Forum Replies Created
- HighIncomeProperty wrote:My 2 cents would tell me that ANY type of guarantee like that – buy back, long term rental, capital growth, just isn't something to rely on. A good enough product doesn't need any "guarantees" like that, while a poor product is never going to come good on them.
What we do, is we sell the homes turn-key, and we offer management thru our local partners, but we'd never be able to guarantee you the future performance. That's not to say we're not confident you will do very well with us:-)
Land is a fantastic investment, you have multiple exit strategies (building, selling to a builder, agriculture, off-plan sales) and very low holding costs, but as rightfully pointed out by Jay, you don't get any income from it and it is also not as liquid as some other investments. I think we'll see though over a 7-10 year period that the investors buying land now, will be the ones who will have made the most money.
We have a lot of experience in residential land lots in communities across the country, and are always interested in new ventures.
There is no doubt in my mind and based on 35 years of investing in the us real estate market that anyone considering entering the US real estate market should diversify and not buy only one asset type. Highincome is absolutely correct, the biggest capital growth based on % gain will be those buying land or shovel ready lots in the right area's. AND I STRESS RIGHT AREAS>
Lets take a case study of what I did in Oregon this year.
1. Bend Oregon 37 lots shovel ready bought from small commuinty bank at 25k per lot bulk sale.
Lots peaked at 175k each. cost to build each lot 75k. From the day we bought them we could do one of 2 things sell for 50k as spot lots to builders. Or build 1 to 2 homes at a time and make 25k on the lot and 25k on the house componant. Or hold for 2 years and sell at 60 to 75k. You will read that Bend Oregon is now one of the best buys in the country.
2. Hood River Oregon:
bought 26 lots from small community bank at 45k each. We are building this out. The bank subordinated the lots to our construction loan. No points no interest on the lots. We are selling houses at 200k under what the exact same house sold for in the peak of 08. and have pre sold 4 and have another 4 ready to brake ground. Profit 50 to 70k per house. With hundred % financing. So not sure what that return on investment is a guess 50,000%. to use the Aussie Gross rate return.
if anyone is interested in seeing this product just e mail me and I will send you a link to the RMLS listings its really neat looking product.
And there are so many other deals like this we are only constrained by capital. AU folks have capital, companies like our selvles and Highincome have the deals and the execution, not to mention the credentials of being local in the community.
We are starting to buyshovel ready lots in 4 or 5 of the biggest markets in the county at what we think is 10 cents on the dollar of just construction costs to build the lots. Granted no cash flow and we will have to mow them and pay the small tax's yearly however we feel we will exit in 3 to 5 years at least 10X what we paid for them. And the price point is rediculisly low. We are bringing in US investors into these deals at 10k or so per lot. So they buy one or 2 of those and sit on them. Then they can buy a rental for cash flow from whoever they want and hopefully they pick a good company and actually get positive cash flow this positive will pay for any holding cost on the lots.
And what I like is the lots will make capital growth no doubt as long as they are bought in the right markets, again there are cheap lots in the US that you do not want to touch. IE and lots were house's are selling for under 50k are worthless. a Lot in Detroit is worthless etc etc.
Have no dought though the big US builders Lennar, Drhorton, Pulte, are buying these lots by the thousands right now. There have been huge transactions in Vegas Pheniox, Central CA. No so much here in Oregon as we do not have the really huge projects. Although I am representing one bank that has a 1100 unit project in south central Oregon. that is going to be sold at 6.5 million for the whole thing.
So my point with all this is the US is not just about cheapie rental houses. We also like and OWN Mobile home parks, Storage facilities, and of course commercial ( which is in the toilet right now and anyone buying that has to have huge dollars and long term horizon) . And if there was ever the demand from AU investors we would set up investments to allow them to participate in these transactions.
There is more to US than buying a rental homes my friends check out some of these other opportunies I think if nothing else it will give you something else to study and consider.
Best,
Jay Hinrichs
Micheelleg
I can refer you to an excellent closing attorney in Atlanta as well as our partners that manage 150 plus units for us and out of area clients. The property manager will also give you a second look at the property to make sure its one that they beleive they can keep rented etc etc. As you know doubt know location is everything when buy in the US.
Once you have your LLC in place closing is very straight forward as I assume your paying cash. Settlement cost are 500 or so.
e mail me for the contact info.
be glad to pass it on to you and make introductions for you.
USpropertydirect wrote:You always pay for a rental guarantee in the purchase price or it is not legitimate. Much better to put strategies in place to reduce your risk of vacancy ie. buy in the right area – check out current vacancy data, crime rates, employment trending etc. Price your rent accordingly (we have seen on so many occasions, sellers putting in a tenant on a high rent, marketing the property with extraordinary yields and the tenant leaves three months later).YA THINK!!!!! THIS IS WHAT HAPPENS MORE TIMES THAN NOT WHEN YOUR DEALING WITH COMPANIES PROMISING THE HIGHEST RETURNS. THEY ARE NOT SUSTAINABLE.
Nigel Kibel wrote:I think that to suggest that people who use buyers services for the United States are lazy is just plane silly. If you want to go to the city and spend months developing the contacts good luck. The problem is the level on quality service that you can find on the ground is poor. Why am I saying this is that I did all of this in 2005 I even ran a real estate company in Texas in 2006 and still struggled to get great contacts. I believe that a lot of people will lose money in the United States, because they are dealing with Real Estate agents who see Australians as easy targets. I am going back to Texas in Two weeks we take small groups and educate people about the market. Who you are dealing with on the ground will determine whether your investing is successful or not.Could not agree with you more. I have been conversing with a few Au folks and in the effort of full disclosure I have not done any business with any off shore investors.
AS I have tried to bring the contrarion view point and some reality to those viewing this forum, I know my comments are not well recieved, but the truth rarely is when one wants to beleive the too good to be true scenerio.
This one gentlemen I was conversing with did explain in detail what the Aussie investor looks for or has an understanding for, and that tended to be Gross cash flow with not as much emphisis on Net cash flow..
Where US investors would look at the opposite.
I think what we are going to do at the end of the day is offer a due it yourself program and fully disclose what we are making up front. and fully managed program with the same disclosures. And try to give the AU investor some peice of mind.
All without any up front fee's and or elaborate buying schemes.
In addition we are going to offer owner financing at very good rates 5 to 7%.
JLH
Trentjr wrote:The Phoenix market has been heating up throughout the summer, yes pun is intended. The investor market is very active with wholesale prices up about $15K since the first of the year. Retail prices remain flat as yet, but it does look as if we have hit the bottom of the market. Available inventory is the lowest in years and sales each month are at all time highs. Banks do still have a high number of homes in the foreclosure pipeline but they seem to have realized flooding the market is not a good thing. So many people have ruined credit due to foreclosure they are unable to obtain a new mortgage so are renting single family homes. Vacancy rates in phoenix are sitting at 5%. Having said all this I agree that reaching a true ROI is important. When all true costs and vacancy average is factored in, 8% to 12% is a valid range for a good investment. It is important to ask for an itemized account of all costs, including rehab and agent fees. Phoenix is a great market as the prices are at the bottom and the economy is trending up (retail sales up 7.5% this month). Capital growth should be good over the next few years. Another positive for markets like Arizona, Las Vegas and Florida are the high number of newer homes. The number of homes constructed this decade significantly contributed to the crash, but they are available now in large numbers. These homes require less maintenance and typically lower rehab costs . Again it is important to have a good agent on the ground to make sure that the home has not suffered significant damage from the previous owner as they were evicted, or from vandals if the house has been vacant for some time.Thank you for posting reality I have been preaching 7 to 10% NET returns and I know this is a fact. But have basically been Booed off this forum. Lots of day dreamers there in OZ
RickH wrote:I dont think there is an easy fix to the situation over there.Empty houses are open to vandalism and people becoming "squatters" and occupying
these houses illegally and are often hard to move.
If the govt offers cheap rent to get people in there will kill the private rental market and be
flooded with more vacant houses and lanlord letting them rot as they cant sell tham and no one
would rent them.
A real catch 22 all created by laws allowing people to up and leave there homes when the going
gets tough. Different laws here thankfullythis is a good point, some of the worse squatter episodes are in upscale Los Angeles neighborhoods. The more educated free loaders. Lower end rentals like most of you are looking at will have very few squaters.
vandilism and outright theft from property managers is much bigger concern than squatters.
Jason700 wrote:The thing with US properties you have to be vigilant on is a few things (as I recently thought similar thoughts).You are better off buying the property outright than getting a loan attached to it because a) banks in Aus won't (will very rarely) lend you a loan b) if you manage to get a loan you are playing with international exchange rates.
Between the US and Aus there is a double tax system. Therefore you get taxed two times.
You cannot negative gear your property.
Whilst yields are quite high (up to 12%) vacancy rates are also high thus cancelling out the returns.
If you'd like to eventually live in said house in the states, you would have to become a US citizen which means you'll have to jump through many many loop holes
Anyway that was more than enough information for me to choose against said option
I would venture to say very few of your countrymen or women would ever live in the neighborhoods that they are buying homes sub 70k.
more like 200k plus in the better parts of the country is more like it. maybe 150k.
jLh
CheevesFinancial wrote:JayHinrichs-
The Red Sox stadium will have next to zero effect on the housing market? Wow..I'd love to get your reasoning for that. If you look at revenues, last I checked, the Spring Training season brings in tons of jobs and money, about $75 – $100 million per season. Then you have the full time season during the summer for minor league players. Granted it doens't bring in the revenue as to when the big dogs are in town, but it is still a money maker and yes it will have an impact on the economy and housing market. We are driven by the retirees and tourism…It's a fact. We don't rely on job growth as much as say New York City. Fly into Ft. Myers and you will see why snowbirds are zoned in on Lee County. The amount of infrastructure being developed now probably exceeds anywhere else in the country. And home prices are still dirt cheap. Buy here or go buy in the horse country of Ocala. Most will choose Lee County as there are things to do here..As far as your reasoning on the vacant land and how many homes will be built in future, capital growth, etc…look at it this way.. Let's say you buy a "lot" in Lehigh Acres for $4,000. Do you know what impact fees alone are? FYI, an impact fee is basically just a fee to the area that goes toward infrastructure, repairs, etc..among many other things. The impact fees in Lehigh are $10k to $15k.
Now you have let's say $20k before you even break ground. To build a cookie cutter house, you are looking at $80 per square foot, MINIMUM!! So if you build a typical home in Lehigh that is around 1,400 square feet, your construction cost is $112,000 (by the way, new construction homes are typically $130k + not including land). Add your other fees and you are at $125,000. It's called replacement cost.
You can buy a comparable "cookie cutter" home that makes a great rental for about $60-$65k per house. Yes, sure there are cheaper out there…but where is it in town and how much rehab is needed. I think I've been in every home priced under $55k in Lehigh.
So basically you are saying that capital growth could be non-existent, limited, etc when the replacement costs exceed current prices by almost 100%? Please explain. Construction will commence in this area when home values get near replacement cost. We are not there yet so homes have a lot of room to grow. If you look at the income levels versus median home price in the area, the proof is there for you.
Also, I am originally from Hoboken NJ and own http://www.NewJerseyRealEstateGuys.com. I won't get into the markets up there, but I am very familiar with the market up there…Did you use the words "New Jersey, Connecticut, and RURAL" in the same sentence? GEESH!!! Taking the train an hour from NYC will get you to Morris County, Essex County, Westchester County, and even parts of Long Island and Staten Island. Although these are suburbs of the NY Metro market, it is very very very far from RURAL.
Apartment complexes are best categorized like this in NJ or Florida…You have to base your budget on what is currently trading and what they are trading for. Here is where the market is for multi-family residential on a capitalization rate perspective: REITS, investors, etc..are buying at these levels all day long. If you ask any better, you will get killed by the competition.
Class A: 4-6%
Class B: 6-7.5&
Class C: 8-10%Sorry to say "stick up" for SW Florida but these are facts, not opinions of mine. Thanks. If you are ever in town, stop in. We are in Ft. Myers. I'll show you some amazing things happening in this area.
CHEEVES
My point was that a Minor league stadium in the US is not a game changer, no pun intended,
I am not an expert on Leheigh although I was there in the mid 80's as part of a steering committee for the state of CA to discuss how states are going to deal with these HUGE subdivisions 750k platted lots in the 50's with in adequate infrastructure for full build out.
Yes I think it will be years here, and as a matter of reference we build homes in Oregon for 65 a foot not 80. but we are builders and that is basically cost.
Having done literally thousands of acquasition and rehab loans. and knowing the majority of the homes that are being bought and sold for rentals, Most of them even after an exhaustive rehab will not stand up to a full house inspection, heck even knew construction homes a good house inspector will find defects.
You need to be a little open minded here, and make sure the major systems, foundation, roof, electrical, plumbing are sound.
In some instance's we will buy a home warrnety for 350 bucks a year that covers major items and is subject to a 50.00 service call, although these rascals will try to wiggle out of the repairs need to have a firm hand on them, and I recommend only going with a top flight company like First American etc.
Anyways what investors need to realize is that its not the first 3 months or 6 months you need to worry about its year 2 or 3. None of us are buying these homes to hold for 1 year or less, and there is always going to be at least 1k to 2k a year in maintanence if your going to keep them in top shape, and or when renters leave, there is very few instances that a renter moves and you are not going to spend at least 1k to 2k getting ready for the next tenant. This is the number I see that is not accounted for in the % returns that are quoted by the turn key operators.
If any one disagrees with me on this point I would be interested in debating this issue.
Anyone can make a guarantee based on a triple net lease type arrangement without being illegal, if your guaranteeing a set return on investment you are selling a security and as such have to register with the SCC. If one is willing to spend the 75k to 100k to register your product that can be done, unregistered PPM's are limited to qualified investors and some non qualifed. a qualified investor has a net worth of 1mil or more and or makes 250k a year.
doubtful these folks giving you a rental guarantee are doing that, more likely they are just giving you a document saying they guarantee rent, and if they are strong enough financially maybe they can, but like what has been posted I would question that with a high degreee of circumspect.
One other point of fact that needs to be addressed is that section 8 is not necessarily a sure thing, although 95% of the time or better it is. However a section 8 tenant can lose their voucher at anytime during the lease and be able to walk away. They loose their vouchers by not declaring income, and when the IRS correlates the tax returns to the SS #'s and see's a 1099 from an employer from someone on Section 8 and they have had income to disqualify them they are immediately kicked out of the program and will in most cases not be able to pay rent and then just up and leave or leave you with an eviction situation. Not commen but does happen and has happened to us over the years.
No chance to borrow on Lehiegh bare land unless your direct relative is going to lend to you
IE Mom or Dad.Lehigh and Coral Gables was the original land speculation play in the US
developers in the 50's platted about 1 MILLION lots. That is why the market went up and then crashed, These lots sold in the 50's 60's 70's 80's 90's for 3 to 15k each,
the craze times of 2003 to 2007 they got up to 50 to 90k. Only to fall right back to their true value 4 to 15k.
Its supply and demand also there is major infrastructure issues with these areas. In the know US investors are not keen on this area for that reason. Wholesale flippers that sell to foriegners love it, they make a nice 20k to 30k profit per deal but very few keep them long term.
There will no doubt be moritoriums on building in the future as the roads will be overwhelmed, Its already been 50 years its going to be another 100 to 200 years to absorb these and fix the infrastructure issues.
When I say path of progress I am talking about lands that are AG zoned now and will come into City limits of big cities over the next 10 years. specifically west coast CA OR WA. with some desert cities showing some promise, But there is going to be water issues long term in the desert areas. Now that could bode well for appreciation if new building is limited.
Just for an example look at this website and this is for Informational purposes only we are not soliciting any Foreign investors.
http://www.americanrealestateinvesting.com
110 acre site. Adjacent to a town of 100k that only has 40 acres of buildable lands left in the city limits. SUPPLY DEMAND.
This is a property that I have a 15 year option on with a purchase price of 5.5 million. When it comes into the city it will have a value of 30 to 50 million plus. I have personally invested over 500k in cash into this property and carrying costs are 120k a year So at the end of the day I will have invested about1.5 mil in cash over ten years With the returns of 20 to 30 million Net to my partner and I. So 750k over 10 years personally will return me 10 million minimum and could be double that. However thats our business we build houses, we buy and sell subdivisions and we own a LOT of rentals for cash flow.
Cannot buy 1 million worth of rentals in the US and even come close to this return. Rentals net (if you look at true numbers ) about 10% return annually. And then lets say they double in 10 years which if you buy the right areas are a distinct possbility, That would be a return of 3million on 1 mil over the same time frame, Not even close to the same return.. but still great don't get me wrong.
but it gives you an idea of what we look for. In the way of land in the path of progress, Also buying finished lots like HIGH INCOME advocates is a great investment as well. Easy double to triple your money in 3 to 7 years.
With our site you will see Intels big facilities within 3 miles, they are under construction of a new FAB plant 3 billion to build and will employ and additonal 2k full time jobs. And that adds to 16k jobs already there, Fujitsu, Genentech, techtronics, NIKE world headquarters all with in 5 miles of this site. This is true path of progress and what one wants to look for.
These deals are far more scarce than rentals of course and the building community here in the states will in almost every instance beat any foriegn investor to the deal, Unless the investor alignes themself with a company that is acquiring these kind of assets.
bid for assets
Buyer beware these are cheap properties that buy and large will be worthless over the long term but you may pluck a pearl out of the lot
land in the path of progress for the long term investor if bought in the right markets will out perform by far any rental properties you could buy. That is were the biggest profits in Amercian RE are made, definatly not buying rentals.
However one needs to be able to buy and hold and feed, no income or cash flow, however if you buy right you could make 10 to 20X return, and you will never do that buying single family rentals.
speedy gonzales wrote:Hi,I have just returned from Dallas buying some property. I am paying cash for the properties but after closing a local bank is giving me a 30 year P&I loan. The LTV will be at least 50% but up to 65%. The better information and paperwork I provide them the better the rates and LTV. They have done plenty of applications for Aussies with all so far having been settled….they just want you to own them in the name of the LLC to begin with and them finance them out. For example I just spent $220,000 on two places so if I get at least 50% I will have funds of $110,000 which I plan to lodge on a CD as they will leverage me again using the CD as security so I can buy another place. Gotta love leverage and it is possible to get it in the US if you look hard.
Extreme leverage killed the US market in the first place FYI
US banks DO NOT rent homes. Ergo the opportunity for investors. If they did there would be no investment market to speak of the banks would just rent them out and ride out the storm.
No matter the market you have to factor in a vacancy factor long term for your rentals.
Most of the pro formas I see grossly understate this and come up with big net returns that are just not realistic, still great returns but I think you can cut them by 30 to 50% of advertised and be in the realm of reality and not dissappointed.
Roger willco
are you going to make sure the properties have any value before you spend the money on foreclosing?
Tax liens are a crap shoot some payoff like you experinced and some won't and you will have lost all your money.
The other issues is if its a home and someone lives in it, your going to be hard pressed to get a judge to give you title to the property as they will always band over backwards to make sure some poor homeowner does not loose their home for 1 to 2k in back tax's.
There was one in San Francisico oh about 15 years ago that was bought for maybe 50k at tax sale property probably worth 500k. and CA. is a tax sale state, not a lien state, but he judge overturned the sale and the homeowner got he property back
If the props are vacant not an issue. I had one where I bought it in Northern CA. and it happened to be a church retreat. we bought the deed on 20 acres in the middle of the compound, Judge overturned the sale, we got our money back but lost 10k litigating it. We were right but like I say the judges are by and large not going to let any Tax lien displace a home owner.
petejac1 wrote:This is why you do your research and due diligence on the liens you purchase. Have a look at Tommy Senatore's Tax Lien Video. Spierreyoung I have been investing in liens in many counties, if you would like a more realistic opinion message me.if you run it like a business and put the time and effort into it yes tax Lien investing can. work my point is the average viewer on this site sitting in front of a computer half a world away has a little more trouble figuring out what to buy and conducting their due diligence.
I am just saying there is a good chance that you can buy one that is worthless, and the really good ones get bid down to where the return is under 10% and in some case's much lower. Then you have the guys that really want to perfect title and own them and of course that is a whole kettle of fish altogether.
You stop paying the property tax's, the lender will either pay the tax's and then do a foreclosure or the lender may decide its throwing good money after bad, and will just let the property go to tax sale. Either another investor will buy it at tax sale or it will revert to the state and be sold off as surplus property or like many parts of these citys that are dying they bull doze the houses and the land goes back to whence it came a "field or Park or farm land"
IE Mom or Dad.
