My recent property acquisition from “Select American Homes”

Hi lawsjs,

I can understand your point although I'm here in Australia.

You may be aware or not, the median price here in Sydney around 665K (based from the last seminar i've attend from Steve) so to buy a property whereby Banks only finance 90% LVR, you will need a substantial deposit…plus the property would be negatively geared………..that is why investors looking for positive cashflow often head to regional areas whereby traditionally, positive cashflow is plentiful but prices also have risen due to increasing competition.

I'm using buyer's agent who is based in Australia but its team are all based in Atlanta (e.g. realtors, attorney, building inspector etc).  Asyou can see, with your 10% deposit here in Australia would buy an outright property in the US returning net ROI at least 14%….this explain why Australia investors are excited seeing their purchased property with quality finished plus cashflow positive….just like the property posted here.   What's possible to achieve in the US in term of ROI, is impossible to achieve here in Australia. For that type of quality property here in Sydney (depending on location) would cost you between 700K to 900K or more.

Indeed Jay. And (esp Alex) I am not having a go at the US (though many 'Proud Americans' also subscribe to Soldier of Fortune magazine and own weapons the Aust Army aren't allowed) but things are very different in the US.
 
Its hard to explain, but in Aus if someone does a job (generally) they do it to the best of their ability whereas the US it seems to be something to get through before you finish work for the day. It may have something to do with our property managers earning at least $60-70kpa and US ones working with much harder tenants, way more of them and for far less money. I haven't worked it out yet, but it seems a cultural thing. My mexican property manager complains about the same thing so it isn't just me. Either way, precisely as Jay said above no property investment in the US is 'set and forget'. My sister is attacking the problem by trying to rewrite the US rule book and setting up Australian style management systems. It seems to be working, but I would be the first to say she has helped people buy very specific properties in very specific areas and it is relatively early days yet – 12 to 18 months at most. In any case (and again as Jay has pointed out) I would be very, very cautious about anything in the US if you cannot afford the time or the airfares to check up yourself on what is 'really' going on at least once a year, and I think anyone would be silly not to try to do it more.

So that then brings up another issue. Knocking off $5kpa from a $12k net returning property (or thereabouts) for airfares before you talk about any repairs at all really makes a dent. I don't see much point in buying one 'just to see'. It will be very expensive and is very random. I know a few of Emma's (my sister's) clients who have bought half a dozen each, one in particular with 'vast' knowledge of the AUS market from shopping centers to retirement villages and pubs who simply said 'how good is this!' and bought six or seven in LAS, a couple in ATL and has all but given up working in Australia. A few are also people who get to the US through work when someone else is paying the bill, keep a go-fast car they couldn't afford in Australia (US guys – check our auto prices:) store them in that wonderful desert air where nothing deteriorates and making it a working holiday whenever they visit. I know of a Texan lady on the Sunshine Coast who is helping people buy 'well' in Houston, again generally to people who travel frequently to the US. I understand from Emma that Karina has bought a bunch of properties for herself and (so far) a couple for clients so that is a similar approach. She too has made it her 'job' (aside from pocket money she makes selling them) and is spending as much time in the US as she legally can. There is no question that approach will reap rewards – the question for the reader is, how much time can you afford to ensure your investment 'works' as it should?

I am living proof of set and forget US investing and my net returns over about a decade in 'good' areas are basically neutral gearing but very satisfying capital growth – far better than Aus. I have deliberately divested myself of Sydney residential property and moved the capital to the US.However I very nearly sold the entire portfolio in the US because it was just so damn annoying dealing with people who didn't care and a banking system that is at best bizarre in its operation. Conversely I suppose (and unlike Australia) their attitude would be that _I_ didn't care so why should they? Either way, my RE broker put me onto a new manager and we are basically splitting the rental returns – in essence I am paying a lot for property management, but net yields increased overnight from 6-7ish to around 13-14 (from what I understand this is also Jay's approach). More importantly for me the incessant worries about maintenance and bill paying (paying them, despite the banking system is the easier part, getting them is hard) disappeared overnight. The _really_ good part is that I get an instant cap growth hit from having a nice property vs a shabby one and am now in the process of refi'ing them based on the $500-700k increase in value per property:) Like anything though, it was a big struggle until I gave the issue 'serious' attention and worked out how to solve all the problems. 

Regardless of what approach you take the returns you get will match the time and effort you put in. And believe me it will be maintenance that will kill the cash returns over time.

DHCP: I only just saw your post (sorry). I live in Sydney and have done all my life – I also used to speak at Australiam property investment seminars so I do know what you are talking about:) What you get in Sydney and Australia is a very controlled market (by the govt) compared to rampant capitalism in the US. Again risk/reward. Which I do not think Australians _really_ understand. 2-4% net in Aus but guaranteed CG. 20% returns in say ATL (and they won't be but lets accept the 'quoted' figures are correct) where I suspect the limit of CG for the next 10-15 years will be a CG increase to make the yield around 10-12%. Because Aus has _generally_ very controlled development you WILL get ongoing genuine CG provided you can hold the losses in the first 5 -7 years until the CG kicks in. Even so, you will probably be negative in a cash on cash position for maybe 10 years. Like the US pre 1986. An interesting aside I got from my US broker when I was whinging about Stamps in Aust. You mention the 10% deposit (say at least 5) on a $600k property. The stamps are $22,490 (NSW) which also has to be saved. Along with govt regulation this does a couple of things. 1) Ensures people have a lot of 'hurt' money in the deal and 2) if you have proved you can save $80k it means you must have earnt with taxes (or been gifted by someone with money) at least $120-130k – you therefore can handle money. Now both these things together ensure the stabillity of the market. Near impossible to get NINJA loans in Oz, which again ensures the low yield is a guaranteed 'win' over time – if you can cover the near to medium term losses. And on a personal note, be VERY careful buying from Australians (especially when they don't even live in the country) selling US property. You might be OK, but make sure YOU at least go and see EXACTLY what it is you are getting.* The horror stories are many and we as a country are very happy to swallow nice sales lines because in our country very little goes wrong. Would you recommend a friend of yours in the US bought an Australian investment property through a US agent who had only visited Aus a couple of times?

*Make 100% certain you get it too – some have not even got title despite handing over the money.

I have to apologise in advance to our American friends if my comments below are biase…as we call it here locally, I just want to get to the buttom of the issue here:

I've spent a decade in the IT industry whereby the industry core products are American made (e.g., Cisco, Microsoft, Citrix etc). A lot of major Banks and finace companies uses ORACLE for their Financial applications and Banking. Further, I got University degree and MBA degree and all 95% of our academic books were Harvard produced whereby "the customers" focus is at the heart of any business success as proclaimed by Harvard professors who wrote the marketing text books.

Now, all I'm hearing again, again, and again….American attitudes when it comes to customers service is people just don't care…Not only here in this forum I heard this before (i.e I've attend a US Property seminar few months ago, it is the same….American just don't care)

Bryan Tracy (motivational speaker) got it right…those professors from academia or academic all there materials are non sense and doesn't apply in the real world…maybe he is right?

I thought as an Australia visiting the US, you are not allowed to live there and pursue Real Estate investment as stated in your VISA? How is possible for Karina to make a living in the US through buy/selling of real estate investment?

I often here about maintenance is the main issue of owning invest property in the US! IF so, What are the main reasons? (e.g., theft, hign turn over of tenant, PM not screening properly hence you get a bad tenant because they don't get paid much)?  What is it? What's the problem with maintenance???????

Is there a way to minimise the maintenance cost (e.g., buy younger property not old ones)?

DHCP: I will send you a PM on this but regarding maintenance etc but a part of the problem is (I think) like Grand Designs. How badly do the projects go if the owner is not there to oversee the build? It is setting youself up for a fall. Add in a US/AUS language barrier and 6,000+ miles and simple things will go wrong at some stage.

Karina: Whilst the properties are 'cheap' and you are no doubt doing your best to hand pick them, you are by definition paying market price. In fact, to really argue the point (and to use my pet argument against the auction process at home) you are paying above the price anyone else was prepared to pay or you wouldn't own them:) There is no doubt locals get better prices, which is only fair really – they have been there longer:) You are (like I get in LA) 'good' buys, not bargains:)

dhcp

the point you and most investors not familiar with the US. is that home owners and renters that exit these houses, when they need major reno this is just how they live period.

Other wise how can a 5 year old home in Atlanta be trashed in 5 years by the owner. ITS lifestyle has nothing to do with maintenance and initial construction.

You can get lucky and walk into one that will need next to nothing like the one I posted above. Or you can have the same vintage same home and all floor walls etc need work…. Holes in the walls carpets that have never ever been cleaned, stains everywhere.

Although I will tell you that the quality of the construciton on most of these homes is just production level. IE minimum standards and materials and craftsmenship these homes when built were put up in 60 days…

Our new construciton in Oregon that we consider production would be semi custom in these areas. that is one major difference so you take that very minimum standards add folks that are inherently tough and there you go.

It takes years of experiences to really get a delta on these homes.

JLH

Hi guys,

Love the new house worldinvestor. Just a quick question as I’m brand new to the forum, and stumbled across this post whilst looking around.

Where do you get your finance for this type of thing? In Australia, or USA? My brother and I are planning to start investing in the US property market this year, but just not quite sure where to start with finance.

Thanks,

Ed

wi

agree with your post except the 80 to 90 a foot to rebuild. The quality of the houses we are buying at the low prices. can and will be built today and in the future for 55 to 65 a foot. not 80 to 90.

Right now lots are selling for 2 to 5k… These vinyl village houses with 8 foot ceilings and the cheapest of everything, Cabinets, carpets fixtures, counter tops, 2.x 4 construciton viynl siding, virtually every component of these homes is the least expensive product a builder can buy. All that on houses that are built on slabs and put up in 60 days start to finish

So in my mind these new construction homes that are on the market at 120 to 130k, are being built for 100k all in or 50 to 60 a foot, the builders are marking 15 to 30k profit per house…

They build them quick and have volume.

In our market in Oregon we take 90 to 120 days. our cost to build is 55 to 60 plus lot and hook up fees which would be another 100k minimum. But our standards are hardeplank up graded cab’s granite and tile surfaces. bronzed oiled hardware, Stainless gas appliances front and back lanscaping with sprinklers.. ANd our landscaping actually includes bushes and other tree’s not just sod.

jlh

USA Investor

Finer comments were never made on this forum!!!!!

We are working on a true loan product, However it has to be a private fund… No lender or government backed program available for non owner occ investment properties for non citizens. And we will not own the home it will be a true loan product.

Even tough for us US citizens to get non owner occ loans.