Hey All,
After numerous conversations with international and National clients the last few weeks, we are looking at viable exit strategies with the USA properties down the road. I am not sold on the 5 year return that a lot of other investors are speaking about. I am also concerned about us turning retail areas into glorified rental markets. This is a big concern for me, as I see some international clients thinking in 5 to 10 years they can sell these deals that they are purchasing capturing appreciation. My first concern is that Americans in general do not move to rental areas. This could change with the new nicer rental homes that we and other companies are now dealing with. Again, this is purely speculation for down the road.
So if one is buying for buy and hold ( cash flow ) and not really concerned about future appreciation, this should not interest them. If one is looking at being able to sell in 10 – 12 or 15 years, this could be a viable option. Again, this is just my opinion, but I am not sold on appreciation coming back in 5 to 7 years. The USA is going through some problems that are new for us. I do see us as a strong resilient nation, and expect things to come back to a reasonable pricing point. To me, this 5 to 7 year plan is more of a marketing strategy for the sales teams. When they say buy now and in 5 years, the market will rebound. Again, I am not saying anyone is wrong, I am just saying I am not sold on this concept. At least not for the markets I have been to, which include all USA investment markets except Texas ( I have not been there).
Just some background information: the phrase 'lease option" in the USA. Again, to me this is really a false phrase (just a marketing ploy). We as a property management company use it to hopefully bring in a better tenant. Besides putting some extra cash in your pocket as the investor with a slightly larger down payment, I don't see this set up as a win-win situation. Investors might win with extra cash, but tenants are not being taken care of. Yes, the tenants are the most important factor ( besides property management for investors in today's real estate market). Our property management company sets most leases options ( rentals ) for our tenants. I know in the beginning very few will buy. Not to sound repetitive, but this is more for our marketing end to keep properties filled.
Now again in the end this will really come down to each individual investors game plan or investment strategy when they get started. This below is what we are looking at in the markets, in which we buy and sell homes. Again, these are for cash buyers only. One cannot truly owner finance an existing property with financing on that property. Some people will do this (sub lease and creative financing) but I think they are playing in a gray area where loans can be called "due".
Our thinking is for cash deals only.
Owner Financing is what we are talking about here.Let's start off talking about the advantages of owner financing. Everyone has this high expectation that in 5 years or so the homes they are purchasing today in the U.S. will be able to be sold at this high retail price. The only true way to do this is to Owner Finance the property. You can sell the home to a buyer at tomorrow's value today (Which is a risk for the back end buyer).
Here is the way that it should be done to give you, as the owner, the most security as possible. You would do owner financing for the person looking to purchase your home (current renter). This is done just like any other Real Estate closing, It will be done through an attorney. You would want to set this up in the beginning, the buyer will be paying a a balloon note. This can be set up we are thinking on a 8 – 10 – 12 year mortgage note.
This will put them in a position to where they need to refinance to pay off the investor. Secondly, every home should have a deed in lieu signed at closing, This will circumvent any costly foreclosure fees and the lengthy time that is involved. If the buyer does go into default, it is a $30.00 fee to file the deed in lieu and the home is returned to you. Now keep in mind, that when you do owner financing, the buyer is now responsible for the taxes, insurance and any HOA's. You will be named as the insured on the insurance policy. This is another advantage of doing the owner financing, as everyone knows property values in the US have fallen greatly, most of your retail neighborhoods have fallen victim to this and have started turning into rental areas. Rental neighborhoods will take much longer to recover. By doing owner financing you and other investors are actually helping to prevent these neighborhoods from turning into rental areas and bring the home values back up, or at the very least keep the values in the area sustained. Of course, you can only owner finance if you yourself or company own the property free and clear. This is a major benefit for you the owner, the home buyer, and the actual neighborhood.
Again this is our company looking at viable options for getting out of properties a few years from now. Looking for some feedback and comments .
Sincerely
Alex
[email protected]
Skype Alex Franks 2002 Charlotte NC USAAlex,
Some great points raised. I am sure many of the Australian investors don't fully understand or appreciate what buying in "rental neighborhoods" means or how it will impact on future appreciation. Many will no doubt say "I only purchased for the cashflow" which is fine but as you point out….that doesn't give them an exit strategy….at some point they would want to sell and get the cash back. Makes it all the more difficult when nobody will buy it because it's in a rental neighborhood.
The owner financing strategy has merits that's for sure. What sort of market would you expect to take up owner financing ?
Alex SC wrote:Hey All,
After numerous conversations with international and National clients the last few weeks, we are looking at viable exit strategies with the USA properties down the road. I am not sold on the 5 year return that a lot of other investors are speaking about. I am also concerned about us turning retail areas into glorified rental markets. This is a big concern for me, as I see some international clients thinking in 5 to 10 years they can sell these deals that they are purchasing capturing appreciation. My first concern is that Americans in general do not move to rental areas. This could change with the new nicer rental homes that we and other companies are now dealing with. Again, this is purely speculation for down the road.
So if one is buying for buy and hold ( cash flow ) and not really concerned about future appreciation, this should not interest them. If one is looking at being able to sell in 10 – 12 or 15 years, this could be a viable option. Again, this is just my opinion, but I am not sold on appreciation coming back in 5 to 7 years. The USA is going through some problems that are new for us. I do see us as a strong resilient nation, and expect things to come back to a reasonable pricing point. To me, this 5 to 7 year plan is more of a marketing strategy for the sales teams. When they say buy now and in 5 years, the market will rebound. Again, I am not saying anyone is wrong, I am just saying I am not sold on this concept. At least not for the markets I have been to, which include all USA investment markets except Texas ( I have not been there).
Just some background information: the phrase 'lease option" in the USA. Again, to me this is really a false phrase (just a marketing ploy). We as a property management company use it to hopefully bring in a better tenant. Besides putting some extra cash in your pocket as the investor with a slightly larger down payment, I don't see this set up as a win-win situation. Investors might win with extra cash, but tenants are not being taken care of. Yes, the tenants are the most important factor ( besides property management for investors in today's real estate market). Our property management company sets most leases options ( rentals ) for our tenants. I know in the beginning very few will buy. Not to sound repetitive, but this is more for our marketing end to keep properties filled.
Now again in the end this will really come down to each individual investors game plan or investment strategy when they get started. This below is what we are looking at in the markets, in which we buy and sell homes. Again, these are for cash buyers only. One cannot truly owner finance an existing property with financing on that property. Some people will do this (sub lease and creative financing) but I think they are playing in a gray area where loans can be called "due".
Our thinking is for cash deals only.
Owner Financing is what we are talking about here.Let's start off talking about the advantages of owner financing. Everyone has this high expectation that in 5 years or so the homes they are purchasing today in the U.S. will be able to be sold at this high retail price. The only true way to do this is to Owner Finance the property. You can sell the home to a buyer at tomorrow's value today (Which is a risk for the back end buyer).
Here is the way that it should be done to give you, as the owner, the most security as possible. You would do owner financing for the person looking to purchase your home (current renter). This is done just like any other Real Estate closing, It will be done through an attorney. You would want to set this up in the beginning, the buyer will be paying a a balloon note. This can be set up we are thinking on a 8 – 10 – 12 year mortgage note.
This will put them in a position to where they need to refinance to pay off the investor. Secondly, every home should have a deed in lieu signed at closing, This will circumvent any costly foreclosure fees and the lengthy time that is involved. If the buyer does go into default, it is a $30.00 fee to file the deed in lieu and the home is returned to you. Now keep in mind, that when you do owner financing, the buyer is now responsible for the taxes, insurance and any HOA's. You will be named as the insured on the insurance policy. This is another advantage of doing the owner financing, as everyone knows property values in the US have fallen greatly, most of your retail neighborhoods have fallen victim to this and have started turning into rental areas. Rental neighborhoods will take much longer to recover. By doing owner financing you and other investors are actually helping to prevent these neighborhoods from turning into rental areas and bring the home values back up, or at the very least keep the values in the area sustained. Of course, you can only owner finance if you yourself or company own the property free and clear. This is a major benefit for you the owner, the home buyer, and the actual neighborhood.
Again this is our company looking at viable options for getting out of properties a few years from now. Looking for some feedback and comments .
Sincerely
Alex
[email protected]
Skype Alex Franks 2002 Charlotte NC USAHi Alex
can you define what a "Rental Area" is??
I understand you are buying in areas of Atlanta such as LIthonia, there are so many subdivisions, older cheaper properties that I would not touch, also nice big homes in good subdivisions with great facilities. I am told many foreclosures in this area, yet I am renting a property in this area for $1300 per month, big home, brick face, excellent subdivision…. So are you saying this will not sell? I picked this up for $48,000 and looking at comparable sales they are around $85-90,000 today.
Also realistically foreign investors would not be purchasing expensive homes in purely non-rental areas if there is such a thing……..simply because the return would be hopeless.
Contrary to what some believe, I know many investors from Australia who are buying exceptional properties, well below market value in reasonable areas. Cash flow is important but this does not mean that everyone is purchasing rubbish, some are just finding those gems
It would be foolish to jump into the US and purchase a property with no cashflow and as per your comment – who knows when US recovery will actually happen.
Would be interested in your comments.
Thanks
WI
worldinvestor wrote:Alex SC wrote:Hey All,
After numerous conversations with international and National clients the last few weeks, we are looking at viable exit strategies with the USA properties down the road. I am not sold on the 5 year return that a lot of other investors are speaking about. I am also concerned about us turning retail areas into glorified rental markets. This is a big concern for me, as I see some international clients thinking in 5 to 10 years they can sell these deals that they are purchasing capturing appreciation. My first concern is that Americans in general do not move to rental areas. This could change with the new nicer rental homes that we and other companies are now dealing with. Again, this is purely speculation for down the road.
So if one is buying for buy and hold ( cash flow ) and not really concerned about future appreciation, this should not interest them. If one is looking at being able to sell in 10 – 12 or 15 years, this could be a viable option. Again, this is just my opinion, but I am not sold on appreciation coming back in 5 to 7 years. The USA is going through some problems that are new for us. I do see us as a strong resilient nation, and expect things to come back to a reasonable pricing point. To me, this 5 to 7 year plan is more of a marketing strategy for the sales teams. When they say buy now and in 5 years, the market will rebound. Again, I am not saying anyone is wrong, I am just saying I am not sold on this concept. At least not for the markets I have been to, which include all USA investment markets except Texas ( I have not been there).
Just some background information: the phrase 'lease option" in the USA. Again, to me this is really a false phrase (just a marketing ploy). We as a property management company use it to hopefully bring in a better tenant. Besides putting some extra cash in your pocket as the investor with a slightly larger down payment, I don't see this set up as a win-win situation. Investors might win with extra cash, but tenants are not being taken care of. Yes, the tenants are the most important factor ( besides property management for investors in today's real estate market). Our property management company sets most leases options ( rentals ) for our tenants. I know in the beginning very few will buy. Not to sound repetitive, but this is more for our marketing end to keep properties filled.
Now again in the end this will really come down to each individual investors game plan or investment strategy when they get started. This below is what we are looking at in the markets, in which we buy and sell homes. Again, these are for cash buyers only. One cannot truly owner finance an existing property with financing on that property. Some people will do this (sub lease and creative financing) but I think they are playing in a gray area where loans can be called "due".
Our thinking is for cash deals only.
Owner Financing is what we are talking about here.Let's start off talking about the advantages of owner financing. Everyone has this high expectation that in 5 years or so the homes they are purchasing today in the U.S. will be able to be sold at this high retail price. The only true way to do this is to Owner Finance the property. You can sell the home to a buyer at tomorrow's value today (Which is a risk for the back end buyer).
Here is the way that it should be done to give you, as the owner, the most security as possible. You would do owner financing for the person looking to purchase your home (current renter). This is done just like any other Real Estate closing, It will be done through an attorney. You would want to set this up in the beginning, the buyer will be paying a a balloon note. This can be set up we are thinking on a 8 – 10 – 12 year mortgage note.
This will put them in a position to where they need to refinance to pay off the investor. Secondly, every home should have a deed in lieu signed at closing, This will circumvent any costly foreclosure fees and the lengthy time that is involved. If the buyer does go into default, it is a $30.00 fee to file the deed in lieu and the home is returned to you. Now keep in mind, that when you do owner financing, the buyer is now responsible for the taxes, insurance and any HOA's. You will be named as the insured on the insurance policy. This is another advantage of doing the owner financing, as everyone knows property values in the US have fallen greatly, most of your retail neighborhoods have fallen victim to this and have started turning into rental areas. Rental neighborhoods will take much longer to recover. By doing owner financing you and other investors are actually helping to prevent these neighborhoods from turning into rental areas and bring the home values back up, or at the very least keep the values in the area sustained. Of course, you can only owner finance if you yourself or company own the property free and clear. This is a major benefit for you the owner, the home buyer, and the actual neighborhood.
Again this is our company looking at viable options for getting out of properties a few years from now. Looking for some feedback and comments .
Sincerely
Alex
[email protected]
Skype Alex Franks 2002 Charlotte NC USAHi Alex
can you define what a "Rental Area" is??
I understand you are buying in areas of Atlanta such as LIthonia, ( I was have not purchased any thing there in a bit).there are so many subdivisions, older cheaper properties that I would not touch, also nice big homes in good subdivisions with great facilities. I am told many foreclosures in this area, yet I am renting a property in this area for $1300 per month, big home, brick face, excellent subdivision…. So are you saying this will not sell? I picked this up for $48,000 and looking at comparable sales they are around $85-90,000 today.( I would not be surprised to see all these comps are homes being sold to investors both international and National clients. Most of these homes would not qualify to be sold to buyers. Being banks wont lend on properties that need rehab. So I would make an educated guess that the majority of these homes are deals investors paid for from wholesalers ( turn key deals )Which would also make them rentals.
Also realistically wholesalers, foreign investors would not be purchasing expensive homes simply because the return would be hopeless. ( Not saying it is hopeless just giving my opinion to what I see here happening. It would be foolish to jump into the US and purchase a property with no cashflow and as per your comment ( Sorry for any confusion that is not what I was saying that their is not cash flow. Cash flow is great, better then it has been in years . I am saying for investors looking for an exit strategy- who knows when US recovery will actually happen. Also saying the majority of the rental homes to even be considered for retail will need $10 to 15k to get to that level in the future.With or with out appreciation down the road. All we are trying to do is look at options to secure long term cash flow , while having a possible exit strategy.
Would be interested in your comments.
As always love to talk real estate and thank you for the follow up..Alex
Thanks
WI
Texas Cash Cow Investments Australia wrote:Alex,Some great points raised. I am sure many of the Australian investors don't fully understand or appreciate what buying in "rental neighborhoods" means or how it will impact on future appreciation. Many will no doubt say "I only purchased for the cashflow" which is fine but as you point out….that doesn't give them an exit strategy….at some point they would want to sell and get the cash back. Makes it all the more difficult when nobody will buy it because it's in a rental neighborhood.
The owner financing strategy has merits that's for sure. What sort of market would you expect to take up owner financing ?
Peter ,I emailed you a few days ago.
Sorry not quite sure what you mean" what sort of market would I expect to take up owner financing. " Or your referring to the end buyer or the homes.
Thanks
AlexAlex,
I've received no email from you so perhaps send them through again.
What I was referring to (and didn't word it very well) was what percentage of the tenants you would expect to take up owner financingFor foreign investors exchange rate performance would also have to be factored in. The long term outlook for the $US is not good. The Fed is determined to inflate their way to minimising debt. Along with many other currencies. It’s likely we’ll see decline and stagnation within the US economy for decades to come. Downside risk is high in the US RE market. You’re really going to have to know your onions to do well there.
The Freckle
Even if you buy in a rental area you can still sell to an investor looking for yield. Prob for none or minimum profit.
Engelo
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
Regarding exit strategies, it may be easier for you to sell to first home buyers in USA for a profit, as I've recently read of Obama's proposals of initiatives to help them out.
mattsta wrote:Regarding exit strategies, it may be easier for you to sell to first home buyers in USA for a profit, as I've recently read of Obama's proposals of initiatives to help them out.This was one of the presidents first programs and it helped sell a few homes. We found that market was priced for first time home buyers at 120k to $140k . This really has no affect on the market today.
Most of the Governments housing recovery plans has not worked.
Alex
engelo10 wrote:Even if you buy in a rental area you can still sell to an investor looking for yield. Prob for none or minimum profit.Engelo
I would say majority of the sales in most of the USA investment markets are being sold to investors already. Buying and selling rental homes has always worked. What I am looking at is an alternative to locking in a back end buyer. Not saying it is a guarantee sale. Just exploring other options.
Thanks
AlexFreckle wrote:For foreign investors exchange rate performance would also have to be factored in. The long term outlook for the $US is not good. The Fed is determined to inflate their way to minimising debt. Along with many other currencies. It's likely we'll see decline and stagnation within the US economy for decades to come. Downside risk is high in the US RE market. You're really going to have to know your onions to do well there. The FreckleAgree strongly 100 % that the risk is high in Re market but deals are priced very cheap. I think the USA economy will take a bit to recover as well. That is why doing research is very important.
Alex
Texas Cash Cow Investments Australia wrote:Alex,I've received no email from you so perhaps send them through again.
What I was referring to (and didn't word it very well) was what percentage of the tenants you would expect to take up owner financingPeter I will resend that email. We are just starting to offer this. Being it is new to put an accurate number on this I would be misleading you and others. We are hoping that we can influence majority of renters to take advantage of home owner ship.
I was hoping to have at least 25 % of our homes which could be a high number.I think it depends on how strong we market this program. For that number to go up or down. I would not want to put all eggs in one basket though. So again just one of the exit plans.
Talk soon
Alexlease option to purchase is a pipe dream.
I bet i have done 50 to 100 over the years and can count on one hand those that have bought… And those that have, their relatives cameup with the money
jayhinrichs wrote:lease option to purchase is a pipe dream.I bet i have done 50 to 100 over the years and can count on one hand those that have bought… And those that have, their relatives cameup with the money
J ay thank you it is refreshing to see other be honest here . Lease option to me was like credit repair here in the USA . A good way to make more money of already struggling tenants.
Oh you got email please follow up with Tori and where is my bottle of wine..LOL Was nice watching my giants pick up another Super bowl Some thin to be said about us NY people..
Alex
Alex
GO BIG BLUE! Mario Manningham is the new David Tyre! Representing Michigan
that catch was awesome49niners 5 super bows wins.. giants I think 3…
Not sure where all this is going to go RE wise having 35 years at it…and then 08 hit.. and well everything went out the window.
I do believe those buying now will profit.
JLH
jayhinrichs wrote:49niners 5 super bows wins.. giants I think 3…Not sure where all this is going to go RE wise having 35 years at it…and then 08 hit.. and well everything went out the window.
I do believe those buying now will profit.
JLH
Jay one of my best friends in town here . Who got me started lost 48 of his rentals. Now I see his personal property $400k house he built up on the auction next week. It think the lesson ,there he purchased houses, but did not learn about real estate.
When the $million dollar housing market crashed in Charlotte years back.I was devastated was stuck in 3 deals. One local guy , one from Silicon valley( money man) The advice the cash lender was the best I ever heard. He said man I know we are losing out on these deals.Look at what we learned. Won't make that mistake again.Crazy how he sat and laughed.We were stuck in 3 hard money Loans .Sure you and others have lost out but look at what you know.Heck I already switched my rehabs up because of your advice.
The way I see it is me passion, energy, some know how. You ridiculous amount of know how. So pairing that up things can go far. Again the 67 houses I want to keep those deals. Need help structuring these notes for 5 to 10 years.
I think long term this is retirement package or start of one. Selling today for profit would equal huge potential losses down the road.
talk soon
Alex
given that the US is selling properties by the 100,000 so cheap. what are the potential risk factors of future tax's being place on non domestic realestate holders???
people wrote:given that the US is selling properties by the 100,000 so cheap. what are the potential risk factors of future tax's being place on non domestic realestate holders??? With the USA their really is no telling but I can see them finding ways to tax or look at ways of International property investors. Hell they already do it to Local investors.Alex
that catch was awesome
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