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Yes, tons of vacancies. Miami has the most and it is most drastic in the condo market. Miami currently has 5 years of condo inventory on the market. Regardless, same goes for AZ, NV, CA, AZ, etc. where there are a lot of bank owned homes. Banks typically do not rent out homes they repossess due to liability purposes. So as the bank releases their homes for sale, these homes will remain vacant.
On another note, the rental market is very strong and vacancy rates for "performing homes" are in the 8% range. Performing homes are those owned by investors or homes qualifying as rental stock. Factor in the bank owned homes and vacancy rate goes higher. You cannot calculate that though as it is not part of rental stock since the bank won't allow rentals.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeIt's moreso due to liability. They would have to hire property management, trust those managers to get good tenants, purchase insurance policies, and hope that everything goes right. Too much risk. They just want out. Currently, banks are reluctant to sell assets for much less than appraised value or BPO (Broker Price Opinion)
On big commercial and multi-family, I am seeing 25% discount from current value. On single family homes, sometimes 5%. We buy small bulk from banks still and our discounts have become thinner….much thinner in just the last 6 months.
Cheeves Financial
http://www.MyRealtySource.comCheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeHi Leo,
I am a wholesaler. To answer your questions, see below. Keep in mind, there are wholesalers direct with the banks / asset managers / etc….and there are wholesalers who have bought properties turned over several times…Unfortunately, there are more of the latter than those direct. A wholesaler typically models their business model very simply. A to B contract, and B to C re-sale. The "A" part is the seller we buy from ie..banks. The "B" part is me or those direct with banks acting as the buyer. The "C" part is the exit to the B, which are typically investors like yourself. ABC is where it stops for us. The other wholesalers look more like ABCDEFG and your price goes up with every sale of that property. Check tax records to be sure of how many times properties were turned over. It's public record.- How would you define wholesalers? Someone or a firm direct with the bank or the best access to the original note/mortgage of the distressed asset. You are looking for a direct discount from the distressed seller or REO supplier. True wholesalers have a true A to B transaction.
- How do they operate and earn their profit or commission? Most of our properties require some rehab. Our model for profits is this: A to B acquisition + Rehab + 8%. The 8% is our fee / commission.
- Do they bulk buy properties from banks or they are lenders' agents? In most cases, yes. We will buy small bulk packages. Long gone are the days where a typical wholesaler can walk into a bank and ask for their huge portfolio of toxic assets. It is much harder these days. It is all predicated on relationships and past performances of closing. We also work with distressed sellers and assist in negotiating their deed in lieu or short sale. In many cases, these homes are homeoewner occupied. Minimal to zero rehab is needed so typically on these we will pay a little more versus those owned by a bank that have been neglected.
- Prepared option to deal with: Bank or Wholesalers? It is very difficult to get in direct with the banks. I get calls all the time from websites claiming to be bank direct that want our inventory because they just cannot get in with the banks. At one time, we were one of the top firms with most bank direct access. Our sources have either dried up, sold everything to Wall Street, or those that are left, have dwindling supply.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeEveryone that is looking into financing…..Be sure to look at SEASONING!!!! Most lenders require 90 day seasoning on assets owned by the seller. I see very few good deals out there offered from wholesalers owned for more than 90 days. Point is, you are probably over-paying for something owned for 90+ days anyway.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeDepends on what area, but Judith is right, not as much as $100. In many areas, we are seeing rental rate increases such as NY Metro areas and inner city NY. Increases as much as 20%. Indicative of job growth in the financial hub of the universe??? Always a good sign.
I agree with Judith, that you were likely misled or misquoted in your pro forma.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeJust out of curiosity, perhaps when quoting ROI's, we can show some numbers to see how we got there. A lot of ROI's are based off of fixed expenses. Soft expenses or usually left out. For instance if you have:
Taxes: $3,000
Insurance: $1,000
Property Mgmt @ 8%: $2,000Does property management include lawn care? Does tenant pay for that? How about turnover or vacancy expense at 5%. Reserves? You don't have to put much in reserves if the property is newer, but perhaps everyone should account for them. A problem I ran into last year….I swore I wouldn't invest in the midwest. Not because it's not a good market, but I know nothing about. Just personal preference. I had a ROI advertised to me at 21%. My more conservative numbers showed 15%. At the end of the year, I ended up with 7% due to issues with unforseen repairs. So when you calculate your numbers, throw in some soft expenses or miscellaneous figures. In New Jersey and Florida our rule of thumb for 1-4 unit homes is to take your Gross Income and expect that your expenses are going to be about 30% of it. Just my 2 cents.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeInvesting in the stock market is way different than investing in real estate. In my opinion you have to catch them just right. My opinion on why some parts of the country has hit bottom is because a lot of the top 10 REIT's, if you will, have been issued uptrend alerts. I watch a few of these and a couple in particular is Camden Property Trust and AvalonBay Communities. Camden was issued its uptrend alert in July and has since gone up 40% or so. In fact most ETF's or REIT's were issued their upward trend alerts in mid 2010. If you wanted to make money, you should have got in before 6/10….but that is unforseen as nobody really knows where bottom is and lets face it…stocks take some luck if you are in REIT's.
They restructured a lot and as rental rates stabilized, so did the stock and with the addition of Value Add complexes, their stocks did very well. Keep in mind that a lot of stockholders took a beating during the crash…So the upward trend movement is positive for the U.S housing market.
Right now, I think its a good thing to possibly diversify in a bit, but tangible assets like outright real estate ownership will likely do better for you. It is always fun to play the market though.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeA lot in Cape Coral for $5,000, Rick? If you can get a lot in CC for that you should jump on it. I am seeing bulk purchases of irrelevent lots being sold for $9,000 minimum. If you PM me the address, I can give you my thoughts.
net_d2u: Yes, many properties in CC have chinese drywall. But CC is very big and "many" is not "that many". A simple inspection will give you an indication of any issues. It's actually easy. The first thing affected by defective drywall is copper. Check the A/C copper coil and the back of an outlet in each room. It stinks and it is clearly corroded. Investors are still buying them though and fixing them…however, nobody really knows what a true "fix" is. That's why we don't even mess with them.
To remove/replace defective drywall, you are looking at about $15 / square foot which includes replacing a lot of the electrical which is usually recommended. Who has future liability? Nobody knows yet, but I don't want to be involved in it one way or the other. There are PLENTY of good homes to buy without worrying about a drop in the bucket of homes having issues.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeYou are having investors assume an institutional mortgage? Or do you have separate hard money lenders that buy and share title with the investor. Sounds confusing.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeNigel,
Are you talking about assuming mortgages? They definately don't allow that in most states I know about, especially with foreign national investors.CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeTroy –
Great post. I agree with everything you said. However, I have looked into private equity funds myself. Problem is you have zero control and are exposed to bigger issues like fraud, comingling, etc….I've seen it a thousand times. Then again, some funds and REITS are good…but that is my opinion. Int'l lenders are very limited and the hardest thing to get over is actually seasoning of 90 days which most require in FL.CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeI lived in a Gulf Access home in Cape Coral until 2006. I am one that likes boating and fishing like many others whose intentions is to live on the water. To answer your question, yes you can buy Gulf Access lots in Cape for as low as $30,000. However to increase your probability for appreciation, you want to be in South Cape Coral. And even in South Cape, you want to be as close to the open water as possible. When builders start building for homeowners/ tourists again, the first lots that will go will be the ones with closest Gulf proximity. We have manatees down here that are all over the canals (manatees are gigantic animals that are also known as sea cows)…so you have to go in idle speed in the canals. If you are more than say a couple miles up the intercoastal, you could have a 2 hour boat ride to the Gulf. Most prefer to be in the Gulf in about 45 minutes or less.
For you to achieve the better locations, you will need to increase your price to about $75k and you will find something that will improve in value more than the $55k lots. Also, for that price, you will likely have your assessments of water and sewer hooked up and already paid for. This is a big deal to Cape Coralites.
On a side not to let you know how the market went in Cape…..In 2004 I paid $255k for a gulf access home…Very old, small home but location was the best.. I sold in less than a year for $315k….Downtown Cape Coral was expected to pass a huge downtown redevelopment plan…Speculation went thru the roof. In 2005, my house was turned over twice and the highest recent sale was $799,000. Market tanked and the downtown plans were scrapped…I was kicking myself in the back of my pants, but at least I made something….That poor buyer got stuck when the market tanked because Gulf Access homes plummeted faster than they went up…Today you can buy a very similar house on the same block for $225,000. Ouch…Anyway, Gulf Access is very appealing..Especially to international second homers.
Cape Coral has 400 miles of canals…more than Venice, Italy…..Take your pick…but be VERY selective. Hope this helps
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone Mexdrew: Agreed about Google Earth being outdated. I also agree with your Lehigh assessment. You can get lost in the ruralness if you don't know where you are going! That being said, those looking to invest in something not off the beaten path in Lehigh should focus on Sunshine area or other areas that are more established.. But yes, there are areas of Lehigh where houses seem miles apart. In fact if you are "out there" some property managers won't even take the job..Same goes for North Cape Coral though…Just a matter of where you are looking. Lehigh is bigger than what you may think.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeHi James,
A $40k budget is not something that will really work in SW Florida. I don't see really anything in that pricerange unless you want to purchase HUD homes which are about $35,000. There is a poster on here named Judith who is an investor in lower priced homes in Ft. Myers. I met with her last week and we agreed that if you are in the right area, you can find a really nice rental property. Judith is from AU and is a seasoned investor in this market. It is easy to get "on the other side of the tracks" so its important to be on the right side.The homes are typically 1970's construction but built of concrete and steel so very good integrity. My partner and I assisted a local investor with one of these. Here is how the numbers worked just to give you an idea what to expect with a $40k +/- home in the area.
- $18,000 Acquisition
- $14,000 Rehab (Replaced A/C, Flooring, Paint, New Roof, New Bathrooms, some fixtures)
- $6,000 Overhead / Oversight / Fee
- Total Investment: $38,000
- Renting for $600 per month or $7,200 annually
- Expenses (Taxes, Insurance, Mgmt = $2,270)
- NOI = $4,930
- First Year Projected Yield 13%
The numbers may not blow your mind, but they are pretty good. An updated house close to downtown Ft. Myers business district will give you a good speculative asset as well as one that will generate an income. We have this on the market for sale at the moment and have been getting a lot of foot traffic at $55,000 asking. I'd prefer that he holds this for 5 years though which is probably what will end up happening. If you want to see pictures, send me a message and I can send you so you can get a visual.
But getting back to the condo preference, I don't know of any in the area that would work. FYI, maintenance is really easy if you have the right management / cooperative tenant. Getting involved in HOA's is something I don't recommend at the moment unless the community is stable. If the community is stable, you won't see prices anywhere near the 40's. Hope this helps a little.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeYep..better opportunities than land right now in CC..Keep in mind that when you start new construction on land, you have to pay the city "impact fees"…In Lee County, those are insanely high….buy rental property. Land is ok if you have a bazillion dollars and want to invest 100k in it….Rental homes will give you a much better return.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeUpdate on Financing:
Ok, so we already established the fact that financing is available. Rates and terms are fine. The problem is the SEASONING requirement that they all seem to have.
In short, you as the investor have to purchase a property that has been owned by the seller for a minimum of 90 days. Your only resource for homes is wholesale. It's just a matter of how many times the property has been turned over and finding a seller that will hold a property 90 days for you. Direct wholesalers who buy from banks will not typically do this. My firm for example prefers 30 day turnovers…60 at the very most from the time we acquire. These lenders will not even begin underwriting your file until that 90 day seasoning. Assuming it takes 45 days to close the loan, that puts me at 135 days. We don't offer that and I'm not sure how many direct wholesalers do.
I sell to other wholesalers, who sell to other wholesalers. You may find a wholesaler who will entertain the 90 day hold for you, but the other problem you will run into is the appraisal. It will be incredibly hard to get a home appraised for your purchase price once it is turned over a couple times.
Seller financing could be an option, but again, that is not something we offer. Puts a big monkey wrench into this financing thing. Does this make sense to everyone? Let me know and I'll do my best to explain.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeI am not exclusive to Lehigh and Cape. I live in Ft. Myers and am always looking for opportunity there as well. We started our Tampa program about 3 months ago after giving it a trial run for ourselves. The homes in Tampa are older, but well built (concrete). Tampa is a little different. We'll buy the homes for about $40,000. Some need a new roof, but most we almost gut the place. Since most have not been updated, we update electric, any plumbing that is not up to code, kitchens, bathrooms, etc. We won't get too fancy, but at least updated.
PropVest has asked the question a few times about where to expect more capital growth. This is almost impossible to answer because each area has different factors. Furthermore, it has to be measured in percentages if you are a speculator. For instance, in Lehigh Acres, you buy an $80k duplex and in 5 years I assume the value will be $130k. That is an increase in almost 60%. In Fort Myers if you buy a home for $150k and it goes to $225,000, that's about an improvement of 60% as well (no calculator..guesstimating here).
So, you will make more money in Ft. Myers but your ROI stays the same. You have to spend more to make more I guess is what I am trying to say but overall, your ROI is going to be your gauge.
I just assisted in the sale of an REO home in Ft. Myers for $185k for 2,500 square feet. The cap rate is going to be about 7%, lower than what most expect, but we both agreed that this home should be much higher in 5 years. My client is a speculator. If that is your thing, that is fine. Everyone has their own strategies. He bought betting on the market to improve in 5 years significantly.
I also just sold a duplex to an investor out of Israel. His reason for purchasing was different. Although I like to speculate as well, I also changed my temporary investment strategies. I explained to this guy in the past that it may be a good time to get back to the old school fundamentals of real estate which is cash flow and put speculation as secondary. If you can get 10% + on a property, that is the target. If it goes up in value in 5 years, that is bonus… So he bought strictly for cash flow.
What price are you willing to pay and what is your strategy? Everyone has their own reasons for investing.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeSteve,
I live in Ft. Myers. What types of property are you buying and what do your cash flow numbers look like? I am wondering why you buy 60 properties in one town and exclude others. Just curiousCheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeI should be in the office most of the day tomorrow. Feel free to e-mail me at [email protected] to set something up.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeI try to make informative responses to this forum. Look in my history and you will never see any fluff. PropVest just tried to call me out that CWAGNER is me? Pretty insulting to say the least as I have spent hours working with him online to give good information and providing him with more due diligence then anyone he has inquired with. I want to warn posters that before you do something like PropVest did which is slander, most are intelligent enough to check the senders IP address or where it came from. He's new here. I'm not, so I guess he can get a pass on this? Clearly CWAGNER is not from Florida or at least didn't have a FL IP address.
Additionally, I disagree with half of the CWAGNER post. Nice response Casey. Thanks for your kindness after all I've provided to you.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone Me- How would you define wholesalers? Someone or a firm direct with the bank or the best access to the original note/mortgage of the distressed asset. You are looking for a direct discount from the distressed seller or REO supplier. True wholesalers have a true A to B transaction.
