To all I need to temper my comments. there is no way that I think the Aussie investor is not intelligent and educated etc.

I think its more of a culture divide in that by and large the average Aussie investor really has no clue as to how the sociodemographics of the US play out. And its my understanding that fully 50% of the Aussie investors are buying their first rental property and doing it half way around the world, so you have a bunch of first timers with no practical experience jumping into a business that they really can't know a lot about based on experience, only what they educate themselves on and or read marketing pieces.

And one just has to be careful of buying based on purported gross or net returns.

The more sophisticated US investor that buys larger multi family or has a large number of single family units would never make a purchase based on proforma data. They will look at 2 years operating history, and come up with a cap rate that is associated with the risk or the asset class be it an A class property that will sell for a 5 or 6 cap. or a C , D property that sells for a 15 cap.

There is a happy medium there for single family and that is 8 to 10% returns if your honest with the numbers and if your an Aussie and you factor in your cost to come to the states and view property your LLC set ups your tax returns etc etc. its probably less over time, the first year is the honeymoon. its year 2 3 4 5 that tell the true story, Tenants average 1 to 2 years max. especially in the low end assets. they are by and large fairly unstable class of renter. And as such you will always have a 1 to 3k bill to turn over the unit. it will need new carpet usually new paint , and other items.

We have hundreds of section 8 houses in our portfolio and we budget 1k to 1500 a year just for the recertification process. You can get lucky and get one for 500 to 800 but thats rare and that does not include ongoing repairs during the year.

one thing that is certain there is no rental in the US over the long haul that will cost less than 10 to 15% of gross rent in deferred maintenance and or cost of tenant turn over.

As I have said if you use 50% of gross rent for your operating expense's your going to be in the ball park. If you do better that's great however when you come in at that number your not disappointed. And or you make sure you have enough capital to own a rental. I have seen more than a few folks loose their properties because they did not have enough money to maintain them once they purchased them.

Just think about it. fully 50% of the foreclosures in the US are from non owner occupied loans, IE landlords that finally gave up and gave the property back to the bank.

Lastly I will say it again if you can get 7% in an Aussie bank with Zero Risk then that is one heck of a return and I will personally be seeing if I can set up accounts in your fair country. Do not leverage your personal residences to buy US rentals with the hope of making 15 to 20%, this is HIGHLY risky. In my humble opinion

yes they can, I have a buddy at my country club that is an attorney and thats all he does is chase foriegn judgements.

In a practical matter as to the size of the transactions that I see most AU folks buying its just too much cost to chase down someone out of country. However if you own multiple US properties its very easy to get judgements recorded in any particular state.

Judicial foreclosures are handled at Superior Court.

Texas lenders are the most aggressive in the deficinacy judgement collection game, they can be down right ruthless in the pursuit of debtors.

to answer your question NO.

thats why there are very few loans for foriegners how would the lender collect on out of country borrowers.

any lender worth his salt will want a PG, and want the borrower to have something in the states to collect on.

can I get a link you your website and is there a published rate sheet.

couple questions

1. is it 90% of acquisition or ARV appraisal

2. and if there is no proof of income (stated income loan) is it credit score based.

3. or to get one of these do you have to prove very large cash reserves and or pledge any cash reserves or any other type of cross collateral. Is this what you mean for the right type of investor.

Would be interesting to know what the underwriting guidelines are. And what the rates and fee's might.

OK just re read the thread and at 9.5% and most likely 3 to 5 points you are hard money lending. and when you say the rate goes up for a 90% loan then I would assume it goes much higher.

These are very dangerous loans for not only the lender as a whole but the borrower I do not know if you have personal Guarantee's attached to these loans. The reality is 90% of the rentals especially at 30k or there abouts will never over time produce 15 to 20% net cash flow. Expenses and vacancies will eat into that figure. So if folks are thinking its as simple as leveraging up at 9.5% and I am going to get my 15% or better and make the spread that is just wishful thinking.

Its real simple anyone who has any experience in US rentals especially anything that is low end must use 45% to 50% of gross rents BEFORE mortgage payment to figure out their NET yield.

Very easy calcs and if you use these your not going to get hurt if you think you can do it for half or little to no vacancy or on going expenses then its just wishful thinking.

Take Gross rent.

Deduct

10% for prop management
15% for tax's and insurance  and if its a state like Texas or City like Detroit tax's Or inner Memphis with its double tax. Tax's will be much higher,
10% for vacancy reserve and that could be low as its not uncommon for a property to take 2 to 3 months to rent. But 5 months vacant over a 5 year period is not out of the question and is the norm anything less and again its just setting yourself up for dissapointment. I have corresponded with one person on this board who had a friend buy an Atlanta property that took 2 months to rehab once they settled and that was middle feb and as of last communication first of July its still vacant and the rents that were used to calulate the NET cash flow had already been lowered by 10%. So there is no that property for the first 5 years will ever come close to the 12% NET returns that the company who sold it to them touted. negative from day one.

10 to 15% maintenance especially if its an older home and in a cold climate. on Average thats only spending 700 to 1000 a year to keep your property in perfect shape, and god forbid you have the a turn over of tenant and you have to spend 3 to 5k for new carpets flooring appliances paint etc. Again this is the norm especially in these asset class's.

So thats 45 to 50% expense's. Some may do a touch better some will have a nightmare tenant and do a lot worse but those are good numbers to plug into the scenerio and see how your going.

So say you have a 700 dollar rent. deduct 350 right off the top for expenses. that leaves 350 and that 4200 a year net cash flow

lets say your in the asset 40 to 50k, if you want a decent area. quick math shows you that thats under 10% net return. Which is a great return and realisitic. Add debt service of 9.5% a year and you basically have an asset that is negativily geared ( love that term) when you calcuate in your cost of filing a tax return setting up a LLC traveling to look at the property etc.

So In my mind if you have a lot of liquidity a loan can be fine because you have the funds to pay it off or suck up the negative cash flow, however if your just a wage earner with good credit and modest CASh savings this is no investment that you should be looking at its far to skinny and risky. 

Again in my humble opinion and based on owning over 500 cash flow rentals in the US.

sounds like your dealing with reality and not fantasy,

10% NET return is much more realistic than 17% or 18% or 20%..

Like I have posted it amaze's me how intellegent the Aussie investor is on our market.

then they totally fall down on the fact that there are on going maintenance expenses and vacancies. I guess its wishful thinking.

Vegas could be a 10 year market. I am looking for a property personally there right now as my kids live there and bought a great deal a house that was 1 mil they picked up for 330k and put about 50 into it. but it would only rent for 1500. You need to be careful in vegas as there is a lot of downward pressure on rents because there are so many vacant homes.

I agree with your methodoligy in what your buying, I do not and have never liked Condo's though the HOA;s kill you and god forbid there is a construction defect lawsuit that renders your property un saleable and un able to finance. Right now there are just too many great buys to be looking at condos in my personal opinion, Unless of course your going to use it personally then they can be a good choice, Just make sure the HOA is rock solid.

At the end of the day though your selling a property, your making some money somewhere your agents are making a commission and you have no vested interest in the property after it close's the buyer is on their own with the property manager
This is the critical componant of any rental investment in the states And luck and circumstance play a big role. YOu can get a good property manager and you can get a bad one this will determine the success of the investment, any one can source US properties heck there are millions for sale. its the long term management thats the key, and setting up realistic return expectations.

Its amusing to see those who bought poperties share their veiws here when they have gotten one or two checks. I would like to hear from people that have gotten check 38 or 52. and how their expenses have tallied up over the years thats the true test of a rental not the first 6 months or year.  YOur still in the honeymoon stage.

Good luck on your company and again us US tax payers deeply appreciate the Aussie investor bringing their money from AU to America where would we be if not for this investor class buying up our low end properties? Its huge for the economy. Just think of all the houses that get rehabbed thats putting some carpenter to work. that is bringing business to Home Depot and Lowes
selling our durable goods and appliances. And in a lot of neighborhoods its stalling off the inevitable IE the houses will go through one more cycle then they will be abandoned and torn down or burned down as is the case in a lot of the upper mid west and parts of New York.

Now is absolutly the time to buy US property just be careful, check your demographics and do not be a pig on the return 7 to 10% return is the Norm for rentals over the long haul if your going to properly maintain them and have a few vacancies along the way.

Or there is me the tell it like it is American with 35 years experience and watching your fellow country men throw their money down the rat hole.

I was telling one of my office staff to day that no matter what I say these Aussies are going to chase the brss ring and they wlll just have to expeience the loss's as I have outlined. at that point they will never comeback to the states but maybe we can keep some from getting wiped out. that would be our goal/

Only fly in the ointment with your deals is your grossly underestimating the operating cost and therefor your return on investment numbers are pure fiction. there is no rental in the US that hs NO VANCAY Facotor, and only 300 a year for MAINTAINANCE this is the high of folly and stupidity if someone thinks they can base the returns on these bogus formulas. Anyone can make these look good if you have operational costs at 20% or less of what they really are. For instance I know of one transaction this company sold to an Aussie for 94k  promised 1600 a month in rent. and a 12  .5 net return and 19 gross, who gives <moderator: delete language> about gross returns its all about net. Any way this Aussie closed end of Feb. the rehab was 15k and by looking at the U tube that was probably puffed up by 5 to 7k so contractor made a nice profit there. here we are 5 months later property is still vacant the rehab that We would have done in 2 weeks took them 2 months. So the return on investmetn on this one is probably going to be close to zero for the first year. And thse transactions repeat themselves. Because the Aussie investor wants to beleive who ever will tell them the best story on the highest return. once the property has sold the seller is down the road the Aussie is stuck and wondered what happend to that 12 to 15 % return that they will never see.

I have owned thousands of these you and your country men are dillisional and will never acheive these returns over any lenght of time maybe year one then they will keep going down and down, and those who bought upper mid west in the Hood and war zones they just through there money away because they were flat being gready thinking they could get some 10 to 20 % return.

Do YOU GUYS NOT UNDERSTAND that is these returns were real and consistant that the local US investors which there are many more of them then you Aussie would snag them and you would never see them

The US investor is indeed doing that and the Aussie is buying the crap by and large, and I would venture to guess that fully 50 % of Aussie investors will loose all their money investing in these <moderator: delete language> properties over the next 3 years.

Do not mean to be so  blunt but it is what it is I know. I have lent to over 1,000 of these , just google my name you will see.

These cities even passed local ordinace's precluding foreign investment, B/C so many foriegners were losing all their money buying worthless real estate.

The issues with the Aussie investor from my perspective is they chase returns. with no thought towards capital secuirty.

I think we will see one of the biggest transfers of wealth this last 5 years. thats the Aussies buying worthless US properties thinking they are getting cheap houses with this incredible cash flow only to realize they to screwed, lied to and have lost all their money. One needs to be very careful buying in the states and any big OLD city on the east coasts or upper mid west, that offers 20 to 30k houses your just throwing your money down the drain , Better to go to vegas and have a great holiday at least you know going in your going to lose all your money but you will have fun doing it.

Zillow is not accurate forecast of values FYI. Values are near impossbile to peg in the US right now, just too many bank sale short sale gutted houses that drag down values and then there are those sales from owner contracts that inflate.

Look at what they sold for 5 years ago  If the house sold for 150 to 200k and you can get it for 40 to 70k there is no big crime and inner city war zone then your pretty safe. DO NOT BUY IN GHETTO WAR ZONES YOU WILL LOSE ALL YOUR MONEY thats a fact and 100% guarantee, I have 35 years experinces at this and specilize in Rehab loans and the fringe markets. Not to mention I have had it happend to me I have probably let Oh 10 to 20 homes go for tax's or donated to churchs once your in the Ghetto or War zone your done. your going to continue to have tenants that wont pay do damage and you will give up. The seller who sold you the property will laugh all the way to the bank on the nieve Aussie investor, Home Depot loves you etc etc.

DO NOT BUY FOR HIGHEST RETURNS PIGS GET SLAUGHTERED and THATS WHAT AUSSIES are doing right now they are buying based on who will tell them what they want to hear.  You guys are smarter than this wake up.

[email protected]  http://www.americanrealestateinvesting.com

all too common occurance.

I would bet this property or scenerio is playing out in the upper mid west

Virtually any City in the mid west will have its Low end area where you can buy houses for 1k to 5k, then put about 2 to 5k into it and sell it for 10k down and carry a contract for 20 to 30k and like this post said no tenant because its the Ghetto war zone.

Same can be said for really small towns in and around the mid west Might not be a war zone but, there is really cheap property and its very difficult or impossible to find a tenant. And absolutly no prospects of capital growth.

Almost any big US city you can access the Mutliple listing service for Real Estate and get a handle on wholesale prices Vs retail.

like where I live in Portland Oregon you can google RMLS Portland and get on the public side of the MLS system and see all the listing just like us brokers. You just can't see the seller data and a few other things like showing instructions or combo's to the lock box's etc.

If it were not for the Foreign investor the US would still be flat on its butt. The off shore investor is impacting the values to the positive, Its the herd mentality, and the exact scenerios that the US investor went through 4 to 6 years ago IE:

When the average home in CA was 500k plus the CA investor ( which CA has almost 40 million people in this one state) was a market maker, You get enough Californians coming in and you created a market, And they thought hey a rental in Detroit for 80k is a steal it rents for 800 a month. Well now that same house is 25k the rents are the same, the CA investor has been wiped out and its the foreigners coming in. Those houses will never appreciate in our life time.  Its strickly a cash flow play and a rough one as the sociodemographics lean toward very management intensive properties that out of area owners have a very difficult time with.

WE are all about investing now, now is the time, just need to pick the market and the team to do it with.

Up state New York is the last place I would invest other than Detroit, Fort Wayne, Toledo, and a most of the rust belt, I digress there have been laws passed in Up state New York to keep Foriengers from buying homes because they just get wiped out loose all their money.

I agree with Miami, you have a S. American influence, They did totally over build the condo market there so would be careful with those.

Vegas is a gerneration away, It was  a false market you had so much speculation going on but no real basis for the values same with a large part of florida and Arizona.  that when they crashed they crashed and the values are not coming back anytime soon. The rents crashed as well. So thats a bad combo high vacancy and foreclosures.

From what I see and based on my experience most markets in the US will support cash flow investments, what they will not support is companies selling properties based on furture Pro formas and not based on actual income data.

I find it very strange that people will just take the word of companies for what the returns are likely to be or hope to be with no track record.

A season US investors that buys income property will buy 4 plex or small apartment complex and will run their cash flow analysis bassed on actual operating income for the last 2 years backed up with tax returns. And the fact is a 8 to 10 cap rate is a great rate.

but no you have all these companies touting 15 to 20% returns on single familys when not one of them actually have a tenant and if they do the tenant by and large has only been there a month or two, This is the hieght of folly, you have really smart people wishing and hoping for returns backed up by what they want to hear not performance data.

Not to mention the majority of the foreclosures in the states were non owner occuppied properties where the land lord gave up and gave it back to the bank because they got tired of feeding it.

Did you ever wonder why when your looking at these properties to buy they need extensive reno. Thats because the last tenant trashed the place. And this is whats in store for the AU investor that is just looking for big rate of return, it comes with big risk.

However I know my views are probably in the minority so you will all have to go through the learning curve. I know I have.

I made 2 loans in detroit for example back in 08 27k and 30k respecitvlely, rehab was 15k about per house, rehabbed them, then my client defaulted I took them back they were trashed, I then rehabbed them again at the tune of 15 per house only to have them trashed again, and finally let them go for tax's I lost 100k cash on those 2 houses alone, And this story played out in many different markets through out the US…  But hey I made 250 plus loan in detroit probably made a million or more in fees and interest so we wrote it off, but for the individual investor this could be devistating.