Have been reading a lot of the excellent material on the USA threads and one common theme I notice is a lack of enthusiasm for the dodgy houses with Section 8 tenants for $20k, yet this is exactly the sort of properties that Steve was buying in Ballarat, Tasmania and NZ in the early 2000s that he made heaps of money on. I understand the difficulties of managing this type of property from here in Australia but aren't they hugely cash flow positive with returns around 30%?
Steve, if you read this I know your new fund is targeted at US commercial but in your seminar with Uncle Zally you two were joking about one particular derelict suburb (can't recall where) in which you were buying up heaps of crappy homes and, I assume, repeating your proven success strategy?
Stefan
I think you'll find that –
1. Kyler here does a pretty decent job on exactly that type of property in the USA, and there are a few others who claim the same
2. The 30% returns are a myth, unless you're talking about gross yield, if they ever existed at all (I doubt it personally)
3. As for Steve, well, he's a brilliant property investor, but a darn good salesman too
you don't get 20k properties in Australia, unless you mean in caravan parks (and not very good ones at that). You may be able to get 20-25% returns in some mining/manufacturing hubs, but I very much doubt the long-term potential there (plus again, nowhere near 20k, so your portfolio diversity goes out the window until you hit the several millions mark).If you spend months and years building a successful network in the USA that can deliver timely and efficient solutions to all emergencies, you may be able to manage these types of properties remotely to a point – but to build that network in the first place you'll need to spend a fair bit of time on the ground there to begin with. If you're up for it, it's achievable (but I still very much doubt the 30%).
Would love to hear anyone's thoughts to the contrary, preferably with backing deal breakdowns and not just "yeah, I can!"
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
The problem for most Australians is that they do not understand what a $20,000 house is like. In most cases they are in slums where you would not want to get out of the car let alone buy.
Nigel Kibel | Property Know How
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I prefer properties around 60K and above and they are harder to find now in FL. I keep right away from the 'cheapies' – bad
areas.
Sparky
Hi SparkyOz…when are you going to e-mail or call me??
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeHi,
Yes the prices are $20K for a reason. In the US you can still get some good properties for say 60K plus – and lovely homes for $100K with up to 70% finance. Location, like in Australia, is key. Why waste your money on slum areas when you buy into nice areas where people want to live.
Keep away from places like Detroit and upper NY state – these are bad news.
You will need to ensure the property is well managed and you have an online bank account.
Regards,
Sparkyoz
"Location, like in Australia, is key".
I bet Steve would disagree – I understand your point but you would have said the same thing to Steve 13yrs ago and he would have ignored you and bought dodgy houses in dodgy suburbs in Ballarat, Tassie and NZ….
Hi sundirtwater,
I have spent some time in the States, and also Ballarat, Tassie and NZ (the latter being where I own some properties). There is no comparision. I have never come across any areas in the latter three that in any way compared with the crime and issues you can find with in somewhere like, for example, Detroit.
If you can rent your property in a neighbourhood of boarded up houses, and if you can manage to collect the rent, you still run the very real risk of your investment being stripped of all it's copper and fittings, the place being trashed and losing all your rent on maintenance.
This is not to say anything derogatory about Detroit as a whole, but even the residents there agree that, as Nigel said above, the derelict houses in that city are in atrocious neighbourhoods. It's not just petty crime. It's violent crime. The murder of Australian property investor Greg McNicol was a harsh reminder of that fact.
That said, I feel there is opportunity for investors in the US, but 'dodgy' in Australia just isn't the same as 'derelict' in the US.
Cheers
Point taken dgirl.
HOWEVER, Steve recently was talking about his experience with Uncle Zally about buying up these types of houses; well at least it sounded like that because UZ was saying he wouldn't enter those areas; so it makes me think he is still at work with this strategy. Obviously the trick is if you can get it property managed remotely…
Stefan
There you go truer words were never spoken and dgirl is being kind inner city anywhere USA is no an appropriate investment for out of area investors Foriegn or domestic
Lol, here we go again. The ones for 20,000 i usually get from 5,000 to 3,000 and have even had people sign them over to me. It's the gems that most people pay 60,000 for that i get for 20,000 to 25,000.
Case and point
Bought this one the other day in a mixed area, African, African American, Hispanic, and white.
http://www.zillow.com/homedetails/3915-Norledge-Ave-Kansas-City-MO-64123/2285992_zpid/
Picked it up for 26,000 with comps around 100,000.
The 30% cap is easy if you are a real estate pimp like myself hahaha!
I get some more time, i will keep posting deals and will break them down. There under contract so i have no problem putting them out there.
Nigel Kibel wrote:The problem for most Australians is that they do not understand what a $20,000 house is like. In most cases they are in slums where you would not want to get out of the car let alone buy.Yep you've got to draw the line somewhere. You can buy a gun far too easily over there..
Jacqui Middleton | Middleton Buyers Advocates
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Bought this one the other day in a mixed area, African, African American, Hispanic, and white.
http://www.zillow.com/homedetails/3915-Norledge-Ave-Kansas-City-MO-64123/2285992_zpid/
Picked it up for 26,000 with comps around 100,000.
Hi Kylermrice,
You paid $26,000 for this small hotel . . .
NICE
.
Wow. How did you get it for $16k off the asking price? And give us the breakdown:
Any reno costs?
Rental income? Vacancy rates?
Property mgt?
kylermrice wrote:I get some more time, i will keep posting deals and will break them down. There under contract so i have no problem putting them out there.that would be awesome, kyler, looking forward to it, the more details the merrier.
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 would never buy such houses in the US. Most of them are in terrible neighborhoods, where any outsider would be scared to get out of a car. This type of investment is definitely not for me.
Pictures where the same as the MLS or i would have used that link, but the link is gone when the property goes under contract. The zillow price is still from this summer, they asked for 25,000 back in July. I missed out then, but doing my searching of properties this week saw that the sale fell through. I jumped on it and offered them 26,000 cash and a quick close. they took the offer the next day.
Won't be much for rehab, clean carpets, paint, caulk the windows, trash cleanout. Maybe 4,000 to 5,000 for the rehab. The previous owner had put a ton of money in it. New electric, plumbing, stone had been tucked and pointed. I went and looked at it again today just trying to find as many problems as i could and was like a giddy school kid. When i relized how little work it would need.
Rents will be in the neighborhood of 450 to 550 per unit (four units). Taxes are around 1,200 (close to what it is without me checking the records) insurance around the same (insured for 100,000) About one month lost to vacancy's on average. Will manage this one myself or it would be 10% on management.
Will honestly flip this one for 100,000.
Quote:Obviously the trick is if you can get it property managed remotely…Hi sundirtwater,
That is certainly a big part of it. Good property managers that are willing to do the job may be few and far between however. I've included an extract from a Kansas City property manager below about just that. It's interesting to read their take on it. The last paragraph says it all really.
Kyler gets some great low entry price point deals, no contest. But from what I understand he is on the ground in the States, knows the market, and is willing to do the hard yards himself. If you are not prepared to buy to renovate and flip, then you need to consider whether you are willing to property manage yourself, because there is no guarantee you will be able to find someone else who is willing to do it for you.
Lower Priced Rent…What a Pain!
For years I have directed my clients away from housing that would bring lower priced rents. I have maintained that the returns are not worth the added hassles of dealing with the lower income mind set. And boy, was I right!
Go ahead. Let the insults and charges of elitism begin.
About 3 months ago a client of mine purchased a bulk of lower income duplexes here in the Kansas City area and after some thought, and being asked, I decided we would manage them. I’d never had properties in the $450-$500 range before because of the reason I stated above. But I thought we’d give it a go.
Out of the 28 doors we took over 19-20 of them are a royal pain in the rear! Rents cannot be paid on the first. They have to be strung out over the course of the month. Every little thing the tenant perceives as broken (never mind the fact that they’ve apparently lived there for 4 years and they are the one that broke it) illicits a call to the property manager…regardless of time of day. NOTE: I do not answer my phone after hours…I check the message to see if it’s an emergency. Does a broken fridge handle merit a 2:00 am call? I guess when you don’t work and your rent is paid by the Kansas City Housing Authority you can stay up to 2:00 am and bore people with your problems.
Income is income. No matter how much you make you can have savings…or not. It’s your choice. Live on less than you make. How complicated is that? But no. They call me on their smart phones while watching their tv’s with cable packages to explain why they cannot make their rent. Literally, not a day goes by we don’t hear from at least one person out there.
The great thing for me is if I reach my limit I can just terminate the contract and let the owners take care of these investment properties. If you’ve made the mistake of buying a bunch of lower income properties you are the one that is ultimately responsible for them. Think about that.
Taken from this blog
These deals aren't in war zones, as Alex says he would left his wife collect rent at night. I would let my fiance collect rent at night on this multi-family.
you don't get 20k properties in Australia, unless you mean in caravan parks (and not very good ones at that). You may be able to get 20-25% returns in some mining/manufacturing hubs, but I very much doubt the long-term potential there (plus again, nowhere near 20k, so your portfolio diversity goes out the window until you hit the several millions mark).
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