Let’s look at the due diligence you should do as a novice or experienced investor, this will lead into what steps you need to take to ensure you are getting the best bang for your buck also.
You can also assess current investments with these tips also just to ensure peace of mind within your current portfolio.
Acquisition
1. Is the home on the open market when offered to you?
You can tell this quite easily by punching in the address here http://www.zillow.com
2. Is it a private sale or bank foreclosure?
Again this information will be on the above link
If it is a private sale it can be listed for any price the seller wants to list it for, here is an example.
Seller secures a property from the bank for 13k and relists it at 65k, that is legal and unless you know how to read the data on http://www.zillow.com you could lose a heap of your money fast, I hear these stories all the time.
3. If it is a bank foreclosure you are actually buying it at the lowest price possible if you are dealing direct with the bank.
4. If it not listed on Zillow for sale there will still be data on the property and you can see the past transactions which is public records.
5. Just to be sure don’t accept the estimated values and area stats as gospel because they are 2-3 months behind and run all the foreclosure sales into account when estimating values and are well off the mark in most cases, just use it a guide.
So hopefully that has kept you clear of some transactions!
Purchase
Buying a turnkey property has some positives and some drawbacks, let me explain.
In most cases 99.99% we as brokers are offered significant commissions 8% – 10% (5k to 15k) or more to offload US overpriced properties to investors. How do I know this? I get approached all the time myself, find me a fool sell them the dream and rake in an additional commission on top of my upfront fee. YES ALL THE TIME!
They call themselves wholesalers or act as a secondary broker based in the USA there are at least 30 that have approached me directly which I have declined them all, many of whom are working with almost every company in Australia marketing US deals left and right.
So now that is out of the way be very careful buying a ready-made investment package from any company at any time and keep your emotions out of the deal, don’t rush anything until you have complete your homework.
After Purchase
Quick vacancy of your new investment lower rental than quoted and poor renovation works if any at all are common practice.
Flick and forget, is the general way US brokers work I should know I hear the stories all the time.
Read the fine print if things go south is the company you purchased the property through here in Australia really care once he has your cash if a tenant leaves? NO in the fine print all obligations got to you dealing with it directly with the management company who do give a damn and that’s if there was even a tenant in it in the first place. I have heard and seen first-hand driving past some of these homes for investors in the US to see them still boarded up. The seller is paying the rent so he can secure another deal before exposing the truth as we are so far away this happens.
Recently an investor contacted me she had purchased 3 homes with 2 other companies before meeting me in Michigan to buy her first property with Cash Flow Gold, just catch up to her recently she is try to offload the 3 homes Florida/ Phoenix as they are all vacant and the Phoenix home is in such a bad location she doesn’t know what she will do.
Make the person you are working with in Australia take a role in ensuring what they are selling is actually what they are selling and back it up themselves and not shift it to the US after they have your money!Finance
In most cases, not all but quite a few where finance is an option the home is so overpriced you have paid for it outright just in you 40% or 60% deposit. FACT!Additional links to assist you in your homework when buying property in the USA
http://www.finestexpert.com/Home/Index
http://www.nationalrelocation.com/ Just type in the suburb or city here to drill down on area statistics
I have no Doubt this article will ruffle a few feathers however that may bring more attention to it than they need so it may stay on the down low we shall see.
Jason Simpson
http://www.cashflowgold.com.au
Working for the investor everyday!
Quality – Location – Results – SuccessWhy would it ruffle feathers ,good advise.
Just some times zillow and those real estate sites will list some comps bit high for sales in areas.
I like for a property to be sold as turn key and completely rehabbed and rented when we sell the deal. Or at least a tenant waiting to get in the home. So selling turnkey prices yes the price is going to be a bit higher.As we are selling a finished product.
To me I don't want to insult any one and say I am better or they are not as good. Seems common in this forum…
Here is a practical simple realist approach all out of state , or foreign nationals investors should use. Good start any way….I posted this before and this is simple no Bull realistic approach for the novice or experienced investor.
The Five (5) Factors for out of state or Foreign Nationals when investing
1: Meet the Team
Find out who everyone is and understand their roles.
Know who are the people involved with this company.My team consist of realtors, contractors, handy men, lawyers , team leaders in different markets , tenants ( biggest part of the team) they make the payments.
2: Get referralssimple and straight forward.
Get all the details from existing clients , take the time to check and call references and find out what the companies does well , and also complaints. We cant make very one happy…There will be complaints ….3: Property Management but most important factor for investing is a good solid management teamAgain this is a simple version….
A: Repairs – how are they handledB: Evictions – how are they handled and how long to re rent and what cost associated with that ?
C: Payments – how are they handled and processed.
Monthly reports (P & L Statements) profit and loss statement…E: Rehab requirement( what type of work is been preformed on the property)
4: Real Estate GoalsHave a plan -Without a plan of what you are doing and exactly what you want to achieve in real estate your goalswill not be met. With goals in place this will help to build a real estate portfolio. This is so over looked just don'tbuy properties or cash lend because it is cheap Buy because you have a plan of attack.5: Personally viewing the properties and the Team in action
View the properties. I like for our clients to fly out Monday – Friday. This helps to see how we run our companyon a daily basis. Weekends are great, but no one else works on the weekend.( except real estate investors )To get a true feeling of how things work. I like Monday – Friday is when the action takes place. One other option is we can
also fly out and meet you one on one after you have seen properties , have met the team , and get videos .I don't like
pictures they don't always tell the whole story.Just my 2 cents keeping things simple seems to work.
Alex
Jason –
Decent advice but incomplete.
My strongest advice is to deal directly with someone locally here. Why? Local knowledge.
<moderator: delete advertising>
My advice:
– Forget the brokers
– Forget FORECLOSURES
– Forget the other middlemen
– Forget the "fully rehabbed houses"
– Forget the crappy areas
– Ask for and get comps for recent sales ON THE SAME STREET that you're buying on
– Buy from people that own rental houses in the same area, otherwise you're just dealing with a salesmanI agree with Alex that a personal visit is beneficial. But there are ways around that. Chief among them is sticking to good suburban neighborhoods that you can verify on the internet. Then you don't have the problem of boarded up houses.
<moderator: delete advertising>
Dennis Fassett
+1-248-971-0764
[email protected]Hey guys
There is no doubt Detroit has some issues however it also has some fantastic locations too.
I spent about 4-5 months a year in Michigan myself however we don't buy or suggest properties in Detroit for a few different reasons, such as higher taxes for example generally speaking when in the nice areas.(however that's not to say there isn't a good deal to be had, but for us it is too much work and there are better location to invest outside the city with less risk)Yes it is very important to have your base in the locations you suggest property < moderator: delete advertising>
I thank you for your feedback it is really great to inform investors of some cold hard facts sometimes, here i just wanted to touch on one issue of so many and not to get mixed up in everything else that goes on, with who does what best etc etc.
thank you
Jason Simpson
Cash Flow GoldZillow values are all over the board, It picks up the Bank sales of props that need total rehab. and then you could have a house on the same street that 30k or so was spent on it rehabbing it and the value looks inflated. So use the internet value sites with a grain of salt is my stance.
Good feedback from all, I think the bottom line is that there is opportunity in the states, there is very diverse asset class's and its up to the investor to source which ones work for them.
What the main theme of these post the last few weeks is, Its that the low end rentals with spruikers advertising these 20% returns, these are <moderator: delete language> not sustainable for the out of area passive investor.
The audiance has heard it from me for 6 or 8 months now, Alex has chimed in, Mr. Kc , And now our friend in suburban Detroit.
All I can say is plan on 7 to 10 Net yield if you do better thats fantastic, however if your investment is dependant on 15% net yeild year after year or more, its time to get a reality check.
J.Simpson wrote:Let’s look at the due diligence you should do as a novice or experienced investor, this will lead into what steps you need to take to ensure you are getting the best bang for your buck also.
You can also assess current investments with these tips also just to ensure peace of mind within your current portfolio.
Acquisition
1. Is the home on the open market when offered to you?
You can tell this quite easily by punching in the address here http://www.zillow.com
2. Is it a private sale or bank foreclosure?
Again this information will be on the above link
If it is a private sale it can be listed for any price the seller wants to list it for, here is an example.
Seller secures a property from the bank for 13k and relists it at 65k, that is legal and unless you know how to read the data on http://www.zillow.com you could lose a heap of your money fast, I hear these stories all the time.
3. If it is a bank foreclosure you are actually buying it at the lowest price possible if you are dealing direct with the bank.
4. If it not listed on Zillow for sale there will still be data on the property and you can see the past transactions which is public records.
5. Just to be sure don’t accept the estimated values and area stats as gospel because they are 2-3 months behind and run all the foreclosure sales into account when estimating values and are well off the mark in most cases, just use it a guide.
So hopefully that has kept you clear of some transactions!
Purchase
Buying a turnkey property has some positives and some drawbacks, let me explain.
In most cases 99.99% we as brokers are offered significant commissions 8% – 10% (5k to 15k) or more to offload US overpriced properties to investors. How do I know this? I get approached all the time myself, find me a fool sell them the dream and rake in an additional commission on top of my upfront fee. YES ALL THE TIME!
They call themselves wholesalers or act as a secondary broker based in the USA there are at least 30 that have approached me directly which I have declined them all, many of whom are working with almost every company in Australia marketing US deals left and right.
So now that is out of the way be very careful buying a ready-made investment package from any company at any time and keep your emotions out of the deal, don’t rush anything until you have complete your homework.
After Purchase
Quick vacancy of your new investment lower rental than quoted and poor renovation works if any at all are common practice.
Flick and forget, is the general way US brokers work I should know I hear the stories all the time.
Read the fine print if things go south is the company you purchased the property through here in Australia really care once he has your cash if a tenant leaves? NO in the fine print all obligations got to you dealing with it directly with the management company who do give a damn and that’s if there was even a tenant in it in the first place. I have heard and seen first-hand driving past some of these homes for investors in the US to see them still boarded up. The seller is paying the rent so he can secure another deal before exposing the truth as we are so far away this happens.
Recently an investor contacted me she had purchased 3 homes with 2 other companies before meeting me in Michigan to buy her first property with Cash Flow Gold, just catch up to her recently she is try to offload the 3 homes Florida/ Phoenix as they are all vacant and the Phoenix home is in such a bad location she doesn’t know what she will do.
Make the person you are working with in Australia take a role in ensuring what they are selling is actually what they are selling and back it up themselves and not shift it to the US after they have your money!Finance
In most cases, not all but quite a few where finance is an option the home is so overpriced you have paid for it outright just in you 40% or 60% deposit. FACT!Additional links to assist you in your homework when buying property in the USA
http://www.finestexpert.com/Home/Index
http://www.nationalrelocation.com/ Just type in the suburb or city here to drill down on area statistics
I have no Doubt this article will ruffle a few feathers however that may bring more attention to it than they need so it may stay on the down low we shall see.
Jason Simpson
http://www.cashflowgold.com.au
Working for the investor everyday!
Quality – Location – Results – SuccessNo doubt what you describe is more comman than folks want to believe
dennisfassett wrote:Jason –Decent advice but incomplete.
My strongest advice is to deal directly with someone locally here. Why? Local knowledge.
<moderator: delete advertising>
My advice:
– Forget the brokers
– Forget FORECLOSURES
– Forget the other middlemen
– Forget the "fully rehabbed houses"
– Forget the crappy areas
– Ask for and get comps for recent sales ON THE SAME STREET that you're buying on
– Buy from people that own rental houses in the same area, otherwise you're just dealing with a salesmanI agree with Alex that a personal visit is beneficial. But there are ways around that. Chief among them is sticking to good suburban neighborhoods that you can verify on the internet. Then you don't have the problem of boarded up houses.
<moderator: delete advertising>
Dennis Fassett
+1-248-971-0764
[email protected]I agree with Dennis that you should try and find people with local knowledge!
There are some firms out there who try and sell you, without having any clue about what it’s really like on the ground.Apart from getting local help, visiting the property yourself is also important for due diligence (even if it means travelling overseas).
Matt
Guys i agree 100%
We are based in Australia, Michigan and Georgia
There are so many more points that could be covered here but i wanted to keep it simple initally just to get the ball rolling
Thanks so much for your additional positive coments
Keeping the buyers informed is so importantJason
Cash Flow GoldReally great advice on purchasing properties from someone local who has knowledge of the area AND who owns some properties in the area themselves. If they say they own some properties in the area, ask for proof of ownership AND do an independent check to make sure they are being honest.
DUE DILIGENCE DUE DILIGENCE AND SOME MORE DUE DILIGENCE!
I am helping an Australian client purchase properties in Midwest where I own properties myself. My client flew down and I gave him a tour of my properties. Took him inside of my properties and showed him some great deals on the market. He liked one particular and made an offer and we are closing on it today. The gross return will be 44% and the net return on that deal will be around 18%.
Good luck and happy investing!
One reality check is :
1. foreign investor wants this huge due diligence check by the local realtor.
2. local realtor makes 3% of purchase price or 2k which ever is greater.
3. what realtor is going to answer all these questions that the foreign investor poses. I for one would tell the investor take a hike.
for 2k what the hecks in it for me.
I believe you cannot expect a US agent to bow to these demands unless”
1. agent is a newbie and startving you will never get a successful agent to submit to this amour of questioning not worth their time nor mine.
2. If you ( aussie investor are coming to the states for 3o days) why who’d you need this from an agent your here to do due diligence.
For me personally I would never summit myself to this amount of micro management unless they were buy 1mil plus of property and I was making 30 k plus.
So in my mind if your expecting ( aussie investor) this amout of due diligence and work from you RE agent to buy one 30 to 50k property your expecting way too much.. I mean really who is going to kow tow to you for 1500 bucks .. Way better things to do.
JLH
Monthly reports (P & L Statements) profit and loss statement…
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