- worldinvestor wrote:Hi All
another great property I purchased, renovated in 4 weeks.
thought I would give you an update on this property. It has now been leased and achieved $100 per month over the estimated rental return. Quite amazing it only took just over 2 weeks to rent out considering the time of the year (holiday season etc)
This naturally changes my figures –
Gross reutrn 25.93% net return of over 17%
My major expenses were – 2 airconditions, repaint, carpet, new kitchen appliances and all other standard bits and pieces which come with the rehab.
This property was built in 2001 and is just over 2300 sq ft according to zillow.
The property below was my first property I purchased with Karina (Select American Homes)
This is a larger home 2500 sq ft, built 2001. This property was rehabbed and rented out within 4 weeks would you believe and achieved $200 per month over the estimated rental return. The net yield is just over 15%.
Delighted with the results.
I have just settled on property number 6 and still looking to add.
I am up to my neck in the reality of management right now; I'm in LA fixing up the last 3 months worth of spot fires. Gross yields are nothing but pie in the sky and net yields mean less than stuff all unless you are talking over 2-3 years. And even then I don't trust what I see on paper. I could give you a 60% cap on the 'right' property over the 'right' month:) The US guys understand what I am talking about, it looks great and congratulations for achieving what you have but be careful out there !! If it was that easy, everyone browsing loopnet would be retired decamillionaires.DHCPMember@dhcpJoin Date: 2010Post Count: 190lawsjs wrote:I am up to my neck in the reality of management right now; I'm in LA fixing up the last 3 months worth of spot fires. Gross yields are nothing but pie in the sky and net yields mean less than stuff all unless you are talking over 2-3 years. And even then I don't trust what I see on paper. I could give you a 60% cap on the 'right' property over the 'right' month:) The US guys understand what I am talking about, it looks great and congratulations for achieving what you have but be careful out there !! If it was that easy, everyone browsing loopnet would be retired decamillionaires.
I can understand your point although I'm here in Australia.
You may be aware or not, the median price here in Sydney around 665K (based from the last seminar i've attend from Steve) so to buy a property whereby Banks only finance 90% LVR, you will need a substantial deposit…plus the property would be negatively geared………..that is why investors looking for positive cashflow often head to regional areas whereby traditionally, positive cashflow is plentiful but prices also have risen due to increasing competition.
I'm using buyer's agent who is based in Australia but its team are all based in Atlanta (e.g. realtors, attorney, building inspector etc). Asyou can see, with your 10% deposit here in Australia would buy an outright property in the US returning net ROI at least 14%….this explain why Australia investors are excited seeing their purchased property with quality finished plus cashflow positive….just like the property posted here. What's possible to achieve in the US in term of ROI, is impossible to achieve here in Australia. For that type of quality property here in Sydney (depending on location) would cost you between 700K to 900K or more.
I think the point being made is that for those buying in Atlanta your purchases are too new ( or early in the cycle ) to establish a true gross or net return.
Professional investment property investors in the US that do this for a living will want to see at least 24 months of operating cost’s tax returns rent rolls ext ext to establish numbers like net return or gross return that actually mean anything.
Anyone can buy a home take in their first month of rent then calculate out rate of return and come up with the 14% or 18% or whatever,
What Lawys is pointing out is that you have no historical track to really know what your return on investment is going to be.
Especially 5 years down the line when your going to need to do basically the same rehab you just did when you bought the property if your going to sell it or just keep it in service.
I walked through 6 of the properties I have under contract here in Atlanata and all but one need extensive work and they were all 4 to 6 years old.
So to keep it real with the numbers. you just have to realize these are not set it and forget it investments.
Your going to put far more money into these homes over time than what I see people represent in the industry. Its 1k a year and every 5 years a complete rehab… If you run your numbers on these facts that will give you a true return.
Now if you get that one in a million tenant that stays 5 years and the house is immaculent when they leave that will be another story,
So lets all check in on Atlanta buys that are being made today in another 24 months and compare notes.
Still great buys and I for one think the investor is not going to get near what they think on annual rental ROI, But I beleive there will be some happy campers in 5 to 7 years when they see some really nice capital growth over what these properteis are selling for today.
Indeed Jay. And (esp Alex) I am not having a go at the US (though many 'Proud Americans' also subscribe to Soldier of Fortune magazine and own weapons the Aust Army aren't allowed) but things are very different in the US.
Its hard to explain, but in Aus if someone does a job (generally) they do it to the best of their ability whereas the US it seems to be something to get through before you finish work for the day. It may have something to do with our property managers earning at least $60-70kpa and US ones working with much harder tenants, way more of them and for far less money. I haven't worked it out yet, but it seems a cultural thing. My mexican property manager complains about the same thing so it isn't just me. Either way, precisely as Jay said above no property investment in the US is 'set and forget'. My sister is attacking the problem by trying to rewrite the US rule book and setting up Australian style management systems. It seems to be working, but I would be the first to say she has helped people buy very specific properties in very specific areas and it is relatively early days yet – 12 to 18 months at most. In any case (and again as Jay has pointed out) I would be very, very cautious about anything in the US if you cannot afford the time or the airfares to check up yourself on what is 'really' going on at least once a year, and I think anyone would be silly not to try to do it more.
So that then brings up another issue. Knocking off $5kpa from a $12k net returning property (or thereabouts) for airfares before you talk about any repairs at all really makes a dent. I don't see much point in buying one 'just to see'. It will be very expensive and is very random. I know a few of Emma's (my sister's) clients who have bought half a dozen each, one in particular with 'vast' knowledge of the AUS market from shopping centers to retirement villages and pubs who simply said 'how good is this!' and bought six or seven in LAS, a couple in ATL and has all but given up working in Australia. A few are also people who get to the US through work when someone else is paying the bill, keep a go-fast car they couldn't afford in Australia (US guys – check our auto prices:) store them in that wonderful desert air where nothing deteriorates and making it a working holiday whenever they visit. I know of a Texan lady on the Sunshine Coast who is helping people buy 'well' in Houston, again generally to people who travel frequently to the US. I understand from Emma that Karina has bought a bunch of properties for herself and (so far) a couple for clients so that is a similar approach. She too has made it her 'job' (aside from pocket money she makes selling them) and is spending as much time in the US as she legally can. There is no question that approach will reap rewards – the question for the reader is, how much time can you afford to ensure your investment 'works' as it should?
I am living proof of set and forget US investing and my net returns over about a decade in 'good' areas are basically neutral gearing but very satisfying capital growth – far better than Aus. I have deliberately divested myself of Sydney residential property and moved the capital to the US.However I very nearly sold the entire portfolio in the US because it was just so damn annoying dealing with people who didn't care and a banking system that is at best bizarre in its operation. Conversely I suppose (and unlike Australia) their attitude would be that _I_ didn't care so why should they? Either way, my RE broker put me onto a new manager and we are basically splitting the rental returns – in essence I am paying a lot for property management, but net yields increased overnight from 6-7ish to around 13-14 (from what I understand this is also Jay's approach). More importantly for me the incessant worries about maintenance and bill paying (paying them, despite the banking system is the easier part, getting them is hard) disappeared overnight. The _really_ good part is that I get an instant cap growth hit from having a nice property vs a shabby one and am now in the process of refi'ing them based on the $500-700k increase in value per property:) Like anything though, it was a big struggle until I gave the issue 'serious' attention and worked out how to solve all the problems.
Regardless of what approach you take the returns you get will match the time and effort you put in. And believe me it will be maintenance that will kill the cash returns over time.
DHCP: I only just saw your post (sorry). I live in Sydney and have done all my life – I also used to speak at Australiam property investment seminars so I do know what you are talking about:) What you get in Sydney and Australia is a very controlled market (by the govt) compared to rampant capitalism in the US. Again risk/reward. Which I do not think Australians _really_ understand. 2-4% net in Aus but guaranteed CG. 20% returns in say ATL (and they won't be but lets accept the 'quoted' figures are correct) where I suspect the limit of CG for the next 10-15 years will be a CG increase to make the yield around 10-12%. Because Aus has _generally_ very controlled development you WILL get ongoing genuine CG provided you can hold the losses in the first 5 -7 years until the CG kicks in. Even so, you will probably be negative in a cash on cash position for maybe 10 years. Like the US pre 1986. An interesting aside I got from my US broker when I was whinging about Stamps in Aust. You mention the 10% deposit (say at least 5) on a $600k property. The stamps are $22,490 (NSW) which also has to be saved. Along with govt regulation this does a couple of things. 1) Ensures people have a lot of 'hurt' money in the deal and 2) if you have proved you can save $80k it means you must have earnt with taxes (or been gifted by someone with money) at least $120-130k – you therefore can handle money. Now both these things together ensure the stabillity of the market. Near impossible to get NINJA loans in Oz, which again ensures the low yield is a guaranteed 'win' over time – if you can cover the near to medium term losses. And on a personal note, be VERY careful buying from Australians (especially when they don't even live in the country) selling US property. You might be OK, but make sure YOU at least go and see EXACTLY what it is you are getting.* The horror stories are many and we as a country are very happy to swallow nice sales lines because in our country very little goes wrong. Would you recommend a friend of yours in the US bought an Australian investment property through a US agent who had only visited Aus a couple of times?
*Make 100% certain you get it too – some have not even got title despite handing over the money.Von KrummParticipant@von-krummJoin Date: 2011Post Count: 23worldinvestor wrote:It has now been leased and achieved $100 per month over the estimated rental return.
This naturally changes my figures –
Gross reutrn 25.93% net return of over 17%
Wow great work. Hope the rent keeps coming in.
I'm curious of your figures… by my calulations you are recieving $250 a week gross return.
$100 over the estimate you say? Thats almost 70% extra, how is this possible…
For all the praise of this USA property mob, surely they could have gotten your rental appraisal a bit closer?
P.S. You couldn't build these homes for $50k could you? Seems pretty good to me.DHCPMember@dhcpJoin Date: 2010Post Count: 190lawsjs wrote:
Its hard to explain, but in Aus if someone does a job (generally) they do it to the best of their ability whereas the US it seems to be something to get through before you finish work for the day. It may have something to do with our property managers earning at least $60-70kpa and US ones working with much harder tenants, way more of them and for far less money.
……………She too has made it her 'job' (aside from pocket money she makes selling them) and is spending as much time in the US as she legally can. There is no question that approach will reap rewards – the question for the reader is, how much time can you afford to ensure your investment 'works' as it should?
………….it was just so damn annoying dealing with people who didn't care and a banking system that is at best bizarre in its operation. Conversely I suppose (and unlike Australia) their attitude would be that _I_ didn't care so why should they?
………….Regardless of what approach you take the returns you get will match the time and effort you put in. And believe me it will be maintenance that will kill the cash returns over time.
I have to apologise in advance to our American friends if my comments below are biase…as we call it here locally, I just want to get to the buttom of the issue here:
I've spent a decade in the IT industry whereby the industry core products are American made (e.g., Cisco, Microsoft, Citrix etc). A lot of major Banks and finace companies uses ORACLE for their Financial applications and Banking. Further, I got University degree and MBA degree and all 95% of our academic books were Harvard produced whereby "the customers" focus is at the heart of any business success as proclaimed by Harvard professors who wrote the marketing text books.
Now, all I'm hearing again, again, and again….American attitudes when it comes to customers service is people just don't care…Not only here in this forum I heard this before (i.e I've attend a US Property seminar few months ago, it is the same….American just don't care)
Bryan Tracy (motivational speaker) got it right…those professors from academia or academic all there materials are non sense and doesn't apply in the real world…maybe he is right?
I thought as an Australia visiting the US, you are not allowed to live there and pursue Real Estate investment as stated in your VISA? How is possible for Karina to make a living in the US through buy/selling of real estate investment?
I often here about maintenance is the main issue of owning invest property in the US! IF so, What are the main reasons? (e.g., theft, hign turn over of tenant, PM not screening properly hence you get a bad tenant because they don't get paid much)? What is it? What's the problem with maintenance???????
Is there a way to minimise the maintenance cost (e.g., buy younger property not old ones)?
Thanks for the post I get what you are saying, that is why I need to buy bargains to improve the figures and mitigate the risk.
I am more than happy to post figures down the track to keep it real.
DHCP: I will send you a PM on this but regarding maintenance etc but a part of the problem is (I think) like Grand Designs. How badly do the projects go if the owner is not there to oversee the build? It is setting youself up for a fall. Add in a US/AUS language barrier and 6,000+ miles and simple things will go wrong at some stage.
Karina: Whilst the properties are 'cheap' and you are no doubt doing your best to hand pick them, you are by definition paying market price. In fact, to really argue the point (and to use my pet argument against the auction process at home) you are paying above the price anyone else was prepared to pay or you wouldn't own them:) There is no doubt locals get better prices, which is only fair really – they have been there longer:) You are (like I get in LA) 'good' buys, not bargains:)
this is the concundrem right now nationwide, what is the true value…..
Atlanta particularly, is dominated by foreclosure short sales. No one really knows the true value, where as other markets most of the foreclosures are pretty beat up and require a ton of work thereby creating added value.
Most of what I see in Atlanta is very new homes or newer that only require flooring paint and modest fix up.
I just look at the atlanta market one way. By the best neighborhoods you can. If your buying substantially under reproduction values.
at some point there will be a return to a higher price.
We bought one this week for 38k that needs maybe 3k. and there is brand new construciton 10 houses down selling at 120k same house same sq ft. etc etc. So what is the value?????
the point you and most investors not familiar with the US. is that home owners and renters that exit these houses, when they need major reno this is just how they live period.
Other wise how can a 5 year old home in Atlanta be trashed in 5 years by the owner. ITS lifestyle has nothing to do with maintenance and initial construction.
You can get lucky and walk into one that will need next to nothing like the one I posted above. Or you can have the same vintage same home and all floor walls etc need work…. Holes in the walls carpets that have never ever been cleaned, stains everywhere.
Although I will tell you that the quality of the construciton on most of these homes is just production level. IE minimum standards and materials and craftsmenship these homes when built were put up in 60 days…
Our new construciton in Oregon that we consider production would be semi custom in these areas. that is one major difference so you take that very minimum standards add folks that are inherently tough and there you go.
It takes years of experiences to really get a delta on these homes.
They may seem hard to value, but in the raw capitalistic world of the US what you are doing of course is creating the market. Fortunately there are buyers out there – albeit at a very low level – or total collapse would have occured (Lehmans). Your $38k house, as ridiculous as it seems has a 'pure' value of $38+3k. And of course I agree it is ridiculous, but if you didn't pay that someone would have got it for less. And since the majors paid back most (if not all) of their loans to Uncle Sam, the cash is simply not filtering through to the market. A la 1930 when everyone was hording cash and no one lent anything. At least guys like you are able to pay cash – it may not be much but it IS something. And that $3k is also not much, but it is going into the sickest part of the economy. I am also going out on a limb and thinking that may not have been your only rehab…
I am 100% behind you guys out there, I am sure this is a once in a lifetime opportunity. Just play it right:)
I had a couple of builders today talk about 'custom' stuff (poor fools thought I had money) and the meaning of those words finally dawned on me. In Australia there really is ONLY custom – which along with labour at $50ph without penalty rates adds to the costs considerably.ed01Member@ed01Join Date: 2012Post Count: 2
Love the new house worldinvestor. Just a quick question as I’m brand new to the forum, and stumbled across this post whilst looking around.
Where do you get your finance for this type of thing? In Australia, or USA? My brother and I are planning to start investing in the US property market this year, but just not quite sure where to start with finance.
EdvselleckMember@vselleckJoin Date: 2009Post Count: 28
Termites are active in Georgia and we encounter about 1 in 10 properties will have some evidence of termite infestation either current or historical, particularly where the properties are over 10 years old. We insist on pest and building inspections prior to purchase and will only contract subject to a detailed inspection report.
Our preference is to purchase further up the chain from wholesale companies where the properties are already renovated with tenants. This creates a crystalised result with cash flow, costs and expenses all determined at time of purchase. We also receive rental guarantees, tenant replacement guarantees and home warranties that allay any foreseeable risks. Net yields of 15% are easily achieved on quality newer homes in good areas without needing to go through rent vacuums while renovating and trying to find good management and tenants. Renovations are often under estimated and potential rents overstated. Time vacant while renovating and tenanting can be 2-4 months which needs to be calculated in your net yields in the first year.
<moderator: delete advertising>jayhinrichs wrote:law sys this is the concundrem right now nationwide, what is the true value….. Atlanta particularly, is dominated by foreclosure short sales. No one really knows the true value, where as other markets most of the foreclosures are pretty beat up and require a ton of work thereby creating added value. Most of what I see in Atlanta is very new homes or newer that only require flooring paint and modest fix up. I just look at the atlanta market one way. By the best neighborhoods you can. If your buying substantially under reproduction values. at some point there will be a return to a higher price. We bought one this week for 38k that needs maybe 3k. and there is brand new construciton 10 houses down selling at 120k same house same sq ft. etc etc. So what is the value?????
Could not agree more, makes perfect sense to me.
I am purchasing properteis in Atlanta at $20-30 sq ft, where building costs in Atlanta is somewhere around $80-90 per sq ft
from what I have seen is a lot of Aussies are borrowing against the personl residences in OZ. then using that cash to buy US assets.
there is sporadic financing for Aussies mostly private funds .
We are working on a few avenues to bring reliable financing to the OZ borrower, as there is a big opportunity there.
Its somewhat scary thinking that OZ residents are leveraging their personal residences to buy US homes… this model was done with Californians and other high value high equity markets in the US. This model crashed badly with the rental homes not producing what the Buyers were told and then their CA home value goes down.
thereby leaving the CA investor upside down on their personal residence and a rental that is sucking cash every month.
this scenario repeated itself literally a million times and thats were a good portion of the current foreclosures are coming from.
For me I would caution anyone on borrowing on their home equity to buy a home on their own. It would be one thing to go into a fully managed product that you can count on, but buying a home on your own, you are setting yourself up for inconsistent cash flow, further cash calls and some real risk of a total wipeout if you buy the wrong property or area,
Remember when you go out looking for US rentals rate of return is directly retaliated to RISK
agree with your post except the 80 to 90 a foot to rebuild. The quality of the houses we are buying at the low prices. can and will be built today and in the future for 55 to 65 a foot. not 80 to 90.
Right now lots are selling for 2 to 5k… These vinyl village houses with 8 foot ceilings and the cheapest of everything, Cabinets, carpets fixtures, counter tops, 2.x 4 construciton viynl siding, virtually every component of these homes is the least expensive product a builder can buy. All that on houses that are built on slabs and put up in 60 days start to finish
So in my mind these new construction homes that are on the market at 120 to 130k, are being built for 100k all in or 50 to 60 a foot, the builders are marking 15 to 30k profit per house…
They build them quick and have volume.
In our market in Oregon we take 90 to 120 days. our cost to build is 55 to 60 plus lot and hook up fees which would be another 100k minimum. But our standards are hardeplank up graded cab’s granite and tile surfaces. bronzed oiled hardware, Stainless gas appliances front and back lanscaping with sprinklers.. ANd our landscaping actually includes bushes and other tree’s not just sod.
jlhusainvestorMember@usainvestorJoin Date: 2011Post Count: 38ed01 wrote:Hi guys, Love the new house worldinvestor. Just a quick question as I'm brand new to the forum, and stumbled across this post whilst looking around. Where do you get your finance for this type of thing? In Australia, or USA? My brother and I are planning to start investing in the US property market this year, but just not quite sure where to start with finance. Thanks, Ed
You don't get finance. You must source the funds in Aus and buy with cash in the US.
Anybody who says they can get finance is selling you properties at inflated prices where the finance is covering their markup. The same goes for those offering rental guarantees and basically any other enticement to try and get you to buy. (think 2 tier market Gold Coast)
Generally those offering this type of deal are selling turnkey houses which are predominantly 15+ years old. When you come to sell they will be 20+ years old selling to a market that wants new.
Finer comments were never made on this forum!!!!!
We are working on a true loan product, However it has to be a private fund… No lender or government backed program available for non owner occ investment properties for non citizens. And we will not own the home it will be a true loan product.
Even tough for us US citizens to get non owner occ loans.Lets USMember@lets-usJoin Date: 2012Post Count: 3
Hello WorldInvestor and Forum Members.
Is there anywhere in Atlanta you should avoid buying?
Im very new to this US property market, I have thought of going to Florida to look at
some properties there but Im sure there are other States like Atlanta I have overlooked?
If so, what areas would be a good start to look into?
thank you and Congratulations on your properties World Invest, gorgeous homes indeed.