Forum Replies Created
Bilobunch
contact me off the forum and I will explain how you can invest and be the bank.
Portpirate,
there you go, its like us crazy americans running up thousands of dollars of credit card debt at 18 to 30%… And then investing in the stock market.. Your better off paying off debt , getting into a cash position then investing. its epidemic here. Credit is far to easy. I did not realize your mortgage rates were so high.
At the end of the day 18% plus returns on rentals in the US is just not sustainable. If it was the case the US buyers would have bought them all. Heck there is 300 million of us and only 30 million of you. What your countrymen are doing is buying half of our JUNK and making a bunch of promoters who have no concience a lot of money. Just keepin it real
Like I said for everyone who post of a bad experince there is 10 to 20 behind them that are too embarrassed to admit they got taken.
Well now the horse is out of the barn, If your saying Aussie investors are borrowing on their primary residences at 7 to 8% pulling cash out and investing in the states becasue they think they are going to get 15% to 20% return, and make the spread.
Then what you have is a big transfer of weath, half of the aussies that do this will loose all their money buying in the wrong areas. and the US companies and the promoters will pocket their hard earned dollars and theri equity in their homes.
There is no way anyone should borrow on their homes or retirement funds and buy a property in the states unless they intend to use it. In the long run you all are going to lose money, not everyone one but at least 50% and the ones that get caught up with the companys like bilobunch invested with will get wiped out. This is just reality
Why do you folks think these deals are there for you in places like detroit, Dayton fort wayne , and other rust belt cities because the local will not touch them with ten foot cattle prod. There are plenty of americans that can afford a 30k rental they just know its money down the drain in the wrong neighborhoods. And if your going to venture into this asset class you need to own hundreds of them not just one or two it needs to be a business and run very tightly
Bilobunch:
Not sure where to start other than to say these kind of transactions give our business such a bad name. However for everyone that comes forward to share a horror story there are 10 like you that are embarrassed would never admit they made a mistake or got taken by a Promoter or buying service.
In the states we have our own versions of buying services. Google Armondo Montalongo you will see he gives free seminars on how to make millions and retire in a year with non of your own money blah blah blah. Then you go to the seminar you get all pumped up by the pitchman and you sign up for the 3k 2 day intensive training, They then go through the normal how to get rich quick stuff like short sales foreclosures how to do owner financing wrap mortgages and the like. The next big pitch and this is where they a really get the Americans is they then sell you a mentorship program for another 30k. With the idea that you have 8 hours a day contact with your personal mentor to help you through all aspects of the transactions. Well I have personally been to these companies they are all in Salt Lake Utah, The promotion companies have huge boiler rooms set up with 100 cubes and 20 to 25 year olds manning the phones big coolers of Red Bull and Mtn. Dew to keep them properly caffinated. These kids know no more about how to mentor someone than any other person off the st. so at the end of the Day someone who came to Armondo's Free seminar has spent oh maybe 40k and still has not bought anything. Then if you want to go with him personally remember he had a reality show, then you can pay another 10k to be his guest on a bus tour of all the deals you going to clean up on. He actually gets on TV and tells people they will start making 40k a month flipping houses if they just follow his program.
When you google him you will see all sorts of law suits etc. Being a hard money lender I have made loans to and talked to many of his and others students with the same horror stories.Ok back to the Aussie situation. I have stated before on this forum that people get way to caught up in return on investment other than capital preservation. And I agree with Speedy this USA buyer they were probably taken as much as the poor owner, However thats bad on them they should have no way put you in an invest how you described it, That shows a total lake of Due diligence and Charater on their part. However they are making profits on each of these sales this is how the business works. And by the time the out of area investor gets a property there is usually 2 to 4 fee's paid out to wholesaler local, Rehabber who bought it and sold it, Out of area marketing company etc etc. As a lender I will not make a loan on a property until I have seen a certfied HUD 1 when the wholesaler purchased the property then I can work the numbers from there.
It is standard in the industry to have between 15k and 50k mark up on these properties over all cost before they get to the end user. but hey thats capitalism and it works because the Aussies are paying cash most of these deals would never get financed by a US bank because the banks would not lend on properties with such big flip fee's in them its inflated value and not true market conditions.
As I read these post I may just start a constulting firm that has no financial interest in any property or area. And do a down and dirty due diligence for potential buyers for a flat fee say a few hundred bucks. I already know the top 10 markets and specific zip codes and markets not to invest in. As I would not touch them as a lender no matter what.
I use my full name on this site as my sign in so people can google me here in the states. Jay Hinrichs Portland Or.
having any investor loose all their hard earned cash by investing in a property that they had no business being in gives our industry a bad name and the good players a much tougher time. unfortunatly you have the heard mentality going on in Aussie from what I can see and as I have stated before the Foriegn investor really gets way to caught up in the % return. And thereby takes far to many risk's thinking they are going to buy a property that cash flows 18 to 25% year after year. Hey I am in the bizz and I cannot achieve those numbers. Of course I do not buy War zones either.
My other thought is I think Aussie investors could do really good just being the bank. And let a professional company like my company or any other number of good smart lenders lend your money. Be happy with 8 to 10% and know your going to in 99% of the cases never loose principal. I am just saying
Nigel Kibel wrote:With the system we run in Texas you can pick up a property worth around $120000 for around $20,000 because we make sure that the existing mortgage in the property is transferred with the deal. We have just finished our third tour to TexasNigel are you saying your buying bad mortgage debt from banks and then foreclosing out the Trustor?? if so this is an excellent play, and you need great connections to get ahold of Note portfolios usually they are quite large 10 to 30 mil at a crack and then there are many that are throw away properties.
This is how we set up our transactions. Our investors are buying the paper at 40 to 50 cents on the dollar but thats after the house is totally renovated. And we manage it for no fee. We just take 50% of the equity. So they are coming in as our partners but they have no down side they get there check every month regardless of if the property is rented. and we pay all the on going expenses because of course we own the asset. I am the only one in the US that structures these deals this way. And I do not give the highest returns but I give a level of safety no one can give. We have substantial assets and 400 plus units in our portfolio with 30 plus years experince. I have not sold anything to a foriegner because frankly I am not sure they get it. My investors are all local here in Oregon and CA. Most of them have owend or do own rentals and know what a headache they are. My clients are Docs attorneys busy professional they rely on us to just give them there check every month and when the properties are sold we split the profit.
These are the type of loans I have made for years to small builders that were not bankable I would lend them the money to buy and develop lots then go verticle. We would charge a decent rate 7 or 8% then take 25% of the net profit. These were fabulous loans for us many times we would lend say 300 k and get a 200 k return in 9 to 12 months.. Now with construction where it is that has not been happening but its picking up.
I am thinking of putting a fund together for Aussies to invest in. They will do far better in a fund like this than buying a rental house hands down, I can show track record and full disclosure on deals I have done.
since I have been folllowing these threads I have come to see that AU investors are really rate of return driven not so much worried about captial preservation. However maybe I am wrong. But I can flat guarantee that those that have bought super low end rust best mid west rentals will eventaully loose there money I have absolutly no doubt of this at all I have persoanlly witnessed over many years. those that thrive in this asset class do it for a living. and or they live off of out of area investors that are totally vulnerable to the property manager.
lastly for me personally I bought a bunch of Go zone rentals in Mississippi they were new construction when I bought them paid 100 bucks a foot average house 200k I bought 22 of them. they rent 1300 to 1500 a month I put 25$ down on each and they break even or loose a few bucks. but I got the huge 50% bonus depreciation in my highest income earning years. So what that means is I wrote off 100k per house year one and being in the highest tax bracket I saved about 43% or 43k in tax's I would have had to pay on ordinary income per house. I think those houses by and large have held value. and they are no issues as for property management goes they are always rented. They had scored concrete floors so that mitigates alot of maintenance issues.
Nigel Kibel wrote:The problem is that many people who are investing in the United States cannot afford to buy properties are are sucked in to buying one cheap property. However many of these people will loose money. I only deal with people that want to build a large quality income stream in the United StatesWell since I have brought up the contrarian few I am glad to see that there are those that agree with my rational.
America is the land of opportunities and the land of those that will take your hard earned money pocket it and not think a wink if you lose it all. Its cutting through the <moderator: delete language> blue sky sales promoters that is the challenge.
You only need to look were intitutional investor are investing. here in Oregon they buy large apartment complexes and MH parks. Cap rates 5 to maybe 6. but these are properties that you will not loose any principal on. The large insurance companies and lenders will lend on them. And they hold their values. Same with Trophy properties in other areas of the west and eastern seaborad. Will an institutional investor buy 300 units in Detroit or Memphis for 5k a door. No frickin way, those properties get bought rehabbed and lost in 3 year cycles. I know personally a few that can make them work I have lent them A and D money to buy them. but they go in with an Army at least 1 full time security guard per 50 units. Only way to keep the gang and drug runners out and for the Welfare mothers to feel safe. Out of every rental on the low end in the US no matter where it is your tenant 90% of the time is a unmarried women with kids. Daddy was a rolling stone. having 400 plus units of these I know of what I speak here.
Its a job. you can make these work but its not set it and forget type of realestate its a business. So one needs scale so you can hire the security folks and the others that are needed to make sure your property will remain intaked much less rented.
Best
speedy gonzales wrote:jayhinrichs wrote:speedy gonzales wrote:jayhinrichs wrote:Texas has really high property tax's and very lax zoning laws its a huge area like the outback only all of it is basically developable. so when things get going builders will be building new construction that will compete price wise with existing inventory there will never be much of a run up in values there because of these factors. Never has historically never will be as long as the zoning laws stay the same which is to say lack thereof. Supply Demand….
Hi Jay,
With the utmost respect….to state that Texas won't have a run up of values..never has… never will… is a little of track. I have research published by the FHFA that shows…
US House Prices overall increased in value by 88.4% in the last 10 years (and have dropped 11.5% over the last 5 years)
Texas Home Prices increased by 88.0% over the same time (and have increased by 9.2% in the last 5 years)
California Home Prices increased by 60.0% over the same time (and have dropped by 42.3% in the last 5 years)
Nevada Home Prices increased by 27.4% over the same time (and have dropped by 52.8% in the last 5 years)
Florida Home Prices increased by 78.50% over the same time (and have dropped by 39.7% in the last 5 years)
Arizona Home Prices increased by 72.50% over the same time (and dropped by 42.5% in the last 5 years)
Georgia Home Prices increased by 53.60% over the same time (and have dropped by 19.4% in the last 5 years)
N Carolina Home Prices increased by 86.50% over the same time (and have increased by 2.3% in the last 5 years)
With taxes in Texas…yes these are higher then other states but the return on rental income and likely appreciation will compensate for this and with it being a non disclosure state….if you do your research you can find places with lower tax rates. I have 2 in Dallas paying around 2.5% in property taxes and another north of Dallas paying under that.
As far as your comments regarding investing in the $30K Rust Belt & Mid West cities…couldn't agree more with you. There is a solid reason why these places are worth $30K….they never will be worth any more and you will end up walking away from the investment with never ending problems with your Section 8 maintenance issues. These places may have sold at higher prices prior to 2007/08 but they were never in good area's to begin with and a drop in price to $30K doesn't make it any better. Remember…just cause it's cheap doesn't make it a good investment.
Your saying that Prices have dropped 11.5% in the last 5 years. I just have to call you on that one.
Other than select markets. San Francisco and the pennisula down to San Jose , Home to Facebook Google etc. those values have held. Certain parts of Manhatten, LA, Boston and again only the upper crust.
Everywhere else in the nation prices have plummeted. Vegas down 60% Arizona the same. Central CA and the inland Empire 50%. Mid west devistated. Florida 60 to 70% value drops.
So to say 11.5 is just ludicrus. And that is why certain markets are really hot right now but buying 100k homes in texas that rent for 800 is not the best cash flow given the large tax burden and the fact that builders will compete in the coming years with existing inventory.
I personally bought a few foreclosures 18 months ago in Ft. Myers nice homes 04 build original mortgages of 250k for 35k each at the court house step. Now those have gone up in value you have to pay 45k for them now. As a flood of Aussies and brits have moved in and drove up the prices. herd mentality again. If foriegners were not buying all these properties the market would remain flat.
Again not trying to be argumentitive, just want to be real. These out of area investors by and large are totally nieve and are really rate of return whores. they follow what they think is the best rate of return with no clue as to Captial preservation. And they have no clue as to the social demographic issues with buying in areas of the US that are sub 100k, and especially sub 50k. Sub 50k doing it on your own you mines as well throw your money down the toilet .
Jay….may I start by saying hallelujua & praise the lord !! Your comments about the herd mentality with Aussie buyers and buying sub $100K….couldn't agree with you more and backs up my own time spent in many US cities and individual research. I have purchased 3 properties so far…one for $140K getting $1500 a month rent, another for $126K getting $1300 a month rent and the last at $85K getting $1100 a month rent….all in owner occupied neighborhoods. Appreciate I could spend less and get higher returns but that didn't fit my personal risk profile….already accepting a higher risk by investing oversea's and wasn't prepared to do my money investing in sub prime areas with sub prime tenants. With the 11.5% drop in US values….don't have to call ME on that….I didn't come up with the figures….just quoting the FHFA figures given to me by an Economics Professor at Texas A&M and published by them. Do appreciate your point though
Now your talkin I just cringe at these investors buying into 10 to 25 k all in markets.. they mine as well go to vegas they will get more out of it.
I suppose if you add in the run up and then subtract the fall of the last 3 years the net could be 11% but you could go back to 1950 and make the case the properties have appreciated.
speedy gonzales wrote:jayhinrichs wrote:Texas has really high property tax's and very lax zoning laws its a huge area like the outback only all of it is basically developable. so when things get going builders will be building new construction that will compete price wise with existing inventory there will never be much of a run up in values there because of these factors. Never has historically never will be as long as the zoning laws stay the same which is to say lack thereof. Supply Demand….
Hi Jay,
With the utmost respect….to state that Texas won't have a run up of values..never has… never will… is a little of track. I have research published by the FHFA that shows…
US House Prices overall increased in value by 88.4% in the last 10 years (and have dropped 11.5% over the last 5 years)
Texas Home Prices increased by 88.0% over the same time (and have increased by 9.2% in the last 5 years)
California Home Prices increased by 60.0% over the same time (and have dropped by 42.3% in the last 5 years)
Nevada Home Prices increased by 27.4% over the same time (and have dropped by 52.8% in the last 5 years)
Florida Home Prices increased by 78.50% over the same time (and have dropped by 39.7% in the last 5 years)
Arizona Home Prices increased by 72.50% over the same time (and dropped by 42.5% in the last 5 years)
Georgia Home Prices increased by 53.60% over the same time (and have dropped by 19.4% in the last 5 years)
N Carolina Home Prices increased by 86.50% over the same time (and have increased by 2.3% in the last 5 years)
With taxes in Texas…yes these are higher then other states but the return on rental income and likely appreciation will compensate for this and with it being a non disclosure state….if you do your research you can find places with lower tax rates. I have 2 in Dallas paying around 2.5% in property taxes and another north of Dallas paying under that.
As far as your comments regarding investing in the $30K Rust Belt & Mid West cities…couldn't agree more with you. There is a solid reason why these places are worth $30K….they never will be worth any more and you will end up walking away from the investment with never ending problems with your Section 8 maintenance issues. These places may have sold at higher prices prior to 2007/08 but they were never in good area's to begin with and a drop in price to $30K doesn't make it any better. Remember…just cause it's cheap doesn't make it a good investment.
Your saying that Prices have dropped 11.5% in the last 5 years. I just have to call you on that one.
Other than select markets. San Francisco and the pennisula down to San Jose , Home to Facebook Google etc. those values have held. Certain parts of Manhatten, LA, Boston and again only the upper crust.
Everywhere else in the nation prices have plummeted. Vegas down 60% Arizona the same. Central CA and the inland Empire 50%. Mid west devistated. Florida 60 to 70% value drops.
So to say 11.5 is just ludicrus. And that is why certain markets are really hot right now but buying 100k homes in texas that rent for 800 is not the best cash flow given the large tax burden and the fact that builders will compete in the coming years with existing inventory.
I personally bought a few foreclosures 18 months ago in Ft. Myers nice homes 04 build original mortgages of 250k for 35k each at the court house step. Now those have gone up in value you have to pay 45k for them now. As a flood of Aussies and brits have moved in and drove up the prices. herd mentality again. If foriegners were not buying all these properties the market would remain flat.
Again not trying to be argumentitive, just want to be real. These out of area investors by and large are totally nieve and are really rate of return whores. they follow what they think is the best rate of return with no clue as to Captial preservation. And they have no clue as to the social demographic issues with buying in areas of the US that are sub 100k, and especially sub 50k. Sub 50k doing it on your own you mines as well throw your money down the toilet . Now if you buy a few hundred of these and make a business out of it thats another thing but to be a passive investor in this Space your running 50% better chance your going to get your clocked clean. I have personally witnessed hundreds of these.
speedy gonzales wrote:jayhinrichs wrote:Texas has really high property tax's and very lax zoning laws its a huge area like the outback only all of it is basically developable. so when things get going builders will be building new construction that will compete price wise with existing inventory there will never be much of a run up in values there because of these factors. Never has historically never will be as long as the zoning laws stay the same which is to say lack thereof. Supply Demand….
Hi Jay,
With the utmost respect….to state that Texas won't have a run up of values..never has… never will… is a little of track. I have research published by the FHFA that shows…
US House Prices overall increased in value by 88.4% in the last 10 years (and have dropped11.5% over the last 5 years)
Texas Home Prices increased by 88.0% over the same time (and have increasedby 9.2% in the last 5 years)
California Home Prices increased by 60.0% over the same time (and have droppedby 42.3% in the last 5 years)
Nevada Home Prices increased by 27.4% over the same time (and have droppedby 52.8% in the last 5 years)
Florida Home Prices increased by 78.50% over the same time (and have droppedby 39.7% in the last 5 years)
Arizona Home Prices increased by 72.50% over the same time (and droppedby 42.5% in the last 5 years)
Georgia Home Prices increased by 53.60% over the same time (and have droppedby 19.4% in the last 5 years)
N Carolina Home Prices increased by 86.50% over the same time (and have increasedby 2.3% in the last 5 years)
With taxes in Texas…yes these are higher then other states but the return on rental income and likely appreciation will compensate for this and with it being a non disclosure state….if you do your research you can find places with lower tax rates. I have 2 in Dallas paying around 2.5% in property taxes and another north of Dallas paying under that.
As far as your comments regarding investing in the $30K Rust Belt & Mid West cities…couldn't agree more with you. There is a solid reason why these places are worth $30K….they never will be worth any more and you will end up walking away from the investment with never ending problems with your Section 8 maintenance issues. These places may have sold at higher prices prior to 2007/08 but they were never in good area's to begin with and a drop in price to $30K doesn't make it any better. Remember…just cause it's cheap doesn't make it a good investment.
Not to argue, but when you take a starting price of 50k and it goes up 88% as opposed to say CA where the average price was 300k and it went up 66% the numbers are far different. Other than CA. your starting at such low values that these high percentage increases only amount to 20 to 30k in equity increases.
at least we agree on the Rust belt
Whats happen in the states is a true roller coaster. and when it comes to investing in certain areas its the herd mentality if you have a huge amount of out of area investors it will sqeu the true values.
Were I live in Oregon 90% of the single family homes are owner Occ. 200k buys you a home that rents for 1k. So we have little to no foriengers investing here. Apartments sell at 5 caps. However you will not find one apartment building boarded up like you will in each and every town east of the Rockies, and I do not care where it is Dallas, memphis , Kc, Chicago, detroit , harlem , DC, West coast is just far different demographically and I will leave it at that.
When you go to the south and mid west say towns like memphis were 60% of all single family houses are rentals it becomes a business and values are like apartment buildings, based on cap rates not what a family is willing to pay for them. If you invest in rental areas you wil never see appreciation and your expense's will be far more than you were told they would be.
I am not an expert on Texas by any means but I have done enough bizz to know that land is cheap there building cost are cheap and builders can and will build for just a little more than investors are paying for rentals. Homeowners will buy in these new construction subdivisions as oppossed to ones that are 50% rentals. And the houses have been rentals for 5 years plus its just simple logic and the fact. I am a home builder here in Oregon and Investor throughout the states along with a private money lending company. Anyone can google me Jay Hinrichs Portland Oregon.
It is well known knowledge in the development community ( of which I am ) in the states that builders in these areas where rents were high and cost of product was low ( texas florida and other areas) that got caught in 07 08 with high priced inventory they wholesaled their inventory to promoters who then sold to "cash flow investors and you have whole subdivisions full of rentals. Please correct me if I am wrong here and give me imperical data to disprove this. I know first hand I have lent money to untold hundreds of these developers and have first hand knowledge of how they sold out of there 05 and later inventory when the market turned south.
AmericaPropertySource wrote:I say this just about everyday. There is a big difference between a bad neighborhood in Australia and a bad neighborhood in the US. Bad areas in the US are dangerous and every large city has them. With all of the opportunities available to real estate investors across the US today there is no need to invest in a war zone.this is absolutly true… what I see happening is Aussies fixate on how the property looks on paper and they are chasing rates of return. instead of looking at capital preservation as the most important factor.
I have done hundreds of loans for the fix an flip crowd in Detroit, and the property manager there that is good, I have been to his office many times. Front window is usually broke and he has a bankers bullit proof window were the tenants slide there checks in . There is a reason these houses are vacant and so cheap. The only people that should by them are locals and do it as a business. This property manager I speak of has 3 retired cops on staff. They watch the rehab crews as much as anything because they come back at night and strip the house they just worked on. going to be an awful lot of Brits and Aussie who are going to get completley wiped out financiall investing in the war zones and Ghettos of any Big american city. Not to mention this very sad case of the extreme.
APerry wrote:It is definately easy to invest in the US if you use cash, but it is difficult to get a return on capital that is sufficient to make up for the hassle and various risks asscoated with investing overseas. There are plenty of opportunities in the US, but i would suggest a lot of caution and due diligence before committing to anything over there.
This is a true statement. I am a private money lender in the states specialzing in the asset class that Aussies are buying and I read here on the forums all the wild claims of 18 to 25% cash flow. The one glaring thing is there is no offset for all the training you pay for the travel the LLC accounting etc etc. Not to mention the turn key operators by and large grossly understate ongoing expense's. If they gave you the real world expenses and vacancy you would never buy their product. We have over 400 single family rentals in our personal portfolios all through the country, And when I see these pro forma's calling for 50 dollars month maintenance and no real reserves for vacancy, then I see the price points that people are paying for houses, just does not add up there are going to be an awful lot of Aussies sorely dissappointed.
There are great buys here in the States no doubt. Just be realistic about the returns and invest for capital preservation do not get rate of return fixated.
Federaly Regulated lenders ( IE not private lenders or seller carry back lenders) will not lend to an LLC. Commercial banks that hold their paper and do not sell in the secondary market will lend to an LLC with a Personal Guarantee.
We are working on a Fund with our Commercial bank for the purpose of lending to Out of country. My commercial bank will not do it directly however they are entertaining providing us a wharehouse line that we can use for those purposes. From the banks stand point they have dual sources of repayment that being our company that has Personaly Guaranteed the wharehouse line and the Borrower even with all of that said, Myself as the lender will be very conservative as we would have no recourse on a out of country borrower.
It would all come down to our underwriting process. Those that wish to borrower and have secured properties where the loans are being made on ARV and the Turn Key operater is taking 20 to 50% profit on the deals which is common in the states right now. These deals will be closely watched and in practice because of the profit being made from the turn key company the values really can't be substantiated as they create their own comps. So LTV's will be very conservative as a result.
Then there are the NON owner Occ rules which have changed dramatically since 08. by and large unless you have substantial cash reserves you will be limited to 4 mortgages on your credit report. Some lenders will go 10 an the rules say there can be 10 but thats for only the very best borrower and one that again has significant cash assets.
3% which is double most other areas and its not just flat rate for the entire state they can be lower and they can be higher than what you stated in Texas.
Detroit can have some wicked tax's as well, and the water bills can attach the properties in Detroit as well, And Memphis has double taxation there is a county tax then a city tax.
I have foreclosed as a lender on a hand full in detroit only to end up with water bills in the multi thousands. I would never invest personally in Wayne county Michigan.
Texas is also a fearsome dual action state. This means if you take out a mortgage on a property the lender not only forecloses but can and will get a definacy judgement against the borrower. Now that probably for the average Foriegner won't mean much as a lender will not pursue judgements out side of the country unless they are substantial million dollars or more. However that is also why its hard for out of country investor to get mortgages there is no personal recourse. so the lender is strickly making an equity loan like a hard money loan like the kind I make.
I have seen many an investor primarily in large multi family end up losing millions investing in Texas because of how agressive the lenders are in seeking definacy judgements when the properties go to foreclosure.
Texas has really high property tax's and very lax zoning laws its a huge area like the outback only all of it is basically developable. so when things get going builders will be building new construction that will compete price wise with existing inventory there will never be much of a run up in values there because of these factors. Never has historically never will be as long as the zoning laws stay the same which is to say lack thereof. Supply Demand….
Same issues in Vegas and Pheniox the big american money has gobbled up literally tens of thousands of building lots in these areas from the banks and big builders for 10k or so per lot and those are lots that are finished. I have a associate that bought 800 lots in Sacramento CA from Centex and these were completed shovel ready for 6.4 mil cash. Production builders can build for $50 a foot so they can put brand new product on the market at 125 to 150 and people are going to buy those way before they buy a house thats been used as a rental for 5 to 7 years and a neighborhood thats 50% rentals. We are already seeing this. I have 10 new constructions going right now personally.
the big rust belt towns that have these under 30k houses and the upper midwest your just buying an annuity there you will never sell for more than you paid for them and your operating cost will be more than you think.
Better to buy below the Frost line. thats states that do not freeze in the winter.
And much better to look at capital preservation rather than percent return. and base your investment on what property pro forma shows the highest rate of return. the higher the rate the worse the neighborhood by and large. A house that you buy in any of the big mid western towns or upper mid west at retail( IE some rehabber bought it for 5k at foreclosure put 10 into it and sold it to a foriegner for 30 k as a cash flow cow) those properties will never sell for more than what you paid for them and 50 % or more of the people that by them will loose all there money because of management issues they will get tired of pouring good money after bad and finally walk away.
there is a reason these neighborhoods are flooded with foreclosures and vacant houses. and its not because some poor american family lost their home or did a stratigic foreclosure.
Portpirate wrote:Not sure what anyone else thinks but below is typical of what I think is profiteering. Take a look at the cost of the property and the buying costs. Anyone agree? No question where are the operating cost's the vacancy vactors no property stays 100% full and every property needs on going maintenance. Not to mention there is no and will be no capital apprecaition in the Michigan market for decades if for ever. There is a huge over supply of houses. Its a cash flow annuity type investment only. IMO <!– Main Menu
–>8510 Troy, Oak Park, MI
Total Cost of Ownership *: $47,300.00 Averaged Return per Year: 21 % Average Annual Rental Return: $6,274.00 Average Annual Capital Gain: $3,433.60 Average Gross Return: $9,707.60 Property Value in 10 Years: $88,936.00 Total Return over 10 Years: $104,377.00 Variable Data Values Used for Current Calculations Our Suggested Values Cost of Property: $39,000.00 $39,000.00 Refurbishment Costs: $0.00 $0.00 Buying Costs: $8,300.00 $8,300.00 Monthly Rental $800.00 $800.00 Annual Taxes $2,392.00 $2,392.00 Annual Property Management Fees $960.00 $960.00 Annual Insurance $775.00 $775.00 Rental Inflation Rate % 3 % 3 % Capital Growth Rate % 5 % 5 % Beautiful street in Oak Park. 3 bedroom, 1 bathroom bungalow. There is a 1 car detached garage and a basement. Hardwood flooring in the bedrooms.
Oak Park Statistics
Population 3,605 Total Housing Units 1,455 Owner Occupied 1,281 Rental Occupied 118 Rental Vacancy Rate 3.3% Average Home Sale Price $81,200 Click here for more statistics on Oak Park
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Average Nett Rent $5,473.00 $5,637.00 $5,806.00 $5,980.00 $6,160.00 $6,345.00 $6,535.00 $6,731.00 $6,933.00 $7,141.00 $62,741.00 $6,274.00 Capital Gain $2,730.00 $2,867.00 $3,010.00 $3,160.00 $3,318.00 $3,484.00 $3,658.00 $3,841.00 $4,033.00 $4,235.00 $34,336.00 $3,433.60 Gross Return $8,203.00 $8,504.00 $8,816.00 $9,140.00 $9,478.00 $9,829.00 $10,193.00 $10,572.00 $10,966.00 $11,376.00 $97,077.00 $8,089.75 Property Value $57,330.00 $60,197.00 $63,207.00 $66,367.00 $69,685.00 $73,169.00 $76,827.00 $80,668.00 $84,701.00 $88,936.00 were to start.
As much as people want to deny the facts. If you buy the cheapest US properties in the big cities Ghettos this is exactly what you can expect.
Of course this writer has taken liberties. Drunk Driving is heavily enforced in all states. Although Texas you can legally drive and drink you just can't be drunk.
Having done well over 1,000 of these transactions throughout the Mid west and South east and 250 in Detroit as a Hard Money lender. I can 100% get behind the issues of property management. It ranges from out and out theivery to ones that are good. And the ones that are good do up charge for maintenance charge placement fee's and by and large do the best they can.
What happens in the states is that most "Promoters" and thats what we call them the company that is in the business of buying the foreclosure rehabbing it. Then partnering with a sales company also run the gamit of good to crooks.
what I see is rate of return shoppers when I see the Austrialians looking at deals and talking to me. They are so fixed on Rate of return they neglect preservation of Captial and furture appreciation. And are blinded by the guy touting the 18% or the 26% return.
these can happen for a short time but will not happen over an extend amount of time unless you get very very lucky and its luck for sure.And there is no doubt that the ones that bought inner city Ghetto properties on the cheap will end up in 90% of the cases losing their entire investment. Seen it first hand for over 30 years. where do you think all these foreclosures and vacant houses come from The vast majority over 70% are from non owner occuppied homes IE investors that have thrown all the money at the houses that they care to and they walk.
the author talked about expense's and he is pretty much dead on about on going mainteneance. I see so many promotors touting 500 a year in maintenance and no vacancy factor and thats how they get the returns so HIGH.
We have over 400 single familys in our portfolio and I can just flat guarantee from vast experince no house can be maintained for as little as 40 to 50 a month I do not care where it is and we own high end rentals as well as blue collar, and especially if the home is located what we call North of the frost line IE hard winters.
Author talks about Aircondioning. Aircondiioning in the mid west is mandatory you can't rent a house without it unless its a shotgun shack with dirt floors.
To be realistic and conservative and to be happy if you do better one needs to plug in 200 a month for vacancy and repairs over a 5 year period. Now if you do a little better hey thats great but as we look at our portfolio thats the number we come up with, and since we self manage for ourselves and our investor partners there is no management fee. All maintenance is at cost there is no lease up fee etc etc. and that is still the target number we shoot for.
Your not going to be able to roll out of a rental ( sell it ) after it being a rental for 3 to 5 years plus without doing another what we call RETAIL rehab job. You will need paint ( better than rental standards) better carpets upgrade appliances etc etc to be able to sell the property to a potential homeowner. Now if your planning to just keep them for cash flow then throw them away at the end of the useful life you can cut some corners. However doing that you risk losing tenants they will move at the drop of hat if the house is not up to at least rental standards. And will for sure withhold rent until things are fixed.
So at the end of the day we do not flip houses to out of area investors. We stay in the deal all the way to the end and take an ownership interest in the property we can and do manage and maintain them better than any property manager can because we own them right along with our investor bad tenant or vacancy is out of our pocket not the investor, you would be surprised how the risk is greatly mitigated using this model. And at the end of the day in almost all cases we will give the investor better net returns doing it this way than the old model which is for sure frought with Risk. And potentially catastrophic if you get hooked up with a bad promoter and management company. Not to mention our investor is the mortgage holder so for Aussie's that means no LLC needed and all the other expense's they incur trying to own the asset outright.
that all said never been a better time to invest in single family residental in the US at least in my 30 plus years we are buying 20 plus houses a month in our chosen markets and adding them to our portfolio.
So bottom line for the out of state or country investor is a big fat Caveot Emptar
Sorry,
You will find counties all across the US use this on line auction site to sell tax sales. Of course not the majority. However a lot of them in CA. As I am a west coast guy I have always focused on CA and WA.
As in all things about US real estate BUYER BEWARE: Or as we used to say in the good ole days Caveot Emptar.. this was actually part of our REal estate contracts back 30 years ago.
J
Many counties are going to http://www.bidforassets.com to sell their tax liens and tax deed sales. Lots of wholesalers selling AS IS REO property as well. Many of these properties have 1k minimum bids and will routinely sell for 10k or less, Via quit claim deeds…. Most of the properties are beyond help and definatly not for out of country owners.
We have disposed of some of our REO's on Bid for assets as well.
I live in Oregon and was raised in CA.
Markets like all over the states have tanked in certain spots. however you will still pay well over 100k for a home that will rent for 800 to 1100.
I am building new construction right now that sells at 275k plus and if I was to rent them I would expect 1200 to 1400 for those units.
Nothing beats the mid west for price VS rent.
good feed back
cash flow = mid west.
potential capitol gains = san fran LA NY city boston.
price of entry 700k plus
