertised prices of cars) and the foreigners not knowing the difference and not really realizing the impact of the minority neighborhoods jumped in with both feet and their cash and have been buying them up by the thousands.
This led to all sorts of US and foriegn companies becoming US property experts…. ?For everyone who post on this site a good experince and brags of 15% income there are 10 who got wiped out. I know this for a fact. I buy these foreclosures I know.
One can make money and we do in this asset class but its as a business we have to control both the ownership and management in house without that your going to risk losing a lot of money.
Any way… Cardinals won the world series tonight …..
nateb,
can you elaborate, you bought tax liens recently and they already paid Off….?
has everyone paid off or are there still ones outstanding,
As I have done this over the years. And have not reconciled my return because I only dabbled at it out of curiosity maybe invested 50k to 100k… I have gotten some pay offs then I lose track of them and some have never paid off and probably never will.
I think with the volume at the tax sale its near impossible to really identify and pick specific properties. When the sales are taking place as a practical matter the taxing authority is selling them every 5 seconds and you just do not have time to react. Plus the local guys are going to get preferrential treatment at least thats what I experinced. OTC of course is different thats just plain crap shoot.
JLH
Can you send me an e mail on this site, I have multiple web sites that explain not only our loan products however in addition our Equity participation net cash flow investments.
I think the moderators frown on posting one's web site.
Be happy to help you navigate the lending world.
shape,
good questions and simple answers.
1. You get an apprasial from a 3rd party independant apprasier and whats even more important is that the Broker or arranger of the loan is some one you have vetted and has impeccable credit reference's surety bond and NMLS licensed ( you can google NMLS this is the new government licensing program you are subject to an "FBI background check credit check personal and company financial statements " before the license is issued. There were many many crooks in the mortgage industry and they created a good many of the problems with phoney loans.
2. Most lenders will only loan on a property that they would not mind owning for what they loaned on it.
3. IF company goes bust. As long as your a 1st position lender your a secured creditor and simply foreclose your position like the 2 million foreclosure that are currently going on in the states.
4. Because your a secured lender they cannot sell and get clear title without paying you off. Just like any other bank they have to be paid off when the property is sold. Now there is a scheme called SUBJECT TOO were properties are sold subject to the exisiting mortgage. In this case the beneficary of the loan will usually have an aleination clause which allows for foreclosure in the event of a change of title. So you can foreclosure just like you could for non payment.
At the end of the day lending is just as big of business in the states as buying rentals, Most folks that go the lending route just do not want to take the risk and hassle and down side of management. As been well documented on this site. especially foriegn owners that can get their clocks cleaned if they get hooked up with the wrong company thats selling low end rentals in the states.
speedy gonzales wrote:Engelo,This sounds similar to a product that a forum member Jay Heinrichs from True Wholesale Houses does. Slight difference is that with Jay's product…the rate is 7% to 9% on your investment paid monthly. The big difference however is that with TWH…you also participate in the equity of the home and have a note over the home. If TWH went broke or didn't pay your your monthly return…you still have a home that you foreclose on and get your original investment back. If all goes according to plan however and in 3 or 5 years time the home is sold not only have you gotten your 7-9% each month…you also stand to gain from the sale as you have a 50% stake in it.
Speedy,
Excellent recap of what we do. our notes 90% of the time are 9% sometimes 10 and a few 11s… the 7 and 8's we do are on new construction that we either hold long term. Or are on properties that we are building in the Portland Or. market and standing inventory and then are sold with in 4 to 6 months. On these there is also an equity kick "not 50% of course" however makes for a yeild over 10. on a very safe solid investment. All first position loans just like any bank.
There are all sorts of brokers in the States that will broker your money like the original poster presented. Just like the turn key guys out there, YOu have to be EXTREMELY careful who you do business with. Many many millions is lost yearly with "brokers placing loans for their clients" only to have said loans go bad and the properties are not worth near what was lent on them.
Be very careful of anything that quotes 15% and up, these are the most desperate borrowers and the risk reward scenerio is very very high.
Any one can send me an e mail on this site and we can go into detail. Anyone looking to be a lender in the states I would be happy to go over some of the ground rules that you should play by and other things to look for. I am a NMLS licensed Mortgage Banker with well over 25 years and 2,000 loans done most in the asset class that Aussies are buying in. So from the lending side and the ownership or equity side of the transaction I have been there done that in about half the states in the US.
had a nice lunch yesterday with a Bay Area client of mine who owns 200 plus houses in Dallas. he is coming to Atlanta and is going to get into our Note with equity program as he is just turning 70 and does not want to deal with the day to day of managing managers anymore. And my rates of return are as good if not better than he can do on his own with him paying all the costs. And he is a CPA by trade…… Funny guy walked him to his car Nice 150k Astin martin and off he went.
what did you find out on your search’s
One reality check is :
1. foreign investor wants this huge due diligence check by the local realtor.
2. local realtor makes 3% of purchase price or 2k which ever is greater.
3. what realtor is going to answer all these questions that the foreign investor poses. I for one would tell the investor take a hike.
for 2k what the hecks in it for me.
I believe you cannot expect a US agent to bow to these demands unless”
1. agent is a newbie and startving you will never get a successful agent to submit to this amour of questioning not worth their time nor mine.
2. If you ( aussie investor are coming to the states for 3o days) why who’d you need this from an agent your here to do due diligence.
For me personally I would never summit myself to this amount of micro management unless they were buy 1mil plus of property and I was making 30 k plus.
So in my mind if your expecting ( aussie investor) this amout of due diligence and work from you RE agent to buy one 30 to 50k property your expecting way too much.. I mean really who is going to kow tow to you for 1500 bucks .. Way better things to do.
JLH
Stu agreed on your assessment of the New construction in the portland market and elsewhere.
The day of putting maximum sq ft of house on the lot has been replaced with much more modest homes. The main reason is builders want to be under the 425k FHA limits that are also going down.
There is a real sweet spot in Portland for 250 to 399k… My Hood River project is 260k and we pre sold 5 this summer have not done that in 5 or 6 years…
Street of Dreams are always a collasol loser for the builders, One of the ones you mentioned that was built about 5 years ago out in Redlands area south of Oregon City was a perfect example, Huge houses with 2 to 3 million price tags that ended up selling for 30 to 40 cents on that dollar value…
My 110 acres by Intel you can view at http://www.americanrealestateinvesting.com I believe this to be the finest path of progress residential property in the entire Metro area, for the following reasons.
1. As you have stated nothing happens with out utilities this property has all utilities at the site.
2. State just built an overpass at why 26 that services Jackson school Road which is where our property is located.
3. vicinity to 25,000 high paying jobs property is with in 10 miles of Nike world headquarters, 3 miles from multiple intel sites, Fujitsu, Gnentech.
4. Any new jobs growth will go on the adjacent 800 acres that has just been brought into metro…
5. This property will come in with a variety of master planned amenities. With single family, multi, some strata, and a neighborhood commercial component.
Not sure any Aussies are really interested in whats happening in Portland Or. as we do not have super cheap rentals here you still need to pay 150 or so for something decent that rents for 1000 to 1200.
JLH
Alex SC wrote:Jay
I give you that one. Turn Key ….LOLSorry but thanks for catching that( did just leave the gym ) .
I appreciate your opinion ,being you have many more years in this business them me. I prefer people that give it to me straight then basically give me a line of bull…So thank you for that . That being said, that makes me alot younger then you…Just kidding
Well next question .
How do you feel about Florida , we are close to setting up shop there. I already purchased and sold a few house through the house calls show( Jay Mcbee ). That was few years back. Focusing on the North Port , Sarasota areas.
Entry point for our purchases their , and back end sales of Turn Key Deals .The numbers are about the same as the Atlanta , and Charlotte Market. The rent I feel will be lower then the other two markets.
I am working on setting up a property management company first there. My oldest brother is a 15 year vet on the Police force.The rehab crew I am running there are all cops so that helps ( very little theft)
Look forward to your opinion
Alex
Alex I have looked at florida with interest, from Ft Meyers and the literally 1 million lots of record there, ( do not get me started on the history of this area its already well documented here suffice it to say I was on a state of CA Steering committee in 1984 and the poster child for rampant lot development with in adequate infrastructure was Lehigh Acres and Coral gables I spent a week their with the local planning directors CA. has millions of these types of lots as well the guy posting the land Site Stu thats what he does buys these vacant lots at tax sales for next to nothing then sells them on contract its what I was raised in my dad did this for 25 years from 1960 to 1985 I digress) to Orlando and lastly Miami Dade,
Insurance is an issue, however I really at this time do not have a good enough handle on rental absorption to comment. I know Jay McBee of course I did a bunch of loans to their clients maybe even a few of yours. They have a radio show in San Diego and are Remax agents. Can’t remember his partners name however I know they work as a team selling turn key properties to SoCal investors.
at the map.
