Forum Replies Created
Nup. Not kidding. Your comments above do nothing than highlight the disparity twixt the two.
Without wishing to sound arrogant I believe I have far more understanding of the issues to comment than you.
Jay – Having fun yet??
Freckle wrote:The US market has been sliding for 5 yrs now and no end in sight. Prices have dropped further than the 30’s depression. It took 19yrs for the housing market to return to pre depression prices. The recover, when ever it starts, is predicted to take longer.The Freckle
Dear oh dear oh dear oh dear Mr Freckle. I shouldn’t but I can’t help myself. My (albeit far from extensive) US RE holdings have not slid in value in the last 5 years, they have actually climbed. Only one property I own in the US has stayed stagnant since 07 – and that is stagnant, not a fall. The rest have increased. The increase has also been sufficient to cover the $US fall vis a vis the $AUD in that time, though obviously I would prefer it to be at $0.70 than $1.07. Jay has made a few posts on this topic and I agree wholeheartedly with what he says. It depends where you buy. Each city in the US is almost a different country with its own little foibles and rules. Again, the US is vast. The most number of foreclosed homes during subprime was only something like 4%. They were in concentrated areas, certainly, but 4% is (for most people) a surprisingly low number. Personally I think it is ‘safer’ not to buy in foreclosed areas – not to say it won’t work, but I do not want to ever be part of the crowd – particularly a relatively unschooled and inexperienced crowd who will all be competing for tenants. Without very careful buying & managing I can see the word ‘ghetto’ in flickering neon appearing in previously up and coming suburbs/streets.Starting out is different, but I am able and I like to buy higher quality assets at relatively competitive prices. If the prices aren’t exactly ‘low’ then what I do get are extremely helpful vendors – allowing me to buy things that 5 years ago I would been laughed out of the room for even asking about.
I am not a screaming fan of the US, but it is far from moribund. I am getting far more rental enquiries than I have been previously in my buildings, I am also seeing solid rental increases (15-20% in the last year) and it seems to me ‘busier’ shopping malls etc. I couldn’t live in most parts of the place that I have seen, but it is (still) the worlds premier economy – by a long shot. Don’t write it off just yet…..
Freckle wrote:lawsjs wrote:Lack of supply controls prices, so IMHO a crash is highly unlikely. Slow growth – sure, but crash – near impossible.Lack of supply???
According to RP Data:
The number of newly advertised properties for sale continued to increase last week however, we are seeing fewer new listings enter the market compared with the same period last year (3.3% lower nationally and 9.1% lower across the capital cities). RP Data is currently tracking 300,994 properties for sale across the country and 143,254 properties across the capital cities. Throughout Australia, total listings are currently 27.7% higher than they were at the same time last year and 25.5% higher across the capital cities. With fewer new listings being added to the market and some stock being absorbed, the total number of homes now advertised for sale is -7.5% below the record highs of last year nationally and -11.7% below their peaks across the capital cities.
http://www.macrobusiness.com.au/2012/02/rp-data-homes-for-sale-leith-van-onselen/This graph shows how unsold property stocks are rising. They’re approaching 2008 levels.
lawsjs wrote:Slow growth – sure, but crash – near impossibleThe graph below illustrates how housing markets have tracked once over their peaks. Interesting to note we are currently tracking the US. The UK and NZ markets had initially steeper declines and levelled out faster. It will be interesting to see how the AU markets tracks over this year.
The Freckle
Couple of things from above. Meant to be studying so this assumes more importance than it should.
Firstly I don’t see AlexSC as making out the US is easy – quite the reverse in fact. And he knows what he is doing as far as I can tell. Your comments regarding the laxity of grammar and niceties of the English language are probably better directed to the US education system than Alex. One of my pet areas of humorous US/English anecdotes (Where in the world would we be without spelling or grammar? – Why America of course!) but that in no way suggests the writer is in any way ignorant. Having proof read (and indeed read) agents writings from around the world for years I would say that quite possibly one of the least important skills an agent/rehabber would have is English boarding school literary etiquette:) Whilst not as bad as the US, one thing amazes me in the UK is how poor many of the RE ads actually are from a grammar/spelling point of view. If you can’t write it correctly when you grew up in the UK and sell £10-30m properties for a living in W1 then what hope does a hard working guy from NY/SC have???
Secondly, your graphs etc above seem to show you have little understanding of my post and probably less of the US market in general. A problem a lot of foreigners have with the US is understanding volume. Vast volume. Development is far more laissez-faire in the US than Oz, indeed almost anywhere I can think of. In Australia we have a severely controlled/limited amount of development allowed – when compared to the US in particular. Our developers build hundreds at most, US developers do thousands at a time – each! Which is exactly why the US has such huge boom/bust cycles – S&L and later Sub Prime. I don’t think many Australians really appreciate exactly how controlled we are as a society, but particularly in real estate development the controls are many and varied. This is exactly why Australians looking at the US market should treat buying there with all the respect and care that playing with a nest of Death Adders would involve – it is not as cuddly and ‘nice’ as our little market at home….
Gotta remember the AUS property market is severely controlled. For the US guys it is probably best to think of the whole of Australia like Manhattan. Lack of supply controls prices, so IMHO a crash is highly unlikely. Slow growth – sure, but crash – near impossible. And that runs independently of the China/India growth trajectory – or lack thereof. If I was wrong (given our net migration patterns) it would mean somewhere in the middle of nowhere (The Alice) would have crashing prices or massive development. That their prices follow steady growth proves how controlled we are. IMHO. And I am out of Aus resi to all intents and purposes so I have no great bias either way:)
So, as I suspected, you and your team Alex (like I would guess anyone else) are successful because you are different and do it better than the next guy.
I would back you any day over a sharp suit….
I don’t know how others feel (Jay and Alex would be interesting) but I would not let a Wall St fund anywhere between my money and real estate. My sister (Emma) has been really successful in subprime stuff because she can outperform, out manage and out deal the bigger operators – she is on the ground doing it. The only reason she is successful is because she can do it better and faster. Same goes for my managing agents – the little guys are always better. Jay partners which means he has skin in the game and Alex buys where he knows the market really well. A glossy Wall ST brochure does not fit in my picture of the down and dirty management that is required, there is too much slippage involved with people who play numbers but wouldn’t know the first thing about a tenant application.
Nor I would not want to deal with a US company that had 14,000 rentals. My feelings are you will only be successful in the US if you can do it better and more personally than the next guy.
Staying away from direct investment, have a look at Jay’s system (truewholesalehomes). Big by my standards, but tiny by fund standards.
As I am writing this my attitude is hardening. I would not like to buy something from any company that has a sales force that in reality will know nothing about coal face real estate – thats already one (big) wage that needn’t be paid….
Interesting, but those are my thoughts.. Like you I would be interested in others opinions.
Funny, Ive just read this post. The US banking system operates in the 1960’s. I keep telling them that it is possible to use the interweb for business and not just porn (like Kodak it seems inventing it and using it productively are light years apart) but I think in the money case my 15years of failure may have led to an alternative method that is far faster, a lot less frustrating and has considerable upside. And – you deal with more professional people. It involves dealing in $US through an intermediary in Colombia, where, unlike the US banking system, people try to assist, believe who you say you are and realise there is a world outside the lower 48.
I have had exactly that conversation with the bofa help line – I would have had a far better response simply speaking to the tree fern outside than speaking to a US bank about the intricacies of international finance though…
NIce video, but no. I was referring to something much more deeply embedded in the US psyche…
Alex – can you explain why you see little growth inside 10 years? I cant see the Fed doing anything other than forcing money into the system – sooner or later people will be able to borrow again, if for no other reason than if they don’t Detroit will not be selling cars which is politically unpalatable of course. I can easily see a settling in the short term of cap rates down to the 10-12% mark based purely on rent return – surely that would put a floor in the market at some level? I get the volume issue, but at its worst the US had only 4% of total inventory in foreclosure, not such a huge number really. Localised, but overall not massive. NYC and certainly LA has seen rises (big in high end in NY) so money is moving – why not in sub prime areas? Even on population growth logic would suggest with no real building to speak of there will be some demand increase, maybe not huge but certainly some… Thoughts??
As above the answer – once more ‘for the dummies:)’
I am glad you asked that question above, because you are right, I haven’t bought through Jay’s system, but I would look very closely at it if you aren’t after every last dollar, or hell bent on control. I had an offline PM with him a while ago and I described what arrangement I had come up with with one of MY Ca PM’s and he said it was exactly (more or less) what he did with his investors. I thought I was a genius (again!) and there was someone who had a whole website devoted to MY idea!! Pretty rude I thought:)Details of your money back guarantee please??
WI – no you aren’t but you may as well be, so I used the nomenclature deliberately** and with some knowledge:) I do not believe you don’t speak for her, so lets leave it at that and we can all go on and watch Mary Poppins sink slowly into the Western sky very happily:)
If I was staring out and didn’t know as much as I did about the US, I would be hammer and tongs into buying directly. Lets make no mistake about it, that is what I currently do. And there is no doubt it would be more profitable. And more educational and I enjoy tremendously that challenge. I read my comment this morning and thought I was probably wrong with the $500k. I think Jay’s concept is more suited to $1m cash +. I think his stuff is probably what Mac Bank would buy. Laws of averages and all that.
What I thought I was doing was endorsing a methodology for shared risk. Which for a major investor is analogous to laziness. I am talking about the boys who buy billions of 10 yr t-bills available today at 1.3%. That type of stuff. With the benefit of hindsight I should have made clearer the distinction between the smaller guy who wants to know EXACTLY where his/her money is going and how much it is going to get and control it as he/she sees fit, versus the more institutional style investor who plays averages and doesn’t really care all that much about the hows and whys as long as the cheque (check) turns up each month….
Again it is horses for courses. I promise you an ‘institutional’ style investor is not going to want the hassle of being asked what type of RC unit / water heater he wants on 50+ houses when his investors just want a check (cheque – must be balanced:)) each month. That is what Jay offers – and I like it. if that is what you are after then it offers a lot of benefit. If you are chasing every last dollar then I would go with Alex in his areas he grew up in, or my sister who makes it a point of pride to make sure you get what you want and will almost certainly save you 50+% on the rehab costs – because to her that is the challenge…. To all intents and purposes they are different, local and very experienced. Horses for courses.
Your comment regarding ‘belly up’ is interesting. I think it stands as much for the M/Karina wholesaling/LLC model as for Jay. Or do you offer a money back guarantee? Do you cover any losses your LLC buyers experience?? I would applaud that if you did – be a first in the world of the RE industry.. I am confident of the US property market, but if you did that, it would be extraordinary!!!
I am glad you asked that question above, because you are right, I haven’t bought through Jay’s system, but I would look very closely at it if you aren’t after every last dollar, or hell bent on control. I had an offline PM with him a while ago and I described what arrangement I had come up with with one of MY Ca PM’s and he said it was exactly (more or less) what he did with his investors. I thought I was a genius (again!) and there was someone who had a whole website devoted to MY idea!! Pretty rude I thought:)
** Although it is way past the time she should learn to drive – How anyone in the US can manage to do what she does without driving is beyond me! I trust you specifically make an effort to help her in that regard:)
worldinvestor wrote:"Jay has an interesting concept which I quite like, you in effect 'partner' the building and get a lower return, but his group solves the day to day problems for you. The more experience you have I think the more you will realise what a good deal that actually is.".
Lawsjs
So would you personally buy this product?
I have no real idea whether it is good or bad, however as an investor what I do not like is that I have no control on what is purchased, also I expect there are upfront fees inbuilt in the purchase price of the property.
I become the bank and fund the deal and this company gets a share of the equity when the property is off loaded.What happens if the deal goes sour, the property actually loses money, no growth, do they also wear or do they walk. My money, my risk……
WI
Karina,
Damn right I would! The way I see it you are being killed on repairs because a) you aren’t a US resident & know nothing about building and b) you should at least learn to drive a car so you can at least see your buyers repairs – being in the US and all, but my story is this….I was taught the ins and outs of wrapping years ago by someone doing exactly what Jay was doing. I knew better however and went out and did it myself – I met Steve M doing his very first wrapping course to nail the finer legal points. I ended up with 20+ properties in Newcastle, all VF’d, none of which worked as VF deals but I ended up with huge CG. Which led me to a restaurant which is now at the pinnacle of restaurants in this country (feature story when it relaunched on the front page of a major national newspaper) but it nearly sent me broke doing it. And I mean very seriously broke – until I got an expert involved.
Two things saved me, a lack of greed and being very creative. Interestingly this sent me in another direction entirely. Those that may know me would understand why it happened, but I got interested in boat storage. I haven’t yet, but it seems I will be able to sign a multi million dollar deal on a storage facility using someone else’s expertise – and the finance arm of their business. The agent involved with this deal thinks I am insane for throwing away $2-300kpa in income, but having had to learn and work a business from the ground up I promise I will never make that mistake again. Get the best in the business to help you and leave you with the time to explore other concepts – and/or fishing or skeet shooting, or stamp collecting.
Then there is my 15 odd year US property experience. I finally found a great manager. GREAT. Everyone who gave me advice on this said she was worth maybe $10kpa to run this one building I have. Its an old hotel. And a catbox of filth though I didn’t realise when I bought it. So my plan (again ignoring greed and helping obvious talent achieve) I spend $200k on the place and lease it to her as an hotel. She is making $80-100, but I get for no effort $70+.
Now I have only bought low yield places in SoCal and not yet bought any foreclosures (probably won’t) because I work too hard to keep what I have.
Starting out, there is no way I would consider Jay’s efforts as worth the money. And its harder to argue with knowing what I used to be like. However, as you get older I think you value time more, and my time makes your (advertised, but unrealistic) 20% returns look like chicken feed.
Its horses for courses. Time/Value. I am in an amazing position in this field that you are commenting on because of my sister. I can 100% promise anyone that she will get (as a matter of principle) the best deal going on any property anyone might want (she doesn’t buy and sell she is a buyers agent) and – this is the biggie – she will reno a place ridiculously cheaply compared to anyone else (like 50% off) and to an Australian Master Builders standard (for the US guys read ‘super custom’) BUT I haven’t taken the opportunity. WHY? Doing so would probably involve me taking up huge amounts of time criss crossing the globe and setting up new knowledge bases and trusting a whole new team. It would also risk a delicate family relationship, but that is another issue. Emma can get me net (over five years history on multiple properties) 16-18%. But its cashflow only. And it is cash to buy (although she has come up with a lender doing 50% at 8%I/O recently) so it is expensive. The hotel I bought on an LA beachfront was $150k down and $200k in repairs for a net $70kpa and a refi and a recent cash out of twice my cash input.
So, in summary I will say if I was starting out then my sisters stuff is massively attractive. But I am not and I see things differently. I see things _personally_ very differently. There is a lot to be said for Jay’s concept from my point of view. A LOT. Currency, returns (8% when most peoples super went backwards last year) and above all lack of worry. I know enough about this to pick the eyes out of what people are saying. Jay is the real deal and I would look at his stuff very closely. I have had a few ding-dangs with Alex as he is very American and I am most definitely not, but I like and respect his attitude as well. Both those guys know their markets inside out and backwards. They LIVE there and grew up singing about rockets every day they went to school. My sister lived with a guy who played with rockets for the US Govt for years, but I digress:) These guys ARE the experts in this market and yes I see a lot of value in using their help – IF you feel you can afford it. I can argue both ways, but if you had $500k to spend I would say look at Jay’s concept very closely (you can afford to be lazy) if you had $50k I would say look at Alex, Emma, Kyler and Karina/WI (though you should change your name). Fortunately, with none of you will you be ripped off, but on the face of it (and if anyone listens to me) find one of these guys that you like and deal with them. In the scheme of things the buyer has the choice and no one wants to deal with someone or some system they don’t like. I will add that neither Jay, Alex or Emma (I don’t know how you are financially Karina so I won’t comment) have to sell properties, they are independently financially secure so they are doing this for fun and for the long term. They are not fast buck merchants and that is a huge endorsement from me. Buy from someone who wants to be in the business, not someone who HAS to be in the business.
Great Stuff Alex…Aussies out there looking, here is a legitimate US property guy who is genuinely doing the 'right' thing by himself and his purchasers. <moderator: delete advertising>. Anyone thinking of dipping their toe in the water with the US (and I think you cannot lose) should look no further than these guys who are honest, open and tell it like it is.
I would also like to add that people who sell RE with RE licences in the US give you (even if you are a foreigner) a govt backed legal protection that any US citizen gets. It is very powerful if anything goes wrong. Not just anyone can sell US RE…
I hope and pray that the time of the fly by night rip off Aussie fast buck merchant has gone. Use the experience of these guys if you are a new investor. I haven't bought through them but every instinct of mine says they are worth looking at very seriously. I could almost promise you that you would learn more from speaking to someone like Jay, Alex, Emma or kylermice for 20 minutes than spending $20k on a 'unique buying tour' of the US.
Karina,
The yields you get are still very new. 20% will not happen over time and that is without factoring in airfares. The stuff you are selling is great, but be realistic with the yields – especially for newbies. Yes you will do better than Oz, but as Jay and Alex both will confirm the yields with even basic repairs will leave you slightly better than ‘quality’ Oz commercial stuff. ATL cold and wet in particular will not help. Add in some improvements and you are talking line ball. The way to get around that it of course buy in bulk, but I really caution people starting out that the US is going to be ‘very’ easy money, worth doing IMHO, but not the great panacea. You _might_ be lucky, but as I have said before the US is about:1) Buying a property – relatively easy (assuming you avoid a major rip off).
2) Repairing a property – unless you really know what you are doing that can be very (or just unnecessarily) expensive.
3) Managing a property – usually extremely difficult and any failures with any one person will lead to many returns to (2).Jay makes a point of saying 8-12% net and that agrees with my experience and ‘gut’ feel. And that is without airfares. Without spending time in an area you are placing a lot of trust in the managers and frankly unsupervised US managers are not in anyway going to perform as you would expect an Aussie manager would. They will do what is easy for them and not what is necessarily (at all?) in your interests.
Fortunately there are enough decent people helping aussies buy to make the avoiding rip off bit a lot easier than it was, but for anyone starting out, I think the way to make this work is NOT buy one – you may be lucky, but you may not. It will take as much effort to run 4-5 as 1, but the averages will make the returns a lot more palatable in the long run. Jay says allow 50% of the rent as a true ‘net’ figure – I think that is a bit harsh, but he has a lot more property than I have experience with in many different areas and it is certainly conservative. My worst building was around 40%, my best is around 95% if I am anything to go by:) Steve M advertising 30% net is only remotely achievable with very ‘non-normal’ methods and I would not in a million years recommend anyone buy anything like some of those high yield places. You will end up walking away from the investment just happy the bills and phone calls have stopped.
I have been contacted by a few (5-10?) people who are clearly asking for some sort of help with management issues. These are guys starting out with places in GA/TX & similar and want some magic bullet. All I can say is that my experiences have been exactly the same as theirs and Jay’s and Alex. My sister (emma) is trying to rewrite the US management rule book by training people in Aus management style, and the idea is promising but I will believe it again in a couple of years time. Proof and puddings etc:) Alex and Emma have VERY strong views on avoiding cold and mould and there is a lot to be said for that. Alex is now (mainly I think?) buying back in SC (he grew up there so knows it inside and out) and Emma will help you buy what you want, but a strong preference to avoiding anything cold (she likes Vegas) – problem is, people are star struck with headline grabbing returns, and they are becoming less common. Jay has an interesting concept which I quite like, you in effect ‘partner’ the building and get a lower return, but his group solves the day to day problems for you. The more experience you have I think the more you will realise what a good deal that actually is. Of course, I only own in places where you can’t get flood insurance (beachy) and to top it all off are slap bang on the San Andreas fault line, so don’t listen to me if you _really_ want something. If you are starting out though, I would make it my business to contact people who are 12 months or so further down the track than you and ask for their experiences. 5 years would give you a real idea, but there won’t be many people with that experience in the areas you wish to buy – particularly as a foreigner.
I only mention Jay, Alex and Emma as they are the people in this market I know enough to comment on with lots of experience in this. I am not having a go at anyone by omitting them – find who you are comfortable with – I don’t buy these things, so don’t just listen to me:)
There are good reasons to having an LLC trust structure if you own a few properties, but remember that the protection of an LLC is realistically no better than living overseas. Someone has to spend a lot of money to serve papers on you if they want to sue you. LLC’s bring a lot of taxation complexity with them – ask yourself if it is _really_ necessary.
As Emma, Jay and Alex know, we are getting there. This will come out. A lot of work has gone into this over the last 12-18 months.
That doesn’t mean it has happened. If anyone knows an Aussie who has been ‘hurt’ then please get them to contact either myself or Emma. We have one very good lead, but more would be VERY helpful to get the story a bigger footprint….
The sole aim in my efforts has been to help the industry clean up the rogue elements. I have had really great people help me in the past – but I would have been a very easy victim early on. What pisses me off is that you do not need to rip people off to make great money – these are great deals anyway!!
Emma just pointed me in this direction.
Jay – That is really good news re the FBI. My guy in LA has very close connections in the property industry and has also pointed a few things out to people. Basically it is NOT right for the honest guys to be outsold by non qualified fast buck merchants and it is NOT right for people to be ripped off by sales tactics deliberately designed to circumvent 200 years worth of property law protections on at least two continents.
AlexSC – I haven’t read your PM yet, but whilst I am opinionated I also use a sense of humour that often doesn’t come across in print very well. I have no hard feelings against anyone here and never set out to offend. I do have a habit of offending people in the US very easily, it isn’t intended and do try not to do it – I just fail a lot. Fortunately I haven’t yet upset a South Central Homie:)
Staceymac – I will send you a PM. I would very much like to have a contact of mine talk to your friend who got ripped off. We have helped someone solve their major problem caused by a spruiker (jay & emma know rough details) and a very good result was had because a lot of ‘good’ agents saw the rip off for exactly what it was. We expect there will be some publicity on this but another person willing to speak up would be very welcome. Most are embarrassed but they have no reason to be. This particular type of operation (for everyones sake) needs to be stamped on very hard.
Nice one Jay!! Well done. Out of interest do you have any idea whether AU superfund money can get IRS 401k tax benefits?
I wrote that above and then thought more about what you have achieved. Great result for everyone. You deserve every success as the planning would have been daunting. From the little glimpse you gave me of your business model I have to say that you are from my understanding of the market the first to really offer something genuine to a big fund management company. I have read extensively and with some interest about the Aus super funds pumping money into what I can only describe as ‘awful’ sounding US RE investments. Your model should provide some solid returns for the end investor and I applaud you for sticking with it.
As an aside Doctors, Accountants, Pilots etc are awful investors – for some reason they think they are gods gift to making money. In reality they need all the help they can get! Nice to hear a ‘good news’ story at last!!
Jay – Interesting article on Bloomberg appeared ysterday saying exactly that.
Karina – I have refi'd $2m worth of property in the last 3 months with a nice cash out – the banks (in this case Chase) are actively asking for my next deals. I really didn't expect anything from the loan apps, but they came through. If I can get that as a non-resi alien, then money is moving into the market and by default prices will increase. There is no other possibility.
I haven't delved into the subprime pond (spreading supply lines too thinly has brought down everyone from Cesar and Napoleon to Hitler and tricky dicky) but that doesn't mean it isn't great.
The 'incredible' buys IMHO have a very short half life. This absolutely cannot last forever.
Don’t worry Jay – they are killing each other in the rush. As you well know the professionals will be safe – it is amusing to watch:) We had a few days ‘spruiker free’ whilst visa runs were in progress.
The ‘great’ US market has probably months to run in ATL (18? 24?)- I do not understand this race to the bottom. I discussed this unfolding ‘desperation’ with my broker over lunch the other day. His comment: ‘They are selling a product standing on quicksand – it works well in the short term, but they invariably cheapen the market, make their fast buck and hopefully have enough hard ground under them when the music stops to get out’.
I look forward with some macabre interest to the multiplication/plagiarism of the USA Property Power Pack thingy…
One can only speculate as to the imaginative titles the forthcoming seminars will have!
If I was starting out (and 13 years ago I did exactly that in the US market) I looked for someone like Jay to help me. I got that help from a similar personality and that is why I am now watching these sales pitches from the background…
