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  • Profile photo of Luke TaylorLuke Taylor
    Participant
    @world-changer
    Join Date: 2005
    Post Count: 415

    Hi Everyone,
    I just thought i would post a section here to caution people about jumping in head first and
    buying property overseas due to the exciting "Cashflow"figures.
    I and others have tried hard to warn people, but  we are all the same ,we learn by our experiences after the fact,thats human nature.
    I have now had over 5 years doing these deals in the usa so can speak this stuff with authority.

         Over the 5 years , I have had so many people contact me telling me their issues of getting burned after the emotion dies down of buy and hold rental properties (usa specifically),and lately, that i wanted to hopefully prevent at least one person from burning their cash and alot of stress.
        There are many buyers agents selling the deals who havent had any of these properties themselves for any period of time and have got absolutely NO IDEA how hard it is to get them managed long term and get a return on them after costs.Then also selling them at a profit after .
           But the thing is they dont need to as they get their money on the sale.This isnt to say that they are all outright dodgey,as some are really well meaning,but at the end of the day , if you havent had the experience how can you possibly know ??.I think the big issue with ozzie buyers agents is they think it can't be much different to how it works in australia.The problem is it IS totally different.

    "Cashflow" deals for long term return in the usa is very difficult. I now recommend people (if they have their heart set on overeseas)go over and check it all out ,then live in the area and buy the cheap deals yourself and reno them and on sell them ,or if you really want to cashflow them and believe the market will inprove then you can sell on the upswing.
     We can discuss all the reasoning behind this further in the thread if people are keen.

       This is not meant to be a slamming thread of specific agents, more a personal experience type thread of those who have done long term buy and holds in the USA(or overseas from there ppor) and their experiences .
      

     All the best
     Luke

    Luke Taylor | Hope Property Investing
    http://hopepropertyinvesting.com
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    Profile photo of Top Rental ReturnsTop Rental Returns
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    @top-rental-returns
    Join Date: 2009
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    Hi Luke,

    Michael here again.

    Cashflow deals are extremely difficult to achieve and it has taken me some time to get this under control – especially with respect to ongoing management. We have hired our own manager and have a large client base for whom we manage properties in Atlanta.

    There are many agencies working out of Australia but we have moved to the US ourselves and i must thank you for your assistance and warnings many months ago which promoted me to go over and do it ourselves rather than rely on a Aust based company.

    Thank you mate and hope to chat again soon.

    Profile photo of Nigel KibelNigel Kibel
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    I have a business partner on the ground in Texas. But I would agree that there are to many people who do not know what they are doing

    Nigel Kibel | Property Know How
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    Profile photo of Garry MacGarry Mac
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    Hi Luke

    Thank you soooo much for your post.
    We have two business associates who have just returned from the US and what you say is spot on. The old saying…”if it appears to good to be true, it usually is”. That’s not to say that there aren’t opportunities in the US, there are. However your warning is very well founded – thank you mate.

    Cheers
    Garry

    Profile photo of WynyardWynyard
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    World Changer wrote:

    We can discuss all the reasoning behind this further in the thread if people are keen.

    Hi Luke,

    I'd love to hear more from you. The concept is new to me, it appears exciting but also has tones of 'too good to be true'. I am keen to know all I can before I either commit or scrap the idea.

    Best,
    Wynyard

    Profile photo of Kipper57Kipper57
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    Thanks for the warning yes has been tempting however if there is a double dip like many expecting, could well be stung

    Profile photo of djjkdjjk
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    @djjk
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    The double dip won’t make a huge difference to your return. People still need to live somewhere!

    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
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    There are so many groups now promoting the United States most fall into two areas, firstly those just selling property often in slum areas and secondly those people who do not really know what they are talking about.
    Be careful of people just dealing with agents in the US. Levels of service are poor. If you want to do this for yourself be prepared to spend months on the ground to gain the knowledge. I lived in Texas for the better part of 12 months. I struggled to find good people to work with. I know have a business partner on the ground and can provide all the back up services.

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    Profile photo of James2118James2118
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    Recently I have been looking into all this American property. I am only new to investing in general and have not really invested anything, however I have started paying off the home I live in.

    The main reason I was interested in America was that with the seemingly low prices it seemed like a relatively small investment, acquiring a property for less than $80k compared to Australia where finding something under $200k is next to impossible.

    Reading through these forums it seems there are alot of horror stories and a lot of things that can go wrong so I definitely need to be wary of that.

    That being said, if it is done right, it can be done with great benefit right? I have been trying to research as much as I can from Sydney, but obviously that is not the same as being over there and seeing it for myself. I have talked to some people over there, property managers, people who can organise finance, people who can find places for sale, but it is hard to know who to trust I guess because at the end of the day they just want your business so it is hard to know how legit they are being.

    I am still looking into investing in America, but at the moment my options are very open, I am yet to take the first step into serious investment, I am trying to plan which would work best for me, but I also don't want to just hesitate continuously and miss out on an oppurtunity.

    Profile photo of British BuyerBritish Buyer
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    I liked the title of this topic, so I figure I may as well add my two cents worth of input.

    I know nothing about World Changer, but what he wrote in the opening post is spot on.  I only hope that he isn't anything like many of the subsequent posters, who are clearly trying to drum up support for their own business concerns.

    It is rather ironic that in a thread intended to warn people against their desire to believe all they hear (namely that it's possible to make 20% annual rental returns), a number of agents trying to sell you just such a "product" would post self-promoting propoganda.

    Here's my take on the US market at present:

    1. It's a once in a lifetime opportunity.  It's the biggest property balls-up since the Great Depression.  In the last decade property has rocketed in every country I can think of (except a few in Africa, although even there there are some amazing success stories).  Yet in the same time-frame, the US managed to lead the world up then fizzle all the way back down, luckily without sucking the rest of the world into the abyss.  Mark my words, we will NEVER again see US$50,000 houses in well-known US cities in our lifetimes!

    2. Everyone using this website is way too obsessed about making a decent rental return.  In my property investing experience, the real money is made when the price doubles (or preferably triples).  People who should be worrying about rental returns are aged 50 and above, and are looking for a way to finance their retirement.  If you're young and have the balls, go for the property appreciation rather than the rental return.  Heck, if you're young you'll soon get bored with renting the place out, and as soon as you see the price inflate you'll want to flip it so as to cash out your profits and BUY MORE.

    3. I have no wish to pick any fights with any person using this site who has had what it takes to go to the States and set up "people on the ground" as you Aussies all like to state.  They are courageous, and they deserve respect and profits.  However, here's my only advice to them:

    Believe in your service.  Become more professional.  Dont' hide anything.  State everything clearly, including whatever problems you've encountered, and how much you're making.  You're assisting all those people stuck in their jobs back home who'd never be able to buy a property without you.  So be proud, be open, and be honest.  And don't waste your time in pointless bickering or negative posts on the internet.  I reckon there is at best 2 years left of buying Short Sales and REO's.  TIme is of the essence.

    4. In conclusion: just buy something in the US without procrastinating so much that you never get round to doing it.  If you can go over yourself and buy yourself, do so.  And don't worry so much about the rental returns.  If you do end up getting more than 10%, that's great.  If you are barely able to pay your monthly property taxes and HOA fees (if it's a condo) even after renting it out, so be it.  Because nobody knows which horse will win the race at this point: the property in Detroit with good rental returns but questionable future, or the one in New York which already costs an arm and a leg, doesn't earn you much rent, yet may well double due to its location.  But if you can't go over yourself, then enlist the help of one of those recently-opened "teams on the ground", so long as you feel that they're exhibiting sufficient integrity.

    Over and out
    Steve from China

    Profile photo of sparky59sparky59
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    @sparky59
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    Hello,

    Yes, it is important to do due diligence but the time to go is now. The US property market is low and our dollar is high – prices here are very high and in the US you can get discounts on properties of around 60%. It is important to deal with companies that know what they are doing and can manage them as well. I have my own property there and am expanding – the returns are good and obviously cash flow positive.

    So, if you wish to know more, and not get pushed into things, please contact me.

    Regards,

    Steve

    http://www.usadreamhouse.com.au

    Profile photo of Luke TaylorLuke Taylor
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    @world-changer
    Join Date: 2005
    Post Count: 415
    Garry Mac wrote:
    Hi Luke Thank you soooo much for your post. We have two business associates who have just returned from the US and what you say is spot on. The old saying…"if it appears to good to be true, it usually is". That's not to say that there aren't opportunities in the US, there are. However your warning is very well founded – thank you mate. Cheers Garry

    Hi there mate,
     Glad i could be of some help !
    As you say there are definately some great opportunities now ,but yes there are heaps of pitfalls too for people trying to do it all from another country. Also trusting people who havent yet earnt that trust .

    To open up a discussion about the issues ,firstly lets talk about :

        MANAGEMENT AND LAWS-
     It is very difficult getting people to do the same job and standards that we get here in australia.
    Then the other issue is there are not the protections/laws in place to cover the landlord like there are on Oz .(and we thought the ozzie standards were tough on landlords hey !)

    I suggest people talk to other investors who have already had experience in the particular area of the states long term ,(with management /quality of tenants ,integrity of agents etc etc )and ask them who they use and how they did it.

    Local councils/governments in the particular areas of the US all differ hugely.So find out exactly what they demand of owners/landlords .Again ask locals and other long term investors.

    This is really powerful
    – Seek out and speak to accountants who do the books for large numbers of investors in the areas yr looking at investing.Ask them where is the money being made? Ask them about the long term buy and holds and the quick turn deals where is the profit coming from? (ill give you a hint some US forums have trustworthy accountants connected to them but remember you need to make sure they have earnt trust first )

     25% OF 50k ISNT ALOT OF MONEY!
    (before all the costs-eg,insurance ,letting fees,re- letting fees,maintenance,damage,court fees getting tenants out,rates,mortgage etc etc) .
    Understand this -If yr getting excitied about the massive  "25%" long term cashflow . Every property you purchase takes work to own. You have got to micro manage each and every property and this costs you time.Dont forget this side if the equation,and its very relevant with the cheaper properties ! So if yr buying a fair few cheap properties for "cashflow",ive gotta be honest and say yr buying yr self another job too.This includes getting up at 5 am before yr day job or staying up till 11 pm to start to deal with issues on the other side of the world.(time differences).
    Thats fine for some but just be aware of this.
    Then if you need to go over to deal with issues for a week or 2 yr looking at 5k plus time off yr day job.

    PS.British buyer -No i am not a buyers agent ive bought for myself only.

    Luke Taylor | Hope Property Investing
    http://hopepropertyinvesting.com
    Email Me

    Property Support,Strategist and Buyers Agent

    Profile photo of jeff2tractjeff2tract
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    Hi Steve in China and money changer,

    I have spent the last 10 years going back and forth doing business in the USA property has always been cheaper than Australia, even when there market was booming.

    I was in Orlando earlier this year and have a close friend that has a business purchasing property and doing rehabs, then flipping them, he encouraged me to get into the market in Orlando, after doing some serious research i realised that Florida was overcome with properties. I decided that I would look into other markets to see what was around. Many quote unbelieveable returns, which when one did there sums seemed to good to be true.

    However there are certain places that one can get a good deal, it is all a matter of were, my brother in law did business with a firm here called wealth creation 888 and purchased 4 properties in Atlanta against my advise, he has only rented out 2 properties and that is after 5 months the other 2 sit vacant. His property taxes are much higher that the brochures he was sent quoted. There are a number of business’s that have been set up to get in on this unique opportunity. How good they are I would have to question.

    I am setting up a business to advise locals on what do do because i think that there is a need for a proffessional service that will give the truth re capital gain and positive cash flow. Yes I will make money, but I am investing my own cash in US property and the positive cash flow is very good 25% net in some cases.

    My background is in real estate property investment here in Sydney, I have interests in a number of property here in Sydney as well as the USA, I cannot get positive cash flow here in Sydney, my business partner has a finance background and is a mortgage broker.

    This is a good forum and I am pleased to see many making a good contribution to what is a growing market here in Australia.

    Jeff

    Profile photo of CheevesFinancialCheevesFinancial
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    Your own due diligence is the only thing that can make your investment seemless.  There are thousands of agents pitching investment property.  Question:  Do these agents even know how to calculate Net Operating Income?  Do they include true expenses when calculating that NOI? 

    Real estate agents in the U.S have the same reputation as Used Car Salesman and that is a shame because there are a lot of good ones out there (nothing against used car salesman..it's just a stygma).  We work with international investment groups and only recommend areas that we have our own money in.  Company and personal asset investments.  Every investor that has come to our area, we show our own properties to that we own.  Agents selling in areas that they do not invest in either do not believe in the area entirely or do not have the wherewithal to purchase.  Wherewithal should not be a deterrent in many cases, but are you going to buy an IPO stock from a stock broker than hasn't unloaded himself?  Different, but same.  The U.S is a great market to invest in but it is a major "BUYER BEWARE" market also.  If you do it right, you can set yourself up for a very profitable 10+ years. 

    Mike
    http://www.MyRealtySource.com

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
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    Profile photo of MakingTheJumpMakingTheJump
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    British Buyer wrote:

    1. It's a once in a lifetime opportunity.  It's the biggest property balls-up since the Great Depression. 

    British Buyer is absolutely correct. This is the perfect storm IMHO. But yes, definitely go over and check it out if you can. I just got back from a trip to the US and although I had visited the city previously, it was an eye opener to go to the actual suburbs and check them out. As it has been mentioned on another thread, some really nice parts (or pockets) are surrounded by some really crummy areas. Sure, you can buy a house for $40k but they are not in the best areas. My advice is spend a  bit more and get a decent property in a decent area = less hassles down the track. Another bit of advice is find a really good real estate agent with very good contacts in everything from repairers to tax agents. It will save you a lot of time and stress.

    Profile photo of CheevesFinancialCheevesFinancial
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    Yes, once in a lifetime opportunity.  If you can get cash or get a mortgage perhaps through Llyods or HSBC you should be able to line yourself up for a lucrative opportunity.  We are seeing a lot of foreign money coming in.  We also have a long time business in New Jersey on the Hudson River across from midtown NYC in addition to Florida.  LOTS of international interest.  Although we did not procure all of the sales (wish we did!), there is one building in Jersey City NJ where there were 19 sales over the last 2 months.  14 of those were from foreigners!  Yeah, prices are higher but upside is what they look at.

    We recently wrote an article about foreign national investing if anyone is interested:  LINK

    Finding good deals you can probably do sitting in your recliner at home in a foreign country.  The most problematic issue is management.  Most good management companies are all online where you can set up with them via phone or visit, then they give you an account on their website where you can get all of your monthly accounting reports and everything else.  Fortunately and unfortunately, we have worked with about 2 dozen management companies over the last 8 years and all of them suck pretty bad with the exception of the 2 that we have continued to work with.  It's process of elimination.  Very hard to just interview a company and find the right people in one day or even one year. 

    Mike
    My Realty Source

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
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    Profile photo of ChuiChui
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    Mike,

    As you said, a lot of people are on the sidelines because of concerns over the ability to find good management. The article is interesting but it doesn’t tell an investor what I need to know – how long are people taking before they find a renter, what sort of property managers were they happy with, what is the result 1 year on. etc. In addition, we don’t know what are the taxes involved in the U.S. May be some more facts, e.g. water taxes are X per month, garbage are X per month.

    Regards

    Chui

    Profile photo of CheevesFinancialCheevesFinancial
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    Yes, even domestic investors are finding property management to be the biggest issue.  Sorry for leaving things out of the article.  I didn't want to be too long winded, just general.  I should really update that because you raise good points.

    In Florida, we work in the SW Florida region (Ft. Myers/Cape Coral) we are achieving tenancy in under 30 days.  It could be different with others.  What we do is purchase small bulk from the banks.  Large bulk doesn't really exist to us that much anymore.  We wholesale them out individually.  So there is an A to B transaction and B to C transaction.  The bank is A, our firm is B, and you for instance are C.  Once the A to B transaction closes we rehab the property to rentability.  Our rehab team creates our budget before we put a hard deposit down with the banks.  Once we close A to B, you would contract with us to form the B to C transaction.  Your closing (if cash) would take about 20-30 days where prior to closing all of the rehab work is completed.  Mostly cosmetic.  In almost all cases, we have tenants ready by Day 1 of the C transaction.  Not in all cases, but most.  We haven't gone 2 months with consistent vacancy.  The management company we work with has guys in the field all the time.  They have their own handymen, and if something is needed by a licensed contractor, they provide the service calls.  You can also purchase an insurance policy for about $350 per unit annually.  This covers appliances, electric, plumbing, HVAC, Heating, etc.  Taxes are broken down several ways…Ad Velorum, City, Schools, etc…Your water tax is covered under the city portion, same with garbage.  Assessed values of real estate is way down.  Taxes are very inexpensive in our area.


    I hope this helps in clarifying.


    Thanks,

    Mike

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
    http://www.CommercialRealEstateVoice.com
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    Profile photo of Garry MacGarry Mac
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    CheevesFinancial wrote:

    Yes, even domestic investors are finding property management to be the biggest issue.  Sorry for leaving things out of the article.  I didn't want to be too long winded, just general.  I should really update that because you raise good points.

    In Florida, we work in the SW Florida region (Ft. Myers/Cape Coral) we are achieving tenancy in under 30 days.  It could be different with others.  What we do is purchase small bulk from the banks.  Large bulk doesn't really exist to us that much anymore.  We wholesale them out individually.  So there is an A to B transaction and B to C transaction.  The bank is A, our firm is B, and you for instance are C.  Once the A to B transaction closes we rehab the property to rentability.  Our rehab team creates our budget before we put a hard deposit down with the banks.  Once we close A to B, you would contract with us to form the B to C transaction.  Your closing (if cash) would take about 20-30 days where prior to closing all of the rehab work is completed.  Mostly cosmetic.  In almost all cases, we have tenants ready by Day 1 of the C transaction.  Not in all cases, but most.  We haven't gone 2 months with consistent vacancy.  The management company we work with has guys in the field all the time.  They have their own handymen, and if something is needed by a licensed contractor, they provide the service calls.  You can also purchase an insurance policy for about $350 per unit annually.  This covers appliances, electric, plumbing, HVAC, Heating, etc.  Taxes are broken down several ways…Ad Velorum, City, Schools, etc…Your water tax is covered under the city portion, same with garbage.  Assessed values of real estate is way down.  Taxes are very inexpensive in our area.


    I hope this helps in clarifying.


    Thanks,

    Mike

    Interesting information Mike. I attended Steve McKnight’s market update last night and he is investing in Fort Myers also.

    Thanks for additional info.

    Cheers
    Garry

    Profile photo of jeff2tractjeff2tract
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    wanelad wrote:
    Thanks for the warning yes has been tempting however if there is a double dip like many expecting, could well be stung

    Hi Wanalead,

    I checked out your blog, very encouraging, I know that this is a property forum, not wanting to get away from what everyone is here for. Still our eternal destination is far more important in the end.

    ” What does it profit a man if he gains the whole world and looses his own soul”

    [email protected]

    Jeff

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