Yeah,
I think this is one of the best threads here.
"Conflict leads to progress…"zmagen wrote:Absolutely enlightening thread. Thanks guys.Not sure what hardware is for your Japan properties but we just sent a package to Singapore
Lots of guys trying to guarantee rent but thats getting shut down by the US government for security violations.
Was talking to my attorney about it last week, just another new thing to deal with, lol.
guarantee in the US is a red flag, and is very dangerous for the seller… if deal goes south,,, first thing the attorney representing the buyer will do is Sue the seller for selling an unregistered security….but then again Bernie Madoffs was selling registered securities:)
There have been far to many investors burned in the US rental game and its becoming a focus of authorities here in the states.
Even for Turn Key operators to give out proformas showing returns will end up biting them in a litigation scenerio… As investors relied on those to make and investment and when the 18% net becomes 5% or more negative gear…. problems arise…Not to mention the horror stories of complete loss of capital…
If I have learned anyting on this site its the fuzzy logic that is used to determine NET Yeilds….And to most US investors Net yeilds are defined as taxable income before depreciation….. So all write offs are included….
Turn Key companies define net yeild as rent minus taxs insurance and PM…. thats just half the story in reality….
JLH
We have been working with ideas containing wording relating to paying off beginning capital in X amount of years with clauses pertaining to buying back or selling of said asset. New stuff for me, but interesting and something i will be researching for while.
My low end high risk gets me returns from 35 to 50 percent, even with a tenant tearing up the place and a couple months of no rent they then dip to 20 percent. It's worth the heartache when you still can make that type of money. If it wasn't for these type of investments i wouldn't be able to buy my A class with cash.
I had a property that was a nightmare last year and after three tenants and multiple repairs it still did decent at 10 percent. My newest tenants are a older working couple that pay rent on time every month and love the house. This type of tenant will stay for years when they find a house they like.
I agree Jay, having a certain amount of doors is the way to be able to average out your return to make this investment work. I would never have anybody buy this type of investment if they didn't have stomach or already have more stable properties to support <moderator: delete language> that can happen.
"We have been working with ideas containing wording relating to paying off beginning capital in X amount of years with clauses pertaining to buying back or selling of said asset. New stuff for me, but interesting and something i will be researching for while"
buy back agreements are only as strong as the entity or person that is to buy back… Just like when I personally Guarantee a bank loan…
one can sell a note "with recourse"
At the end of the day if you have a bummer and you buy it back all is well in OZ,,,, its when you can't buy it back that problems arise. And since your making 30 to 50% on your rentals why even risk buying them back,,,, the legal fee's will be more than 4 or 5 of the houses cost… thats my take.
One of my client ( borrowers) I put in business in your neck of the woods I lent them a few hundred K.. and they own a bunch of the houses your talking about there in KC… the one partner had to move from Portland to KC, as they take constant surveylance and work…
I think we all agree that these types of investments for those that want to deal with it can do pretty nicely,,, You have to have a burning desire to get up everyday head to the hood,,,, then to the gun range,,, and deal with these type of renters….
Its like my Kokomo stuff,,, but kokomo has no crime to speak of but same thing 10k house rents for 600…. just bad job market so you only collect rent 6 yo 8 months… I only have one left…
I prefer a solid 8 to 9% and be able to sip those umbrella drinks on the beach…
when I get 100% financing to build new construction in Oregon and make 50k a house,, now your talking 50,000 % return with NO risk.. all cash out in 6 months….. Better than the hood… but need financial strength to deal with banks these days….
JLH
Kilermice ,
where do you invest?There is too much risk if your buying overseas for less than a 15% yield. I am finding 10% and better all day long here in Australia. Just bought a run down house in regional Australia for $22,000. After a $15,000 renovation I can walk it out the door for $60,000. It will return around 17% after all costs.
Engelo
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
Kansas City and SW Florida are my areas i deal with most.
http://www.forbes.com/pictures/efel45eddf/kansas-city-mo/#gallerycontent
http://www.bizjournals.com/kansascity/news/2011/06/23/forbes-kansas-city-in-best-for-renters.htmlkylermrice wrote:Kansas City and SW Florida are my areas i deal with most.http://www.forbes.com/pictures/efel45eddf/kansas-city-mo/#gallerycontent
http://www.bizjournals.com/kansascity/news/2011/06/23/forbes-kansas-city-in-best-for-renters.htmlOK NIce
Been slowly adding in a mix of lots that will be nice to build on when new construction is cheaper than buying and rehabbing. Hopefully all my rentals can fund a couple new construction properties each year on these lots i have been getting. Trying to get some in really desirable areas.
If i can pull it off myself, i won't try to tap the bank if i don't have to. Try to stick to having the least amount of debt that i can. I would take out for buying an island and lvg my houses, lol. That's something i would roll the dice on and get a loan
And since your making 30 to 50% on your rentals why even risk buying them back,,,, the legal fee's will be more than 4 or 5 of the houses cost… thats my take.
I have to come up with more capital through the year and will sell some to free up liquid. I'm asset rich but don't always have the liquid i need when i want to buy something and the rents for the month aren't enough to obtain it.
jayhinrichs wrote:Alex, I think this is a really good point about you exiting the Management business. And demonstrates to the OZ investor that property management unlike in OZ is a very tough business to make sense financially for the PM company,,, Ton's of work very thankless in a lot of instances putting up with hard to manage tenants and owners that were sold one story and then reality hits. Take WI… If WI has to fly all the way from OZ a couple times a year just to try to keep management in check, how do you not justify adding those expenses into your running costs, and thereby getting to a true net number….And I have owned properties in Douglasville and flown my own aircraft into the local airport there… this is not a garden spot anyone would choose to go visit.. its work its protecting your investment. I have yet to see one OZ investor or investment company include all the ancillary costs that are associated with a foreign purchase plus their personal time and cost to come look and pick something out. Also WI bought newly renovated houses from what I remember in the last year and now WI is talking about maintenance costs, so what WI is experiencing is reality,,, and goes to why I get a little miffed at say the guy from Detroit who just posted last week talking about fresh Reno's and sec 8 with no vacancy etc etc… No such thing exist. And if you and Kevin and your whole staff decide there's no money in PM and your pretty much the mac daddy there in Charlotte,,,please need to read the tea leaves… rental returns in the US directly relate to risk period. 10% or higher, risks are that much higher 15 or more and risks can get very high, 20% rates of return in the lowest end US cities and risk is astronomical over the life of an investment… One the main factors is who every you started with will not be in business 2 to 3 years down the line… And its during that transition time that investors get clobbered,,, I know that one first hand. Our economy is changing for the better no matter what the stats say… So what is a guy like Alex going to do beat his head against the wall to make a 70 dollar a month management fee, or use half the energy to rehab a higher end retail product or build ground up and make 20 to 50k per deal, he does not own any of the houses he manages and neither does any other PM… A PM can just exit when they want nothing says they have to stay in business. And owner cannot exit..HI Jay
This is my second visit to Atlanta. I do not see any need for me to fly over again for quite some time, however as it is tax free visit I may decide to pop over again and combine this with a trip to NY. The flight is a killer though, business class next time for sure.
It would be totally foolish for any investor not to consider maintenance costs when purchasing properties whether in US or Australia. Just part of the business, no one gets a free ride here.
For me personally one way of mitigating this risk is to purchase newer construction and purchase properties with a minimum of 20% GROSS.
On a positive note – the drop in recent county assessments are helping pump up the returns nicely, I will take the money and run.
Cheers, WI
My sister makes things easy for people. She acts like my property manager and overseer (manager 7ish% – overseer maybe $20-30kpa) in one, but for my stuff in LA I can say that I conservatively visit around 30 times a year and things still go wrong. I nearly choked when someone on a different thread boasted about having visited the US for a few weeks and that made them an expert. There may be others out there that do what Emma171 does, but as yet I haven’t heard of them. If you want pain free, you need someone like her there, on the ground working for you and be limited to her areas of operation, or go through Jay at TWH – I am totally separate from Emma and have completely different areas of operation so I haven’t had the benefit of that management (Australian style) in the US. Emma offers what they refer to in the UK as ‘bespoke’ service (now used way too often) – she gets great buys and properties and tenants that no bulk operater could possibly manage. My story is that after 15+years and ‘going it alone’ I can assure you I have achieved no more return than Jay is honestly offering (though by the grace of gods subprime didn’t affect me at all in CG terms, and casflow increased) but I have had the worry. I have a great deal of respect for both my sister and Jay. My way worked, but it was in hindsight lucky and I would not recommend it – even though it worked. Over time it has been made very clear to me how lucky I have been. Buying a property in the US is easy. Management is the key. You have to have people on the ground in the US and very personal and very local helping you or you will fail. It is sadly as simple as that….
One thing you also must consider (aside from the not inconsiderable expense as Jay very correctly always points out) is the time a ‘little trip’ to check up on things takes out of your life. When I go on a ‘property trip’ I am wrecked when I get home. It is usually 3-4 weeks of bloody hard work. It takes a week to find out what the problems are, followed by 2-3 weeks of getting things (or trying to get them) how you want them. This is time out of your life and really needs to be accounted for in some way. This is not fun after a few years. I have professional management companies that look after all my buildings, and by US standards they do a good job, and it can be set and forget. However when I found my project manager/cleaner/overseer the rents went up 30-40% in the space of 6-12 months. In my arena that also gets me huge CG and therefore loans based on that as well. I don’t have enough money on the table to ignore that much cash and also I take pride in my properties and work hard to have them as nice as possible – both in Aus and the US.. It is incredibly frustrating to me to have hideously presented property (what is it with Ca. and beige with extremely ugly fake semi-country fittings?) reno’d in your absence getting predictably low rent only to have to redo it 3months later to jack the rents to something decent. As a one off, you would understand, but when you have a 16u and want them all the same you would assume that might happen in your absence.
Even in Australia you never get a perfect result leaving things to the manager. They do a great job, but if you don’t care then really why should they? In the US that problem is magnified hugely. Jay is very correct to always point out the cost of travel – the time involved (away from your ‘earning’ time at your normal job) I think is an equal part of that. It needs to be making a decent chunk of your net income to justify that cash and time expenditure.
time is money,
My last 2 weeks went like this.
Portland Atlanta 4 days… Atlanta to vegas 3 days.. then up to Indy 2 days over to memphis 1 day drive to jackson 2 days. back to memphis then back to PDX>.. 14 days on the road.. Nine legs 5 hotels…. 3 rental cars… plus all meals out… say close to 5k all in….
And I am just giving it the 100 ft level, my partners do all the details I just walk through before during and afters… And give them there atta boys.
middle of May off to NY and the Bermuda got invited to present the TWH model to the Independant financial consultants on their annual convention only US RE provider invited,,,,, Why because of the way we take care of the down side risk and keep the investor passive…
I suspect we will make lifetime relationships with financial planners sending us clients…And the best part is we were invited,, alot of these deals you have to pay to speak.. The chairmen happened to catch one of my presentations to a small gathering in Portland and really liked what we do… It was funny he owns 2 rentals in Cincinnati where he is from and he is giving me all these PM stories…. I just looked at him and smiled ” not with the TWH Model”” .
JLH
kylermrice wrote:If i can pull it off myself, i won't try to tap the bank if i don't have to. Try to stick to having the least amount of debt that i canSolid gold, my philosophy exactly. Make that income work for you, set aside 30-40% if you can, and you'll be able to increase your portfolio by 10-15% yearly with the best deals on the market (cuz you're a cash buyer). Works like a charm, and while the growth is far slower, there's nothing quite like that free-as-a-bird feeling that comes with not owing anyone a cent, and having the upper hand in any discussion with the banks. :p
Ziv Nakajima-Magen | Nippon Tradings International (NTI)
http://www.nippontradings.com
Email Me | Phone MeZiv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property
jayhinrichs wrote:Not sure what hardware is for your Japan properties but we just sent a package to SingaporeThanks, been hearing alot about your service! However, we're into zero-maintenance, no need to really – last time we got a quote to spruce up a place it came to something like $2,000 including new wallpapers, kitchen & bathroom fixtures, flooring, paint, the works.
(We ended up not needing the spruce, because the government accepted our higher rent for its docile-as-a-doe-disabled-support-tenant – they find it hard to get places in Japan, as Japanese owners don't like them much – win/win for us, and means we probably won't have to replace a tenant again unless this one dies or is hospitalized, god forbid, and certainly won't need to renovate).
Ziv Nakajima-Magen | Nippon Tradings International (NTI)
http://www.nippontradings.com
Email Me | Phone MeZiv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property
Hi Everyone,
We've been using an Australian real estate agent who is working Florida. Her name is Judith and she has been great in helping us buy our first property. Happy to pass on her details or if you have any questions then shoot us an email. We've written about our experience on our blog http://www.streamlineinvestingaustralia.blogspot.com
Hi,
I agree with Jay – I am keeping way out of Detroit. Watch the bulldozers make it a better town.
I keep to Florida and Georgia.
Sparkoz
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