A year ago there was really great threads and bantor… I left the site for 6 months or so and have just come back in the last 30 days.. Its dead. Is this systemic of lack of interest in US properties or some other reason no one is talking about Overseas deals.
There are still great opportunities overseas. I met with Alex who flew into Orlando while I was there. He claimed that he did not have time to post because he was so busy. The US markets are in recovery and there are still great opportunities on both apartments complexes and single family homes.
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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Jay must admit there are so many opportunities here in Oz at the moment maybe investors are seeing better value at home.
We are working with investors all day long on some of our new developments and can't keep up with the demand from the forum.
Good to hear you are back anyway.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Alex sure loves to fly to meetings Have to give him a ring and catch up. My point was,,,,,, there just does not seem to be the interest from individual investors that would come to the forum and ask a myriad of questions related to buying a property in the US>
Jay,
Great to see you back. I agree….the threads on US deals has certainly gone quite. Like you I have been too busy to be on the forum but have checked in from time to time to see what's happening. Certainly less content then a year ago
I am also being run off my feet in Australia however there are still great opportunities in the United States. However can you buy a property with only $27500 down and make $4500 pa positive cash flow. Well you can in the states. Still great opportunities in a recovering market. Also great opportunities in Australia
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
Might be due to the fact that a larger and larger portion of US investors, before or after their first purchase, have moved on to Japan
Tenants that stick around for 4-5 years on average as opposed to 4-5 months, never damage a property and almost never pay late (not to mention evictions, which just don't exist), net pre-tax returns of 10-15% (and beyond, as some here can testify, but that's rare), and the safest business environment on the planet. You can't buy a $1 house like you can in Detroit, but you can still get a tenanted property for as little as $30,000 (all purchase costs included) – and that's only if you go through a buyers' and managing agent like us or other similar ones – if you do it on your own, it's even less.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
Jay
As has been the case all along the returns in the US have to be very generous or else the headaches associated with investing in a different jurisdiction is just not worth the effort.
Thus with the reduced returns from more expensive US properties and then add to that the falling AUD and the limited capital gains in the US why would any sane investor bother.
USA investor, Capital growth in certain markets is very real right now….I am sure there are many happy Atlanta investors that bought a few years back as well as Vegas Pheniox Souther Ca … Even here in Oregon our values across the board rose 12 to 15% year on year… Now as long as those investors had good properties and they at least broke even on cash flow there is some money to be made… We sold our TWH portfolio last month in Atlanta and returned our investors 23 to 28%… And that return was a split of profit with us so we netted 46 to 58% for the entire portfolio and then split that with our investors.. So pretty good deal for them being totally hands off and not having any down side risk on the tenant side… We are looking to move the rest of our 250 house's this year as well and go ahead and cash out and wait for the next opportunity..
jayhinrichs wrote:We are looking to move the rest of our 250 house's this year as well and go ahead and cash out and wait for the next opportunity..Yep. There's going to be a few foreign investors with big holes in their pockets in around 18 months. I suspect you have less than 6 months before you see a reversal in the US property markets. There is real potential for this to be even worse than the last property correction.
Wall Street Engineers New Frankenstein’s Monster For Housing
Freckle, I think there could be another correction but no way worse than the last one. Houses dropped 80% in some markets and too many houses have been paid for in cash… Even if the market dropped 100% those that payed cash would just hold they would not give the houses away, at least thats my experince. I think the bigger issue is those that are in Aligator houses IE ones that eat you alive every month some of those folks could just take a walkabout.
Hi Jay,
Agree that things have died down a lot over the last year.
I decided to chronicle my journey on a personal blog rather than post things on here.
After a year of ups and downs with the US market moving so quickly making things ever more difficult, am pleased to say that we have recently settled on a 51 plex property with 3 other joint venturers. Thought I'd never live to see the day with so many failed attempts…..but it goes to show, that there's still opportunity. It's just a lot harder work than I thought it would be.
Cheers, K
congrats. 51 plex means ???? is it a 51 unit apartment… or 51 duplexes or fourplexes… What area of the US did you make this purchase. I certainly hope it is a successful venture for you and your partners.
jayhinrichs wrote:Freckle, I think there could be another correction but no way worse than the last one. Houses dropped 80% in some markets and too many houses have been paid for in cash… Even if the market dropped 100% those that payed cash would just hold they would not give the houses away, at least thats my experince. I think the bigger issue is those that are in Aligator houses IE ones that eat you alive every month some of those folks could just take a walkabout.I tend to think a correction regardless of how severe (and that will vary from area to area) will be more profound this time coming on the back of a mini boom straight after a bust. The large institutional players will change how this plays this time. It looks like risk is about to get offloaded to the market in the form of derivatives. That's ominous and doesn't bode well for the average Joe who doesn't have that ability. Lot's of variables though so things could or will play out in unforeseen ways.
There are those now who are entering at what is virtually the top of the market with lots of downside risk. I see nothing in the US economy or global for that matter that could even remotely be construed as positive for the US market. Quite the contrary. If the property market retraces like I think it will it could signal a tipping point in the US economy that triggers a negative feedback loop.
Your decision to exit will prove correct and none too soon I think. Better a year early than a day late as they say.
Freckle wrote:There are those now who are entering at what is virtually the top of the market with lots of downside risk. .
I tend to agree that those now entering the market are lambs to the slaughter. They will be hoping for increases as have occurred over the last year or so but they don't understand the limitations of the US general public to be able to afford housing even at the relatively low levels that current prices represent.
The original highs in Atlanta (of my market) were $150 -200K these dropped to $30-50k plus reno so averaging $70k renting for >$270pw around 20% gross. My ideal exit is $140+k which would mean 100% return on my money plus the rental in the mean time. They are now up to $120K and I don't feel positive that they will go much higher for a long time. The funds have a lot of stock that they will get tired of holding and as Fickles article already indicates, will go exit stage left potentially leaving those late entrants with negative equity and a double whammy of only getting 12% gross which is way below what you need to stay in the US market.
It will be interesting one hedge fund or REIT that I know of is retrenching some… their stock opened at 22 and is now trading at 16… So yes Freckle is right the large companies are raising money through Wall St. who are selling to Mom and Pop… The Huge difference and this is why its hard to crystal ball this… Is that so many of these properties are sold for cash.. The Hedge funds Have CASH there is no leverage or fixed bank debt on any of these properties… So the only obligation to keep the property is pay property tax.s they could board the houses up if they wanted to and still not loose them…. the US problem that got us in the first mess was Sub prime loans and loans that banks new exceeded value… heck you could get a loan back in the day for 125% LTV and you could get a loan with crappy credit… So put those two together crappy credit and no need for cash to own a home and there you go… People that should have stayed as renters decided to grab the american dream of home ownership, as we saw many of these folks just were not prepared to own homes… For a myriad of reasons,, some as simple as they had never owned a home and had no clue on how to maintain one.. They had always rented and if something broke just call the landlord. Look at the houses that are still being bought by wholesalers… Rare is the house that one just walks in and vacums the carpet and cleans the windows and sells the home… be it owner or renter what we typically see in reno is > New flooring, new cabinets , new appliances, new bathrooms, landscaping paint in and out. were as I am sure there are many readers of this forum that have lived in their homes and they may change these items once every two decades… Everyone has a certain degree of neatness that they live by, however if you really think about it ,,, just look at the pre reno and after reno shots of any turn key operator.. they are all the same… Not sure its like this is OZ but many many americans are just tough on houses period.
jayhinrichs wrote:The Hedge funds Have CASH there is no leverage or fixed bank debt on any of these properties… So the only obligation to keep the property is pay property tax.s they could board the houses up if they wanted to and still not loose them….Blackstone has been on the forefront in the housing market, gobbling up 32,000 single-family homes for $5.5 billion, helter-skelter, at foreclosure auctions on courthouse steps scattered around the country, hoping for capital appreciation and rental income. Deutsche Bank has been on the forefront funding this binge and leading the issuance of $3.6 billion in loans.
Jay,
In regards to your comment
"Rare is the house that one just walks in and vacums the carpet and cleans the windows and sells the home… be it owner or renter what we typically see in reno is > New flooring, new cabinets , new appliances, new bathrooms, landscaping paint in and out. were as I am sure there are many readers of this forum that have lived in their homes and they may change these items once every two decades… Everyone has a certain degree of neatness that they live by, however if you really think about it ,,, just look at the pre reno and after reno shots of any turn key operator.. they are all the same… Not sure its like this is OZ but many many americans are just tough on houses period."
The Australian tenant has a different expectation. I have homes in Australia that I have not repainted, recarpeted since I purchased them , some have old wallpaper, old kitchens, old bathrooms. One tenant moves out another moves in. I have properties that I have not painted or replaced flooring in over 10 years and they still rent no problems. I have also never redone a bathroom or kitchen. The US tenant has a higher expectation of how the property should present.
USA Investor,
My take on your comments
"I tend to agree that those now entering the market are lambs to the slaughter. They will be hoping for increases as have occurred over the last year or so but they don't understand the limitations of the US general public to be able to afford housing even at the relatively low levels that current prices represent.
The original highs in Atlanta (of my market) were $150 -200K these dropped to $30-50k plus reno so averaging $70k renting for >$270pw around 20% gross. My ideal exit is $140+k which would mean 100% return on my money plus the rental in the mean time. They are now up to $120K and I don't feel positive that they will go much higher for a long time. The funds have a lot of stock that they will get tired of holding and as Fickles article already indicates, will go exit stage left potentially leaving those late entrants with negative equity and a double whammy of only getting 12% gross which is way below what you need to stay in the US market."
In my opinion you purchased BELOW fair market value at the time. I am almost certain some of your purchases were the lowest sale priced recorded in a subdivision . So a 37k purchase on a 2500 sqft home that last sold pre GFC for 170k was an exception not the Norm. I can understand that you may look at an 80k price today and think that's expensive to you because of how well you bought at the time.. The reality is it was probably worth 60k when you bought it but you got it for much less. That's one thing I love about the US housing market, the market imperfections presents great opportunity for savvy investors. In all the chaos of thousands of foreclosures there are bargains to be had if you search for them.
For those that know my story I purchased many homes in Geraldton WA before the mining boom in Australia.
http://somersoft.com/forums/showthread.php?t=21333
I picked them up dirt cheap at 60 -110k, in many instances below fair market value. I started buying at 60k so when they got to 110k I thought they were expensive and stopped buying. They went on to be worth 200 -250k within 24 months. Had I kept buying I would have continued to profit.
I have personally been buying in the US for last 3 years and buy whenever I can afford another property, I am still buying today. I bought when the currency was 88 cents (3 year ago now) and when it dropped to 83, and when it went up to 90, 95, 98, $1.00, $1.05. It's back to 89 today so really the exchange has been kind to me.
My personal view is that we still have more growth to come on well selected properties as we are still well below replacement value in Atlanta. Properties are still positive cashflow even though the returns may not be as high as those achievable at the absolute bottom of the market around 2011/2012.
Owner occupiers are back in the market and buying. Its still cheaper for them to buy than rent so those that can get finance will continue to buy in my opinion.
I don't think the hedge funds will dump properties for a loss. They get the funding at such cheap interest rates that they can only profit from the rental income they receive. Their cost of acquiring the properties is much less than the Aussie investor who has to pay 5 – 6 % for money through a line of credit.
For those that don't know the hedge fund story here is a great video of what's been happening.
I am not as optomistic about the Australian Housing market. I think the US housing market will out perform the Australian market by a long way in % terms over the short/medium term.
Picking when the US economy tanks will always be difficult but tank it will….
Each successive correction is worse than the last and the causalities of these corrections take out an even greater proportion of the populace. Every recovery has been predicated on CB support that simply sets the US up for the next wave of Wall Street induced chaos. Meanwhile the economies ability to recover reduces with each cycle. My instincts tell me that the next crash will be the clincher mainly because past recoveries have been able to utilise remaining system capacity both locally and internationally. The effort gone into preventing total collapse this time around has largely exhausted remaining global capacity.
Tenants that stick around for 4-5 years on average as opposed to 4-5 months, never damage a property and almost never pay late (not to mention evictions, which just don't exist), net pre-tax returns of 10-15% (and beyond, as some here can testify, but that's rare), and the safest business environment on the planet. You can't buy a $1 house like you can in Detroit, but you can still get a tenanted property for as little as $30,000 (all purchase costs included) – and that's only if you go through a buyers' and managing agent like us or other similar ones – if you do it on your own, it's even less.
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