Similar experience with HousebuyersUSA. Salesperson hadnt even been to the U.S. Upfront fee for a look.
The difference is that I have been there on many occasions I was there 2 weeks ago. I generally charge around $1495 that is the cost of a tour plus you can buy as many properties as you like. My aim is to work with people who want to establish a separate income stream in the United States
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
Email Me | Phone MeWe have just launched a new website join our membership today
My company has been supplying properties from the Phoenix market to Australian agents for the last 18 months, nearly 150 in all. We have worked with most of the agents mentioned in this thread.
We stopped doing business with one agent who did not tell us he had changed his fee from a flat charge to a substantial percentage of the total purchase price. We valued the relationship and relatively sophisticated investors he brought, but did not like the way the numbers were being cooked to support the exorbitant fees. At that point we began working directly with Australian investors referred to us by clients who had done business with us in the past 18 months.
There is a place in the market for Australian agents for investors who don’t have a relationship with a US property supplier who has experience with international clients. The value of avoiding buying the wrong property in the wrong area is equal to the price of most agents. But why pay an extra $8,000 if you don’t have to? That is good sum of money even if it is USD.
And in regards to the earlier post that Phoenix is not a cash flow market- when the income and expenses of a property are fully disclosed Phoenix performs as well as any market with the added benefit of excellent opportunity for equity growth.
Trentjr:
Though it sounds outrageously egotistical to say this, I would like to thank you on behalf of a great many australians who may have, or may yet to be, hurt by unscrupulous property marketeers.I have had the great fortune to be able to find (when it wasn't trendy) a US agent who was scrupulously honest and though a salesman helped me find 'fair' (not great) deals i could get into when I was looking for them.
His motto is 'I would rather sell 10 buyers 10 properties than 100 buyers 1 property'. The result? Most of his clients are now retired from 'real jobs', most of his clients just pick up the phone and ask him if he has anything available, and most, like me, have been dealing exclusively with the same guy for more than 15 – 20 years.
It is very easy to rip people off. What that will do is put food on your table for a day. If any US agent can be seen as very genuine I can promise you that whilst the initial profit might not look nearly as good as some others, satisfied customers will eventually go nowhere else.
Australia is a very small country, but we share a lot of values with the US. We will both be here a very long time, and for years I have never understood why it should be more difficult to invest in one country or another. It is a lot easier than it was 15 years ago, but my fear is that people will get badly burnt and the whole thing will get a bad name.
You stopping doing business with one agent might seem like a small step, but I can promise you that if you make sure your end purchasers are notbeing ripped off then you will have quality buyers for quality investments for decades to come. The last thing you want is 100 angry property owners creating new sub prime debacles in your neighbourhood because of outrageously greedy marketeers.
Buying investment property in Australia is currently netting around 1% – if that. it is a very different market to the US (I think like kinderagrten compared to college) but it is going to be around a LONG time.
The smart guys will nurture the gosling that will one day become a big fat gold egg laying goose. Do not let cheap and nasty australian real estate agents ruin a very solid future market by ripping off a couple of gullible buyers. They sound very glib I am sure, but believe me the names you are probably familiar with are also familiar to most of the investigative reporters in our country. Your agency does NOT want to be associated with those guys.
Like the buyers educating themselves about property you are selling, I would suggest educating yourself about the wants, needs and expectations of your buyers. One day, I am sure it will pay both sides of the equation massive dividends.
Thank you for caring….
HighIncomeProperty wrote:I am not surprised at all at what Property_scout is reporting.
We have supplied properties to many Australian- and international "buyers agents" and many of them (although not all) are looking to mark up the price to make huge profits, on top of any commission they were due.
As you can see on some American/international agencies websites, they're now offering to bring an "International buyer", which is really saying, pay our fees and we'll get you more money than your house is worth.Getting the property from the source is greatin theory although I'd need to second Nigel's comment right above mine that it's a minefield, a deal might look great on the surface but once you dig deeper into it, that particular block might be a "warzone", the property has liens on it, bad roof, poor management – any of a number of things. Unless you have a person on the ground, or someone with a competent team, it's a can of worms trying to do it from 10.000 miles away.
With rentals you always need to be so careful, we are trying to stay away from the highest yielding ones now after seeing some issues with management etc, and I'm just not entirely comfortable buying homes anymore for $30-$35K that on paper brings you a return of 15-18%, once you have a few months of unpaid rent, the yield drops significantly and maintenance also tends to be more costly with those types of tenants.
We are going down another route with most of our investors, something we have done for years and consistently got returns out of, although we still do rental properties in select areas of the country, where we have a very string network of people working with- or for us.
To all heed the above mentioned Advice….
The major issue's you have with any and all sellers in the US wether you buy direct from the Owners ( which is frought with its own peril) as these sellers are one off and will rip you off just as bad as anyone else. FSBO's are usually dilusional about what their property is worth and that dilusion is on the high side of reality.
Its all about location, Running costs that are real ( which I have not seen one purveyor on this site come up with real numbers some are close non are real) the reason is they all have to quote 15% plus or this audiance is not going to respond.
I had a funny experince last week we are opening a new market and I was with my new partner and we were discussing this phenom of Aussies and GB buying these low end rentals. And he said he had a group of them and when he showed them real properties that would return a nice 8 to 10% net yeild if everything went right, 2 women just laughed at him and said we are out of here we are going to detroit we can buy 20 to 25k houses that return 20 to 30%…. We had a beer and good laugh over this one, the amount of wishful thinking is really incredible…. Anyway as I have stated and others are doing so with far more eloquence than me, is these quotes of returns are just not sustainable. If you see a brochure and their is no Letting fee's No vacancy factor minimal mantenance costs then your looking at something that is just pie in the sky and if you base your investing decisions on these numbers you will be very dissappointed….. In another thread going on this site they are talking about tax lein or sale investing, I predict that many hundreds and thousands of these ghetto low end rentals the foriegners are buying once they figure out they bought a money pit and keep feeding them will be tax sale inventory 3 to 5 years from now. When the foriengers pay cash there is no obligation of a cash buyer to pay the tax's its not a crime it does not go on your credit, and their is no bank thats going to pay them to protect their mortgage, so these investors will walk and ergo you will have another slew of tax lien properties avalaible for the next set of folks that thinks cheap properties in the US are a great investment. Just saying.
Hi Jay,
Agree with some of your points. The benefit of buying turnkey compared to “pre rehab & pre tenant” property is that running costs are real and active before you purchase. The numbers you cant really forecast are vacancy and maintenance and this always needs to be factored in.
The guys at AmericanRealEstateInvestments advise to allow 10% per year for vacancy and also up to $500-$1000 for a property clean every time a tenant moves out (new internal paint, possible new carpet or floorboards re coated)
Always try to factor these figures on the more conservative side so there are no huge surprises once your deal on paper becomes reality in your bank account!
property_scout wrote:Hi Jay, Agree with some of your points. The benefit of buying turnkey compared to "pre rehab & pre tenant" property is that running costs are real and active before you purchase. The numbers you cant really forecast are vacancy and maintenance and this always needs to be factored in. The guys at AmericanRealEstateInvestments advise to allow 10% per year for vacancy and also up to $500-$1000 for a property clean every time a tenant moves out (new internal paint, possible new carpet or floorboards re coated) Always try to factor these figures on the more conservative side so there are no huge surprises once your deal on paper becomes reality in your bank account!'''''
Getting better on divulging running cost. Good rule of thumb is to factor 50% of your gross rent to expense side. If you do that your going to be fine most of the time unless your house gets trashed in between tenants.
I think its a fair assumption that these are long term holds 5 to 10 years minimum. What happens in the first 12 months of ownership is the best its going to be numbers wise you have fresh ( should be quality rehab and new tenant). I think it fair to say:
1. No house stay's rented 100% of the time so there needs to be a vacancy factor I think we can all agree on that.
2. Letting fee's; most profitable ( and you want your PM profitable so they stay in business) charge a letting fee unless they have wrapped this into their up front profit.
3. If you have a section 8 tenant your annual inspections will rarely come under 1000.00 and you have on going cost with a majority of these houses. Unless your buying new or near new construction. If your buying 20 to 80 year old homes stuff does break or wear out and the tenants are tough on the properties. Or you could have a sewer plug up or any number of small issues that will create a service call that you will have to pay for on top of a turn over mini rehab. Again its not the first year its year 2 ,3 ,4 ,5 and so on that your going to see your cost increase I think this is only logical, and of course what we experince in our portfolio's.
4. Your not going to paint recarpet or stain your floor boards for 500 bucks, I think thats a given
I just think its better to have a contingency line item in your budget that gets you to that 50% number, Us US Real estate wholesalers and lenders of which I am one, have seen SO many US clients lose their properties because
1. they borrowed against their personal residence to buy these.
2. Had little to no experince in the business and put 100% trust and faith in the nice salesmen that was selling it to them.
3. Totally undercapitolized to being buying property IE once they spent their downpayment they had no cash reserves to pay for major items. Like when their Air condioner unit got stolen and the property was vacant for 2 months and kids got in and did damage and now its 5k to get it rentable and they do not have the money. Ergo the house goes into foreclosure and is recycled stock for the next investor to take a wack at it.
One great thing that I think is happening is most transactions are cash these days either US investors using their super funds or Foriegners this is better than leveraging and creating the extra burden of debt.
There is a reason local community banks in the US will not lend to anyone who does not live within 100 miles of their property, Managing them is a big job as is managing your manger.
Jay are you saying that every year section 8 goes through the property and nit picks at minor issues and will costs you on average of $1000 to repair otherwise they wont approve the house to be section 8 standard?
Property Scout
Don't knock 888 as they actually provide houses at better rates than some of the US so called 'Wholesalers'Check this house out:
http://www.888usaproperty.com.au/111215/Now look at the same house here: http://www.mastermindreg.com/Default.aspx?PageID=6686226&A=WebApp&CCID=11560&Page=2&Items=15&CCQID=1982994
888=`$69k USA Property dealer – ~$73K
I understand where you are coming from dj_ajay and I dont mean to knock 888 at all. I just want people to save money where they can. I just went on that website and I have been offered some of those properties to buy through american real estate investments for prices consistently 3-5k lower after 888 add their fees on top. 888 look like they do a good job as well so apologies if I have been a little agressive on this thread, but I am just being honest with my assessment.
If you are buying 10 properties and consistently save 5k per property….. hmmm that means you could actually be buying 11 properties with the money you save going direct
trent74 wrote:Jay are you saying that every year section 8 goes through the property and nit picks at minor issues and will costs you on average of $1000 to repair otherwise they wont approve the house to be section 8 standard?Yes, Section 8 houses are subject to annual inspection the tenant has to reqaulify as well as the property, The inspector will come out give you a punch list and on average at that will run you anywhere from next to nothing ( very rare to have a section 8 tenant that is spotless and a home that needs no work at all) to 2k to fix various items. The average that we budget for is 1k per house.
so you get the punch list fix the items get a reinspect and the property is good for the next year. The tenant can also call HUD during the year term and report items that the HUD office will then come out and inspect and issue a corrective order.
If you do not fix the items or the items do not pass the inspection the house is dropped from the program and of course the tenant is off looking for another property.
Also Section 8 folks can and do loose their vouchers. The HUD office gets copies of their tax returns and if they made too much money they get dropped, and it can be mid lease term and the tenant will just walk away as they normally do not have the funds to stay in the property.
I love the section 8 program. If your house passes a section 8 inspection, you know you have bought well and the house is in good shape. They are very picky but if your house is rehabbed with certain paint and flooring specifications, vacancy costs can be minimized.
Textured darker colour walls, darker tinted floorboards, dark carpet to name a few will help minimize that outlay once the tenant moves out. Makes sure the company you buy through understand that this is paramount to your bottom line.
Here’s a video on why the textured walls etc. You will be able to find other tips in this blog which will help you understand other aspects of real estate investing often neglected.
http://www.americanrealestateinvestments.com/blogs/why-do-texture-walls-on-your-rentals/
property_scout wrote:I love the section 8 program. If your house passes a section 8 inspection, you know you have bought well and the house is in good shape. They are very picky but if your house is rehabbed with certain paint and flooring specifications, vacancy costs can be minimized. Textured darker colour walls, darker tinted floorboards, dark carpet to name a few will help minimize that outlay once the tenant moves out. Makes sure the company you buy through understand that this is paramount to your bottom line. Here's a video on why the textured walls etc. You will be able to find other tips in this blog which will help you understand other aspects of real estate investing often neglected. http://www.americanrealestateinvestments.com/blogs/why-do-texture-walls-on-your-rentals/Property Scout
The only problem with that is section 8 seems to change from state to state and county to county. We use and love section 8.Our old practice was to raise every thing to section 8 standard. In the lower income areas we still do. Currently looking at a 204 unti section 8 in Atlanta. The project is a mess so not all section 8 can be trusted and counted on….
just my two cents
AlexNigel Kibel wrote:Frankly trying to buy properties yourself is dangerous. I have been involved in the Texas market since 2005. We focus on the pre forclosure market and obtain properties for clients that already have financed locked in. If you wish to do this yourself you need to invest a great deal of time and research into you investing. In many American cities one area may be great but an area just a block or two away can be bad. Without someone on the ground to work with its makes investing a game of chance rather than investing.Nigel,
When you say your buying pre foreclosures with financing already in place. Do you mean you are buying direct from the person who is losing the house and you take Title SUBJECT TOO the exisiting mortgage or deed of trust?
If so are you aware of the new federal laws and most states have state laws that pertain to this activity, To consult someone in forelcosure you need to be a licensed Real estate agent or Lawyer. There are anti equity skimming laws. There are restrictions as to how much profit you can make on these deals and if you make more than a certain amount the previous seller is entitled to some of those funds… On and on. There were a lot of scammers in the Subject Too market.
And not to mention the Alienation clause in the deeds of trust or Mortgages. Not to be confused with Alien's. This clause allows the lender to call the loan all due and payable if the property has transfered ownership from the original borrower. Now clever people have work arounds for these in the way they title the property, and a lot of banks as long as payments are being made don't care for a practical stand point, but a few will defiantly call the note due if they catch the property has been sold without their lien being paid in full.
so just curious how you set them up there in Texas. And Texas has the most fierce foreclosure laws in the country I would personally never borrower money in Texas. It is not a Purchase Money state its a dual action state and here is the difference
Purchase Money states are prohibited from recieving any kind of money judgement for a short fall in the event of a foreclosure on owner occuppieds, and for non owner they rarely ever pursue defficiancies because its a state court action ( full blown trial)
Take Texas and other dual action states when a foreclosure happens the lender not only gets the property but a JUDGEMENT against the borrower and in Texas they will hunt you down to try to collect on the judgement… They go after poor mom and pops and commercial borrowers equally,
So in the event you need to get out of the Texas loan and you have a short fall it can get real ugly real quick.
The Subject Too business has all but died here in Oregon and Washington and CA because of these new laws. Now there are people every day that break the law,
JLH
property_scout wrote:In a recent post I made mention that 2 months ago I purchased a house for $23,000 in Kansas City. However what amazed me when I was doing the due diligence is this same house was for sale through another website called – "888 US Real Estate" and purchase price was for $45,230……. This was only 6 months earlier…… It made me sick to think that if you are not careful, you will be slaughtered by these Aussie Agents…. 888 Real Estate had the property advertised at renting for $850/month. When I took over as landlord, it was only renting for $625. $625/Month is still a great return when purchasing at $23,000 but it worries me that some Aussie agent can just inflate the rental estimates to make the investment numbers look appealing, when reality is, a few months later my tenant signed a lease for $625 per month. Now I apologise that this post has probably smashed 888 Real Estate's business, I realise that, but I would like to give Vincent an opportunity to explain himself and why the rent was inflated as well as the price? Address of this property was 3919 Euclid Ave Kansas City, google it and you will see the 888 RE listing that I found while doing my due diligence I don't like to criticise the Aussie Buying Agents for charging $3,000-$5,000 per property they find (It is a service provided after all), but more point out that there is a huge American company supplying to all of these Aussie Agent's at huge wholesale discounts and who also look after all of the LLC/Bank Set Ups/Property Management for these agents without charging the huge fees Hmmmm cutting out the middle man sounds good to me… Fortunately, I never ended up using Australian agents to purchase US property. I apologise for ruining the secret but http://www.americanrealestateinvestments.com supply to all of the agents out here in Australia, see for yourself… Good Luck Property_ScoutHi Property Scout
When a wholesaler offers us a property we research the market and assess value. In Kansas City the market value is determined by the renovated quality of the home. 3919 Euclid Ave Kansas City was brought to us by Mike Cantrell, who we believed to be sufficiently principled to provide good judgment when providing listings. Our subsequent building inspection found this property to be severely lacking and we therefore turned it in. The $23,000 you paid would have been more appropriate. Rent prices of $850 per month were possible through section 8 and this was how the property was presented to us, as already tenanted and leases produced to support this figure.
We have since terminated the relationship with Mike Cantrell. Anyone who misrepresents a property does not last long as a source with 888. We tend to favour large wholesale companies who provide consistent quality and value for money in providing turn key properties. Kansas City tends to be active with lots of smaller players with variable results. We highly recommend full due diligence for every home and independent building inspections. There was also a trend for vendors in KC to compete by providing vendor rent contributions to bump up the rent and give higher net yields, which is the main reason buyers invest in KC. We do not tolerate this practice and are very clear with the vendors about this.
American Real Estate Investments have been one of our wholesalers and provide very well renovated properties and excellent service. We are one of the few companies that have marketed their properties without mark-up or collecting commissions on the seller side. We also have a very healthy discount that would provide investors a better price than their direct model. We can never disclose full address or price in our website due to the conflict this causes with their other buyers who mark the property up and receive secret commissions.
For genuine net returns with quality renovations we have now turned to Indianapolis where duplexes fully renovated with tenants often exceed 20% net return. We have several orders from buyers now in this market and have a quality pipeline coming through.
Not every property we list passes through our due diligence process. We are the first to pull a listing if it proves to be less that expected. We tend to deal with specific suppliers with consistent, quality delivery and results now. Our network of supply is constantly improving.
Thanks for your comments and the opportunity to address them. Could you please also email me so that I know what is being said, rather than finding by accident month's later?
Many thanks
Vincent Selleck
http://www.888usaproperty.com.au/buy-now/listings/
[email protected]Vincent you need to talk to me… your dealing with US flippers and you will continue to go through providers…
jayhinrichs wrote:Vincent you need to talk to me… your dealing with US flippers and you will continue to go through providers…
Jay , let me know if you speak with him.
When I was in KC last year some time, and they explained their funding for international clients ( have not seen it here just in Kansas city and private money ) they are crushing people with the fee's. That is when I decided to start researching and emailing resellers from the Australia . I have built up quite a list , while taking down peoples comments and asking alot of questions.
So let me know how the conversation goes with Vince.
Alex
Sorry to object, but I think quoting any kind of vacancy rates (10%, 6 weeks a year, call it what you will) or maintenance costs ($300? Based on what?) is misleading and unfair.
In reality, there is absolutely no way to predict such expenses/income losses, and going off statistics for the area, similar sizes, previous deals or whatnot is a huge mistake.The bottom line is – GOOD property managers will minimize your vacancy and expense. They will know their market, their areas, their tradies and their advertising packages, and will make sure they (and you) are on top of things IN YOUR PARTICULAR CASE.
Every property, area, month of the year, and tenant profile is a completely unique set of circumstances, and there's no room for guesses here. Think 10% and you'll miss out on a good agent that can make sure you lose less. Think 1% and you'll be miscalculating your deal and wondering what went wrong. In most cases, this can make for at least as much as your taxes, if you don't have a good accountant who knows what they're doing – why settle for less with property managers?
GET. GOOD. PROPERTY. MANAGERS. I can't emphasize that more. Whether you work through proxies or independently, this is your number one concern.
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
Zmagen.
Your speaking from a Aussie perspective regarding vacancy and proficient property management.. We wish it was as you described. But alas it just is not…. Not with our tenant pool and fractionalized property management for SFR's, yes you buy Class A Multi family that trades at 5 to 6 caps and price of entry is 3 to 50 million and yes you can expect these kind of metrics.
You deal with onezy twozy mum and pop landlords and properties and their is no way no how you will be able to dictate these kind of metrics and expectations….Then you drop into the super low priced properties and the ONLY way you can achieve anyking of success is if you live here and work the business daily.. NO property manager can acheive what you describing in the low end market for ANY Length of time..
50% of all foreclosures in the US are from Landlords walking away because the properties are killing them with negative gearing when they were suppose to be positive cash flow..
Move up in property class and move down in rate of return 5 to 8% net and yes you will achieve the metrix you speak of but no way in the 15% net yeilds that are bandied about here on the property forum.
JLH
JLH, I'll respect these comments as I have no intimate knowledge of the workings of the US system. As a Japanese and Australian land-lord (and renter, on many an occasion
), I stand by this 100% – good property managers (not necessarily the cheap kind) are worth their weight in gold, so to speak. Paradoxically enough, this is because they often put the tenant's interests first – something that we, as owners, easily neglect – and guarantee long-term, hassle free, minimum expense tenancies.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 stand by this 100% – good property managers (not necessarily the cheap kind) are worth their weight in gold, so to speak. Paradoxically enough, this is because they often put the tenant's interests first – something that we, as owners, easily neglect – and guarantee long-term, hassle free, minimum expense tenancies.You must be logged in to reply to this topic. If you don't have an account, you can register here.
