Jay,
Agree fully on the water bills in Detroit/Wayne, also, many investors don’t know that they actually become a lien on the property in Michigan, as opposed to other states. In either case, I still think Michigan makes sense for some investors to consider – if your prime objective is cash flow, it is probably the best place in the country. I hear a lot of people say “oh, I’d NEVER buy in Detroit, it’s too dangerous/risky/unattractive”. but then instead they’ll go buy in Missouri, parts of Illinois and Ohio etc – these areas aren’t neccesarily bad, but a 30K home is a 30K home, regardless of the city, and probably won’t be in a great area. An investment like that should really only be made for income rather than appreciation.BritishBuyer has a valid point also in that 1x150K property means less risk than 3x50K properties in terms of management – my only thing is that I see 30K homes rented for $800 a month, while a 150K home might be rented for $1200 a month, so the yields are much better at the lower end. Off course, your chance of seeing capital appreciation increases greatly if you invest in a more attractive property which the 150K one is more likely to be – we are just working with a lot of cash-flow investors, so I guess I’m biased:-)
Location is everything though when trying to do a good rehab project – this might be similar to what you (Jay) was mentioning, but we also run a program where investors can buy “with us” directly from the source and we then do a full rehab and resell the home in the local market (for a share in the profits) we believe everyone wins that way, rather than having the investor pay over the odds for a “turn key” deal.
highincomeproperty,
Agreed on cash flow vs appreciation.
And I fully agree on the smaller markets of Ohio, etc. there is just not enough jobs to support those markets. It will always be a cash flow play. And you can have a hard time finding renters. the bigger cities properties stay rented much better.
When I lived in San Francisco back in the 80S we had a similar melt down. If you recall the 89 earth quake then the Iraq war. Our market came to a screeching halt we had 50% devaluation accross the board through the bay area. House's fell to the low point by 91 but never recovered until 97 98 then doubled between 98 and the dot.com bubble burst. Although that bubble was very short lived houses kept rising. Now if you look at Palo Alto CA. Home of Facebook Google or Cupertino were I was raised its home to Apple prices are still sky high and will remain so as long as we have computer industry. to name a few you still can't buy a house there for basically under 1 million. the houses stopped rising but they did not crater like the rest of CA. And actually from SF right down to silicon valley prices held. Now you go out to central CA or the Inland empire of SoCal and prices got crush 50% or better. So that speaks to location location location. Same thing in Vegas and Phenoix, in these markets there is competition for renters and the rents have erroded along with values. The big hedge funds have been quietly buying up the land inventory and buildable lots in both LV and PH for pennies on the dollars. They will be able to build new house and compete for the foreclosures because a 100k lot was purchased for 20k or less.
I have bought 35 lots in the Portland Or. market over the last 18 months and have been building them out. I bought the lots for 50 to 75% less than the high of the market so what was 150 I bought for 75 to 50k per lot. What we are doing is pricing the new homes 100k under where they were 3 or 4 years ago and that is competitive with current REO's and people would rather have a new home for the same price as a nasty ole REO. Not to mention the REO and short sale process is a nightmare much of the time.
Lots of different options here in the states I really think as long as folks do their homework align themselves with companies or individuals that do not rip all the equity out of the home up front, and have control of the management of the asset people should be buying everything they can afford. It will never get any better than it is right now.
As you stated places like detroit the houses are less than replacement cost including geting the lot for free and not paying for any building permits or system development charges….
We welcome off shore investors the more folks that buy these houses and put them into service the stronger the neighborhoods will be and all of us who own Real Estate will benefit.
Florida is not going to bounce back in 2 or 3 years price wise things will stabalize but there is just way to many living units to absorb. I think Florida is like CA of the early 90S 5 to 10 years of stable prices then some inflation.
I bought 2 foreclosures over in Ft. Meyers in August just to test the waters. They were 06 built homes no chineese drywall issues they had mortgages on them of 250k I bought them for 35k at the court house steps. they rent for 800. Needed to put 10 to 15k into them. I ended up flipping them to UK buyers for a small profit…
I know the British post was talking about sec. 8… however section property managed is some of the best cash flow you can get its governement backed. But you need to stay right on top of them. and it takes a little more maintenance reserves….
I own a lot of rentals in Oregon and we have the same issues with non sec 8 tenants. And we pay 150k or so for a rental that rents for 900 to a 1000. I am systimatically selling them off. and going for the lower value properties and creating cash flow for myself and our investors. And if we have further erosion of value its much smaller dollar amount then say a 20% devaluation on a 150k home as 20% on a 40k home.
If I was considering using an individual or a company to do my US property purchasing for me, on top of researching as much about their history as possible using the internet (and if you find no history, then be very wary), the easiest way to be sure that they're not all just hot-air trying to separate you from your hard-earned cash, just ask them for a list of addresses of the properties that they've bought/sold in the past 5 years.
Once you have the addresses, you can easily varify the truth of their assertions by going to the local government website and checking on the house price history of the addresses they've given. You will be able to see whether these individuals have actually made the purchases/sales they claim to have, and see the dates and sales prices (and to/from whom the transactions were made).
Here's an example of a Miami address:
8818 Dickens AveGo to http://gisims2.miamidade.gov/MyHome/propmap.asp and under Search By choose Address.
Enter the address and you will see the property taxes on the property, the amount the property has been appraised at by the government, the current owner of the property, and if you scroll down you can see the most recent sale. Here you will find a link called View Additional Sales, and there you will find the complete price history.
So if you find somebody pushing their property services on this website, ask them to prove their abilities by supplying addresses they they or their LLC's have already bought and sold. This will also give you the ability to see how much money they generally make on each transaction, for example they might buy an REO from the bank for 30K and sell it to an overseas investor for 55K, so you'll know that they're making 25K less whatever it cost them to renovate (plus of course transaction fees).
Good luck weeding the honest from the conmen.
British: That is a great point – one thing we DO have here in the U.S. is a somewhat transparent system to track sales values. There’s always ways where it doesn’t work, such as using Quit Claims, which can happen when a bulk seller is involved. However, checking previous sales and (to a smaller extent) the taxable values will provide a much better picture than websites like Zillow etc would.
I do agree that on the lower end deals (say $30K) a further 10% drop in value is not going to affect you as much as it would on a $300K property, but then again – who are we to really predict where things are going! I am in it mainly for cash flow which is why I prefer the low-end properties (yields are higher) but for investors with the cash available and looking for appreciation over a period of several years, Surfside Miami is for sure a good bet, and sounds a lot better than owning Section 8 in Detroit
[British,
Good advice. Although some states are non disclosure states and the only disclosure of sales prices is through the MLS system. then its picked up by Truila or Zillow.
Most of the Guru's in the states are really just information companies they sell their systems books and tapes, boot camps etc etc. I highly doubt they own much more than there personal residence and whatever 2nd and 3rd homes they may own.
They use the power of their large e mail lists and past student lists to market folks then they take a commission much like a realtor for each deal that is done.
As I am privy to a lot of HUD 1s as a lender to the guys that are sourcing the inventory I can tell you there is usually 2 to 3 layers of payments that are being paid out
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This board has become so clogged with spruikers it is hard for ordinary folk to know where to turn. I have checked a few websites and sales information and found one in particular that was over stretching the truth by a long way. Sound advice offered above to check County websites for sales information BTW. I am seriously thinking of formulating a class on how to buy in the US to offer (cheaply) when I am back home. Each time I have the time to look in here by blood boils at some of the posts. Buying in the US can be easy.
Like many others I have followed this forum topic with interest and have commenced my own research.
I note Miami-Dade does around 60 online auctions/day at http://www.miamidade.realforeclose.com/index.cfm. You need to register but it is free.
Many of the auctions are cancelled or “won” by plaintiff but a number each day are won by third parties. A prepaid 5% deposit is required and balance must be settled by noon next business day!
The information available is quite extensive. It provides historic, current and future auction detail.
I am surprised no one has mentioned this site in this forum as it would seem to be a primary source for Miami buyers. Is anyone actively using it? If so have you made any bids, successful or otherwise? I like specific examples and this site provides them.
As an example I am looking at (not an active buyer for it) a property that seems similar to BB’s target. It is for auction today (overnight Melbourne time).
Property had Final Judgment Amount: $1,745,019.98 Wow!
Property Address: 8070 HAWTHORNE AVE MIAMI BEACH, FL 33141
Assessed Value: $362,364.00
Zillow Zestimate®: $516,500 Value Range: $346K – $547K.. It last sold on 12/06/2005 for $1,700,000
It is on land 7500 sq ft. It is a 2061 square foot single family home and has 4 bedrooms and 2.0 bathrooms.
It has water access to the ocean. A nearby property is on the market for $525k.
I am interested to see how this sells but there are many more each day.Terry, When you start looking at foreclosures you are needing a whole lot more experience and it is not something I would go into without a good deal of due diligence. Some of the Tax Deed sales offer good buys but many of these are selling for more than their value too. You cannot gain access for inspections prior to the auction and it is a bit hit and miss as to the condition of the interior. You would never want to pay more than 75% of the appraised value to give yourself a bit of leeway for repairs.
?To All:
buying at the court house steps "aka foreclosure sales" is a very risky proposition for the average investor. In the states there is for lack of better words a little Mafia group that will control the sales. From buying people off to bidding a newbie up with no intention of buying the property. The regulars protect there turf vigoursly.
Tax sales are not the same. still competitive but not nearly the amount of intrigue. The folks that bid at Foreclosure sales do it for a living and are there every day.
Not that you could not get lucky but an out of state investor has little to no chance of scoring a real good deal when competing against the folks that do it for a living.
so good advice from Act Today
ActToday wrote:Terry, When you start looking at foreclosures you are needing a whole lot more experience and it is not something I would go into without a good deal of due diligence. Some of the Tax Deed sales offer good buys but many of these are selling for more than their value too. You cannot gain access for inspections prior to the auction and it is a bit hit and miss as to the condition of the interior. You would never want to pay more than 75% of the appraised value to give yourself a bit of leeway for repairs.Like the post that claim 20% return or 50 or even 70% get real. these kind of returns can be made flipping property, but you need to live here and its not going to happen for out of area investors.
ActToday wrote:This board has become so clogged with spruikers it is hard for ordinary folk to know where to turn. I have checked a few websites and sales information and found one in particular that was over stretching the truth by a long way. Sound advice offered above to check County websites for sales information BTW. I am seriously thinking of formulating a class on how to buy in the US to offer (cheaply) when I am back home. Each time I have the time to look in here by blood boils at some of the posts. Buying in the US can be easy.I just hope that all the valuable members that have contributed to this post will continue to do so in the near future. So far it has been an amazing source of information.
I am evaluating the opportunity of setting up a LLC to buy a condo in South Florida. I am interested in cash flow as I do not foresee mayor value appreciation in the near future.
What I am concerned it is mainly the HOA fees. I saw that condos (1br/1ba) in nice neighborhood and buildings in Miami can have HOA fees up to 600$….Carlo
My advice is to forget about a Condo purchase unless it is a very good price and you can see copies of the HOA financials. You need to know equactly how many of the Condo's are occupied (not just owned) and what reserves of cash the HOA has.
Good advice. I would only buy into a condo project that was full or near full. The HOA in great shape and active management from the homeowners.
Do not buy into a condo development that is empty or near empty those turn into nightmares for a myriad of reasons.
ActToday wrote:My advice is to forget about a Condo purchase unless it is a very good price and you can see copies of the HOA financials. You need to know equactly how many of the Condo's are occupied (not just owned) and what reserves of cash the HOA has.Hello,
Buying in Florida has great appeal at the moment due to the low prices and potential return. Like anything, it is location that is key and you need good management in place. Sometimes the HOA fees are high too and you need to stay away from a lot of the short-term rental market.
Getting a bank account is easy – just use HSBC in Sydney or go through Wachovia Bank in Orlando.
I do not know Miami, but have one house in Orlando and buying another. I personally plan to purchase 10 houses in the US given the exchange rate and yield – and no stamp duty.
However, do your research and take the time to know what you are doing.
Regards,
Thank you all for your points of view and suggestions.
It looks as the HOA fees and management are a very important part of any "condo deal". I believe though that this can also be the good aspect of buying such kind of properties (e.g. good global maintenance of the buidling, less weather-related problems).
Do you suggest any other kind of property for a good cash flow return?
Sparkyoz, how do you find the Orlando market? Even if I like all about Florida, I am not sure about buying properties far away from the sea…Also, do you have information about setting up a bank account in the name of a LLC rather than a single indvidual?
Carlo
Sparkyoz. I need to contact you URGENTLY. Please email me [email protected],au as you are marked as not receiving e.mails.
Hi all,
I am in the process of purchasing a property but have hit a minor stumbling block. I need to get an EIN and open a bank account but both are proving difficult as I live in Australia and don;t have current plans to travel to the US.
I have set up an LLC, purchased a certificate of good standing and now need an EIN. Can someone tell me the best way to go about this?
In the EIN application, question 7a asks for the responsible party and 7b asks for an ITIN or EIN number. Isn't this a catch 22 situation? Also, is it possible to open a bank account in the US without being there in person?
Your advice is much appreciated!
Cheers,
LennyLenny, you will need someone in the US to act as your designated person for the EIN. A .bank account will be opened by some banks’s but they are few and far between.
Banks do not open bank accounts FAR and FEW between they all play by the same rules, those being federal and following the Patriot Act.
There is no way one bank will open an account and another will not this is simply not true ….Banking is highly regulated by the feds.
ActToday wrote:Lenny, you will need someone in the US to act as your designated person for the EIN. A .bank account will be opened by some banks's but they are few and far between.Lenny,
You can open an account in the USA with HSBC from Australia. I will cost you $200 and it takes approx. four weeks.Regards,
Giacomo
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