Some new figures with some good insights and market characteristics of the top turnaround towns:
http://www.realtor.com/blogs/realtor-com-names-top-turnaround-towns-may-2012-data/[“What I think is happening is a surge of hot PI money flowing into the market from overseas investors looking to possibly buffer their wealth. I get the feeling many internationals see the US as at or near bottom so if things do go pear shaped any fall would be minor if at all.”] We are definitely seeing that in South Florida.
Your statement is right on the mark,,, with the addition of the US investor has come out of hibernation as well…
We are closing 15 to 20 plus TWH sales each month in our 4 markets and keep expanding… And we are just one of 100S US companies transacting with only US investors….
worm has turned for the better…
Only bump could be shadow inventory,,, however thats mitigated with whats happening in the bigger market players the Hedge funds are jumping into our pond…
The largest wholesaler in Atlanta Key properties just cut off all their Us and foriegn resellers.. they are now keeping every property they buy just like my TWH model… Equity share with the big institutional investors… And its really not that much money 10 million… but it goes along way in Atlanta when your buying houses at auction for 10 to 30k each… they tend to play in a sand box that has to many cat do do 's in it for me.. and most of the in the know Atlanta investors…
….Freckle’s statement, repeated by me.. well here in Miami there are foreign investors (many Brazilians!) buying high end apartments @ 3.5 million a pop in cash, sometimes 2 at a time in the same building…
At the bottom-feeder end of the market supply is really tightening, for all the reasons you mentioned- the formerly fragmented investor market is consolidating.
Regarding shadow inventory, I’m reading conflicting prognoses, but providing you match your strategy to the dynamic and ever changing market conditions, there should be a quid to be made no matter which way the shadow inventory issue plays out, I think key is to stay ahead of the game and adapt accordingly.
What is the TWH model you speak of, and do you have plans to expand into FL anytime soon?
Its our version of TurnKey investments…
If you got a minute just go to my website and check it out.
I looked at Florida, since I never lent money there in my hard money days ( because of the foreclosure rules) and lucky I didn’t because the deals I looked at were 250k homes in Lehigh, that wanted 125k loans…. And we Know were those ended up… Court house steps for 25 to 40k a pop I would have taken a huge hit.
For now our model only works in the better cash flow markets we are going to start an equity fund. For west coast purchases… Targeting mainly the chinese.. they don’t care about cash flow ( like the brazilians) they want higher end SF Bay Area and LA San Diego type properties at 300 to 600k each… and may or may not rent them…. they like 1 flight non stops… I had a group in 2 weeks ago that had 500k on their debit card thats how they are getting their cash out of china.
Last time I was in Miami there was something like 11 years of inventory in the high rise condo market…Sounds like that has changed.. Vegas still has great deals in the condo market.. 1.2 mil penthouses cookin off at 500k or so… which I am sure is less than replacement costs.
JLH
@ JLH: Fascinating read! And I like your business model! Less risk and more suitable for the hands-off investor..
Interesting article from Wall Street Journal declaring the US housing bust over
http://online.wsj.com/article/SB10001424052702303644004577520414196790098.html
There is still the shadow inventory, the banks will have to do something with them after the robo signing scandal. I'm starting to see a trickle of new properties i hadn't since since 2009. I agree with Freckle, we are far from out of the weeds, there are to many problems with our government and debt before things will be right again.
I find this a more honest take on the market
Of course, the US real estate market could be dropping much more than expected. Yet, it sure does seem to be getting better, especially if more wise investors start incorporating drawn-out plans for investing in property.
kylermrice wrote:I find this a more honest take on the marketHm yes true I guess on the ground in SFL it feels like it’s heating up again pretty quickly.. The weird thing is, despite the huge shadow inventory we aren’t seeing any of it here so there’s this inventory shortage, have you heard what could be driving this? Word on the street is that it will not be released like before and many banks have downsized their asset managers for good…..??
Banks aren't trying to take anymore losses than they have to, they have dug there heels in and are trying to slow the bleeding.
To add to Kyler's comment.
Banks are also working with the bigger institutional investors that Alex and I have been talking about packaging up 100 to 500 homes, that will all be used as rentals… So many of the shadow inventory will never see the open market… It will be sold.. and used as rentals… Just like all of us Little guys are doing. The danger for the smaller investor in certain very popular markets, is when these institutional guys get their properties on the market they are looking at 4 to 8% returns and happy as a Clam, So in certain areas there could be price wars in a negative manner for rents…. Supply Demand… So its definatly something to keep in mind. If I was an Ozzie and I have borrowed against my home in OZ and need to make a certain spread thats a very dangerous scheme in my mind… Add that to buying the wrong property to begin with and I can see a lot of pain coming the way of the OZ investor that has no real cash and is just leveraging equity.
Market has bottomed… On the retail side its really starting to take off in most markets.. And then you have Vegas that has that Robo signing bill so Its an anomoly and stay tuned for what happens there.
JLH
So if I understand correctly this alternative startegy has the potential to absorb much of the shadow inventory and may impact on the cashflow side in the medium term, on the other hand that absorption should keep the prices stable if not trending upwards due to the contricted supply.. Do you see an impact for the TWH model with the rental scenario you mentioned?
Yes I think your already seeing prices rise in certain markets,,,,
And yes, it will be interesting to see were the rental market shakes out in these areas that are seeing what was traditionally homeowner stock going into the rental pool…Alex has touched on that.
For TWH we base are model on consertive rent numbers… For instance many of the homes I see in Metro Atlanta that others market and speculate on rent at 1000 and more… We rent today for 850 to 950… I like being under market it allows me to cherry pick tenants alot like Emma talks about… As well as retain them… We can operate successfully if rents dropped another 30%.. We would not be making any cash flow, and since we self manage we do not have management fee’s to absorb or lease up fees etc etc… And our model is set to perk along at a 7 to 9% return vis a vi rental income….. So we are really conservative and positioned well in the case of a rent reversal.
My point is the OZ investor that borrows at 7% or so on their personal residence in OZ Plus LLC fees tax returns and all the other what we call soft cost add up to another 1% or 2%… So to be positive geared in any fashion that mitigates the risk… Most OZ investor want to make 12 to 15% NET and 20% or higher gross and thats what gets advertised over there… So my point is if rents fall or are never what was represented US investments can become slight positive to big negative gear…
Then you take the case of some of the folks that really run into problems like the Gentlemen who was on the TV show there and he has a large number at risk… Not only no income but loss of capital.. And of course I have no way of knowing if this was just after tax cash he had…. Or if he borrowed against his home to buy the Detroit and Youngstown properties.. But you can see where someone could get in a pretty big mess.. US investment is a total loss and there is still debt on the home in OZ… And then if the Home in OZ drops in value at all which I am hearing is happening next thing you know any equity or cushion is gone and your upside down on your house like so many americans….. Then the banks get skittish like they did here and it can be a cascading effect
I just don't think the big banks will be able to really cut it as landlords…
kylermrice wrote:I just don't think the big banks will be able to really cut it as landlords…Yeah not sure how ‘they’ will handle to be told to GTFO for a change
P.S. 2 more articles, the second one with a detailed interactive map
http://online.wsj.com/article/SB10001424052702303343404577517123112194092.html
http://blogs.wsj.com/developments/2012/07/11/has-housing-hit-bottom-on-your-street/
kyler, I do not think many banks are going to go into the PM bizz with their inventory,
but they are rehabbing houses more and holding tighter on price on the nicer inventory,,, that means the 200 to over a million in our market…
Its these new hedgefund type investors that are going to take a stab at larger portfolios… I got another call this week from a rep of one they want to buy 500 to 1000 homes in bundles… thats my exact thought and conversation how are you possibly going to manage that many homes all at once it would take an army to do it correctly.
Nah, i wasn't really serious, just saw an article about how Wells Fargo was going to try and get into rentals, lol. They are coming up with new ways to better handle there inventory problems. Have to get creative after you just dump so many properties that where bundled and sold off, gov can't save the banks forever. The politics is what really caused this whole problem, i don't think to many Aussies understand that aspect.
I'm surprised more hedge fund types didn't jump on this quicker, but it's easier cost wise to bundle this time around i guess.
Working with a hedge fund would be to much headache. I would do it on a consulting basis and still do my own thing.
kylermrice wrote:Nah, i wasn't really serious, just saw an article about how Wells Fargo was going to try and get into rentals, lol. They are coming up with new ways to better handle there inventory problems. Have to get creative after you just dump so many properties that where bundled and sold off, gov can't save the banks forever. The politics is what really caused this whole problem, i don't think to many Aussies understand that aspect.I'm surprised more hedge fund types didn't jump on this quicker, but it's easier cost wise to bundle this time around i guess.
Working with a hedge fund would be to much headache. I would do it on a consulting basis and still do my own thing.
Jay and Kyler both big banks and Funds are going to screw things up even more. With help from our goverment programs this is not the long term solution just a quick fix.
This is why they need people like WI , Emma , Cheeves, Kyler , Jay and people like me to name a few. It is going to take the seasoned investors who under stand each market they are in to help fix things. All which have different approaches sorry if I am leaving some names out Nigel , Peter ( Texas man)
We already know our government, our banks have no clue and now wall street come one what a joke.
Jay you were the first to really preach the buy and hold and and nice system. To be 100 % honest Kyler was a buy and hold guy selling a few deals on the side that I read about . So most of the current people on here are buy and hold first. As my company grew so did the sales. Now looking at more holding but I would be foolish not to sell and hold whats left over .
Well just my two cents
One of the funds I know that just entered the Atlanta market.. Was targeting properties at 75k to 125k at the auctions…
happy with 6 to 8% net returns or a little less…And the quality of tenant should be better although rents do not grow exponentially with value.
Otherwise we would all be buying 1 million dollar houses And renting them for 10 to 15k a month… In our market a Million dollar house will rent about 5k… So unless its corporate housing thats about the top your going to get for rent in our area.
SF NY etc those numbers double and triple easily.
Same here on price range and 10 % return but I wanted more held back from what if so 8 % is realist but still have people telling me I am crazy. They can go and get 14 to 20 % all day long.
Any way can play the numbers and put on paper and make things look great .
Same in Charlotte $1m plus house $5k to $7500 k for larger house similar
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