- worldinvestor wrote:
Hi Speedy
I stand by my statement regarding US market – its basket case and I would personally would not rely on appaisals etc . Personally the only way of knowing whether you have purchased at real/market value is to work out how much it costs to build per sq ft and how much you actually paid per sq ft.
I agree, zillow, trulia etc are only tools as I mentioned in another post, far from perfect, however it does provide useful information ie county rates, rental returns, I guess similar to realestate.com which I use all the time when searching Oz properties as I am sure most do.
WI
I understand where you are coming from.
I understand that you have an implied bank appraisal as denoted by the term having been included in quotes. I would say that you have also assumed that the sq ft measure is based on an initial assessment of the property (ie meeting all normal US DD) rather than a blanket measure across any and all properties.
I have previously outlined my DD process re zillow et-all and 'trust' them more with a good measure of DD than any BPO that could be biased and you would never know how that biases skews that valuation.
Speedy you have previously rubbished zillow as it didn't correlate the right value to your property but that might just be because you overpaid for the property.
Re the property management. I have tried to move these PM's over in the US but they tend to be a stubborn lot. They are utterly convinced that they are giving superb customer service and should charge accordingly along with locking you into extended contracts even if they happen to fail. Just read Alex and Jay's comments re real estate and property management in general and this just highlights the believe system that the US real estate fraternity operate by. I think it's 'gouge' until they bleed and keep telling the customer that you are doing a good job.
Regards
us investor,
I guess we all will agree to disagree about PM… It is the most thankless business I can think of in the residential relm.
Unless your really large like 2 to 10k units and mainly multi family and you run it like a well oiled corporation. And those companies that do that only buy A and B buildings your never going to get a top flight management company taking on c and lower assets.
In the SFR relm.. the business is totally fractionalized.. huge amounts of small players.. Just run the math there is already not a lot of money in the business. and most like Alex do it because they have too… they were tired of referring their PM out to third parties only to have clients complain like heck… better to do it yourself.
beleive me I have been there done that both personally and as a company,, and it was the biggest reason why I set TWH up the way we did and brought the PM's in as equity owners…. HUGE difference than a vendor relationship…
In the sandbox 90% of OZ's are playing in which is SFR's to blue color workers or Hud tenants your just going to have these issue ongoing till the day you sell the asset. Now you can get very lucky and get a good tenant that stays maybe a 2 to 3 years. but turn over and reletting fee's are industry norm..
Any property manager that actually wants to make a living better than just a living wage needs to create profit centers in their management company thats bottom line …
speedy gonzales wrote:worldinvestor wrote:I would say another major lure to Texas is the fact that foreign investors can source finance at an attractive rate.
What I think is incredibly scarey about this one is that the investor receives a "bank valuation" and assumes this must be spot on, how could you possibly take this seriously in this current market of foreclosures, short sales, foreigners paying over the top prices.
Zillow may not be perfect and I am told it generally overstates the sale price, but alarm bells must be ringing if you are paying $50K over the zestimate. Build cost today and how much you pay per sq ft is one way of keeping the figures real.
Also, what about the investors purchasing in Texas actually taking over a mortgage, I really don't get that one, common sense would tell you that you are paying too much for the property in the first instance.
WI
WI,
You seem to make the assumption that everybody and anybody can get finance anywhere in Texas based on the above statement. Believe me finance for foreign nationals is not an easy thing to achieve ANYWHERE in the USA and you will find that it is available only in small pockets. My lender for example is only interested in North Dallas because that is the area they operate in and are familiar with. If I presented a property in Houston to them they are not interested…..(I have asked).
The investor doesn't receive a "bank" valuation as you incorrectly assume. You need to do some research on the valuation processes and what acts of law they need to follow in the USA before you make ignorant comments based on no foundation. Banks appoint companies to order appraisals on their behalf…they are not "bank valuations"…they are done by independent appraisal companies and a professional appraiser really wouldn't find it too hard to separate normal market sales from foreclosure sales…they do speak to people as part of the process you realise….people like real estate agents !!A very good friend of mine has been buying property in Atlanta…he got hard money finance at 50% down and is paying 11%. The hard money lender did an appraisal and that backed up what he had paid…he got a 22 page report which shows the comparable sales. So are you saying all appraisals are flawed no matter what city your in ??
And Zillow….really….your comparing a free online appraisal process to a proper recognised valuation. Zillow and Trulia can be miles apart with figures so which one should I base it on.
Its common for banks to finance their own inventory this could be reo's this bank owns and why the loans are regionlized.
if they are small commercial banks they are only allowed to lend in their FOOTPRINT the fed has come down hard on small banks lending out of their area so they just cannot do it anymore even if they wanted to…. My commercial bank here in Oregon is under the same order. they can only lend in the 3 county area. go 50 miles away and they cannot loan.
jayhinrichs wrote:us investor,I guess we all will agree to disagree about PM… It is the most thankless business I can think of in the residential relm.
Unless your really large like 2 to 10k units and mainly multi family and you run it like a well oiled corporation. And those companies that do that only buy A and B buildings your never going to get a top flight management company taking on c and lower assets.
In the SFR relm.. the business is totally fractionalized.. huge amounts of small players.. Just run the math there is already not a lot of money in the business. and most like Alex do it because they have too… they were tired of referring their PM out to third parties only to have clients complain like heck… better to do it yourself.
beleive me I have been there done that both personally and as a company,, and it was the biggest reason why I set TWH up the way we did and brought the PM's in as equity owners…. HUGE difference than a vendor relationship…
In the sandbox 90% of OZ's are playing in which is SFR's to blue color workers or Hud tenants your just going to have these issue ongoing till the day you sell the asset. Now you can get very lucky and get a good tenant that stays maybe a 2 to 3 years. but turn over and reletting fee's are industry norm..
Any property manager that actually wants to make a living better than just a living wage needs to create profit centers in their management company thats bottom line …
Hi Jay
Like you, I have been in this business a long time, be it in Oz rather than the US. We have just over 50 properties in Oz where I only pay 5% management fees and a 1 weeks placement fee. No lease renewal fees and no long term management contract, in fact I have been with the same property manager now for over 12 years for the bulk of the properties. This is because they have performed over all this time.
I have previously calculated that with the 1 month placement fee, a 1/2 month lease renwal fee and 8% management fee that you are potentially paying 20+% pa in fees to the management company. This is not even including the retention fee that a lot of management companies require nor the 10 – 20% add on to invoices etc.
So the gouging by the management companies is a big shock to the Oz investors. Particularly those who operate on the eastern seaboard. Over in WA they try and gouge you I suspect due to a lack of competition over there or maybe they have followed the American model lol.
The other thing is that you defend the level of charges based on the work that is involved. I simply don't buy the concept that it's harder in the US then Aust – it's a people business and at the level that I want to operate (A to A- properties SFR's) there should be very little difference in tenants in either country.
Further, the staffing overheads are less in the US as the pay rates are significantly less than remunerations in Aust.
Anyway, it's a pet peeve of mine and as I am a cash-flow guy a cost is a cost and should be minimised. Maybe with these new market conditions (no substantial capital gain for 8+ years) more US investors will also start being more conscious of the + cash flow rather than the hoped for capital gain and will start demanding reduced management fees and management contract that are less biased to the PM.
I am sure that most Aussies will understand when I talk about the one sided contract that is the US owner management agreement.
So I stand by my statement that I consider it gouging but as you say we will have to agree to disagree.
My only reason for highlighting the situation is to make other Oz investors aware as through awareness things can change.
regards
USA
I could not agree with you more and that is why I have taken the contrarion position so many times on this site… When you add in all the true cost of management maintenance vacancy excetra
The PIE in the SKY BLUE sky numbers that so many of these property selling companies advertise are just not reality.
AS we know we are not going to change what the property managers charge here,, So your right 20% of your income comes right off the top and most OZ investors just do not realize this or are sold on non realistic really low numbers..
And of course have no experince in owning rentals like you and I do… WE NEVER make what we think we SHOULD make right.Stuff happens. You will get the odd one..
Again its why I say the US market when you have to hire everything out,, is a 7 to 12% return market if everything goes right period.
We can pay 9% in our program and absorb all costs because we do not pay any letting fee's management fee's or up charge on repairs..And we bring the asset in at a realistic price we do not take our big profit up front. Make for a more secure investment all around… We do get 50% of the equity but we get it at the END and the property has to perform otherwise its out of our pocket.
We basically sell everything we get to US clients just had our first 7 go to Perth…. But our US investors already have experince in the US market and Know what the real returns are.. Can they do a point of 2 better maybe… But do they want to deal with property managers NO… Our cleints just like checks and no drama and no calls for more cash etc. And we like it becasue we are in full control of the asset I have seen way to many investors who really should not be in the rental business and just cannot get out of their own way and end up managing their asset right into the ground all by theirselves.
Jay,
Spot on….it's a small commercial bank and it's NOT their reo inventory they are financing. I can't see it being any more independent from the sale of the property personally.
Speedy good find… Do not share other wise the poor bank will be over run with investor applications
Also bodes well for their beleif in their community… Pert near impossible partner to find this kind of loan anywhere else in the country unless its a bank that you have a long standing relationship with…
In GA for instance they are all out of bizz and taken over by the fed
some 400 community banks have gone pear shape since the credit crisis in GA. compared to maybe 10 in Oregon.usainvestor wrote:worldinvestor wrote:Hi Speedy
I stand by my statement regarding US market – its basket case and I would personally would not rely on appaisals etc . Personally the only way of knowing whether you have purchased at real/market value is to work out how much it costs to build per sq ft and how much you actually paid per sq ft.
I agree, zillow, trulia etc are only tools as I mentioned in another post, far from perfect, however it does provide useful information ie county rates, rental returns, I guess similar to realestate.com which I use all the time when searching Oz properties as I am sure most do.
WI
I have previously outlined my DD process re zillow et-all and 'trust' them more with a good measure of DD than any BPO that could be biased and you would never know how that biases skews that valuation.
Speedy you have previously rubbished zillow as it didn't correlate the right value to your property but that might just be because you overpaid for the property.
usainvestor,
I haven't rubbished zillow or mentioned anything about the correllation of zillow values to the properties that I own. I have simply always implied from the beginning that buyers shouldn't base their entire decision on values listed in zillow, trulia etc etc and it should only be a part of the DD. I am more then happy I have paid below market value. Part of that based on the appraisal…part of that based on a list of comparable's that an agent friend of mine got for me that were normal free market sales….not foreclosures or short sales that I went and looked at and part based on what the construction cost per sq ft to replace the properties would be.
Alex SC wrote:kingsr wrote:Can anyone refer me to wholesalers of properties in Atlanta and KC?With out saying names ,read the post on this Forum great people in both Markets. I was in Atlanta but pulling out.I can PM you some names their if you would like.Great market just choosing not to buy their.
Talk soon
Alex
Thanks for your reply. Can you pm me why you are pulling out? And also pm me areas you would recommend? I'm a virgin here and just trying to educate myself before heading over there in a few months. Cheers
kingsr wrote:Alex SC wrote:kingsr wrote:Can anyone refer me to wholesalers of properties in Atlanta and KC?With out saying names ,read the post on this Forum great people in both Markets. I was in Atlanta but pulling out.I can PM you some names their if you would like.Great market just choosing not to buy their.
Talk soon
Alex
Thanks for your reply. Can you pm me why you are pulling out? And also pm me areas you would recommend? I'm a virgin here and just trying to educate myself before heading over there in a few months. Cheers
You are not accepting private messages but I am .I can reply to any questions you ask me in PM
I can refer you to some wholesalers in Kansas City if your interested. lots of good deals with people getting ready to stock up on properties to rehab this spring and summer
some 400 community banks have gone pear shape since the credit crisis in GA. compared to maybe 10 in Oregon.
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