Hello Everyone,
I saw this great article about the US housing market so I thought I would share. Hopefully it will loosen up enough to give internationals decent terms for financing american investment property:
thats interesting because most banks we re talking to talk about tightening finance to foreign nationals. The other unknown here is Europe. If we get a number of countries defaulting in Europe it will effect the amount of money available worldwide.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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I was advised of a possibility of securing finance this week, however I have not yet received all the details.
The various products that I have looked at over the last 6 months for foreign investors has been shocking and I would not touch, too high risk and expensive associated costs.
WI
http://www.thepetitionsite.com/2/save-our-animals-ban-puppy-mills-in-aus/I agree, every time we hear about a product it is either very expensive or false. In some cases people are being sold over inflated property with finance. With the United States it is very important that you do your due diligence very carefully before proceeding further.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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I would have to agree with this article. After many many months of due diligence on our company and the inventory that we supply to our clients we were able to get a local commercial bank in Dallas to lend to our foreign national clients. It was not an overnight process and took plenty of face to face meetings with senior bank executives and finally the bank board for approval.
For a foreign national, finance is hard to get…no doubt about that. But look at this realistically. Banks took a hiding on the residential property market. The issue they face is that your asking them to take a bet on someone who doesn't even live in the USA, someone who likely has zero experience or background in property investing. Someone who likely doesn't have a clue where good neighborhoods are, someone who probably has no idea on buying foreclosures or what is a quality refurbishment is needed by a bank and would most likely be out on their own with property management. There is a lot more to consider then just your income, assets etc to decide whether they want to take you on or not.
Our foreign national buyers have exclusive access to the real deal…foreign national finance from a commercial bank. It is real…we have closed plenty of loans so far. Basic terms are 30% downpayment with a rate of 5.75%. Loan terms are either 15 or 20 years depending on the loan amount and a 1% origination fee. Currently limited to Dallas but shortly will be available for Houston and hopefully San Antonio as well
Prior to this finance coming on board I agree with what Nigel & WI stated. Products for foreign nationals were either way to expensive or promises that would never come to fruition. Private finance did came from around 9.5% but you needed to refinance or repay it in 3 years so it was only a short term solution. You have to be wary of private finance or finance provided directly by the company selling the homes….good chance you will pay too much for the home.
Hi TCC
Would be interested to know whether these loans are asset lends or full doc bank loans with similar criteria to what is required in Australia?? In other words do your clients need to jump hoops to get these loans.
Hey Worldy,
Most definitely 100% full income verification loans. Tax returns for last 2 years, payslips, evidence of deposit etc etc. No major hoops to jump and most of my clients get a pre-approval in place within a week before we let them go to contract on a property.
To be honest the most technical part is after approval and getting the Deed of Trust (mortgage) witnessed and Notarised here in Australia. After it is notarised and gets the Notary Seal you also need what is called an Apostille Seal which is issued by DFAT. All to do with the Hague Convention and international law and signing outside of the USA but that's also straightforward once you get pointed in the right direction
Almost any bank will loan 30% down to a Non-resi Alien at reasonable rates on a (one) vacation home. Even at the height of subprime these loans were available.
Housing crises is just getting warmed up. We’re not even close to 50% through it yet. The second wave of foreclosures is now on the way and looks to be larger than the first.
How does a dying market absorb 9 million properties?
How do you play a terminal economy?
The Freckle
I'm getting deeper than that, lets say we can't. Is it really matter if nobody wants todo business with us if we can't pay our defaults. Doubt there would be a war, everybody knows we are gun crazy waralistic nation. We fight and win more than anybody else, just don't see that scenario happening. We lose when we go to other peoples home court, it would be a wild fight if the fight was brought to our country. Like i said, then we just have to do everything here. Pretty sure we can do just fine with out having to import all the stuff we could do now. Would be proud if everything was always American made. Speaking for the young generation we are getting to that point that we want no part of the big business and the bloated Government. I wouldn't even be surprised if some day we have some type of anarchy in the future. These truely are some interesting times, who's to say your inflated market won't implode like ours
At least we will have a surplus of homes for people in the future, lol
Wondered where the Freckle had been.
Seems like offering VF is the way to go, since i have started offering properties that way. They don't take any where as long to sell to investors.
kylermrice wrote:Wondered where the Freckle had been.Flat out running around West Australia makin’ a buck
12 – 14 hr days don’t leave much energy for fireside chats amigo.The Freckle
Ahhh Kyler…
I could use an oldie but a goodie and say the US has never won a war they have not had help with…. Which of course puts you way above Australia who has never won a war:)VF does the trick. It works and you deal on a people level. Most of my US deals are done with VF – pisses me off no end when you try to do a vanilla deal in Aus and it doesn’t happen because no one has the faintest idea what you are talking about! Telling agents they have no grasp of reality and I will simply take my money elsewhere is met with stunned silence. ‘But the vendors want you to buy’ – Too late – in the 24 hours you said ‘no’ I just bought a 4plex in SoCal…..
In Oz we live in a very protected (mostly) Democrat world. Its a bit like the LA arts community if you can imagine that for a whole (small) country. Almost every social problem you guys have I think we will have in 20-30 years time…
I hope its different but I suspect its not:)
freckle,
The fed just came out 3 days ago with a position paper that allows banks to look at their portfolios and if it makes sense enter the rental business. heretofore the banks were required to liquidate the wisdom of the time from the Gov was that banks can't be in the real estate business… this is changing you will now see banks looking to partner with asset managers, and or provide take out financing for their inventory as oppossed to having to sell for cash… With financing avalaible for their REO's in house they will be able to sell their homes for more money than whats happened when you have to sell an asset for cash in a cash strapped environment…. Although the US is not that cash strapped per say… there are trillions of dollars in cash sitting in Mum's and Pops accounts earning exactly zero or 1% those investors are starting to jump in… this is why you see wholesale prices firming and or rising.. Even though you see reports were the market is suppose to go down another 3 to 5% nationwide… those are just averages and we have so so many 400 to 2 million dollar properties that will price compress that sqews the averages.
Your average dinger foreclosure in the better cash flow markets has bottomed.. and is rising. The days of just picking REO's off the MLS are long gone in the better markets. whats more common is 3 to 10 offers and bidding wars… So now to get the great deals one is going to have to buy in bulk.. or buy defaulted paper… I made my first offer on defaulted paper this week, and on Paper it looks pretty spectacular… Not really a play an investor that does not live and work this as a business could probably do.
To much work, and having to hire everything out would kill the discount.These were all sub prime loans that are in default.. All in the county that I like in Atlanta, I think WI likes this county as well. Prices were great about 10k per door… some of them are dumps some of them are the exact same homes WI has shared with us here on the site.
What I find interesting is how well the new home starts are coming back…. in most markets new starts are almost double what they were in the preceeding year and certainly 09… There is a robust new construction in Texas… Atlanta has the 10 largest new construction market, and even here in Portland we are number 20 nationwide.. we were are up 1.5 billion year over year.
And that does not include the 3 billion Intel is spending on their new D1X fab plant. Intel is going to build 2 more of these over the next 7 years. so thats 10 billion in new plants and 6k jobs into our local market here. Its within 1 mile of the 117 acres I optioned 2 years ago from the farmer.. We are hoping for 1000 plus doors and a commercial componant….I know we have talked about land before however with these building starts doing what they are doing I beleive for the more cash heavy investor land plays are something they should look at right now. Land has certainly bottomed.
JLH
http://www.hardwaresupercenter.com buy all your hardware and more at 20 to 80% less than the big box stores. No sales tax as well.
Jay my understanding of the market is this. Growth states tend be proactive pro business environments. For example CA is the opposite and loosing out big time to TX. The building demand is being fed by businesses moving to business friendly states and consequently drawing personell along with them. This in turn feeds into the unemployed space as a better place to live and chase jobs. The problem I see with this is a concentration of efficient parts of the economy along with a concentration in the less efficient parts. This has negative connotations for states slow to react to this type of economic atrophy.
In reality things aren’t getting better overall just better in places at the expense of others.
I think banks holding defaulted stock and handing it over to management companies might be a short run thing. Banks do not like to hold onto assets and then manage them to get a return. It’s not what banks do nor know much about. They may however use this option as a stop gap until they can liquidate.
I.m not sure there’s trillions sitting around in personal bank accounts doing bugger all. The average value of an American is $6000. So my guess is that accounts for 70% of the population. If there’s anything sitting around it’s corporate stashes like Apples little hoard.
I’d be wary of loading up on anything at the moment. Share investors would call this a bear rally at this stage. I don’t think the US property market is anywhere near the bottom yet.
The two following links point to worrying concerns within the US economy;
http://www.zerohedge.com/news/consumer-credit-decelerates-most-feb-2011
http://www.zerohedge.com/news/51-months-after-start-recession-here-report-cardItaly and Spain are now entering into the default cycle phase
We’re closing in on the End Game, the real crash. Everything up until now is just a warm up.
The Freckle
Freckle, Trillions of cash in USA Ira,s. 401k,s dbp,s PP plans etc etc. Plus cash in pass book savings.
Can,t compare us. To spain. Unemployment is almost 20%. Us unemployment continues to fall in most markets
California. Will survive. Weather is just too good.. And huge diversification in jobs…
Motion pictures are not leaving. Silicon valley just produces massive wealth
No question there are dead and dying regions, by and large one pony economies
Texas is enjoying a run right now, back in the mid 80’s it saw huge crash like we see now in Florida
Although the US is not that cash strapped per say… there are trillions of dollars in cash sitting in Mum’s and Pops accounts earning exactly zero or 1% those investors are starting to jump in
Jay you need to look a lot deeper. $0.43 in every dollar the Federal Govt spends is either printed or borrowed money. 50% of Americans can’t scape $2000 together with 2 weeks. The average punter is worth less than $6000. The trillions you assume are sitting around in various funds and accounts aren’t as accessible as you think.
The US is more Spain like than you think. The US actually has higher youth unemployment (54%) than Spain (48%). Unemployment is not falling in the US nor is the US in any sort of recovery despite what the MSM, government and Fed tell you.The figures are heavily manipulated. For real world explanations and analysis see;
http://globaleconomicanalysis.blogspot.com.au/2012/04/nonfarm-payroll-120000-unemployment.html
http://www.shadowstats.com/alternate_data/unemployment-chartsCal generates 1/3 of US GDP so a significant player in the US economy however it’s broke and insolvent. Last year it had to arrange an emergency $5B bridging finance in case the Fed debt limit didn’t pass. It’s a welfare beneficiary on the way to bankruptcy. Municipalities pose a significant problem/risk in the near future. Bankruptcies are rising.
http://www.familysecuritymatters.org/publications/id.11682/pub_detail.asp
The next crash will be different. In the past crashes where isolated events and could be covered by state or federal assistance. The problem now is that both States and Federal Government are drowning in debt they can’t pay back. The next crash will be a total system failure affecting everyone and everything within the system.
You may not think this is possible but your government sure does. It’s imposing new laws (and even breaking its own laws) and positioning/developing resources to better control the populace once things start to go bang.
The Freckle
frekle
I guess I just look at how my business is going from a macro level then micro level.
And things are just Soooo much better now than 2 years ago…
housing is a big driver in the US economy,, 2 years ago in the Portland Market that had been building 12,000 housing units a year, in 09 we built 700…. Total crash, I would say 90% of builders and small subcontractors went BK.. I might be exaggerating a little but it was a melt down
2010 saw 2400 permits pulled… 2011 3800… and 2012 will top 5,000, I personally have 7 Presold homes going right now for clients… I had not had a pre sold new construction home in almost 5 years.
US citizens with money in their IRA's and there are trillions residing there have access to it on demand either through loans and or cashing them out,,, however there is a penatly if you take it out early.
In our TWH model 8 out of 10 of our sales are US IRA's.
I am not an economist by any stretch just an investor and builder, who has lived through 3 of these cycles since 1980…
the GFC of course was the worse.
The transfer of wealth from the securitized Mortgage debacle is huge.. For all the investor that lost their money, you have new investors picking up their equity…
Take the average Aussie investor who has bought right,, I do not refer to the Aussie investor buying in the War zones or dead zones. Ones that are picking up the better properties.. They are buying them for 30 to 50% less than replacement costs.
And even if rents went down 30% they will still be positive cash flow,,, As long as they have a handle on management ( which is the trick)….
So as I saw my Real Estate portfolio that I amassed before the crash, come tumbling down in value,,, I set out to buy 100's of these properties so I could income average out my portfolio… So far so good.
I suppose if we have total devaluation and social melt down then, it will be about food and water… And I have that covered.
I will simply move out to my 500 acre Tree farm in Rural Oregon which has no debt, and live off the land I have a nice 3bd caretakers cabin on it with a big shop….. Set up a little portable saw mill, trade lumber for goods, grow my own food,,, Take Venison or the occasional Elk when I need meat that sort of thing, Salmon and Steelhead run in the rivers that I can ride a bike too as well…
JLH
JLH
Jay, when the US collapses into social mayhem from a US$ debt crisis – can you put aside 25 acres for me please? I am happy to pay you for the benefit (maybe in filipino or thai maids if currency is worthless) because I think armageddon Jay style sounds pretty good:)
12 – 14 hr days don’t leave much energy for fireside chats amigo.
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