USA – Where to buy?

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 States

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 Texas

Well 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

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Gents,

Just like to share my limited experience and exposure to the market to help anyone that was in my position that i was about a year ago.

I started looking at US property just under a year ago and started researching this company. They send out a very informative DVD explaining all queries one would have to investing in the US market. However I had to pay them a decent amount of money just to be on their mailing list. Now i m all for people making a quid but the price was really steep just to be on an email service (and to be honest i dont believe that the only money they making from the sales is a fixed price they declare in their brochures…. anywayz I did a bit of research on areas and initially liked all the major cities in Ohio. I received about 4 properties from Ohio and then I didnt hear anything back from them for a few months where they started sending me properties in Florida which is the one place I definately wanted to avoid. kept asking for Ohio properties and kept getting Florida properties.

about a few months ago started looking at this different company US Prime Property Which I have to say did not charge me to view their houses was really helpful put up with all my stupid questions and has now given me a property that I am very happy with.

The property is in Kansas City I have a 3 yr rental guarantee on the house and the house is already tenanted. When they gave me the inspection reports there was a insignificant change i merely suggested. They replied back telling me theyll fix the issue and extend the gutters to furthermore avoid the possiblity.

All on all I am really happy with my purchase and wanted to share my lil bit of info I researched and learnt:

From what I can understand major companies in the North of the country are struggling, as there cost are quite higher, and moving to Middle and the South hence why I stayed well away from detroit and opted out of Ohio (Cleveland Columbus etc) and started paying more attention to kansas City.

The reason why I stayed away from St Louis is due to it having a reasonably small population and since the GFC i couldnt really see an incline in population

So hopefully everything goes well and within 6mths to a yr Ill be looking at diversifying to another city

Jayman,,,

I think the focus for out of country investors on the single families is price point and ease of understanding them.

For these same investors to step into say C apartments that offer 12 to 16% caps would be very very risky,
Just drive through Memphis Tn for example half of the 20 to 300 unit apartment complex's are boarded up just waiting for that next investor group to make a run at them rehab them all and have a less than 50% chance  of keeping them running profitably until they give up. This asset class needs Armed security 24 hours and really heavy handed management and And owner that is in the town. I have a friend in Oregon who bought a 300 unit in Oaklahoma city, and it almost broke her she had to move from Portland ( green and trendy) to Oaklahoma city ( not green and Trendy) and work this property personally for 2 years to get it back to where it was just braking even. First property manager was stealing her blind, and this is more common than we all want to admit.

For instance here in Oregon and most of the west coast apartment investing is very competitive and nice properties sell for 5 to 6 caps. but they hold their value run 95% or more full and you do not need anything more than management. Most folks buying these are looking for long term safe cash flow the live well sleep well type. I sold one building to a client of mine for 5 mil cash it was 90 units, he makes 5% cash on cash and is pleased with it.

And commercial has tanked, I know I own a few office buildings in Portland Or. which have devalued 50% with no upside in sight. this is the same all over the states, It could be time to jump in. But a vacant building is just that vacant.

Anyway All these areas have their plus's and minuses. it really boils down to who is going to guide them on their purchase and who is going to manage their properties. This is what makes or breaks an investment here in the states. And because the better cash flowing properties are in Blue color areas they tend to just perk along at values of what an investor will pay for the cash flow. Like you said not a lot of upside.

I think Australians chase the high cash-flow because interest rates in Oz are so relatively high. 7% on a risk free term deposit means there has to be a high return or lots of upside to make it all worthwhile. If I could get 10% net return with reasonable upside and little risk I would go for that. There are lots of people on here touting their buyers agent companies and it can be hard to distinguish the good from the bad. Any of these people who ask for “registration” fees are going to rip you off. Period. Would any Aussie pay a real estate agent just to see their listings? I don’t think so!

So if any agent out there can GUARANTEE me at least 10% return plus capital growth, I’m listening.

With 7% guaranteed I am surprised there is not a reverse capital flow. US deposits pay less than 1%. this is why a lot of americans are turning toward cash flow RE. Do you need to be a AU citizen to get these returns??

We can, and do, achieve and exceed your investment criteria as a routine. the Key being able to find the right asset for the right price then staying in the transaction as a princiapal throughout the life of the investment. putting Our money where are recommendations are.

There are plenty of managed RE funds in the US like us. Just not in the single family realm. Not any that are truly managed as we are where we remain in operational control and are responsible for all expenses thereby quantifying the return for the investor and offering the Capital growth.

In the larger companies these are run through a REIT  Real Estate Investment Trust and are publicly traded companies, the mutual funds of RE if you will. Most of these REIT's investment in very large projects and of course your investment is pooled with thousands of others. REIT's were hot few years back for obvious reasons,

There is no question that single family has basically bottomed out in the US. 5 to 7 year horizon for rebound is realistic.

Dan, Your correct the better term would have been TRUE EQUITY I wrote that post at 3am so was a little foggy,  Our fund buys at True cost and our investors come in at true cost. The same homes you see being sold to foreiengers all over the US come into our company and our investors at roughly 50% less than the investor will pay for it on their own. Our managed fund makes their money on the cash flow just as the investor does. As for capital growth that would be appreciation and icing on the cake.   When you look at a house being sold in and around Detroit for example for 30k to 50k all the middlemen wholesaler rehabers are Making some Profit Correct? Because once the house is sold they have no future interest in the house. And thats the cottage industry of buying a foreclosure fixing it up and flipping it the wholesaler rehabber are not doing it out of the kindness of their heart or for practice..  and I submit to you that that profit is anywhere from minimum of 20% of their true cost to more like 50% and more. I know I made over 250 hardmoney loans in Detroit to the wholesaler rehabbers in the area.  As well as 1,000 more throughout the mid west and South east, so as a lender we see the purchase side of the HUD what the wholesaler is paying for it buying it from HUD or Duestche bank, Wells Fargo, and any myriad of servicing companies or hedge funds that have bought large tapes and are selling off.

So thats the major differnce in our model, our investor comes in at true cost, we have ownership with the investor for the life of the investment, and we make our money on the cash flow along with our investor. Our model is not for everyone. Since we are covering all the down side our rates of return are lower than is routinely quoted here, Our investor partner is  one that is risk adverse and wants to know that if they put out X dollars they will never put out another dime and they can count on X cash flow. And they are buying the asset at truewholesale with no myriad of middle man fee's tacked on.

And I think from your post you acknowledge that Detroit and the suburbs will see no capital growth for a very long time if ever, There is a vast oversupply of homes in Detroit, you could knock down 5,000 homes tomorrow. Just look at Devils night, For Aussies that's the Night either before or after Holloween. The locals set fire to Hundreds of vacant houses all throughout the city.

My full name is on these post anyone can google me. I come up number 1 or 2 in the US as well as my companies. So again to your point of your post I would welcome anyone to check me out. I have never done business with anyone out of the country, we have plenty of business state side. And our model may be too conservative for the Aussie investor.

I just became curious as in the markets I work which is the west coast, Portland Or. And select citys in the South East I was hearing about Aussies buying cash flow homes. And when talking to my partners on the ground they were commenting on the neighborhoods and zip codes that the wholesaler and Rehabbers were selling them properties and we just cringe, there is going to be a lot of folks sorely dissappointed when their investment criteria is strickly who tells them the highest % return. And you make a very good point investors can achieve (X return if they do it right), I have plenty of clients that run these type of low end assets for a business and thats what it is a business, Just like our company its a business not a passive investment. very very difficult to do it right from an armchair around the world and put all your trust and faith in a property manager who has no skin in the game. It will work for the first year maybe 2, then when you have your first Airconditioner unit stolen and or tenant turnover that cost 3 to5k to make rent ready again and or god forbid your house gets hit and totally stripped of anything of value in the home., the arm chair investor is going to wonder what happened to my 15% return and my turn key investment.  Between my partners and I we have over 500 single familys in our portfolio and all of the above has happened to us at one time or the other, Its just devestating to an investor if you only own a few homes and one of them gets HIT by theives and vandals. this is the dark underside of our Big cities that people just do not want to talk about.
We also own Mobile home parks commercial buildings (which suck right now) and storage facilities (which are great but again a business).

Heck on this post one of the Aussie's even got shot and killed in Detroit trying to work on his own property very sad but all too true if the investor just focuses on % return with no consideration to the safety and long term viability of the neighborhood. The property manager that my clients used in Detroit, His office right off of 8 mile is like a Bunker, razor wire bullit proof glass etc. you drive down any of the streets and you see these nice little brick houses, but those were built by european craftsmen at the height of the auto industry and the Auto industry in the US has fleed the NE and has relocated to the South and South east.

The other major sore point with me is that when you look at the pro forma's the expense side of the equation is no where near correct. It is always vastly understated and that is how these numbers are being cooked in my opinon. There is not a rental in the land that you are only going to spend 50 bucks a month on maintenance for any extended period of time unless your a slum lord, Again based on experince running our portfolio and when I get the sad calls from one of my past borrowers wanting to know what to do.

Just trying to keep it real as I have personally witnessed some pretty low operaters totally ripping people off not only out of country but fellow americans that are just too trusting and are taken in by the promise of these very high returns. At the end of the day I think about 50% of the investors will make it in some fashion , and continue for some years, It will be interesting to see how many still own their properties in 5 to 10 years. Its cycle I have seen it repeat 3 times in the last 10 years of investing and lending in the mid west and south east.

Detroit Dan

I looked initially at Detroit but decided I wouldn’t buy anything I wouldn’t live in myself and the 20% returns you mention would definitely not be in an area I would live. I also wonder about 20% returns over the long term. These would appear to be older properties which would most likely need more maintenance. I believe a house roof in the US for example has a life of maybe 10 years. Maybe less in the rust belt. Aussies are more used to a roof lasting almost forever.

I would appreciate any feedback on what if any appetite the AU investor would have for a transaction like this. At least its new and different than anything I have read on the site which seems to be 100% focused on  turnkey cash flow single family properties.

Return will be 10 to 20 X amount invested (depending on the depth of the economic rebound ) in about 5 to 7 years. Its cash out up front and cash yearly And yes Detroit Dan this property will have substantial Capital growth without question,

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