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Great post.
I am also not a finance whizkid but I agree with Mattnz. I have a layman’s understanding of the goings on and am aware of the cloak and dagger operations in finance and government. I think that all that mattnz mentions is not only possible, but if we go blindly down the path we are at present, it is probable. It is a worst case scenario, but I don’t see the US out of their hole after 3 years. Europe has huge problems, China is a sleeping giant(dragon) of epic proportions. The US certainly is doing a great job of digging themselves a bigger hole than they are in and history tells us this is most often so, in similar crises. Why is Australia different?
Did KRudd save the country in 08-09 by giving some people $900 cash and swinging his magical cash reform sword with the FHBG and freeing up foreign investment? No, he inflated the market, stopped it running its normal course and placed thousands of unsophisticated first homebuyers in potentially dangerous, financial, situations. Now Gillard has less of an idea but expect more from her with even less forethought, if the occasion arises. SO if the proverbial does hit the fan, don’t expect the politicians to save you, they have no idea, but they are excellent at fanning an inferno. I think the only thing to save Australia was the resurgence of the mining sector, but if you remember when the stock market took a hit, that same sector fell sharply and quickly, so keep that in mind and an eye on the markets in China.
As far as profits in 2010 go the biggest areas have been in resources and banking. We all know that. But if you take away the banking and resource sector from 2010 profits our economy grew by -3%. Is that good? No its not. It stinks.
There are also a lot of things we are not privvy to until the damage is done. Take the banking industry as one example.If we were privvy to what goes on behind closed doors, we would have a very different perception of the stability of Australian banking, the economy and various markets, including housing.
How many of you believed that in 2008, the 4 big Aussie banks were in a safe position, (because they told you they were!) unlike the precarious ones most, if not all US banks were, when the GFC first took hold? Most of you I would hazard a guess.
How many of you know now that the NAB and Westpac borrowed BILLIONS from the Federal Reserve in the US in 2008 and 2009. None of these loans were disclosed to the market as I understand, otherwise we all would know about it right and bank shareholders would have had fatal seizures, correct? I understand the CBA and BankWest also borrowed over 100 million in 2008. Not huge money in the scheme of things, but you have to ask why was all this money required, when our banking system is like no other. It is sound and without exposure to the negative factors at the time. Maybe that was basically true, to a degree, but at the time the only way to get access to credit it appears, was to do what everyone else was doing and that was knock on the Fed’s door and beg. (If you were JP Morgan, I’ve heard, you went back 253 times)
So, Mattnz is correct in his assumption regarding a credit problem worldwide and how it will affect Australia. The credit market in 2008 froze. Liquid funds were required to ensure that the banking system of credit rollover was sustained to avert insolvency. Aussie banks were in the same deep black hole as everyone else. No special policy had been adopted, no special protective measures were in place by them. Today their exposure as I understand is at much greater heights ( in the housing market in particular). I wouldn’t be holding bank stocks for the long term, thats for sure.
That being said, I think the main thrust of this post is in having the knowledge at your disposal of the factors at play, rather than arguing over the right and wrong of it. Analyzing how it affects you, if at all and then putting into place protective measures to ensure the best result for you in a worst case scenario. It’s not a case of “run for the hills!!”, but it always seems prudent to have exit strategies in property investing, so why not here when we are considering variables that could have a serious effect on our portfolios.
Like mattnz, I have also been investing in precious metals and the returns have outrun my property investments by 100:1. Property is a great investment and it can be really exciting and fulfilling, but it isn’t always the best. Diversity is the key and a bit cliched but knowledge is the answer.
Ian
http://theblockblog.com
Free Property Investment Info, Tools & Resources for Property Investors – US. Aust. NZHi George,
All the above are correct. Be good to know the agent you are dealing with so we can avoid them and what area of the states are you investing in? I will be in the USA from May based in New York. If what has beens suggested above doesnt work out for you let me know. Maybe I can also help.
Ian
http://theblockblog.com
Free Property Investment Info, Tools & Resources for Property Investors – USA< Aust<NZHi
I've been looking into the options of leverage through loans within the USA. It seems that things are opening up in this area for foreign investors and at a low loan entry level.
I came across this site : http://loansusa.com.au but don't know the interest rates. Also a Memphis operation offers private lending finance at 9.9% which is a stop gap measure for 18 mths while you build a credit rating through the property ownership and the use of a credit card ( issued with your bank account). The idea being to get the property revalued, refinanced and withdraw your initial investment to repeat the buying process.
There is another business offering 70% finance at 5% over 15 years. They operate out of Arizona. When I get the details I will post them.
Ian
http://www.theblockblog.com
Free Property Investment Information, Tools & Resources for Property Investors – US, Aust, NZI dont think buying brand new is necessary either. The benefits are in the depreciation and tax advantages, a 12 mth builders warranty ( or longer) and less maintenance issues, but negative gearing territory, which buying new often is, is investing to lose money. Weird long term strategy based on property always going up in value. Like a new car though, I would imagine that new dwellings depreciate too much in the first year or two, in all but a booming market, so if you can pick up a 2 or 3 year old property that is priced well for the market conditions, you will have the tax advantages without the buy new ( builder/developer/spruiker) price. Does anyone agree on this or have experience of this?
No 14 – should be dont seek advise from friends or family only their money.
Ian
http://theblockblog.com
Free Property Investing Information, Tools and Resources for Property Investors with A Sense of Humour.I haven't been to Memphis yet and don't know the market, but will be there to check one outfit out very soon. What I do know is that the finance is through private lending (hard money) at 10% or just under. Option given is to pay cash and take the bigger return or leverage with the finance offer and possibly buy more. Both with the view of using the following 18 mths to obtain a credit score to refinance the property at around 80%. Asset + credit card use + income. Then pull the initial investment and/ or pay off the private lender. Seemed like an ok alternative if for the short term and a means to an end.
By the way thanks for all your input. Much appreciated. Will contact Mr Loans USA too. Thanks for the heads up on Nike, FedEx and hospitals.
Also I agree about the mark up on these properties, but after visiting the USA five times in the last 3 years, I can see why investors here would agree to pay those prices. It seems to be the compromise you are comfortable with when you cannot physically get there yourself to buy them cheaper. The other factor it seems is the security of a good turnkey operation from rehab, to management etc. It is difficult enough when you are there in person and doing deals, so these alternatives, if they are up to scratch, I can now see, to be viable for Aussie and Kiwi investors.
Believe everyone when they tell you though, these properties sell 'initially' very cheaply. My last purchase in the states was a pub with 2 apts for $13,600.
To 'USA' – try the site again
Ian
http://www.theblockblog.com
Free Property Info, Tools & Resources for Investors with a Sense of HumourGday Sparky
If you disagree to the point of the post, fair enough that's your right. Hundymen are not worth $66 per hour to shave doors and attach a towel rail, just the same as apprentice electricians are not worth $30 per hour standing around picking their nose and scratching their bum while the qualified sparky does the work. I dont mind paying a good tradesman for doing a good job anytime and they're worth their weight in gold, but a rip off is a rip off anyway you look at it.
As for whinging, you and Diclem should listen to yourselves. This is not a dig at electricians per say, I used it as one example of a few to point out that maintenance costs can be a problem for property owners and this relates to the original thread.
The solution was to find suitable, qualified tradies that do a good job for the price/fee you are happy with. Take action and change what was a bad situation into one that works for both parties.
If you agree that changing a light bulb is worth $130 and replacing a tap washer $60, then I'd gladly do that work at your place next time it's needed. Just call me. <moderator: edit>
Ian
http://theblockblog.com
Free Property Investing Information, Tools & Resources for Property InvestorsThe only way out of your dilemma ttman, as I see it, is this. You have to tell your prop. manager you want quotes on everything before work is done. You want to know the hourly rate for the electricians, plumbers, handymen etc they hire and no account gets paid from rent and is sent to you personally.
If the rates don't suit, then you have to take control and find people who will do the job at the rate you want to pay. That may mean hunting them down next time you are in the locale of your property. It can be done, but takes a bit of effort. Get references from others and the people here on this forum may be able to help.
You might want to calm down a bit though – but I feel your anger.
I've had the same problems. $66 to change a tap washer, $132 to educate a tenant on the evaporative cooling system, $110 per hour for an electrican AND his apprentice to check a meter board. This sparky is charging out his apprentice to the tune of $30 per hour and I'm sure getting gov't assistance. Since when does a first year apprentice earn $55k per year? (or do they). My last beef was paying a handyman $66 per hour. Thats over $100k per year for a handyman and the property manager thought this was ok.
Anyway, I now have found tradesmen that do the job for the right costs and this is at properties hundreds of kms from where I live. They are out there and a good handyman can do everything bar the elect and plumbing for $30per hr. including changing a light bulb.
Hope it works out for you.
Ian
http://theblockblog.com
Free Property Investor Information. Tools & Resources for Property Investors with a Sense of Humour.Best is No 2: Offer a property option deal. You agree to buy for X amount within X time – say 18 or 24 mths. You pay a non refundable fee – say $2000 – now and have 18 or 24 mths to complete your DA and onsell to another developer or to acquire the funds to purchase and develop yourself. This way you have control of the property without partners.
http://www.rentalagreementsdiy.com.au/option_to_purchase_real_estate_agreement.phpIan
http://theblockblog.com
Free Property Investment Information, Tools & Resources for Property Investors.Go to http://theblockblog.com There are free tools and resources available there. You can also download 600 website links to a whole host of property investing websites for Australia and NZ that I'm sure will come in handy, especially if you are new to property investing.
The particular tool you asked for is here : http://www.theblockblog.com/propertyinvestment/ip-holding-costs-the-numbers-never-lie/Hi Leo
Firstly banks aren't in the property business. They are in the lending business. I have heard that Fannie Mae is currently spending $10 million per month cutting lawns and they're not happy! That's how much it is costing them to maintain foreclosed properties in their portfolio and that's just the lawns.
All they want to do is get rid of these liabilities. They have government funds propping up their balance sheets and these houses dragging them down again.
As far as discounts go it depends on the property, the suburb, the city, the county and the state AND the competition AND the lender.
If it's a total dump, you might get 80%, if its value is around $1m you may get 20%off – depends. The trouble with dealing with banks is, simply put, you're dealing with a bank. Had any good experiences here lately dealing with your bank?
<moderator: delete advertising>
Ian
http://theblockblog.com
Free Property Information, Tools & Resources for Property Investors with a Sense of Humour!Hi Matt,
My advice, on top of all this other advice is "KEEP IT SIMPLE". Don't get caught up with too many things at once. In the current market especially, but for me at any time, the best thing is take control of your own capital gain and let the market do what it does.
In other words 'add value' and increase the property value immediately, not when the market dictates.
If you combine this strategy with a sound purchase which is under current market value, then you win both ways from day one, not 5 years down the road. This will mean you can borrow against the new value a lot quicker and move forward faster.
Look for property that is being sold by a motivated vendor and where you can add value straight away, either through a cosmetic renovation, adding another dwelling to increase rent return, a subdivision, a plans and permits sale or development.
Five good properties like this and you can buy your $500k house with cash.
Best of luck mate and good on you for getting into it and for not being afraid to ask questions.
Ian
http://www.theblockblog.com
Free Property Information, Tools & Resources For Property Investors with a Sense of Humour.I have to agree. Buying tax deed properties is a lot riskier than tax liens. Although you have to do a fair amount of due diligence for each, tax deeds need much more and you really need to be on the ground to make the strategy happen, or have someone you trust to do the ground work. Most importantly you need to know what type of auction is taking place (there are a number of different stages and auction types) and how many liens are actually on the property besides the county taxes.
You don't want end up with a property with a mortgage and an IRS lien sitting right under the tax lien.
I have purchased properties through tax deed auctions and they are heavily contested at auction, leaving the inexperienced or the lesser cashed up investor on the outer. That being said, they are extremely profitable if you end up with a property with a good sale prospect, given the current environment. One thing is for sure and that is you will buy the property at a huge discount, leaving you a lot of room to repair, market and sell way below current value, leaving a swag of money in the property for the new buyer.
The last 2 properties I purchased realised a 100% and 180% profit in 5 months, so as you can see it is profitable. Both properties also sold for 50% of current market value after I had them repaired, but tred with caution with tax deed auctions and take heed of these guys who are promoting tax deed or tax lien investing.
Ian
http://www.theblockblog.com
Free Property Information, Tools and Resources for Property Investors with a Sense of HumourIt's growing and growing really fast thanks Dan. There's a lot more information and giveaways there now and people are taking advantage of that from Australia and New Zealand. I just sent a message out to subscribers that they will be getting about 500 resources specifically for researching the market in the US. It's not available on the site, but to everyone that joins the community which is free to do anyway.
Anyway… onward and upward. I hope people here get as much out of it as they can. That's what it's there for.
Ian
http://www.theblockblog.com
Free Property Information, Tools & Resources for Property Investors ( with a Sense of Humour!)There are hundreds of these properties for sale and it is an art selecting the right one to buy, if you have the ready cash. Without getting into all the details, you look for property of this type with the right things wrong with it, not just occupancy rate.
You need to have a motivated vendor of the type mentioned above, retiring and mismanaging. It has to be in a rentable corridor, it needs to have maintenance costs that can be lowered, it needs fixed costs easily transferred to tenants (eg elect usage) etc and these all need to be easily procured within a short time frame. There are a number of other areas that need be assessed as well.
If you can lower your overheads AND then increase rents by $5-$10pw x 100/200/300 units, then your NOI changes in your favour dramatically and quickly, putting less pressure on occupancy rate. It also increases the commericial value immediately as well.
Ian
http://theblockblog.com
Free Property Information, Tools & Resources for Property Investors (with a sense of humour!)Does anyone know about investing in Memphis Tennessee? I have heard that a local outfit there is offering 50% finance, no questions asked on all property purchases. Most houses are going to investors there for around the $40k mark.
Ian
http://www.theblockblog.com
Free Property Info, Tools and Resources for Investors with a Sense of Humour.There is a link to discussions about MYUSA Property here : https://www.propertyinvesting.com/forums/property-investing/help-needed/4322475
Ian
http://www.theblockblog.com
Free Property Info For Investors with A Sense of HumourHave you heard of Rookie Developer? It's run by a person known to a lot of people on this forum and is designed to help people such as yourself who are starting off with development projects. A wealth of information there. http://www.rookiedeveloper.com.au
Ian
http://theblockblog.com
Free Property Information, Tools and Resources for Property Investors with a Sense of HumourThanks for the info on these guys. I have a friend who was looking into investing via the myusaproperty so will pass on the details for them to look a lot closer. A reputable outfit with one of the Aussie directors a previous heavy contributor to these forums is Global Property Deals based in Houston, Texas but investing also in San Antonio and Sherman among other Texan cities and towns. They do tours as well and I've only heard high praise of there conduct and systems they have in place. I'm sure they will come up if you google the name.
Ian
http://theblockblog.com
Free Property Information, Tools & Resources for Property Investors with a Sense of HumourBe willing to chat about US investing and my experiences over there – anytime
[email protected]Ian – http://theblockblog.com
Free Property Information, Tools & Resources for Property Investors with a Sense Of Humour
Australia, New Zealand, USAGFC Global Financial Crises
+CF / CF+ Positive Cashflow / Cashflow Positive
CoCR – Cash on cash return
ROB – ripped off blind
Ian
http://theblogblock.com
Free Property Investment Info, Tools & Resources.
