Hi team,
I thought I'd provide you with a quick update about my thoughts on the US property market.
As many of you know, I first started buying US property (Florida) at the end of 2009. History records that I got lucky because that seems to have been the technical bottom of the market. Since that time the market first stabilized and then improved.
So, where are things now?
First up, prices have risen… substantially! Those cheap duplex properties I was buying for $15k to $20k are now $30k to $40k. That said, the middle and high end of the markets are still sluggish. There is no doubting that there are more buyers now though, and 'good' deals are attracting multiple offers and selling in hours or days, not weeks and months,
Second up, rents are now starting to rise… slowly. This is perhaps more encouraging as it is a sign there is life in the US economy after all. I'm getting about $20 to $40 extra a month as leases reset, and this is a good sign as rents (like prices) fell significantly.
So… are there still good deals?
I'm getting this question a lot, and the answer is 'yes'… you just need to work a little harder to get them. Back a few years ago all you needed to do was be a cash buyer and good deals fell in your lap. Now you actually need to do some research, make some offers, and look for the 'better' opportunity.
Here's an example. My business partner, Tommy Senatore, just bought a condo. He paid $11,000 for a 2 Bed 1 Bath Condo in great condition with a tenant paying $500 per month.
So, all in all, things are going well, but the window for taking action on the really great deals is closing, quickly.
– Steve
P.S. If you're interested coming to the US with me on a guided tour of my properties PLUS be trained by my US expert team then be sure to register your interest here: https://www.propertyinvesting.com/us-tod/roi
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
As you would know Steve, a very, very dangerous game buying 11k properties in the US. The caveat (of course) 'a' tenant 'paying' (once?) $500pm gross.
Net figures?
I admire your work Steve, and encourage people to look for opportunities. In essence I agree with your comments above, but be careful out there people. Steve has a LOT of experience and a LOT of helpful contacts. Contacts you will NOT get from calling a local property manager.
Is the person selling you a seminar an investor, or a spruiker?
Sub Prime is over. Now is the time for the long term smart buyer in the US. In 'sound' areas of the US, with a little capital you can buy a lot – and you do not need banks.
Never met you Steve, but I will say that I like the way you stick to one specific area. At least I only know about one of your areas which is my area of Ft. Myers. The duplexes you are buying for those prices I am guessing are off Palm Bch or in Pine Manor. Some call Pine Manor "Crime Manor" but as long as investors are aware what they are buying and the fact "you get what you pay for", I don't see anything wrong with buying. It's not my preference, but that doesn't matter.
I will say this: I'm pretty sure I started the REO duplex buying program in Lehigh Acres back in 2009. I was working with Synovus Bank and another local bank who I knew funded a bunch of these construction loans back in the boom era. Since, those banks have liquidated all of their distress for the most part. We were buying 2007 built duplexes for $43,000. I wasn't paying any higher then $53,000 until early 2012 when the duplex concept became very popular and everyone and their grandmothers wanted one. I represented a local investor who now owns about 100 of them and on paper (pro forma) I would re-sell at about $65,000 and still yield my buyer about 15%.
Come full circle, I have charted my investors ROI year over year since to calculate ACTUAL yields. I think I mentioned this in another thread on this forum, but even though 15% was on pro forma, investors were netting 8-10%. I figured the actual stats would be different but you have to quantify that when buying in a high risk area. Still 8-10% is a good return, but I have not sold duplexes in Lehigh for awhile since prices have skyrocketed. Today's pro forma ROI is 12% and actual could drop as low as 6-7%. For that potential yield, I am staying out of the higher risk areas.
I am curious as to how yields are comparing from pro forma to actuals in your area. REO duplexes in Lehigh are history. They are all now re-sales being offered from mid $80's to $110,000. In hindsight, I wish I would have held onto more of them! My banks would allow me to assign so I laid out no money so I can't complain.
Helpful hint to those looking to spend a bit more…Look for multi-family properties with 5+ units. You can buy for $25k – $45k per unit. Good ROI and good upside potential. Forget loans though if you are foreign national. Need cash.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeBravo to tash and cheeses on honestly and professionally expanding on a post that was a tad lacking in objective info.
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
I agree good feedback, and needs to be kept real.
My concerns are that what Steve is buying may be higher risk and would not suit the average investor because he/she does not have the contacts, resources and business partners that Steve has in this area to make ti work. I think it is important that this is clearly highlighted.
Steve is providing investors with tools however I personally believe that for the average investor to try to replicate what Steve has achieved will be a tough call.
Cheers WI
Very interesting thread. I am really interested to understand how much of the yield gets eroded due to paying a slightly higher PM & tradie fee due to being a remote owner that cannot just swing by to check on things
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
JacM. In a lot of cases more than 100% is the answer. Think about what the words 'sub-prime property' really mean and why you think they may have been coined by banks to describe them. $11k properties are SUB-sub prime. If you are an out of town investor I think you should only be looking at 'prime' areas, or have extremely good assistance (and I mean extremely) to do otherwise is buying something I can all but guarantee you will want to walk away from just to avoid the losses/repairs.
Great thread, it's good to get both sides to any argument.
Personally, I would not touch USA (or any other OS market at this stage), I know my limits and who I am as an investor. But I have followed with interest the last couple years as this area has taken off in a big way. PI.com has positively filled with both Aussies and Yanks chatting about buying, the perks, the pitfalls etc.
I think the reality is that if you got on board at the start (several years ago) and bought well, and had back up on the ground, contacts etc, then you were onto a winner. I think Steve has his American counterpart Tommy Senatore to collect his rent and carry his guns.
There are probably a few Aussies who don't have these contacts and have gone in thinking Oz/'Merica it's the same right? But it's not. I have seen a few people do well, and some get absolutely stitched up buying blindly. I think the Tour of Duty should be mandatory for people going in to the American market, and if not with Steve then with someone else/other program who is equally knowledgeable.
The only problem is how many spruikers are there now? And are the deals as good as they were at the height of the madness?
Wouldn't be surprised if the window of opportunity was already half shut.
Just my thoughts.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeI personally believe the window of opportunity has closed for me in the Atlanta market, but then I will only purchase properties at 20% gross due to slippage, this has certainly given me a buffer.
Also, I would not recommend anyone purchasing in US unless they are buying multiple properties, cost involved such as insurance, pm, accounting, structure set up etc just does not make it a viable proposition.
My experience to date is very positive it has taken about 12 months for me to secure 8 properties, I can no longer source properties at 20% gross, my completed properties averaged around $65K each. I am told these are now averaging around $85K which will require a reno/rehab.
I have no doubt from what I have read there will be many that will get burnt, why? buying in the wrong location, buying the wrong property – too old, paying too much, not understanding or researching stats/data provided, not setting up correct structures, also the big I see is buying 1 property and expecting to end up with cashflow is just naive.
Cheers WI
DWolfe.
You nailed it. Doesn't matter what market you are in (international or domestic). People you trust and a system that you will trust will be the important piece of the puzzle.
I agree, the bottom has probably passed us in a lot of US markets. Which is good from the retail investor view, as that they don't want to be catching a falling knife, and now we are seeing a lot more action, especially in our bidding wars at foreclosure auctions.
Getting into a foreclosure at 2011 prices is becoming a little trickier. We have had a few large institutions now approach us and try and buy everything on our books. Not a bad problem to have, but a suggestion that maybe the big boys/girls are coming back to the market now that more positive economic data is being released
Google the ticker code ITB (this is an Exchange traded fund that tracks a group of the largest home construction companies in the U.S.)
This will give you an understanding of the new home construction trend since 2008
AREIJoel
Trusting a system and the people securing properties is important and one way you can achieve this is by firstly being able to understand, research and interpret information that is provided by any company selling in US.
Lets face it there are plenty of investors buying and not even checking recent sales in subdivisions, size of the home, year of the home, building costs and what they are paying, last sale of the actual property and it goes on.
Cheers, WI
The window of opportunity is 75% shut in the popular "cheaper" markets targeted by out of towners. At least in Florida and Atlanta. I can say FL because I work / live there. I can say Atlanta because someone very involved in that market told me so.
If you want good deals, it is in the multi-family arena. I'll let you in on a secret. It takes a sizeable investment in cash. I'm talking buying 6+ units for $250,000+. Over the long run, your yield will be higher then the single families. I can write my reasons but will take all night but I am very very involved in wholesaling and buying distressed properties in bulk. Even I am having trouble finding deals and I have established relationships. Yes, still some deals, but not many.
MULTI-FAMILY and if you don't want to buy multi family, you are costing yourself a lot of opportunity if you can afford it. If anyone wants a fair opinion on the markets and single family versus multi family, PM me and I'll tell you.
About Detroit…I bought a home on Mortonview Drive. Paid $15,000 for it and was told I'd get a 29% return. I thought if I got 12% I could live with this. Keep in mind, I represent investors and I always buy myself before I preach. The reason I never suggested Detroit is because my $15,000 home, with a ROR of 29% cost me more money in 18 months then what the home costed me. I ended up deeding over the property to another investor for a hot lunch. I got killed but I went in expecting the worst. Lesson learned. Detroit is not for me. I bent myself over and kicked myself in the gonads for that one.
Getting back to diminished yields, warzones will look great on pro forma, not great in reality. I consider Lehigh Acres on the fringe of a warzone but not necessarily in it. Everything there was victim of diminished returns. Yet, a better investmnet then the financial markets. Investors are also realizing much higher values today then when they bought a year ago.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeHi Cheeves
so where from here, do you see the property market in general in US going from strength to strength?
I still hear that there are lots of foreclosures that the bank has not released, however I am assuming there are now major players buying up so this will continue to drive the prices higher.
I would be interested in your comments.
Cheers WI
There are a lot more banks now setting up there own REITs and buying bulk SFH's, without even doing building inspections. We have seen this first hand and it makes an easy quick sale for our company, but more and more retail investors are finding if they are too slow to place a contract they have been missing out on a lot of properties.
Its frustrating for everyone involved, because we like to please everyone, but, its hard to cater to everyone right now without sounding like a sleazy salesman and using the "you need to be quick" line.
Being a wholesaler, the trend seems to have changed to that of 12-18 months ago.
Perhaps it is all the positive home building data coming out of the U.S. which is now bringing more larger players from the sidelines.
Shadow inventory has been slowly released for the past few years, which have kept prices steady, although we still have a bit to go in the way of cleaning out the foreclosures to a normal level:
We're finding the same in Japan. More and more realtors are suggesting that deposits be sent through with offers to increase the likelihood of those offers being accepted. This used to be a tactic that was rarely used, but now seems to be almost a norm, as sales are settled much quicker and competition becomes fierce. And while you're entitled to receive your deposit back if the sale doesn't go through (as long as the contract hasn't been signed), it's still daunting for the buyers, and subsequently to us as their representatives.
Guess these are the signs of a recovering market…can't be helped.
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
WI:
The market is undoubtedly getting better, but I will say that there has been some skeptisism in some markets. Why are investors buying? High yields in cheap areas? What do those cheap areas have to offer? You are now an affordable housing investor. Historically these are cash flow homes with high risk and very little hope for capital appreciation.
Quick Story: As most know, I am an avid New Jersey guy where I buy and sell as a wholesaler and a licensed commercial real estate agent. I just sold 10 two-family homes in a package deal that was in a Court Appointed Receivership. Homes need some work but all Section 8. 13% Net Yield which is outstanding in NJ. I have written about Section 8 and how I believe you NEED section 8 in inferior areas. This area I sold in is in the slums of Jersey City but you can throw a rock to New York City from it. What does that mean for appreciation? Very little, but the housing authority will consistently raise rental rate allowances for Section 8 tenants. That is considered upside AND Cash Flow, but more emphasis on Cash Flow.
My Point: Domestic investors are migrating their investing dollars to higher priced real estate to where risk is minimized, but the "warzone" investors are seeing potential in or around major cities. With the economy SLOWLY picking up steam, and a housing market that has hit bottom already, rental rates can only go up from here. Yields will climb, prices will rise, then yields will drop. That's what happened in FL and GA already. Still good potential, but yields are dropping big time which is an indication of what is happening to prices going up.
I'm nomadic and I look for opportunity in 2 very different states since I know them well. What's nice about my areas is that over the last 10 years, when one state is good, the other is not and vice versa. For instance when the housing market finally imploded in NJ in 2007, everyone was rushing to buy in FL because prices were dirt cheap and cost of living was more affordable. Now, FL and GA seem to have hit a stagnant point. I think that is a good thing and still holds an opportunity to buy for LONG TERM potential.
Yields are 8% in FL. Deal with that or don't buy. Yields will drop as prices continue to go up. Rental rates are good where they are. I don't see a change in rental rates for at least 18 months. Those went up already and see good ratios when comparing local income.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeWell I think this is where I chim in and say " told you so" 4 to 5 months ago…
I think all good advice and opinions in this thread… I will say though that some of my most profitable years in Foreclosure buying were the mid 2000's in a very hot sellers market.
There are still deals just NO low hanging fruit which is what a typical OZ investor that needs to analysis fly over here and then make a decision was used to doing… Houses just don't wait that long.
I have been Picking up some multi as well… Subject Too deals… However again you talk about PM issues, buy lower end apartments in the cash flow markets… They are far harder to manage than single's.. And great for Cheeves and I who are on site and can watch them… Private investors need to be very careful. turn over in Apts is annual for 75% of the units.. So if you have a PM doing their normal thing your cash flow gets crushed.
July was our best buying month in Atlanta we got 5 props that we love in the areas we work.. And at the older prices… I am considering flipping them… AS WI says things just jumped 20k per door there this last 45 days. Court house steps saw craziness in the AUG. auction…..
What does everyone think about this new format…. Where is the major titles @ Like Offshore investing …. REno's… etc etc.
Cheeves and Jay
Thanks for the feedback appreciate this.
Good for those who got in before the herd and have already made some money with great returns, they certainly are slowly deteriorating.
My plan was once I double my capital I will be offloading and bringing back the money to Oz, I was expecting a timeframe of 7-10 years, perhaps it will happen earlier than this.
I do not like this new format whatsoever, and it appears to be very very slow, very frustrating.
Also, I got an email this morning where a wholesaler has access to finance at 50% I think 8.25% – 30 year loan, first time I have seen at 30 years for Atlanta, set up fees $7000 pricey.
It will also be dependent on how they value the property, they are only providing this for what they call A grade properties that the wholesaler is selling, I looked at some of these properties they similar properties I have been purchasing, however much more expensive. Also they will not refinance properties that have already been purchased.
I would still be very causious when entering into any loan agreement.
WI
WI
How are you? Huge Change in USA of late in all markets . The demand is up from USA buyer.Loans are moving for investors – demand pushing price up in all markets. I am back to bidding ( this week will hit 500 ) that was my goal. Trying to buy everything we can scoop up that is 3 -2 and 4 -2 . With Atlanta , Phoenix leveling off with inventory and, prices going up. The USA buyer is searching for other markets.
The USA buyer who understand the USA rental market bit better the an international buyer. Is looking for 8 % return. Most of the International buyers are being pushed out of the market with that number alone. Cheeves is correct smaller Multi Family moving as well.
You did very well for you time in the market. Good timing on your part. Atlanta still has great prices on some things getting all granite for counter tops. Super cheap there compared to Charlotte
Talk soon
"Yields are 8% in FL. Deal with that or don't buy."
Hmmmmm I beg to differ, double digit returns are still very much achievable in SFL and I don't mean war zones
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