Another group trying to flog Detroit property
They show Detroit is the only city to go up in America
Give me a breakPerhaps this company can respond as to why anyone would buy in Detroit. There are much better markets to invest in
Nigel Kibel | Property Know How
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Give me an example, I need ONLY ONE example with better areas in the US with better cash-flow that Detroit.
And please document it with real numbers not with what you've heard from some other guys…Mihovi,
the reason you only got one response here,,, is that Detroit is well known in Au…
The great britian spruiekers hit it real hard though..
From my point of view from being on this site about a year…
In the beginning it was all about Net and gross yeilds.
Now I think these investors are starting to balance those yields with Risk assessement… Even though these properties are far less than anything they usually buy in AU… its still after tax money they are using and no one wants to lose 30 to 40k…on a property,
The reality is they lose far more than that if they buy a lemon…. Because the off shore investor will usually rehab it more than once thinking its an anomoly until they figure out,, the hood is the hood and there is no place for out of area investors in these areas.
This is one of the reasons the prices have crashed so badly in Detroit… and other tough markets… I made at least 200 loans in Detroit to LA buyers from 04 to 07…. average loan HARD MONEY was 50 to 70k houses apprasing at 100 to 120k… they would refi these loans pull a few thousand out ( that they were suppose to keep for reserves) and if the buyer broker even on cash flow that was great if they made a 100 per month net per house that was over the top….. Well these buyers never made anything and they walked by the thousands, and those exact same houses are the ones that the Ist Gen wholesaler is buying in Detroit for 1k to 10k max… rehabbing sticking a tenant in for 800 a month and the cycle continues. same cycle different buyer… At the end of the day… there is no consistancy in the returns and its not sustainable over any length of time… Now thats general of Detroit there are better areas.. but anyone flogging 25 to 40k all in houses my statement you can take to the bank and I challenge anyone to to refute a word of what I describing above.
I can offer homes for 25,000 with 600 rents a month, ROI 30 to 35 percent.
I could do better in St. Louis, but i put it on the same level as Detroit, Memphis, Cleveland, Baltimore, and we can't forget Flint, MI.
I have a client from Oregon that has moved part of his team to your hood..
he has bought about 100 of these homes… in KC.. he likes it all set up he takes care of everything himself of course..
Kyler,,
Here is were I have got to chime in on reality for our friends in OZ….
And please do not take this personally this is just from my experince.
What you talk about is great with these great returns….. And I have no axe to grind .. I would like them however to buy hardware and rehab supplies from us…
The ugly truth is you will make your money and move on to greener pastures.. there is very few folks that can and work the hood for many years they get burned out… See Alex comments about getting out of property management because of the thankless non profit event it is in the US.
And our friends in OZ they are thinking long term investments 5 to 15 years… Its like resturants,,, rarely does a resturant in the US make it more than 10 years in one location thats a fact… Same with turn key guys.. I will bet you right now 10,000.00 cash that I will put into an irrvocable escrow you put your 10k as well …. that your not living or doing business in KC 10 years from now….If your still in the hood you take my 10k if your gone or out of bizzness I take your 10k and go on a cruise.
so that becomes the major problem these folks like and trust you invest with you you make your money and profits and the last place on earth you want to live is KC… I mean really who the hell wants to live there if they have choices… You will be on to Forida, California, NY , vegas anywhere but KC…Of course unless you marry some hottie from there that won't let you leave.. then all bets are off…
We all get invited to the wedding and I will pay 2k of my 10k for booze at said wedding.Having loaned to over 75 different turn key companies from 2002 until 2008 GFC, I can count on one hand who is still in business… And those that are are my partners in TWH….
All these turn key guys are the new versions…
Alex and I are the old dogs… and we have had to reinvent ourselves…Of course I am a much older dog than Alex… but hey I have a lot of respect for one of my old borrowers who made sure I was paid back!!!! And Alex and his partner Kevin did that… Most did not… they just went on to selling cars or starting companies selling to the brits and Aussies.. the new easy target unfortunatly.
However I think we have done a nice job telling both sides of the story here..
If someone is a regular on this site an still buys 25k house when it all blows up its not like they did not have intel to make a decision one way or the other…. Greed wins out—- 25% returns on a proforma is like a drug… can't help themselves and want in the worse way to beleive It is better than 10% so lets go for that even though your chances of losing all your money are exponentially greater than they can even imagine…..
JLH
Jay and Kilermice,
You both are so right in your statements!
But, this is how I see the it: depending on the term of investment you have the short-term and the long-term, of course. For the long-term, to be sure that your money will be safe , you have to find low risk investments, that's why I find your TWH model very clever, but hard to be considered by someone out of the US, as it's hard to be understood by someone who's not familiar with promissory notes, IRA, 401K, etc. I, personally find it as being an excellent idea. I remember I've read some years ago about something similar – it was you or somebody else; I don't know, but anyways very good model and set-up.
To deal with safe (low risk) and long-term investments you need a pretty good amount of money, which will be recovered in a long time (10 years +). If you have that money, it's OK. Even if you have a small amount, is it worth to invest 40k now and get them back in 10 years, when the currency conversion will be different and the future value of the money will be on some other level? I don't know …
I think lots of investors have small amounts (20-100k). How can they invest them? Some people are looking for a faster recovery and of course who offers this kind of deals other than high risk investments? Let;s not compare them with the bonds or the mutual funds; there are some kind of another story…Where can you find a RE deal which meets both: low cost and fast recovery? Of course, hard hit areas like Detroit, Memphis, Atlanta, KC, etc. (they might have something in common…) where the economical, demographic, financial condition are somewhat different that regular class B US neighborhoods. Do they present higher risk than the others? Of course. But, now depends on the knowledge of the wholesaler and the ability of him/her to provide properties in areas safer than the average (because everything comes to this, at the end). Let's take Detroit, in my case. Do I consider it safe? As a whole – No WAY! As considering small pockets, block communities – YES. Everything depends on how much you consider stretching the term "safe". If the places where I invest right now will ever disappear, that means the whole City of Detroit won't be there anymore; I have good reasons when I say that. I know investors in the area who sell 100-150 properties/year to foreign investors, in worse than mine areas, with higher prices (they don't even negotiate) and are making tons of money and I haven't heard anybody complaining , yet. The only thing sustaining those communities in Detroit are the wholesalers, right now. In those distressed areas where nobody wants to even drive, everything is collapsing. Are the investors interested in those? Of course not.
As I said it before, things come to everyone's perception. You can't generalize and put Detroit, KC, Atlanta, New York , LA etc. in the same bowl. Each of the bad areas in those cities have their own "jewels" – it's just hard to find them. The bigger a city is – the bigger its good areas and the bigger the bad areas… Will those bad neighborhoods disspear? I doubt it…
Will I be in the same area 10 years from now? I don't know. I try my best to protect my business through giving the best to my clients. That's all I can say.
I'm willing to learn from investors more experienced than me and that's what is keeping me on this forum yet.
Mahovi,
on anther thread is a gentlemen named Gavin who has had a very unpleasant experince in detroit and youngstown with an Aussie Spruieker,,, Would you reach out to him and have one of your people just do a drive by and snap a photo for him as a courtesy, and maybe a brief description of the property and WHAT YOU think he should do with the property,, My advice not seeing it but knowing what he most likely got sold is to just dump them for whatever he can get and to certainly stop paying any further money like tax's insurance utilities etc… As thats just money wasted in my mind… Unless you say otherwise I will stand corrected.
As for the TWH model there is no question its a learning curve for the AUssie as its not how they do things there..But the sophisticated Aussie who uses a financial consultant or Accountant to help guide them we have done business with.. we closed a large package to a group of Doctors out of Perth.. We never met or spoke to the doctors we just went through their accountant, who was very thourough….
by and large the Aussie investor reading these post is very smart and knows what they are looking for and how real estate works in their country,,,But because so many have been burned badly over the years in the inner cities.. Most of the posters recommend coming to the US and spending 2 to 4 weeks picking out their properties and for those that can do that, that is a great way and is recommended by all… For those that can't do that or do not wish to spend there time driving around looking at rental houses…The cheap prices are like a drug and it induces them into taking a stab at these High Risk low price of entry homes and thats were the bad stories come from…
So with our program its totally passive which the OZ investor is not used too… And because we are not Guaranteeing rents, and anyone who does that is violating US securities laws… And to do that marks up the property to cover for the loss's they know they are going to take… so we factor that all in with real Running numbers,,,,,, work it backwards to come to a realistic cash flow that can be sustained and counted on month after month… and that is 7 to 9%….. Plus 50% of the upside at re sale… Bringing the total NET Yeild based on no inflation about 14% to 16% after 5 years… This is whats so attractive to the US IRA buyer who has been there done that… Its a disaster in your IRA to buy a property then have big cash calls…It brings on all sorts of IRS issues.
so to never have a cash call from TWH is far safer than doing it on your own.. And our clients are leveraging our years in the markets. and the most important thing of allALIGHNMENT of INTEREST….
As OZ investors get one to two years under there belt and figure out what they are spending on all the other soft costs to own US rentals I have no doubt we will get a few gravitating to our model… Our US investors virtually all of them own rentals or have owned them… They just do not want to deal with PM anymore… Just want there checks simple as that.
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JLH
OK Jay. I've sent him a private message. I'm waiting for his answer now. If it will be in my power to give him a hand, I'll do it, for sure.
Detroit, like (or more like) any other place where out-of-state investors are expected is FULL OF SCAMS. I've heard so many stories…thats what we want to prove to our Aussie friends that there are good guys out there that will help them….
thanks for stepping up appreciated and I am sure Gavin will appreciate it as well… Now he may already have this covered but at least we are offering…..
JLH
jayhinrichs wrote:thats what we want to prove to our Aussie friends that there are good guys out there that will help them….thanks for stepping up appreciated and I am sure Gavin will appreciate it as well… Now he may already have this covered but at least we are offering…..
JLH
If we can help, we'll do it! This is another way of rewarding ourselves
kylermrice wrote:I can offer homes for 25,000 with 600 rents a month, ROI 30 to 35 percent.I could do better in St. Louis, but i put it on the same level as Detroit, Memphis, Cleveland, Baltimore, and we can't forget Flint, MI.well I just picked up 67 houses purchase price is $862k rehab $390k so basically $1, 250,000.
So basically if you do the numbers about $19k house. Average rental $650 dollars. So I can do it here as well.The problem being when I bring in the cash partners. Now the numbers change. If I could convince my lenders to do quick sales $34k and $30k . Still could meet those numbers.
Now what we are not putting in there is the actual numbers ..so on paper it could look great but reality can be much different.
I don't really want my 10K sitting in escrow for ten years. This is a long term passive income for me Jay, I plan on renting my A, B, and C till i am ready to retire.
got it.. have a great weekend,,, we got our first 80 degree weather of the year here.
so we are braking out the sun screen
JLH
Kyler you get enough A’s and B’s you will have a 3.5 or Better GPA and C’s will be a thing of the past for you
Lol, then why did your friend move here to get 100 doors. To make that money!
my friend opened shop there did not move… He owns 350 rentals here in Oregon and his holdings are in the 50 million range..
he will do what I am doing in my markets he will move in and go for 100’s of units and make a business out of it….
Just like the hedge funds are doing in almost every major city in the US… The hedge funds will be the next one’s to get clipped if they do not set up with in house management that are their employees and rigorous reporting functions.
When you have mass you can afford a few bummers its the poor individuals that buy one or two and end up with a lemon that becomes a problem.
I had never even considered investing in the Detroit area. I am sure there are some nice areas there, but I have not heard many good things.
We all get invited to the wedding and I will pay 2k of my 10k for booze at said wedding.
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