BEWARE – Inexperienced buyers agents and Cashflow Hype USA

Hi Luke,

Michael here again.

Cashflow deals are extremely difficult to achieve and it has taken me some time to get this under control – especially with respect to ongoing management. We have hired our own manager and have a large client base for whom we manage properties in Atlanta.

There are many agencies working out of Australia but we have moved to the US ourselves and i must thank you for your assistance and warnings many months ago which promoted me to go over and do it ourselves rather than rely on a Aust based company.

Thank you mate and hope to chat again soon.

Hi Luke

Thank you soooo much for your post.
We have two business associates who have just returned from the US and what you say is spot on. The old saying…”if it appears to good to be true, it usually is”. That’s not to say that there aren’t opportunities in the US, there are. However your warning is very well founded – thank you mate.

Cheers
Garry

Thanks for the warning yes has been tempting however if there is a double dip like many expecting, could well be stung

There are so many groups now promoting the United States most fall into two areas, firstly those just selling property often in slum areas and secondly those people who do not really know what they are talking about.
Be careful of people just dealing with agents in the US. Levels of service are poor. If you want to do this for yourself be prepared to spend months on the ground to gain the knowledge. I lived in Texas for the better part of 12 months. I struggled to find good people to work with. I know have a business partner on the ground and can provide all the back up services.

I liked the title of this topic, so I figure I may as well add my two cents worth of input.

I know nothing about World Changer, but what he wrote in the opening post is spot on.  I only hope that he isn't anything like many of the subsequent posters, who are clearly trying to drum up support for their own business concerns.

It is rather ironic that in a thread intended to warn people against their desire to believe all they hear (namely that it's possible to make 20% annual rental returns), a number of agents trying to sell you just such a "product" would post self-promoting propoganda.

Here's my take on the US market at present:

1. It's a once in a lifetime opportunity.  It's the biggest property balls-up since the Great Depression.  In the last decade property has rocketed in every country I can think of (except a few in Africa, although even there there are some amazing success stories).  Yet in the same time-frame, the US managed to lead the world up then fizzle all the way back down, luckily without sucking the rest of the world into the abyss.  Mark my words, we will NEVER again see US$50,000 houses in well-known US cities in our lifetimes!

2. Everyone using this website is way too obsessed about making a decent rental return.  In my property investing experience, the real money is made when the price doubles (or preferably triples).  People who should be worrying about rental returns are aged 50 and above, and are looking for a way to finance their retirement.  If you're young and have the balls, go for the property appreciation rather than the rental return.  Heck, if you're young you'll soon get bored with renting the place out, and as soon as you see the price inflate you'll want to flip it so as to cash out your profits and BUY MORE.

3. I have no wish to pick any fights with any person using this site who has had what it takes to go to the States and set up "people on the ground" as you Aussies all like to state.  They are courageous, and they deserve respect and profits.  However, here's my only advice to them:

Believe in your service.  Become more professional.  Dont' hide anything.  State everything clearly, including whatever problems you've encountered, and how much you're making.  You're assisting all those people stuck in their jobs back home who'd never be able to buy a property without you.  So be proud, be open, and be honest.  And don't waste your time in pointless bickering or negative posts on the internet.  I reckon there is at best 2 years left of buying Short Sales and REO's.  TIme is of the essence.

4. In conclusion: just buy something in the US without procrastinating so much that you never get round to doing it.  If you can go over yourself and buy yourself, do so.  And don't worry so much about the rental returns.  If you do end up getting more than 10%, that's great.  If you are barely able to pay your monthly property taxes and HOA fees (if it's a condo) even after renting it out, so be it.  Because nobody knows which horse will win the race at this point: the property in Detroit with good rental returns but questionable future, or the one in New York which already costs an arm and a leg, doesn't earn you much rent, yet may well double due to its location.  But if you can't go over yourself, then enlist the help of one of those recently-opened "teams on the ground", so long as you feel that they're exhibiting sufficient integrity.

Over and out
Steve from China

Your own due diligence is the only thing that can make your investment seemless.  There are thousands of agents pitching investment property.  Question:  Do these agents even know how to calculate Net Operating Income?  Do they include true expenses when calculating that NOI? 

Real estate agents in the U.S have the same reputation as Used Car Salesman and that is a shame because there are a lot of good ones out there (nothing against used car salesman..it's just a stygma).  We work with international investment groups and only recommend areas that we have our own money in.  Company and personal asset investments.  Every investor that has come to our area, we show our own properties to that we own.  Agents selling in areas that they do not invest in either do not believe in the area entirely or do not have the wherewithal to purchase.  Wherewithal should not be a deterrent in many cases, but are you going to buy an IPO stock from a stock broker than hasn't unloaded himself?  Different, but same.  The U.S is a great market to invest in but it is a major "BUYER BEWARE" market also.  If you do it right, you can set yourself up for a very profitable 10+ years. 

Mike
http://www.MyRealtySource.com

Yes, once in a lifetime opportunity.  If you can get cash or get a mortgage perhaps through Llyods or HSBC you should be able to line yourself up for a lucrative opportunity.  We are seeing a lot of foreign money coming in.  We also have a long time business in New Jersey on the Hudson River across from midtown NYC in addition to Florida.  LOTS of international interest.  Although we did not procure all of the sales (wish we did!), there is one building in Jersey City NJ where there were 19 sales over the last 2 months.  14 of those were from foreigners!  Yeah, prices are higher but upside is what they look at.

We recently wrote an article about foreign national investing if anyone is interested:  LINK

Finding good deals you can probably do sitting in your recliner at home in a foreign country.  The most problematic issue is management.  Most good management companies are all online where you can set up with them via phone or visit, then they give you an account on their website where you can get all of your monthly accounting reports and everything else.  Fortunately and unfortunately, we have worked with about 2 dozen management companies over the last 8 years and all of them suck pretty bad with the exception of the 2 that we have continued to work with.  It's process of elimination.  Very hard to just interview a company and find the right people in one day or even one year. 

Mike
My Realty Source

Yes, even domestic investors are finding property management to be the biggest issue.  Sorry for leaving things out of the article.  I didn't want to be too long winded, just general.  I should really update that because you raise good points.

In Florida, we work in the SW Florida region (Ft. Myers/Cape Coral) we are achieving tenancy in under 30 days.  It could be different with others.  What we do is purchase small bulk from the banks.  Large bulk doesn't really exist to us that much anymore.  We wholesale them out individually.  So there is an A to B transaction and B to C transaction.  The bank is A, our firm is B, and you for instance are C.  Once the A to B transaction closes we rehab the property to rentability.  Our rehab team creates our budget before we put a hard deposit down with the banks.  Once we close A to B, you would contract with us to form the B to C transaction.  Your closing (if cash) would take about 20-30 days where prior to closing all of the rehab work is completed.  Mostly cosmetic.  In almost all cases, we have tenants ready by Day 1 of the C transaction.  Not in all cases, but most.  We haven't gone 2 months with consistent vacancy.  The management company we work with has guys in the field all the time.  They have their own handymen, and if something is needed by a licensed contractor, they provide the service calls.  You can also purchase an insurance policy for about $350 per unit annually.  This covers appliances, electric, plumbing, HVAC, Heating, etc.  Taxes are broken down several ways…Ad Velorum, City, Schools, etc…Your water tax is covered under the city portion, same with garbage.  Assessed values of real estate is way down.  Taxes are very inexpensive in our area.

I hope this helps in clarifying.

Thanks,

Mike

Hi Wanalead,

I checked out your blog, very encouraging, I know that this is a property forum, not wanting to get away from what everyone is here for. Still our eternal destination is far more important in the end.

” What does it profit a man if he gains the whole world and looses his own soul”

[email protected]

Jeff