Mahovi
I remember back in my Detroit lending days it was the first time I saw the following:
1. Glass bricks on the basement windows so they could not be entered easily but let light through
2. Paint copper pipes grey to simulate Galvanized pipes fools some of the crack heads coming in at night looking for easy pickings.
3. Rehab contractor had armed Security guard on premisis during rehabs, All workers had to show ID and log in… Alot of times its the rehab workers that come back at night and steal… ( they know right were new things have been put in)
4. Property managers office Barb wired and bullit proof glass ( office was just south of 8 mile) little slide drawer to shove rent through.
5. And of course Glock 9mm in the shoulder harness of the owner of the PM company and any of his management that had to go deal with tenants and houses.
The issue with Jeremy Burgess type of operation is they will sell anyone anything in any area with no regard to wether its a proper investment they do the opposite they market these properties as safe cash flow investments.. And again not all of Detroit is like this but there is a HUGE swath of it that is….And of course the OZ spruikers are no angels either they are out and out financial physcopaths they could care less if their Fellow OZ investor lose's their hard earned money.. They just want the fee's on both sides of the transaction,,, Like I have said I have been approached by a bunch of these guys… NOT ONE MENTION OF THE QUIALY OF PROPERTY OR NEIGHBORHOOD IT WAS ALL ABOUT I NEED TO MAKE X AND CAN YOU PROVIDE ME PRODUCT.
One in particular wanted me to source Atlanta properties for 2o to 25k all in including rehab and a profit for our company and they were going to sell to OZ investors for 40 to 50k to OZ investors. 20k all in in Atlanta is the Hood… 50 to 80k or higher all in in atlanta is an investment you have half a chance with.
It really boils down to these guys attacking the greed factor in the Investor… US investors by and large think something is wrong if the returns are much over 10% Alex can attest to this… Bottom line is there will be Millions upon millions lost by OZ and GB investors who venture into the Hood not knowing what they are doing and its in any big US city period.
One last comment,,, About two years ago before I knew of this Off shore investment phenom of buying US rentals… I had this one lady contact me and I was giving her real advice about US investing.. And when I mentioned 7 to 10% true net returns she just laughed and said I am going to detroit I can get 25% or better there,, Like its investing it in the bank or something… I just shook my head and thought there goes another lamb to the wolves.
JLH
Oh and by the Way Alex does not need a gun,,, he can just scare the heck out of them by staring them down
Alex is a Martial arts champion so he is a lethal weapon… Just kidding Alex Not really Yes Jay,
It's tough to work in the hood and in my opinion, all the hoods present the same dangers and opportunities, more or less – the hood is the hood… When you consider those being almost equal, what's the only thing which drives an investor more towards one or another? The posibility of getting more money out of the investment – the cash-flow. But you have to face some other bigger dangers – the FAKE wholesalers, the SHARKS. They sale anything, anywhere, as you mentioned and don't care if their client will or won't be successful after that. In their own eyes they are the big guys, the big business men, the real investors… I think this is the BIGGEST THREAT what an out-of state investor has to be aware of. I did my homework, I did my own research and the Detroit reality is far from what the majority of wholesalers are presenting to their potential customers; you just can't buy a property anywhere just because the street looks clean and the price is more appealing than you've ever dreamed- there are lots and lots of other factors to consider. The good areas for investing (believe or not but there still are good, safe areas in Detroit) are very small and located in certain parts of the City. Most of the RE Detroit agents don't know them. The wholesalers are not interested in them because you won't the volume; the houses popping out on the market in those areas are insufficient to sustain their huge businesses and that' s why they purchase in bulk from banks (packages of 50+ properties). What's worth to rehab and sell it gets done, what's not is foreclosed on. Investing in Detroit requires a certain knowledge about how to CORRECTLY purchase the properties with a Warranty deed ALL THE TIME and using Michican Licensed people, how to CORRECTLY rehab the properties, to whom CORRECTLY rent them, take all the necessary steps before wiring the money to anybody else. I can't believe how Richard had the courage to wire the money directly to Allen without any safety net.
For me personally, it's not mandatory to sell anything, as I'm pleased with my investments. If someone wants to purchase from me, it's OK as I'm not into scamming anyone, if I can make some more money out of my business I don't mind, I'll go further, get more houses, rehab them the way I know it has to be done and go on. Before any transaction I like to inform my customers and to give them as much inf I can about the City, the properties, the investments, the legal stuff, etc. I like to sleep well at night if you know what I mean…A question I wanted to ask you since I discovered the topic about getting money from the US banks as a foreign investor: how an investor in the US can get a buy-to-let mortgage from an US bank and if you know some details? What I found online has multiple references to UK, not US.
Funny thing: Two weeks ago I had a client from Toronto who own multiple multifamily building there. He was interested in one of my properties I have for sale and, finally quit on working with me. His decision was based on the fact that the price I was asking ($42k for a 4 bedroom rented for $850, Section
was way too small to be true. He was thinking about a scam…I laughed so much after that…You know, not having any information about the place where you want to invest leads or to loose the money, or to loose an opportunity…Boy, the nightmare is just getting worse…
buy to Let mortgages for the GB buyer is nothing more than owner financing.
goes like this.
wholesaler buys property for 5k puts 10k into ….
GB Spruiker sells to unsuspecting GB investor for 60k… 30k down and owner finance 30k… Profit of 15k is made just on the down payment and GB Spruiker and US wholesaler split profits in some manner.
30k private mortgage is recorded GB client pays whatever interest rate say 6 to 9%… its all gravey for the seller… Some of the sellers will then sell this paper in the secondary market.. All though very tough to sell any MI paper or OH paper to any note investor for some discount.. profit to the GB spruiker and US wholesaler will be 30k or better per transaction.
With the exception of Dallas and I do not know this first hand only what Cash Cow investments has conveyed, there is NO bank financing for SFR rentals in the US for foriegners and very difficult for US citizens. And the Dallas financing is from a local commercial bank that holds the paper according to my communications with Texas Cash cow.
There is no bank in MI that is going to lend on rentals in MI by and large… Especially to out of area borrowers.there is financing for the locals that live there.. However 99% of mid western banks have already been through the out of area borrower and changed their policies years ago after facing so many defaults because of the intrinsic risks that are in rentals.
so they will only loan to those that can prove they live within 100 miles of their rentals. The other issue you have is most mortgage lenders will not do a loan under 50k…Again because the super low priced properties by definition are basically in the hood and have a huge default rate.Being a NMLS licensed Mortgage banker I get the industry journals that are not avalaible to the public.. And beleive me the banks know where the foreclosure cluster are and they are not stupid… they do need to make a certain amount of loans for the CRA minimums. but those are to homeowners and ones that can qaulifiy for FHA….
For this simple reason the lack of liquidity has caused the prices to crash… Just think about it.
What would an Automobile be worth in the US if everyone had to PAY CASH…. If there was no leasing no financing for 7 to 10 years for that SUV. Not sure how it is in OZ… but we would be just like any other 3rd world country that requires cash for all items.
We would be riding scooters and horses.I have not financed a car in 20 years but when I was 18 to 35 I certainly did….
Same with Aircraft…if all airplanes had to be paid for in cash we would still be riding the railroads… Most people do not understand that there are huge leasing companies that actually own the aircraft.. far to much capital to tie up.
I bought not one but 2 aircraft in the last 10 years one for 430k,, and put 5% down.. and one for 275k and put 10% down.. but I wanted state of the art.. If I had to pay cash I would have only bought something for probably 100 to 150k and that would not have gotten me the latest and greatest. I think I mentioned these to you they were 2004 Cirrus SR 22's….Plus the hanger for 250k so almost 1 million for my partner and I to fly to our projects in 30 minutes instead of 2 hour car rides… And or for me to visit clients in SF or LA in 3 hours to 5 hours instead of slogging through the airport…. then you have the movers and shakers that do this in jets and thats a whole nother financial dynamic all together…I had a deposit on the Cirrus Jet.. but let it go. Getting too old to be safe flying the JET as you know from you past Jets are a whole nother world…
Ergo where we are in America… Cars cost more than many homes and auto sales are doing great.
houses are just coming back..
JLH
Thanks a lot Jay.
Excellent lesson. Happy I asked.
Would like to have that kind of money to spend Jay
In the US… we have whats called bonus depreciation
It was enacted to stimulate certain industries… You can get it on vehicles if its for your business.
So those aircraft I was able to year one right off 75% of the purchase price off of my gross income.. And in those years when my lending company was doing 40 to 60 loans a month we were making some fairly large cash income… So on the one plane year one I took 300k write off on my gross annual income the other one I bought a year later and wrote of 200k or so.
so being in the highest income bracket.. the first plane I put 20k down ( which is still hard to beleive) and saved 120k in cash income tax I would have paid the government that year.. for a net cash savings of 100k.
then you had the GOZONE in the Deep south it was the Katrina hurricane bonus deprecation… that allow one to write off 50% of a New construction house.. AS long as your in the business which I clearly am. I bought 11 of those over the 3 year period.. about 2.5 million worth… And wrote off 1,200,000 over those 3 years so with the aircraft and the go zone.. I paid less than 10% in total tax on income greater than 7 figures for a 3 year period. You do need to recapture the depreciation once you sell though..
If it werent for the bonus depreciation the aircraft industry would be on its ear..
JLH
Jay…….
Actually no, ………… – there is another “rent to own” scenario that is DEFINITELY not vendor financing and is quite clever…. it goes like this (and is pretty genius AND gets the property owner quick funds – but what you would buy with the $$ is another matter in a rapidly increasing market)
FHA loans exist right now with 0% down – these are the loans that go to low income people, first home owners etc…..
SOOOOOOOOOOO trick is to find an “almost” qualified low income person (in GA they are the $1k down loans)….
HYPOTHETICAL STEP THROUGH
Property owner buys with cash property at $60k – standard 3-4 bedder in ATL comps are all 90k – 110k for financed equivs
Property owner thinks… I would like $110k for this and I would be willing to flip this propertyProperty owner uses this play:
Property owner wanting a quick flip contacts expert in this field. R/E agent advertising house puts it on Craigslist – they are a mortgage broker or r/e agent….they calculate the LOAN REPAYMENT AT $110k at today’s rate (haven’t looked it up so humor me that it is ?? $750 a month) – THAT IS THE ONLY FIGURE ANYONE FOCUSES ON…
So now…
Advertisement reads”LEASE TO OWN FOR ONLY $750 PER MONTH – this 4 bedroom 2700 sq ft house is a dream waiting to happen – lease this property to own!!”
$750 per month is less than the actual rent on this house by about $450……
R/E agent and mortgage broker finds the “nearly qualified person”, verifies they CAN fix their credit (i.e. pay off a credit card etc) to raise it to qualifying level, moves the “tenant” in while the loan is being processed and then within 2 months the property moves from a $750 a month rent to closed and the homeowner has just flipped their house and made top dollar. So long as the property has GOOD comps so that the property will appraise for the amount being asked… the new home buyer doesn’t squabble over the asking price (OMG THEY OWN THEIR OWN HOME FOR ONLY $750 A MONTH!!!!!) and the property owner makes top dollar in the shortest amount of time….
Normally the R/E agent earns much higher commission for sorting this all out and inevitably paying off someone’s $2k credit card debt or outstanding $500 medical bill etc….. but that is fine if they are earning 10% commission instead of something around 6%… they have wiggle room…. just need an FHA loan specialist, a good friendly appraiser and an r/e agent willing to do it….
This is all absolutely legal and above board. Hinges on 3 matters in my mind:
1) you are giving up a yield generating property and
2) you MUST buy in an increasing market and one where you bought about 30k cheaper already than the neighbors and
3) that you use 1031 exchanges to avoid the cgt.My only problem is that if I sold out of any of my own properties, I wouldn’t be able to buy them back in anymore…..but if you were PURELY looking for a cash play….. great way with the right team….I have one property I will do it with which is a flip in the making anyway and that money will continue to be played as a flip…
Emma,
This is SOPS (standard operating procedures) in the credit challenged mid west and deep south…
We do some of it on the West coast…
The risk you run is fixing the credit these people can be really tough, I have had these drag on for more than a year and never come to fruition.
they keep dinging their credit even though your working with them;But yes this is a good way to retail a house.
JLH
I have had a lot about flipping in the States, I am amazed that the government still lets it happen, due to the way the Property market is at the moment.
Well realistically every house is a slow flip in a healthy market……
They have put in laws to try to prevent the fleecing – but it is circumvented by using LLC’s – remember all those seminars where they say “asset protection in the same breath as LLC – or “we set up an LLC for you” or “we secured this great property” or or or….. …. LMAO…… the greatest scam on the planet that I have heard of….. laughable – THAT should be illegal but the best thing about the States is that for every law in place to protect people, there are 200 million trying to figure out how to circumvent them…..
It normally starts with a genuine concern for protecting YOU … yyyyyyyyeeeeeeeaaaaaaaaahhhhhhhhh right.
In essence, buying a house, putting sweat equity into it and selling it for more than the actual sweat is what keeps the building industry going – so it is tough to say people can’t sell for a profit – BUT, the real estate industry is LICENSED to specifically prevent fraud, unethical behavior etc – it is when people DON’T buy through a licensed real estate agent they lose that protection and THAT is the message that just HAS to get out there….
At any point, you could have sued, got your money back and sued some more if you had been dealing with a licensee anywhere…. and THAT is where this crazy loop hole in the law comes into play – you could sue ANY US person who fraudulently pretended to be a buyers agent in the US as that is a legal term. You can’t sue them if they sit in Australia and call themselves a US Buyers Agent?????? HOW CRAZY IS THAT?
Further, other forums have even allowed unlicensed people to actually PITCH to their members. It is ridiculous.
It is wrong but back to the matter at hand….Jay has some GREAT points – did you and everyone reading this who has bought in the US got a seller’s disclosure when you were buying these things?
Further – without making the cultural divide seem like a chasm – I have a fundamental belief that Australians rarely genuinely meet people in Oz (and I am making such SWEEPING generalizations) who absolutely and without hesitation are out to scam you. As in, literally stand there and promise you the earth and in the precise same breath are not unintentionally, not accidentally but LITERALLY out working out how to scam you…. mind you I have only been to one property seminar in my life and most know that did NOT turn out well (lol)
I know I am not programmed to expect it or put up with it. I am shocked and floored when it happens. I expect that when something goes wrong someone will genuinely try their almightiest to fix it and if they can’t will almost die in the process and for all the “god fearing” that happens in the US, you just end up in situations where you are shaking your head with disbelief.
I again urge anyone entering into the US real estate market to ASSUME you ARE being ripped off – intentionally so – figure out HOW they are ripping you off and work backwards…. if you really and truly, after becoming masterminds of sleuthing, discover they aren’t ripping you off – check again….if they aren’t licensed, 99% they are scamming or making a SERIOUSLY large mark up which might be fine in your mind.
Read Gavin’s posts and learn.
Emma171,
Every time I buy a property in Detroit or outside Detroit I use licensed people: RE agents, title company , etc. I'm looking for seller's disclosure all the time; I NEVER buy from individual owners! I'm looking only for transactions with warranty deeds; I never deal with QCDs or special deeds (unless there are Fannie Mae, Freddie Mac or other Government's entity and have a strong foundation). Selling LLCs makes the transaction smoother (for me, at least, because I represent a honest side), but yes, you are right – it circumvents the right and the only way it should work. But the problems arise when when you expect the least. Even if I purchase through LICENSED people, I still had problems (small ones though), due to their negligence or, in some minor cases, due to a small greed (the type of "let's get this closed so I can get my money faster") unjustifiable for their position, in my opinion. I can't stretch ehough the need to come educated in any RE market in the US if you want to avoid future unpleasant surprises, which in some cases can't be fixed. That's my opinion anyway.
Emma 171,
Your 2-nd post touched a pretty sensitive aspect. Today I spoke with my PM in Detroit, as we want to help Richard with his wrong investment. I told my Manager the whole story (I've sent him all the Richard's post on this forum connected with his 730 issue) and he replied that this is a long and wrong story in Detroit. Everybody knows there that the OZs are effectively jumping on their head when they find out about the opportunities in the US. Most of them end up being scammed by a bunch of people belonging to the same species as that Andrew Allan and after that turn to some other companies hoping to fix what's already badly broken. My PM says that almost every month he has an investor from OZ or New Zealand who is referred to him and he spends his time and money trying to fix the un-fixable: bad properties, very wrong locations, overpriced properties, etc. About the OZ killed while collecting his rent, the story is a little bit different: the OZ investor was crazy enough to live in the property he purchased in Detroit, with no white guy in at least 10 mile radius. His tenant was a young lady, who claimed to be abused by the OZ in exchange for the rent money (so he was collecting his rent but in an Unorthodox way). Like any other dude, who cares for his daughter's honor – her father killed the guy during a very hot dispute. That's the story everybody knows in Detroit.
Anyways, the point is FOR ANY INVESTOR COMING OUT OF STATE – LEARN AS MUCH AS YOU CAN AND EDUCATE YOURSELF IN THE US REAL ESTATE. IT'S ABOUT YOUR MONEY. YOU CAN FIND TONS OF INFO ONLINE. You know what Oprah says – "when in doubt say NO" . It will save you.I guess the thing is too, not always to believe the information that's online, websites will often put small disclaimers at the bottom that are hard to read. My Allan's company is a case in point
Mihovi
I with you – 14 million%%% – gets back to ASSUMING you are being ripped off by anyone selling you anything other than a property off the open market and simply work out HOW. In that process you will learn 40,000 times more about the US market than the spruiker trying to sell you.Richard could write a book, he literally knows more about US property than Andrew Allan ever did – as self evidently Andrew Allan couldn’t even look up title for the guy! GOOD GRIEF…
So – simple simple simple JUST 12 HOURS OF ARMCHAIR RESEARCH…
1) Find an EXACT address … if that is the address the spruiker is selling you or just ANY address in ANY city that you are interested in buying in….
2) Find out the sales price of EVERY property on that street (Geojet) from the local county website – go to the assessors page and type in the street address… EVERY Neighbor’s sales price will be there and when it was sold…… are you in an investor owned enclave? Does the surname match the demographic breakdown of that neighborhood?
3) Find 3 houses that are actively for rent within 500 yards of the house that you are looking to buy – CALL THOSE HOUSES AND ASK IF THEY WILL ACCEPT $100 less for rent than listed – if the answer is yes… BACK AWAY – but chat with whomever is renting – “is it easy to get to the school from this house?”, “how far are the nearest shops…. I don’t have a car, could I comfortably walk – I have 2 small children” – if the person renting the property is a licensed agent, they can’t lie to you …. they may avoid any issues that would get them into Fair Housing violations but you get a FABULOUS feel for where you are by chatting… get a Skype to Go Number that is local to your target market…
4) Google drive the streets, look at the composition of the elementary school versus the local high school – have you got a transition going on? What are the rankings?
5) When you have done all of that, contact ANY locally licensed buyers agent and ask for current listings, comp sales and rents for that area…… they will give that to you for free…..daily updates every day of every listing that is coming onto the market…No, buying through a US buyers agent won’t be a magic pill but by JOVE if they misrepresented the return, the material facts or the reason for you purchasing that property, don’t provide disclosures etc YOU HAVE RECOURSE. Which is a DARN sight more than those I have personally known who were ripped off to the tune of 100k on promises of rents that were even by the furthest stretch of the imagination over $400 PER MONTH more than they would EVER have stood a chance at getting…. and quite frankly, I don’t know what else to recommend to get the information out there – and that only covers the BUY – not even close to covering the Repairs or, further down the line, the actual management of the property…..!!
This is about those starting out and having the tools to understand this ISN’T hard, this can be fun and it isn’t all scary but don’t think that you can circumvent learning this market – you are going to be in it for a LONG time…. get to know how to stand on your own two feet, and if you are paying an “expert” – check they ARE an expert …… then get them to teach you how to fish – not actually just give you a smelly, rotten fish and tell you it’s Good Friday and this is the best and only fish you can have as all the others are sold out!
Oh, and yes, it will STILL be fun when the market turns…..I’ve been having fun for over a decade of investing… admittedly now is still like a smartie factory but still….
Always two sides to the story,, the OZ side is the poor fellow was there on his 30 day vacation to work on his units and did not know any better, that buying hood properties for an unarmed white person can and will be hazardous to your health..
Its a crazy world the Black folks live in by and large in the US.. OZ investors have no clue… Just like any other slice of society there are good and bad,,, the bad blacks are just really bad and thats a fact.. Uneducated do not value life as a whole, Terminally unemployed with no where to go… There is some crazy stat that the unemployment rate in Detroit in the black community has a rate of 30% plus with the majority will never work.. The men live off of the women.. the women get Sec 8 rents EBT food cards and all other manner of public assistance…Its a totally matrearical society,, Those of use that invest there and Every one on this forum is working with predomiatly black communites… I mean Atlanta is 50% black so thats your tenant base..
Detroit is just a tough tough town,,, Again not all blacks are like this but on the bottom end of the rental pool its the norm, and why I personally do not believe the risk is worth the reward, and that these are not suitable investments for anyone but people in the business of running these properties.. Can you get lucky and get a good tenant that will stay for years YES,,, can you experince what Richard has gone through absolutly,, I have had at least one call a month and I am sure this is just the tip of the ice berg…..
Even the higher end suppliers like TRR have clients that have fared not much better at least according to the post from a few days ago.. 2 houses doing fine.. one trashed and one no tenant and probably will end up being trashed if its not taken care of post haste… Its just the ugly truth…And it does not have to be this way… Just lower your return sights to Quality properties and these issues are deminished exponentially.
You can invest in Portland were I live and the tenant pool is either hispanic or white,, there are under 1 % of the population in Oregon that are Black.. Hispanics are tough on properties but by and large pay there rent.. YOu get some white trash tweaker and they are worse than the bottom end blacks.. YOu get nice middle of the road white renters in Oregon and its just like OZ set it and forget it… Returns are 3 to 5% max on a cash on cash basis but you will not ever have a bad day.. its why our Multi family is some of the most sought out in the US.. less than 2% vacancy rate and 100% collection rate with little to no eviction issues.
Risk reward capital preservation you the investor need to choose.. go for High yeilds and your rolling dice…
Alex and I have said time and again a happy medium is 9 to if your lucky 11% net returns.. OZ investors get blinded by the sales pitch of the OZ spruikers and off they go taking huge risks… But hey if you got the cash to lose your making some wholesalers day and the OZ resllers lots of money on every transaction…There are expections for sure but far and few between.
JLH
JLH
Emma,,, what do you really think???
great advice,,,
One last thought on the subject,,, Do you ever wonder why the US wholesalers are pounding so hard on the GB and OZ is because by and large have burned through the US investor, the great majority of these foreclosures come from the US investor that had the exact same experince as RICHARD,, the OZ and GB investor is just new fodder,, and in a year or so. the OZ and GB investors will back off.
The Isrealies are coming in now and some others.. But take the Brasialians who know poverty and tough,, they wont buy any of these properties they buy high end condos…
US investor is back in the game but much smarter than the last go around,, this is why the super low end is there for the picking for OZ investors.. We don't want it… And make no mistake there is far more capital to buy property in the US than in OZ by 10 fold.
These low end areas really just need to be bulldozed,, they have lived there life they are funcionally and economically obsolete..TWh is clipping along at almost a million a month in US investor investing in our model,, 9% and never a cash call and equity this resonates with the US investor.. My investor tend to be 55 plus 500 to 2 mil in their reitrement accounts and want fully managed no worries investments.. If they did not do TWH they would not buy real estate at all.
Now if I can get Alex off his rear and get our Charlotte market opened up I will be a happy camper…
JLH
Alex is a Martial arts champion so he is a lethal weapon… Just kidding Alex Not really 
was way too small to be true. He was thinking about a scam…I laughed so much after that…You know, not having any information about the place where you want to invest leads or to loose the money, or to loose an opportunity…
You must be logged in to reply to this topic. If you don't have an account, you can register here.
