putting Kansas in the Detroit basket is a little harsh.
I have done some research into kansas city.
it is a pretty stable place. you arent going to get your booming capital growth
but it a place that offers good returns and cash flow.
From a personel point that is what I want.RickH wrote:putting Kansas in the Detroit basket is a little harsh.
I have done some research into kansas city.
it is a pretty stable place. you arent going to get your booming capital growth
but it a place that offers good returns and cash flow.
From a personel point that is what I want.What returns you can expect to achieve there?
One couple we are looking at mid teens net return. Gross returns around 20-22 %.
Not the best parts of town . But similar returns in better parts of the city close to downtown.The US is difficult to invest in only because there are a gazillion different markets and it's so hard to know where to begin. You could start with a resource like http://www.housingpredictor.com or a list of USA resources at http://theblockblog.com/2011/01/thats-r-sum/
There is definitely something nice about having a property near the beach. On the other hand, if you are looking for a stable market and good long term returns, it might not be the one near the beach. ;o) I would love to own a property in Florida or California, but simply I can't afford to invest there, because the returns are lower.
I have done the research for Kansas and the average rental yield was 8.8 . You can see the sources where I got the numbers here:
http://www.buyingpropertyinusa.net/market-research/high-rental-yield-markets-in-the-usaBut that's just an average, and you can find properties with higher rental yield and gross returns. I will try to calculate this for all US states this weekend, so I will post it here then.
I think you may be surprised by Florida there are sub 35k properties with double digit net yields available in many Florida markets. Plus of course you have any future capital growth.
Hi Xarp,
I like your method of calculating returns.
I did the numbers on 1 property in LC i am looking at . It came back with a result
of 5.3.
That isnt too bad i think/In every country there are up and down markets… in every state … every city …. even in neighbourhoods.
I have had a lot of advice that says "get down to neighbourhood level"… and make your assessments from that.
There is so much info online, it isn't hard.
Start with something general like demographics that you want to rent to, and work backwards … highest city market, then which neighbourhood … and then get specific about looking at houses for sale.
Don't start with the "for sale" list. End with it.
As I promised, I have calculated the rental yields for all US states. You can see the table here:
http://www.buyingpropertyinusa.net/market-research/price-to-rent-ratio-and-gross-rental-yield-in-usa
Hopefully it will help some investors with the choice of the US state to invest in..
Nice data – cheers!
Hi,
I believe there are a number of places to invest in the US. I think that both Orlando, FL and Atlanta, Georgia have good long term prospects. I myself have invested in Florida and am happy with the returns and long term potential. Like anything, it is important to do research and like anything, location is key.
Regards.
Steve
Each market has its strenghts and weakness. Since I am new to forum and am wishing to learn how the AU purchase property in the states.
IE: do you pay cash most of the time?
Or do you obtain financing in the states?
If your obtaining financing in the states you will want to know what happens if things go bad and you have a deed of trust or Mortgage against your property.
Texas as a rule has the most feroucious foreclosure laws in the US its forelcosure law is called dual action:. In the event of a foreclosure not only does the bank get the property back they also get a money judgement against the borrower. Now I do not know what good a judgement against the borrower would do a bank in the states trying to collect in AU. However if you owned multiple properties they could be liened by the judgement. Most states will just do traditional non judicial foreclosures and the lenders remedy is to the property only, however they do have the right to do a judicial foreclosure and seek a money judgement.
And then there is debt releif, again not positive how the IRS handles that for foriegn investors. However for US investors a bank that has foreclosed and extinguished the debt will issue a 1099C and that will be treated as ordinary income. And with the state of affairs here in the US the IRS goes after them vigorously if its non owner occuippied property. As a general rule they let owner Occuppieds that lost a home off the hook. Not so investors. As a private money lender here in the states.I have personally seen some very nasty litigation in regards to Texas properties. Now granted these were larger deals multi million dollar mortgages that were defaulted. However it is something to be aware of. the other thing I think foreign investors need to know is that the Vast majority of foreclosures in the States are NOn Owner occuppied propertys. that is why its next to impossible to get a loan from a US bank on Rental properties. US citizen have to be extremely well qualified to get a non owner Occ loan and then they can only have 4 on their credit. Even though the rules allow 10 in practice you would need extreme liquity and income to get a loan for your 5th property.
And since I am brand new to the forum and international investors, I am still learning how you go about buying your properties. I see a lot of talk of LLC's I am curious why you think you need to form an LLC if your just an individual and your just going to own a few propertys. If you get loans from a US bank they are going to make you sign personally and vest the property in your personal name when you close the transaction. You can then deed it over to the LLC later, and I suppose folks are doing this for Liablity reasons. However in my 35 years and many thousands of real estate transactions and owning well over 200 properties. the only reason I use an LLC is because it offers the most freedom when you have partners. Liability is certainly secondary.
If its personal liablity your looking to protect you need nothing more than a Good insurance policy, and an umbrella policy. This will give you far more protection than an LLC especially a single person LLC. A good attorney will peirce the LLC in the event of litigation. They will sue you personally as well very very difficult to make the case that you have no personal liability when your the only member.
If you go to a US attorney they will charge you about 2k to create one and depending on the state you file your LLC in they charge
Anywhere from 80 bucks like Mississippi to 300 or more Like Tennessee. In addition you must then file a tax return for the LLC and that will cost you annually. You can save this money and get far more protection by buying Insurance.APerry wrote:husky0108 wrote:interesting speedy, thanks for the information. do you think its worthwhile holding off for about a year or so before getting into the us property market. sounds to me thats there is no rush to get into it yet.anyone care to comment…
Every State is very different, there are some areas that are going to perform terribly but others that will probably do well. The Texas market is apparently pretty strong, so if you wanted to invest there then waiting might not be such a good idea, in other areas waiting forever might be the safest bet. You really need to get an understanding of the specific market you want to invest in before you make a call on when to jump in. As with Richard, i suggest you speak with Nigel Kibel who posts regularly on here.
Regards
AlistairIn my opinion, the best cash flow and yields will be found at the lower end of the market – therefore, you need to look at places like detroit, Birmingham (AL), Indianapolis, Kansas City, St Louis etc….
From what I have invested in myself, there is very little difference between a 25K property in Michigan and a 25K property in Illinois, or Florida, or Ohio – you get my point. They need to be seen only as an “income product”, and not as much as an asset, as they are very hard to sell (never mind at a profit) if for whatever reason they are sitting empty.Section 8 is not without problems, but to me, it is the best way to receive a reliable income at that end of the market.
You will most likely have a much better chance at seeing capital appreciation at the higher end of the scale, while your rent might hardly make you anything each month, and I believe (as a professional investor) that we might have at least a year, or even a few, before the markets appreciate.
Jay: Agree with you on the liability issue for LLC’s, I think for foreign investors a lot of the time it is just easier to have a US based company to be able to deal with utility companies, banks, and other issues that requires you to be “domestic”, but I am also surprised at how much some firms can charge to set these things up!
I went to your blog and read some of your articles and I think you have done a very nice job getting both sides of the story.
I am assuming the prices for Real Estate in AU are such that you need huge cash infusions to get cash flow??
And the price of entry is high. This is why AU are looking at the states after our well document RE meltdown.
As a private money lender ( Hard Money) and my Niche' is loaning to REO, shortsale and foreclosure buyers, who then rehab and sell to investors I have a very unique and qualified perspective on what is happening in the US markets right now.
We are in most of the hottest Cash flow markets, from FL to IL…. And my kids live in Vegas so I am there often.
Here are the biggest issues I see with Anyone regardless of if they live in the US or some other country when it comes to buying and holding investment properties in the States.
1. Lots and Lots of choices so it can be paralysis of analysis trying to figure out when and where to invest.
2. finding a quality company to help with your purchase that being a realtor or one of the TURN KEY COMPANIES remember both realtors and turn key guys make no money unless you buy their product. And certainly be very cautious if a real estate agent is only showing you their personal listings, Its human nature they make twice as much if you buy one of their listings. If that was the case I would insist than another agent from their firm represent you interest in the sale.
3. ANd last but very certainly not least Property Management.
Anyone can figure out and buy a cash flow house in the states there are millions avaliable, and like all business there are stand up rehabbers and investment property sellers and then there are the guys that are in it for the quick hit and you never hear from them again.
However at the end of the day it all hinges on property management, And it does not matter the asset class from High end to Section 8. This at the end of the day will make or break your investment.
In reality most investors do not make anywhere near what they think they are going to make because the cost of owning and running the properties are grossly understated.
At the end of the day its about NET cash flow not Gross cash flow.
These are the minumum numbers I crank in a rental that I would be looking for myself to establish net cash flow.
10% of gross income for vacancy yearly if I do better great. Most managers charge you first months rent for placement fee or at least half a months. and you will be changing tenants yearly and bi annually for sure just the nature of the beast.
100 to 150 a month for on going maintenance if a tenant moves after a year which 75% of them it will cost you 1k to 2k to turn the unit over and ready it for a new tenant. If you do better then that great but your being realistic.
75 to 100 a month for property tax's place like TEXAS are JUST KILLERS with property TAX I know many folks who invested there only to find out the annual tax's where wiping them out. Same with the City of Detroit and Wayne county.
50 to 70 a month for Insurance.
10% of gross rent for property management.
So to do the math on a 750 gross rent. you have ($75 vacancy or tenant placement this number could double if your property sits just one month with no tenant.) (%60 for insurance) ($125 for repairs) ($100 for tax's unless its Texas and that number can be much higher) and (%75 for property management) ($75 preperation of tax return for LLC) ( $50 for contingencies) So to be prudent and conservative your NET CASH FLOW is to round off $200.00 month with a property that rents for 750. And if you buy condo you can have sky high HOA's and other problems with condos. I would steer clear of a condo unless you plan on living in it. And of course this is if you pay cash for it. If you put debt on it your numbers could go down to break even. I know this is not what the sellers of these properties will disclose or want to dwell on however its something an investor needs to know so they are not surpriesed by the costs.
These are the real numbers and heck if you do better in a year you might average 250 or even 300 and your tickled.
Its going to be many years before we see prices back to 05 06 levels and if ever in some market Like Pheniox and Vegas and Florida. There is simply to many buildable lots that have been scooped up by the big builders and they will be providing new construction for fractions of what they used to sell it for and they will still make a profit. Most large subdivisions in these markets have been sold for 5 to 10Cents on the 05 price. These builders are literally in lots 5 to 10k. And because subs are starving construction cost have come down 20 to 30%. I know this first hand as I have 11 homes under construction in Oregon where I live. I bought 150k lots for 50k and lowered the price of the home by 100k and we are selling them and making a nice profit, our houses are new and are comparablly priced to a nasty REO or short sale with no where near the head aches associated with purchasing those properties. For these reasons. FL AZ LV will be very long time bouncing back . You have to also realize the bubble was a false market. You have Guru's pitiching folks all over the world to buy in these markets hold the property 6 months and make 50k. One investor was just selling to another in many instances then when the bottom fell out prices crashed as we saw and investors walk away from the homes. That market was never sustainable from the onset so to expect big bounce back in prices in the next 5 years on these I do not think is realistic. You will be competing with new construction at all time low prices per sq ft.
This is why when you look at the chart you did on your blog. its states like N Dakota that did not move much. Because no Guru was pitching N. Dakota back in 04 as a place you could buy a home flip it in 6 months.
This brings me back to property management.
I think what happens is a lot of people look at a fully rehabbed house like its brand new and therefor will require little or no maintenance for many years. This simply is not true. Also Vacancy rates are glossed over, no property stays full 100% of the time. Renters in the states move its a fact. There needs to be a vacancy factor to get true net numbers.
property managers: this is a big one. There are for certain good ones out there. However how much can a property manager do for your property when they are making 75 bucks a month. Property managers make their money on turn over and marking up repairs. Other property managers will churn tenants like a stock broker churning an account because they either get the first months rent as a fee or half of it for placement. Then there are the horror stories of Property managers just being flat out crooks and stealing the rent money. I had one of my borrowers call me B/C his promotor turn key seller was none responsive and I had done the A and D loan for him so I was the only one he could get a hold of. he was in CA. 5 states away from his investment and he had only gotten 1 rent check in 12 months, and could I help him, I had one of my assets on the ground go talk to the tenant and the tenant was Section 8. Thats guarantee rent from the government its ACH'd into the property managers account 3rd of every month. When confronted the manager said that there has been repairs to the property that equalled a years rent. And this on a house that was just rehabbed 12 months before….. This is just one example.
Bottom line is you need to fully trust your team that is helping find purchase and manage these properties. And you need to be realistic about NET CASH flow…. If someone is showing you a property and there is NO vacancy factor no monthly maintentance factor your not getting good numbers to evaluate your investment….
Clams of 15 to 30% cash on cash returns in my opinion are exagerated and one just needs to use the formula that I have laid out above to get to best case and worse case scenerio.
After watching this whole market come full circle, We are getting back into the equity side of the business as well as staying in the Debt side.
<Moderator: delete advertising>
As I promised, I have calculated the rental yields for all US states. You can see the table here:
http://www.buyingpropertyinusa.net/market-research/price-to-rent-ratio-and-gross-rental-yield-in-usa
Hopefully it will help some investors with the choice of the US state to invest in..
[/quote]
Highincome,
We have done a lot of loans in birmingham, and Indy. we are looking at KC and St. Louis although have to be very careful with neighborhoods in those areas, I have donated 2 houses in ST. Louis because my loan originator brought in a bad loan and I would not sell the home to an investor, its the ole do unto others as you would yourself rule that I try to adhere too.
I would like to have an off forum chat with you if you would not mind. I would like to know the specific issues that foriegners face buying US properties. It did not occur to me about UTilities and bank accounts. Although the utls on our rentals are always in tenants name and paid by tenant.
So if you have some free time and would like to have a dialogue please e mail me at [email protected]
I would like to fully explain my new program that we are rolling out and get your honest constructive feedback, if you would be so kind.
I have invested in Kansas City, Missouri and consistently get a 20% ROI. I have also attached a link to show why Kansas City is the place I put my investments.
Hello,
Generally it is hard to get loans in the US, although I now do have a lender for FL. I am working in Atlanta and Orlando, FL. It is important to have good management in place or esle you could get into trouble.
Generally, if you looking at Florida it is around 10-15% return and in Atlanta it can be as high as around 20%. When you consider the cost of purchase, no stamp duty and good yield, it is a fantastic opportunity.
Regards,
Hello All,
I can see that most of you are owners of properties in the US. Thank you for your knowledge and time with these posts…they are SO helpful to me!
Can you please recommend a company that I can contact to get started in the US market myself?
Much appreciated.Try Nigel Kibel he is a forum member based in Melbourne and been in the US property game for many years including spending time working over there running his own agency.
Search his name from a previous post and shoot him a PM or drop him an email direct [email protected]
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I spent 12 months in the US, looking and travelling and learning and eventually after a lot of research bought a property in SW Missouri. There is a lot to learn about the US market. The cultural differences to start with (1950's white flight, transport issues, ghettos, etc). For example you can buy property very close to downtown Chicago for $30K, or less!!
There is no scarcity of land in the US, different planning regulations, better land than Australia…….
Looked at Denver, upstate NY, nothern MI, nicer cities in TN (not Memphis), resort cities along the Atlantic coast (NC, SC, GA), TX?
As a matter of interest I believe that foreigners can't buy in OK.
PM me if you'd like to hear my rant and experiences.
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