Dennis,
None. But that is not my business. You may be in this for the cash flow, and that's great. I don't have any interest in being a landlord, honestly. Again, nothing but respect for you and your experience. We just disagree on this, and that's fine. A disagreement doesn't mean that we can't have a drink, and talk about business anyways, and maybe one day we'll have the ability to do so.
I wish you much success with your turn key properties in the suburbs. I'm always open to having our buyers look at properties in the suburbs. In fact, I'd love to talk with you about that as I have people interested from all over the world, and if the numbers are better in the suburbs over all, perhaps we can do business together. ROI is ROI, and if your numbers above are accurate, it seems like a potentially great fit for the people we are working with.
Do you partner with others who have buyers to sell your turn-key properties to? What cities do you work in mostly? What is the average acquisition cost, and how do the numbers play out there? Fill me in and maybe we can work together.
If nothing else, I do appreciate your honesty.
Nathan
I got to Chuckle you ask me if I own any properties in Detroit, and then when your asked ( have to hand it to you your honest) you admit to owning none. I put probably 10 million of my own money over the years into these properties in the form of hard money loans just in Detroit many many millions into other markets. Most of them worked but the ones that didnt were flame outs as I was lending when you could still get a rate and term refi and I was taken out very quickly. Its my clients that have lost 50% or bettor of their equity and their houses have been lost to the bank because they just could not keep rehabbing them.
So your just like the dozen's of wholesalers I lent to over the years really, you make the middle man profit up front at settlement have no skin in the game other than your word that you will take care of folks, and now when confronted you back into ( hey I never said the units would be full 100% occuppied and yes one should have a reserve account)
but your not unique very very few turn key operators actually own what they sell. alot of them that I have done underwriting on have horrible credit No real cash and spend their dough as quick as they make it.
Just like Real Estate agents I have known over the years that rent and have no other assets.
Were as I own every single property that my investors choose to do with me. Huge difference we have skin in the game all the way through the transaction. But again our investors give us equity in exhange for security and no cash calls. Its a win win for the true passive investor. Everyone of my investors already owns rentals they are sic of managing the managers and or managing the tenants and look at us as a vehicle to continue to make great cash flow and have the protection of a partner that has the financial capabiity to execute…. Its really apples and oranges vis a vi the safety for the investor. And of course before the equity split we do not pay anywhere near the 20% you claim as thats just not real if you factor in true costs.
And Detroit is not the only city that is like this. Every city in the mid west and most of the east coast has these same issues. Whether its Indy St. Luis Kansas City ( KC who post here says he is happy if only 20% of the homes on a block are boarded) memphis, Pittsburgh Chicago, ( some of my worst loans were there) cleveland. I have lent and invested in all but Pittsburg and Cleveland. Invest in the hood and your in trouble invest in the suburbs and your OK… Like Memphis is real popular, but you get into fairhaven or South haven where the Great Britian groups are working selling these crap houses to the unkowing Brits these folks are going to get screwed just as bad as investing in the worse part of Detroit. The reason these companies work these hoods is the wholesalers buy the houses for 5k or so put lip stick on a pig for about 10k then the marketing companies sell them as CASH FLOW TURN KEY RENTALS for 40 to 50k and 25 or so profit is split between these companies. And since they are all cash transactions there is metoring device to tell the unsuspecting investor that they just bought a property in a war zone . They get the same old bullshit story, the house is rehabbed and tenanted, And 6 months later when the tenant defaults or loses their voucher reality sets in.
Then of course on the west coast you have Oakland, Richmond in the Bay area…. Watts and Compton east LA for So cal. War zones and killing fields in each of these towns. I have never done any research but I wonder how many murders per year are in big Aussie citys like Sydney and Melbourne??? Each of the cities I mentioned have well over a hundred a year. Most gang and drug related, but they happen in the inner city which is the point Dennis is making.
One last comment on Detroit….. Dennis makes a very good point. I have buddies there that have moved to selling on land contracts only and do no renting. They sell the houses as is IE no heating and airconditioning elec appliances etc. They buy them for 1 to maybe 3k and then basically sell them to what are sub prime borrowers as is. for 10 to 20k each. 500 down 300 a month fully amortized. they do not put a dime into them. These buyers then go out and raid other houses for materials put theirs together and do fairly well. Although Scott tells me the default rate is about 60%, but that means 40% actually make it to pay you off. So depending on the deal you get all your money back within a year then have 300 a month cash flow for 8 to 10 years. I have sold probably 50 of my personal REO's in this manner. Its not too bad its trashed house you sell in trashed condition if you get it back it could be in better shape but certainly will not be any worse than when you sold it. THIS is what we CALL SWEAT EQUITY DEALS> Lots of this goes on.
Lastly comments on Wayne county, I could not agree more with Dennis its the most unorginized corrupt government body in the entire country, it can take deeds weeks to months to get recorded, I really do not know how title companys can even write title insurance there since the recordings take so long to become of public record. They need to issue gap insurance. And then do not get me going on the water bills and how they hold you up for that dough..
Aussies,,,,,, If anyone is listening, What I would do is form your own sydicates in AU. pool your money and go into the states with a company that employees its own acquasition team rehabbers and PM. You should form groups of a few hundred of you raise 10 million then set up a company to do this. Even with the overhead your will probably do 12% like we do because you control all aspects and you take the inificincies out fo the scenerio and the theft and over charging. This is what we have done. Everyone in our deal is an owner from me to the Property manager to the rehabber to our investor. One big team with one goal THE PROPERTY SUCCEEDS. not just one or two of the vendors the property and when the property succeeds we all succeed pro rata to our investment.
If anyone is interested I do have some REO properties that I will sell for 5k down 0% interest payments 500 to 1000 month. in most of the major cities we are talking about. they will need work usually 5 to 10k. prices right at 15 to 30k total. you can own them in 30 months free and clear. Caveot they tough neihborhoods caution and stamina is required.
I also have some great product in Oregon. Where we can do some zero interst financing on properties right on the pacific ocean and a great recreational vehicle park right on the deschuttes river which is world famous for trout and steelhead and salmon.
I would be intersted in some Aussies comments i raised about the murder rates in AU. and if they would liek to buy reos with 5k down and 0% fully amortized financing.
let me know
Google Jay Hirnichs Portland Oregon. you will see Silverado funding come up thats my hard money company, I am not active in the mangement these days just retain ownership. Silverado group is my real estate holding company 10 mil plus in assets.
The Truewholesalehouses.com is our latest venture into the lower end single families with my fully managed program.
You can check on all of my state affiliations and licensing. can't hide anything from Google
Jay – How does $5k downpayment with interest free loan repayments work? In other words how do you make you money…? Is it through the rehab, property management, selling above market rate?
Dj_ajay
I think the properties only cost Jay 5k in the first place so interest free finance is all profit. Is that right, Jay?
$5k purchase price must more Ghetto than Ghetto. Probably a bulk purchase.
These are properties that I foreclosed on. most are pretty decent homes as I never loaned in the deep hood in the first place.
these are loans I made in 06 and 07 at the peak of the market and am selling at a loss like any other lender.
I do not buy them right now and resell them. I am not a home flipper. we buy for long term hold. and I am not selling them for 5k I am getting 5k down and selling them for 30 to 60k depending on the house. I get 1k a month 0% interest so they pay off in 30 to 55 months. works for us as a lender because I never have to take these back, and I own them free and clear already written them down on the books.
Guys instead of trashing each other I could agree with Both jay and Nathan…Now the guy from UK Richard…If the UK is so great which I don't know about that ..You should not have to trash the USA and it's markets to promote your business.. The homes and the module should speak for it self. Unlike most I put my money where my mouth is…..
Jay yes was just in Atlanta(auctions ) myself .Sorry I did not call last weekend . We just been super busy with travel..
I don't care where the house in if it is vacant and has copper . As some point a thief's will steal it .I am working on a super nice new rehab sales price will be $650k . Some one just helped them selves to the kitchen appliances. Inside job I am sure but this is a nice area. Nicer homes, good families .So theft can happen any where.
Where most people are on goverment income and no work in those areas.It sure does multiply the negative factors of investing for that market. Now that being said , I feel I can go to most markets in the USA .If I buy right and rehab right and keep cost factor where the numbers need to be. I can get a solid return.Just comes down to personal choice and the head aches I am willing to deal with….
Detroit I have never been a fan of the market but cash on cash returns if done right it can be a money maker( from experience more of a head ache in properties lower end of investing spectrum)
just my two cents
Alex
investlongterm wrote:I know there's a lot of people who beat up on Detroit investing, and for good reason. There's so much crap in Detroit that you can buy for $1,000 it's ridiculous, and unfortunately so many morons in Detroit have taken advantage of people everywhere and that has left a bad taste in their mouth, and frankly, I don't blame them. I've talked to many who won't touch Detroit simply because of a bad experience. That's where working with the right company is so important.What I can tell you is that every day we are selling rental properties in Detroit, MI to international investors that are generating 14-20% returns. If anyone you ever talk to about Detroit investing talks about "equity" or "value" then run away as quickly as you can. The only real opportunity right now in Detroit real estate is in ROI from actual rents. This is no equity play. It is a really good ROI / Cash Flow play though.
For example, here are actual numbers from a property that we have for sale. You can view pictures on our website. This is a beautiful house in one of the nicest parts of Detroit. We don't buy junk, and that's how we generate the returns that we do, completely hands off, for all of our investors.
Currently Available: 17330 Strathmoor, Detroit, MIYour Investment: $42,000 USD
Monthly Rent: $900/Month USD
Annual Rental Income: $10,800 USD
Actual Annual Taxes: $1,755 USD
Projected Annual Property Insurance: $850 USD
Annual Property Management: (10%) $1080 USD
Net Monthly Rental Income: $682.92 USD
Net Annual Rental Income: $7,115.00 USD
Projected Net Return: 16.94%
3 Year Projected ROI: 50.82%
5 Year Projected ROI: 84.70%Check out pictures at: http://www.detroitcashflowproperties.com
You can also download a free report that I wrote about Detroit real estate investing, and how to generate great returns from it. That is located here: http://detroitcashflowproperties.com/?page_id=34
Again, just be careful with Detroit real estate investing. There is a huge amount of opportunity but there are also a lot of snakes here who will do anything to make a buck. We're in this long-term and to build relationships long-term with investors. That's why we actually answer our phones, return phone calls, and work constantly to prove to someone that we are trustworthy. We'll always do that, no matter how good or bad the markets are. Right now I assure you… Detroit is a really good market with a ton of opportunity.
Hey there ,,,, the more I read this the more I wonder what the heck does one have to do to get reality in the equation.
<moderator: delete language> no vacancy factor no maintenance factor One if not the toughtest rental markets in the US vis a vi tenant abuse everything is rosy type of post and induce these nice folks from AU thinking they will make 20% on their money,,,,,,, Your really giving the US a bad name…. There is no way you can substantiate these numbers over time.
Then when your asked on this forum how many of these fantastic cash flow cows you own you say none, AS ITS NOT YOUR BUSINESS. of course its not your business Your business is making 10 to 30k per property and walking away and laughing alll the way to the bank …. Your kind really need a reality check in a big way. and I am being kind.
All I can say is anyone who goes for this drivel gets what they diserve a royal screwing. and will lose most if not all their money.All,
I have to respectfully ask (and I have been nothing but respectful) that if you want to discuss this, contact me in person. I'm not going to be attacked on a forum for something that I know works very well for my investors, and for many other investors as well. Negativity gets you nowhere in business, and I refuse to acknowledge negativity on a forum. Contact me personally, then I have no problem discussing my business, how I do it, and how I make the claim of no vacancies, no major repairs, etc. No one has even bothered to ask how I actually do it, so at this point, I'm walking away from this discussion. I have no time for this.
<moderator: delete language> I stand by what I have said.
I will not be responding to posts on here any longer, as I have much better things to do than to argue with a bunch of people who are nothing but negative. If you want to discuss this further, send me a private message and I will be glad to do so on a personal level.
I do appologize I was probably too strong in my comments. It just so happens I had been getting e mails from an AU investor who is having major issues with a detroit property all the same scenerio.
The nice turn key company that sold it does not call them back tenant paid for few months and left. Problems getting the rent from the property manager, So now they have a vacant house and once they go vacant with no one to look after them you have a great chance of having your property stripped and major damage done.
One good thing for this person is they are not in the property at a real inflated price like the 42k nathan was offering they were in the property less than half of that. So they can walk and only lose 10k or so, which will probably be the best course of action depending on how bad the street has turned.
I think the audiance is getting the picture with True running cost and that is good that way you can get a handle on what is reality.
What a spirited discussion on Investing in Detroit. I personally have worked with Investors that have been very successful in Detroit and some whom have lost their A** . I also agree that there are some great values in the suburbs of Detroit that would also make great income properties.
Most importantly when you buy anywhere make sure you do your research on your Realtor and Property Management Company. When you locate a property get a third party opinion on the property itself along with the surrounding neighborhood. I work daily making video and photo inspections for investors buying in the area so I see a lot of good and bad. If you buy it this market or any other do your homework and get a third opinion!!
Best Regards to you all!
This has been a very spirited discussion, and I understand both sides of the argument. My company is very similar to Nathan’s and I understand the systems he has in place to ensure lower turnover, lower maintenance costs, etc. I can go into a very long discussion on the systems we have in place for this, but I’d much rather talk about a more important aspect of this discussion.
With regard to owning properties in the markets you’re working, I think this is a very important discussion. Jay you bring up some very important points about wholesalers having no skin in the game and profiting from the sale on the front end. This is absolutely true, and I agree this can turn into a bad situation a couple years down the road if the properties are not setup right to begin with.
To combat this, I’d like to get your thoughts on something I’ve been thinking about installing in my business for some time now. Unlike Nathan, I own properties in the markets I am working, and I want to increase my holdings. I think the Michigan market is very depressed, and purchasing as much property as I can right now is very appealing.
So here’s what I have been thinking about. Rather than wholesale turnkey properties perhaps it is a better business plan to partner with clients on these turnkey properties. This arrangement accomplishes a couple things. First and foremost it keeps my skin in the game as a wholesaler. I don’t make my profit on the front end…I make it right along with the investor in the form of cash flow. Second, rather than counting on a property manager (again who has very little skin in the game) you would have an additional set of eyes and ears locally to manage the property and direct the property manager on a day to day basis. Jay you recommended earlier that a group of Aussies get together to form a partnership, and send a group over to investing in the properties and provide the management. You thought this scenario would provide very good potential for generating around 12% return. I think the situation I’m presenting would create the same sort of arrangement, but nobody would be required to relocate to the States…my team here would provide the oversight AND we would have skin in the game to make sure things get done right.
I first thought about this scenario after reading Warren Buffet’s book The Snowball. He talks about when he first got started selling stocks he hated the fact that he was sitting on the opposite side of the table from his clients. As a stock broker he would profit no matter how the stock performed. So, rather than be a stock broker he decided to partner with his clients so he sat on the same side of the table. If they profited, he profited, and if they didn’t he suffered right along with them. He partnered with them, and the rest is history…
I’m very interested in your comments, so please feel free to critique this scenario.
Cheers!
Todd,
This is EXACTLY what my company does…. If you go to my web site you will will see how the model is layed out.
I use a different scheme though, As partnering with people on the deed can be a very sticky situation down the line. One if they have a problem or if some reason you had a problem… One answer to that is to put together a 504 Reg D offering. for this activity.
My Scheme is more of a commercial transaction something that say a Donald Trump would do with one of the big Investment bankers.I am a NMLS licensed Mortgage Banker with 30 plus years experince in Lending and a fairly large single family portfolio owner at least by the standards on this web site. So I have married the 2 into what I humbly beleive is the safest vehicle for investing in single family homes in the states, and I know I am the only one in the states that sets up the transactions as such. There are few people that under stand both sides of the transactions like I do. Having made well over 2,000 hard money loans in the Fix and flip space to most of the successful turn key guys of the mid 2000's. In my peak we were doing 50 to 60 a month. When the rate and term refi died. The turn Key companies then went looking for cash buyers. That led to OFF shore investors. And US investors in their IRA's…
It also was one of the factors that caused massive deflation in the single family rental space. NO FINANCING. Majority 70% or better were being done by cash and Cash talks finanacing Walks.
I can tell you from personal experince that my program is so popular with US investors there will be no need to go off shore. One the Off shore investor really does not appreciate the Risk factors here in the states by and large so they are not willing to what in their mind is give up any % ROI in exchange for greatly reduced risk, These investor are just going to have to experince it on their own. And the ones that do fine or can tolarate the risk and the amount of time and effort it takes to successfully manage ones property at the end of the day will just accept what they make.
The Off Shore investor who is thinking these investments once set at 18 to 20% net will just roll on year after year are going to become disenchanted and will most likely suffer Capital loss's on a pretty large scale,
I have done 200 plus loans in Detroit back in the day and enjoyed my time there, In all honesty I got out in time before price crunched I was loaning in 04 05 06 when properties were apprasiaing at 100 to 150. And now they are half or more of that and as you know once a street or block starts to turn bad your in trouble with your investment.
I think most folks on this site agree that they should be buying in the burbs and pay more for a better quality home if they are going to venture to Michigan.
I will put my web site on here for you to check out hopefully it won't get deleted http://www.truewholesalehouses.com
Best,
JLH
Nathan, I have no interest in Detroit, my city is Charlotte NC and surrounding areas. I stick to my own backyard. I was in Atlanta but now I am slowly pulling back and just focusing on Charlotte, NC, which it is great that you just focus on your own backyard. Smart way of investing, but it does help if you are buying and holding the properties for your own portfolio that you sell in the same areas (credibility is what we all work hard to establish) with the low prices in Detroit it is not a bad idea to scoop some of the properties that you are selling. Not looking to get any thing started. Just easier for a over seas or out of state investor to knows you also have walked and will walk in his path. This was our old strategy buying 12 homes a time (cash flow rentals) selling 10 and keeping 2. Building others real estate portfolio's along with ours.
I also have a PARTNER that owns 57 homes in Detroit, they are all section 8 and he is cash flowing quite well. So not just bashing your market. Just fyi he is a Foreign national.
Sincerely
AlexPS: At the end of the day, I ask my self would I own this property. Again just my two cents…
Jay, I very much appreciate you comments. Like I said, this is something I have been contemplating for awhile now, and I'm glad to see someone implementing such an approach. The more I think about it, it just makes sense, and honestly it seems quite simple the way you have it setup.
Again, thank you very much!
Cheers!
Todd,
It does to you and me because we have experince with both the good the bad and the ugly, Like the Clint Eastwood movie.
Also the Off Shore investor especially from OZ can get 7% or better risk free with their money in the bank in their country,
With that in mind they are looking to leverage and make money on the spread. So a realistic 8 to Maybe 12% Net over the course of a 5 year investment is not that appealing to them.To the US investor its extremely appealing. 90% of my clients already own 1 to 5 rentals and are burned out on managing the managers. If you look at my testimonials on my web site you will see a few of them.
JLH
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