Forum Replies Created
- DetroitDan9 wrote:Jay – interesting post! Good luck with your business.
Detroit Dan what is your opinion of all these agency's selling real property withoud a licnese.
Not sure whats with in the rule sand whats not.
Question are any of these buying services Licensed to SELL Real Estate in the US.
If I was the gentlemen who lost a bunch of money on a deal that was misrepresented first thing I would do is see who got paid what commissions. And unless these buying services are coming into title and selling their own properties. I would venture to guess the question is no they are acting as licensed agents without a license.
Anyone care to comment on this.
HighIncomeProperty wrote:Jay,
I will check out the link, however, I don't share your views on the Florida land opportunities. Partially yes, there's a ton of land inland (pretty much any county not on the coast) where land isn't worth anything at all.
The Cape Coral (I think that's what you meant when you said Coral Gables, which is an area in Miami) area still has very few lots selling for anywhere near $5K. The average sale now in Cape Coral (I'm talking the incorporated city and not including Lehigh Acres, and not including the swamp lands outside it) for a vacant building lot is $51.000, with the average in 2006 being $415.000.You're right that if you are working on "the inside" of this business, you can ind SFH in the area, especially in Ft Myers for $20-$30K on occassion, although that'd be the exception and not the rule. We don't do a lot of stuff in FL still as we're focused on the high income properties, but I think for a long term investor, Cape Coral and FL in general present excellent opportunity.
We only need to look at where people are moving when it comes to retirement, and also now with the cost of homes so low, it'll take a while for land prices to go up, but I think over a 5-10 year period, it'd be hard to not make money.
Off course, if you buy a property with a 10-15% net income, you'll have been paid back all your initial money after 7-10 years, but a lot of investors prefer the multiple exit strategies and low maintenance that a land investment offers.
Your the first one to quote 10 to 15% net returns for cash flow rentals. First time on this forum anyone has come close to what the true cash flow will be over time. All these claims of 15 to 20% NET cash flow are just wishful thinking as in wanting to beleive in the worst way it will be true. Any US investor with any kind of experince will take gross cash flow and deduct 50% for long term operational expense's before mortgage payment. So if you paying cash for a property. just use 50% of the projected rent as your net income and then figure your net annual return. If you do a little better so be it. but over the long haul this is where it historically has fallen. If you have a nightmare tenant the Net cash flow can be zero or negative. If you are one of the lucky ones that has a tenant move in and stay 5 years and do all their own little repairs, then your return will go up. No property stays full 100% of the time. And no property can be maintained for 20 to 50 a month unless your planning on operating it as a slum lord.
white_goodman wrote:speedy gonzales wrote:Charles 1 wrote:Interesting article in Property Update yesterday on investing in the USA. http://propertyupdate.com.au/articles/is-the-investment-grass-really-greener-in-the-us.html Read it and take out of it what you will. There are always different opinions on how and where to investInteresting that this sounds like a recent article from Neil Jenman. Both even made the exact same mistake of saying that if Americans can borrow at rates of 0.50% why aren't they buying the properties. This sort of statement is crap. 1. Banks simply aren't lending regardless of how great your credit score is. They can make better returns on the markets and have no incentive to lend 2. Americans cannot borrow at rates of 0.50%. Anybody can research that and see thats a load of bull Statements like this reak of someone who has their own agenda and have no credibility
yeah source and reliability…
what business does the article writer run
You can get .05% interest rates in the US. But only one Place http://www.Naca.com this is a non profit anit sub prime neighborhood stabilaztion program that is only avalible to US citizens. This is underwritten by B ofA and Chase. they have 10 billion to lend they are not in every state.
How this happens is that the Seller is allowed to BUY down the interest rate all the way to .50 % I sold one of my REO's to a NACA buyer it was a 114k house he put not a penny down even closing cost I paid 12k to buy down his rate and he ended up with a .69% rate of interest and a monthly payment over 30 years of 132 a month. B/C his tax's and insurance were higher than the mortgage all in he was 300 bucks a month. You then have to pay 50 a month to be a member of NACA you cannot sell the house for 10 years if you do you owe them the equity. And you have to go to 2 or 4 Sat seminars and tall others about your good fortunes.
Look it up. http://www.naca.com No credit requirements but you do need a job.
However as home builder which I am I can only buy down a FHA or conventional rate .50 to 1.00 depending on lender.
Nigel Kibel wrote:The housing market is very stable. Finance in general is still a problem. Our system is a little different we take over existing mortgages within the properties so it is possible to buy a property worth around $120,000 and only need to invest around $20,000. If you send me your details I would be only to happy to discuss what we do in more detail.Nigel,
there have been no assumable mortgages written by a US bank in 20 years. How are you dealing with the alieanation clause's which are written into every US mortgage or deed of trust?
Or are all of your deals owner finance contracts that you are wrapping or taking subject too?.
I would venture to guess that these are bank loans. And do you explain to your investors that a transfer of Title can trigger the Alieanation Clause and the lender can then start a foreclosure and of course the foreclosure is in the name of the poor seller who thought they were getting off the hook. Now granted most lenders as long as they are getting payments will not call the loan. But some will I have had it happened to me. And if your investors do not have the cash to pay the loan off it could be a problem and since they are AU ciitizens financing is not readily avaliable to them.Just curious how you handle this technicality when doing subject too deals. Of which I have done hundreds by the way. and it can be a great model if your prepared to pay the bank of if they call the loan.
JLH
HighIncomeProperty wrote:I have been away from the forum or quite a while, always find it interesting to check in every now and then.
The scheme Jay is talking about, although I'm not familiar with the particulars (never even been to Oregon, one of the few states I haven't) is something that sophisticated investors might want to look at.We've had a decent number of Australians invest with us in residential land lots in planned communities across the country, although when investing with us, the difference (I think) is that you would get individual title to the land, and could sell at will. Lots in some communities across the country are off by as much as 85-90%, those of you on here that follow Lee County, FL will know what I am talking about.
DetroitDan is right on Detroit, we've put most our investors in there with net yields north of 15%, and I know I sound like a broken record, but NOT all of Detroit is bad. We have done deals on the "fringes" like Warren, Dearborn, Oak Park, Eastpointe, and these are all good areas. We're an asset manager, not a broker, so we LITEARALLY have to invest in these places ourselves, and if we can't sell the property on once we have finished the rehabs, then we will hang on to them. Section 8 in michigan is fantastic as well compared to the rest of the country.
Kansas City is interesting – we are very big on Indianapolis as well, it's got a very strong rental market, low purchase prices, the "bad" areas are very isloated, consistent yields north of 15% net, and is slowly transforming from a manufacturing/rust belt type of economy to an economy focused on services and Government.
There are deals everywhere, it's just very important to decide what YOU want – if growth is what you want but no need for income, then either land (long term) or a property in Florida (higher HOA so low yields, but great groeth prospects) or parts of Texas, Cali etc would be good, but if you want cash flow then my vote is still 100% for the Midwest, and our clients seem to second that, but as always – look at what you are buying, and at what price.
Highincome; check out http://www.americanrealestateinvesting.com Let me know what you think of this bad boy, this is one of the finest sfr development properties in all of oregon. if not the best. I might be a tad bias since I own it. But just look at it. 3 Intel campus with 16k employees within 3 miles. Hillsboro airport were the Intel shuttle runs out of ( Intel has their own airline) Phil Knight of Nike has his hangers there as do other major corps. The commercial dirt around us sells right at 1mil an acre. I have no doubt that in 5 to 7 years we will be sitting on a 40 to 50 mil property. Oregon has this imaginary line around the metro area called the urban growth boundry, if your in it your golden. they then move this boundry by law ever 5 years to accomodate growth, well this movement issue was hotley debaded. ANd Metro then decided 5 years ago to master plan the future and that begat the 2050 plan. they created the urban reserves. these are properties ear marked for development. Then the rural reserves. these are off limits for 50 years. Can touch them they stay age. then thennext thing they did was long range traffic design.
So as our property sites. it adjacent to the City, it will be the first that comes in 2015 becasue of the location that is clearly evident on the map and areial. Another 2 years of governement hassles and we are in and approved for 700 plus units. Land value 40 to 50 mil easy.
One need s to know by region where the land use controls are tight like Oregon CA washington. Where they are loose, Texas
And most of the mid west cities as they are flat and do not have real envirionmental concerns. Here in Oregon we have to protect Salmon, Steelhead, spotted Owls and all other manner of fuana and flora, same with CA its even worse there.RickH wrote:High Income,I think your post is 100% on the money……… I looked at land inFlorida for under $5k a block (very long term prospect) and the returns in the midwest with very low chance of capital gains in the near future.
Kansas City is one place under going a transformation and is now more diverse ….not just heavy industry anymoreExcellent post
Florida land were does one start. Here is a History lesson for some just so you get some perspective of why you have 5k lots in florida and other parts of the country.
Lehigh acres and coral gables, lets start there, these subdivisons were created in the 50s when florida was swamp infested mosquito ridden place, the state in an effort to bring people and money let land developers go wild, and wild they did, Leheigh has over 750,000 lots of record, coral about 500k So we all know real estate 101 supply and demand, there is an endless supply there, demand is weak , these lots origianlly sold mainly to snow birds from Mich Wisconsin, Illinois etc. back in the early 50's what was a tidy sum them 2 to 5k , they maybe got up to 10k over the next 40 years. then come the big boom not to be confused with the big bang, Builders moved into these areas because lots were dirt cheap and bulit 1000 of houses. there is sewer and water to some of them and they have more value but the vast majority are on Well and septic. thats a well and septic every 100 ft. So these 1000's of houses were built mid 2004 alittle before up to 2007, prices of lots rocketed all the way to 90k then the crash the 250k house went all the way down to 35k, I know I bought 2. lots plummetted back to 5 to 10. There are still over 500k lots undeveloped these are not what you would consider buying and holding. I was on a state of CA land use steering committee in 1985, subject: what to do with the millions of lots that were platted but really cannot be built out becasue of infrastructure constraints. We flew to fort meyers and had meeting with planning staff etc. These 2 sub's are the poster child in the whole state of developments that can never fully build out because the road systems sewer and water could never handle it.
If you go out of LA towards Edwards airforce base ( home of the Shuttle) thats riverside and San bernadino counties biggest counties in entire country there are over 2 million lots platted there back in the 20s if you fly over especially in a small plane like I have done 100's of times you will see checker board dirt roads the occasional mobile home. these lots have been trading for tax's and low dollars nearly 100 years. Some profiters will come in and try to flip them off to foriengers one group in San Francisco was selling lots he was buying for 100 to 500 dollars each at tax sale and selling them to unsuspecting chineese for 20 to 30k each. Of course they were cash buyers and the profiter very well orginaized, I was in his office he was Chineese there he is with his Rolls parked infront of his office, and pictures of him with Reagon.
bottom line there are land plays in the states and then there are land plays that are like florida not worth a crap. These same florida lots create this whole tax deed investing scheme as well since there are a million of them.
hope the history lesson helps people are flying back into Leheigh to snag those 35 to 60k houses built in 04, I personaly thing if you want to live there or use it as a second home that they are great buys. And there should be some appreciation.
its cost 75 a foot to build so your 1500 ft house is going to 90k or so to build plus your 10k lot. So its reasonble to think these homes on a case by case basis will go up to 100k and maybe alittle more if some folks want the area and a more custom home. its going to be hard though with virtually every house owned by an Aussie who has put in renters. Buyer of homes by and large will not buy in areas of high rental density
Portpirate wrote:Jay So as a matter of interest, what is the investment level required?60k US plus 2400 a year option payment. return in 5 to 7 years 10X plus. My partner and I and my childrens trust will hold 50% of the investment, I have another group here in Portland that just closed on 20%, young guys that have successful local business's.
My main interest in posting this was to see if there is any interest from OFF shore investors that want to buy and hold strategic properties with huge upside as oppossed to cash flow rentals, which seems to be the only thing talked about on the forum.
There are many smaller deals this one is 5.5 mil purchase price, which I consider a mid size deal. but when we roll out in 5 to 7 years at 30 to 50 mil it becomes a sizable transaction.
My thought is there are smaller deals that the big boys will pass on, Deals that are say 250K to 750K. that present great upside,
so in my brainstorming I am thinking hey if there is appitite for these off shore we could start to pick them off one by one. And to take it further if we built out the product, which we are capable of doing we would make anywhere from 30 to 75k builders profit per house which is what we are enjoying today. Any run up in values and it gets real good real quick.Different level of investing for certain, Much higher quality product and price points.
Let me know your thoughts.
As a follow up to my comments on Vegas and cheap lots. in those markets to put it into perspective. Lots that were 100k plus were sold shovel ready in bulk and I mean 500 to 1000 at a time for under 10k per lot.
You are already seeing new construction going up on those, and they can compete with the foreclosures because the reset of the land values.
Its the same here in Portland we building about 2 homes a month in 4 different subdivisons. We can do that because what was a 200k lot we bought from the bank for 80k we lowered the price of our finished product from 475 to 350 and they are selling.
Portland for 20 years until the crash built 10k to 12k housing units a year. 09 saw less than 1k. 2010 about 1500 and this year looks like close to 3k based on permits applied for. So the rebound is happening, prices are lower, The builders that bought land at the peak are the ones that lost out. Along with their lenders. Most lots in our market are bank owned thats who we have bought them from.
Its what we call path of progess investment.
Its an opportunity to buy into the partnership that holds the option to purchase on this 110 acre site in Metro Portland Or.
Upon annexation into the city of Hillsboro this site will be zoned for 700 plus housing units and some retail commerical.
Its my understanding on this forum that particulars on an investment cannot be shared. Other than in General terms.
If you want to e mail me privately at the e mail I would be happy to share the fiancial details.
I will have no problem bringing in Local Portland investors into this deal as this property is just one spectacular peice of dirt and as the google maps shows incredibly located.
I was just more curious as to if AU investors would even look at this type of Land Bank investment that will generate no cash flow however cash on cash will give far greater returns than buying any rental property with the same investment capital. And set carrying cost as oppossed to owning rentals where you never know from month to month what your true cost are going to be.
If there is a demand off shore for these types of investments then I would look at other opportunities. As like the housing market, there is huge upside to buying land that can be developed in the economic rebound.
The institutional investors, Hedgefunds etc. have been picking off almost all of these properties the last 2 years. And buying exsiting lots. They pay cash and wait on the market. For instance most of the dead subdivisions ( bare lots but shovel ready) in vegas were snapped up by the big money last 18 months, same with Pheniox.
East of the Rockies or more specifically the Mississippi river Dirt for subdivisions has never had a huge value like we have on the west coast so not as attractive.
Our development land in the Portland Area ( properties zoned and approved for housing) peaked at 600k + an acre. The values like the rest of the country dropped in Half and have stablized. In our market you have very very tight land supply, that is created by government control. This property is squarely located in the Heart of the Silicon Forest as you can see from the web site. Intel employee's 16 thousand people at the campus's shown, you have Genentech, Fujistu, Google, Nike world headquarters etc etc all within 10 minutes of our site.
so with this property we optioned it 2 years ago right at the height of the economic crash for a fraction of the 300k an acre and expect to sell in 5 to 7 years for about 10X purchase price.
So thats it just throwing up a trial balloon and see what's of interest other than single family, But using a real property that we control.
RickH wrote:there will always be a mark up if a company buys and renovates to on sell. They will always add the renovation cost as well as a margin (profit).
I believe they do make good money on reselling but you are paying for the service and also it seems they work the prices out to acheive a gross return somewhere between 10 and 15%.
My thoughts are not aimed at any certain company but just in general across the board.Your way low on the % profit. some of the more competitive markets may have this low of profit for the flipper. Upper mid west at least the example of the OHIO properties I can pretty much guarantee these are marked up more like 50%
munecita20027739 wrote:My advise to anyone looking at any of these companies is to understand what they are buying. You need to understand what price was previously paid for the property you are looking at buying.I have looked at some buyers agents operating out of Australia and the properties being offered. The first thing I do is type the address of the property into http://www.zillow.com and look at the price history and see what it was last listed for.
I also do a general search of the propertyaddress on google and see what comes up including looking at the prices of surrouding properties.
I have seen properties in Memphis being offered on buyers agents lists for around 35k that were listed for sale for $8,500. I have seen properties offered to Australian Investors for sale at 62k in Toledo Ohio that were last sold for 13k.
Dont get me wrong, I think the US presents an incredible investing opportunity right now but NOT if you pay too much for the property.
If you don't know how to look up the sale history of a property I suggest you don't buy it.
Those prices you quote are wholesale as is, the houses then need to be rehabbed, However I could not agree more the Toldedo example I would bet they have no more than 20 to 25k into the house and the seller is making a huge fee. Plus Toledo is dead. If one were to pay 62k for rental you will have paid far more than true market value that being what Local investors will pay for rentals.
IMC Newbury wrote:Rosa, My advice, its worth what you paid for it, is don't………………. You got to be absolutely nuts to take a personal loan to buy US property. You will never get enough net return to be even close to an even cash flow. World gone mad… greed rules………………… crazyAs a US Real estate broker mortgage banker and investor I could not agree more with your reply, Do not borrow at such high rates to buy US cash flow properties. Especially super low end ones you will no doubt have a bad financial experince.
Although us Americans love the influx of capital especially Home depot and the supply companies.
I would appreciate any feedback on what if any appetite the AU investor would have for a transaction like this. At least its new and different than anything I have read on the site which seems to be 100% focused on turnkey cash flow single family properties.
Return will be 10 to 20 X amount invested (depending on the depth of the economic rebound ) in about 5 to 7 years. Its cash out up front and cash yearly And yes Detroit Dan this property will have substantial Capital growth without question,
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In the states you can buy any quality of roof, Slate, concrete tile, tile, cedar shake, fake cedar shake, architectual comp.
All of them if they are new will last 20 years plus and 30 to 50 plus if you maintain them..
Just need to have an inspection and get a roof cert then you will know where you stand on the roof.
bigger issues are Electrial Plumbing and Hvac and cooling. are they new or 25 years old and just working when you purchase.
Any property in the states will run you at least 100 to 200 a month for maintenance if your going to keep it in really good shape and stay ahead of maintenance issues and or have tenant turn over at the lease term. Sec 8 inspections annually run 500 to 1200 depending on inspector.
When we put a property in service we put 3k into the vacancy reserve account day one then add 200 a month. This insures proper care and feeding of our properties and if we have a little left over on a property when we roll out thats gravy, However we rarely if ever have to add to the fund.
DetroitDan9 wrote:@portpirate A 10% return in Detroit and the surrounding suburbs is a very average return – most people get somewhere between 15-20% if they are doing it right. On the flip side, I would be hard pressed to believe anyone can guarantee you Capital Growth. No one can guarantee that – if they do guarantee that I would take a close look at who you are dealing with! Just my 2 cents – best of luck!Dan, Your correct the better term would have been TRUE EQUITY I wrote that post at 3am so was a little foggy, Our fund buys at True cost and our investors come in at true cost. The same homes you see being sold to foreiengers all over the US come into our company and our investors at roughly 50% less than the investor will pay for it on their own. Our managed fund makes their money on the cash flow just as the investor does. As for capital growth that would be appreciation and icing on the cake. When you look at a house being sold in and around Detroit for example for 30k to 50k all the middlemen wholesaler rehabers are Making some Profit Correct? Because once the house is sold they have no future interest in the house. And thats the cottage industry of buying a foreclosure fixing it up and flipping it the wholesaler rehabber are not doing it out of the kindness of their heart or for practice.. and I submit to you that that profit is anywhere from minimum of 20% of their true cost to more like 50% and more. I know I made over 250 hardmoney loans in Detroit to the wholesaler rehabbers in the area. As well as 1,000 more throughout the mid west and South east, so as a lender we see the purchase side of the HUD what the wholesaler is paying for it buying it from HUD or Duestche bank, Wells Fargo, and any myriad of servicing companies or hedge funds that have bought large tapes and are selling off.
So thats the major differnce in our model, our investor comes in at true cost, we have ownership with the investor for the life of the investment, and we make our money on the cash flow along with our investor. Our model is not for everyone. Since we are covering all the down side our rates of return are lower than is routinely quoted here, Our investor partner is one that is risk adverse and wants to know that if they put out X dollars they will never put out another dime and they can count on X cash flow. And they are buying the asset at truewholesale with no myriad of middle man fee's tacked on.
And I think from your post you acknowledge that Detroit and the suburbs will see no capital growth for a very long time if ever, There is a vast oversupply of homes in Detroit, you could knock down 5,000 homes tomorrow. Just look at Devils night, For Aussies that's the Night either before or after Holloween. The locals set fire to Hundreds of vacant houses all throughout the city.
My full name is on these post anyone can google me. I come up number 1 or 2 in the US as well as my companies. So again to your point of your post I would welcome anyone to check me out. I have never done business with anyone out of the country, we have plenty of business state side. And our model may be too conservative for the Aussie investor.
I just became curious as in the markets I work which is the west coast, Portland Or. And select citys in the South East I was hearing about Aussies buying cash flow homes. And when talking to my partners on the ground they were commenting on the neighborhoods and zip codes that the wholesaler and Rehabbers were selling them properties and we just cringe, there is going to be a lot of folks sorely dissappointed when their investment criteria is strickly who tells them the highest % return. And you make a very good point investors can achieve (X return if they do it right), I have plenty of clients that run these type of low end assets for a business and thats what it is a business, Just like our company its a business not a passive investment. very very difficult to do it right from an armchair around the world and put all your trust and faith in a property manager who has no skin in the game. It will work for the first year maybe 2, then when you have your first Airconditioner unit stolen and or tenant turnover that cost 3 to5k to make rent ready again and or god forbid your house gets hit and totally stripped of anything of value in the home., the arm chair investor is going to wonder what happened to my 15% return and my turn key investment. Between my partners and I we have over 500 single familys in our portfolio and all of the above has happened to us at one time or the other, Its just devestating to an investor if you only own a few homes and one of them gets HIT by theives and vandals. this is the dark underside of our Big cities that people just do not want to talk about.
We also own Mobile home parks commercial buildings (which suck right now) and storage facilities (which are great but again a business).Heck on this post one of the Aussie's even got shot and killed in Detroit trying to work on his own property very sad but all too true if the investor just focuses on % return with no consideration to the safety and long term viability of the neighborhood. The property manager that my clients used in Detroit, His office right off of 8 mile is like a Bunker, razor wire bullit proof glass etc. you drive down any of the streets and you see these nice little brick houses, but those were built by european craftsmen at the height of the auto industry and the Auto industry in the US has fleed the NE and has relocated to the South and South east.
The other major sore point with me is that when you look at the pro forma's the expense side of the equation is no where near correct. It is always vastly understated and that is how these numbers are being cooked in my opinon. There is not a rental in the land that you are only going to spend 50 bucks a month on maintenance for any extended period of time unless your a slum lord, Again based on experince running our portfolio and when I get the sad calls from one of my past borrowers wanting to know what to do.
Just trying to keep it real as I have personally witnessed some pretty low operaters totally ripping people off not only out of country but fellow americans that are just too trusting and are taken in by the promise of these very high returns. At the end of the day I think about 50% of the investors will make it in some fashion , and continue for some years, It will be interesting to see how many still own their properties in 5 to 10 years. Its cycle I have seen it repeat 3 times in the last 10 years of investing and lending in the mid west and south east.
Portpirate wrote:I think Australians chase the high cash-flow because interest rates in Oz are so relatively high. 7% on a risk free term deposit means there has to be a high return or lots of upside to make it all worthwhile. If I could get 10% net return with reasonable upside and little risk I would go for that. There are lots of people on here touting their buyers agent companies and it can be hard to distinguish the good from the bad. Any of these people who ask for "registration" fees are going to rip you off. Period. Would any Aussie pay a real estate agent just to see their listings? I don't think so! So if any agent out there can GUARANTEE me at least 10% return plus capital growth, I'm listening.With 7% guaranteed I am surprised there is not a reverse capital flow. US deposits pay less than 1%. this is why a lot of americans are turning toward cash flow RE. Do you need to be a AU citizen to get these returns??
We can, and do, achieve and exceed your investment criteria as a routine. the Key being able to find the right asset for the right price then staying in the transaction as a princiapal throughout the life of the investment. putting Our money where are recommendations are.
There are plenty of managed RE funds in the US like us. Just not in the single family realm. Not any that are truly managed as we are where we remain in operational control and are responsible for all expenses thereby quantifying the return for the investor and offering the Capital growth.
In the larger companies these are run through a REIT Real Estate Investment Trust and are publicly traded companies, the mutual funds of RE if you will. Most of these REIT's investment in very large projects and of course your investment is pooled with thousands of others. REIT's were hot few years back for obvious reasons,
There is no question that single family has basically bottomed out in the US. 5 to 7 year horizon for rebound is realistic.
Jayman,,,
I think the focus for out of country investors on the single families is price point and ease of understanding them.
For these same investors to step into say C apartments that offer 12 to 16% caps would be very very risky,
Just drive through Memphis Tn for example half of the 20 to 300 unit apartment complex's are boarded up just waiting for that next investor group to make a run at them rehab them all and have a less than 50% chance of keeping them running profitably until they give up. This asset class needs Armed security 24 hours and really heavy handed management and And owner that is in the town. I have a friend in Oregon who bought a 300 unit in Oaklahoma city, and it almost broke her she had to move from Portland ( green and trendy) to Oaklahoma city ( not green and Trendy) and work this property personally for 2 years to get it back to where it was just braking even. First property manager was stealing her blind, and this is more common than we all want to admit.For instance here in Oregon and most of the west coast apartment investing is very competitive and nice properties sell for 5 to 6 caps. but they hold their value run 95% or more full and you do not need anything more than management. Most folks buying these are looking for long term safe cash flow the live well sleep well type. I sold one building to a client of mine for 5 mil cash it was 90 units, he makes 5% cash on cash and is pleased with it.
And commercial has tanked, I know I own a few office buildings in Portland Or. which have devalued 50% with no upside in sight. this is the same all over the states, It could be time to jump in. But a vacant building is just that vacant.
Anyway All these areas have their plus's and minuses. it really boils down to who is going to guide them on their purchase and who is going to manage their properties. This is what makes or breaks an investment here in the states. And because the better cash flowing properties are in Blue color areas they tend to just perk along at values of what an investor will pay for the cash flow. Like you said not a lot of upside.
Troy McErvale wrote:Financing property in the US is not impossible for "foreign nationals" (what the US call people who are not US citizens, and have no residency status in the US either), however it is very, very tough. By way of background, the lending market is very different in the US. In Australia, if you want a loan with the ANZ, you get a loan with the ANZ. They are a bank that operates nationally. As do Westpac, St George / BankSA, Commonwealth Bank, National Bank and so on. By contrast, in the US, each lender needs to be registered in the particular State that they want to offer loan products in. Consequently, there are very few lenders who are registered in all States. Some truly National lenders in the US are Bank of America, ING Direct, Wells Fargo and Ditech. And, that is about it. Problem one – none of these lenders offer loans to foreign nationals. The same rules apply to mortgage brokers – they are registered on a State by State basis also. In reality, it is no good talking to a broker from New York (or even worse, in Australia) if you want to buy a property in Texas. They will not be familiar with the lenders and lender policy in that location. You need to talk to a broker active in the market you want to purchase in. What that means is that if you wish to finance your property purchase, you need to select your property first. The lender selection will depend on the location of the property (which State it is in, but often also which county).
So that is step one – decide which State you want to buy in. Some States, like Florida for example, have a reasonable number of lenders who offer loans to foreign nationals; however they are restricted to the State of Florida for such loans. Other States have no lenders that will offer loans to foreign nationals. And then there are some States (such as NY for instance), where there are only 1, 2 or 3 funders who extend credit to foreign nationals to chose from. And that is step 2. Identify the lenders that will extend credit to foreign nationals in that location. Whether the lender will extend credit against the property depends on a number of variables, but the most important factors are: 1. Purchase price2. Property type (i.e. is it single family residential, or mutli-family, or apartment block)? If you are like most Australians, you are looking to take advantage of the price reductions as a result of the GFC, and purchase property at a low purchase price. Unfortunately, the lenders will probably have a minimum loan amount or minimum valuation of the purchase property, which will also vary from location to location. Step 3 – decide which property you wish to purchase, and see if you can then fund it.I know what you are thinking…. That it seems counter-intuitive to do this. Perhaps your objective is to leverage as much as possible, and thus your property location will be selected upon where you can achieve greatest amount of leverage. Be prepared for a maximum of 70% (or even 60%) LVR. There is one more problem I have not discussed. Australian banking legislation. Some lenders (like Lloyds TSB, and Barclays Bank (both in the UK) for example) offer international mortgages to residents of many countries. However Australian legislation precludes them from offering loans to Australians living and working in Australia. So there is the dilemma.And the reason why most Australians say they want to invest in US property, however do not. It is very, very difficult to do so. And I have not even touched on the complexity of real estate practices and purchasing yet (which also varies State to State).
I talk to a lot of people, and observe the following: 1. Many people seem to have a strong desire to invest in the USA2. The desire seems to be to purchase lower priced dwellings that have decreased in value as a result of the GFC, as well as properties that will deliver a strong rental yield3. Investors have some cash, but would like to leverage as much as possible to enhance the return
4. Investors knowledge is growing, but not at a level where they could invest with a degree of comfort yet (for reasons explained above)
5. Investors usually don't know exactly where they wish to invest yet The obstacles and risks associated with this strategy are as follows:
(a) Investors will find it difficult to qualify for a loan due to the property prices they are seeking. Thus any purchases will need to be bought with all cash most likely
(b) Any properties bought will be exposed to potentially poor returns if there is even one poorly performing property in your portfolio, thus your investment is exposed to higher risk of loss
(c) Time and effort and financial cost to complete due diligence is high (especially if the investor is going to fly to the US to view properties) Investment in a pooled property / private equity fund would be a better solution for the majority of people. I say this because:
1. The upfront costs and time compared to doing it yourself are lower
2. The investment risk is spread over a few hundred properties instead of 2 or 3
3. You will be able to utilise leverage within the fund itself, and thus enhance your returns that you would not achieve
personally, and do so at historically low US interest rates
4. You will still be able to take advantage of decreases in property values
5. You will still be able to take advantage of favourable exchange rates Quite honestly, this is what I think the majority of people in Australia (including people on this website) who have an interest in investing in US property should be doing – 95%+ of people do not know enough about US property (and US property law, property financing, etc) to invest with a through understanding of the investment. Thus, poor knowledge equals higher risk. Have a look at an interview I did with Sky News a month or so ago – it might interest you http://www.switzerbroker.com.au/broker-video/troymcervale/My contact e-mail is [email protected] if you wish to contact me
Some good info, however one needs to be very careful of investing in Pools. if the pool goes down investors in the states typically get wiped out.. Can you imagine 500 to 1000 investors invested in 100 200 300 properties and it unwinds the only one who makes any money in these deals are the attornies or Solicitator what you you call them in AU.
I think the play for AU and other foriegners is to be the bank and have equity in the debt instrument thats how I set up my deals. Best of both worlds without all the hasle and heart ache. YOu get the management aspect of a pool but one investor one property. investor leverages off of our incredible buys we bring investor in at a little over wholesale cost so you do not have any profitering up front then we all ride out the down market and sell in the up.
Ok we have the same in our self directed IRA's and 401ks. its all about making the right investment decison.
and if its super fund it seems to me you want to be super careful. Not go out on the limb chasing the highest investment % someone touts only to be wiped out.At the end of the day its about capital preservation and return not just return. that is why your hearing all these horror stories Aussies chasing the golden ring of high return with no idea of the risk.
Jay Hinrichs Portland Oregon try me on Google US
