Hi jay, I'm only new to the site but may be moving to Washington State in the next 6 to 12 months. I would love to seek your advice on property (both buying a home and IP's) if you would be willing to educate a beginner some time.
Hi, as you may be aware I am a new forum member and I have just returned from a fact finding trip to the USA to have a look at the property market. I thought I would share my experience. Firstly I went to St Louis and Charlotte NC. I chose these cities for the following reasons. St Louis… Very high rental yields on a number of Multi-Tennant Apartment buildings listed for sale <500k (20% gross) Charlotte NC, high quality Single Family Residences in an area with low rental vacancy and limited stock, but low acquisition cost. I avoided the typical Florida/Atlanta/Nevada due to high vacancy rates and sheer number of vacant properties in the market (personal choice/opinion) Additionally as I am a pessimist I was looking for areas which would experience strong migration in the event of continued economic difficulty. St Louis, is fabulous city with a strong future and good fundamentals, home to a the headquarters of a number of fortune 500 companies. However the "Slumlord apartment owner" was not the style of investment I was looking for. Most buildings in this category I viewed were old, rundown, and tenants were on month to month leases. The risk of owning one of these whilst living overseas and having a property manager try to deal with issues certainly outweighed the high theoretical returns. Charlotte NC, is a beautiful part of the world. Reminded me of Maine but with better weather. I caught up with AlexSC from these forums and he showed me around. I was impressed with the team Alex has built, to enable him to purchase REO properties well below the value that that the Bank Asset Managers would like, rehab them and turn them into quality long term investments. It underscored a very important and fundamental point and that is the process of locating, bidding, buying, rehabbing, tenanting and managing a property investment in the USA requires intimate and detailed knowledge. On the topic of local knowledge, as an Australian I probably undervalued this when looking into the US market. At home no real consideration is given to house values based on the proportion of home owners in a particular street. In Australia house prices all tend to trend the same in a particular area. However, in the US the same house could be worth 50% less just one street away, and as foreclosures mount home some home owner neighborhoods are now turning into rental neighborhoods. I looked at a number of estates built in 2000-2006, where the developer in conjunction with a low doc lender turned many prior renters into homeowners. Foreclosures are now reversing that process, these estates are gradually turning into rental neighborhoods. Not that that is a bad thing, from an investors point of view, these are beautiful modern solid houses, which will always rent easily. It is just that you have to understand how to correctly value them. Another interesting thing I discovered about myself while I was in the USA, and that is I did not know how to act around black people. Honestly I was a bit scared of them. Fortunately I discovered that I was an idiot, and I really enjoyed talking to those I met. One question I had to answer on my visit was.. how long did I think it would take for property values to begin appreciating. Even after looking at close to 50 properties across the market spectrum I still have no idea. All I can say is that in my opinion an investment in the market at this stage is a cash-flow play. While I was in the USA the 7.30 report on USA property scams was aired. I watched it from my hotel room. My initial reaction was OMG what am I doing here. But when I really looked closely at it I could see that it was not criticizing that value of investing in US properties but instead was a cautionary tale about dealing with overseas promoters who inflate the price of these properties and sell them to unwary investors with no regard to the soundness of the investment. So yes I will be investing in properties in the USA. But I will only work with local experts in the areas I choose. While Zillow is a great resource I won't be buying from it. Steve
Steve let us know your exact dates you are back in town.Want to make sure we are here.
Just curious, do you plan to rennovate/flip or rent out the properties? By your description, St Louis sounds like it might be ripe for some section 8 investments.
I agree St Louis is a terrific market, it has strong demographics and in well positioned in the Midwest, if you drop me a PM with your email I’ll send you some video I took of the properties I looked at.
Section 8, another reason our country is in the trouble we are. I hate government housing! Our taxes for the people that can't pull there own weight.
I feel all the government programs. Lets start drug testing all of these people. My wife works for her tribe ( Catawba Indian Nation as a grant writer ) This is basically like working for the federal Government under BIA. Now they get random drug testing , hair testing , and all other crap. Yet we are paying alot of these people to sit at home and not work. Obomanomics is got to go .
I am sure their is legitimate people using these programs. By far I see most of these people just taking advantage of the system and teaching their kids how to do the same.
How is Kansas city going , see alot of investors back in the market their been alot of promotion from USA and international clients alike. Hope all is well
Kevin will be in town for your trip in. I hate I won't be here. Make sure Kevin takes you to the higher end homes. We are seeing the 4 bed room 3 bath homes . Priced here from $130k to $230k. No buying them under value is what we are looking to do. $60k less and rental income seems to be that 1 % a month.
Hi Ruth, While I am not a qualified tax accountant, I believe that your comment above is incorrect. As far as I'm aware, capital gains tax on a property you've had in the US for more than 12 months is 15%. Any rent, expenses, tax paid in the US will then be recorded on your Australian tax return. I know there is no stamp duty on purchases in the US. Maybe that's what you meant?
I'm not sure whether to defend ourselves or not even bother.
Anonymous people with a largely unknown track record, apart from what they have chosen to disclose online, are ok to throw mud at people they do not know. And people like us who have and are, putting a lot of time and effort into specialising in a new investing area in addition to a long history of success and education in Australian property, should have an even playing field.
Let me start by saying, I think it's great that you have invested leveraging off someone else's knowledge. A wise move, as many will agree. I have no reason to have any problem with your US agent or the service she is providing, although I do not know her at all.
Our lack of experience is relative.
If you are familiar with the steps in becoming an expert, they go from not knowing what you don't know, to finding out what questions to ask, to learning from personal experience, and applying their ongoing knowledge to explore further questions as they arise. We are partnering with, and being mentored by, people with a proven track record on the ground. We are learning new things every day. Dare I suggest, our ignorance is way more aware and well advised than others'. And no, I am not throwing that as a barb to you personally.
Our connections can save people time (how long does it take to arrive in a new city and meet competent rehab people?) They can help people earn a good profit with well-managed risk, and we will keep them updated frequently and personally monitor the progress. All work is done with registered contractors, and our clients only buy through qualified realtors who have expertise in their field. And the property is in the name of the client's LLC. We are on the ground, and have the knowledge to research all of the requirements for a good cash flow property. We are driving through neighbourhoods we have already researched, and already have very good personal knowledge through our 16 months of research and personal experience in this market. We will not misrepresent any investment for the sake of making money from someone, but will only put forward a deal that we would consider worthy of our own purchase.
We are not charging any upfront fees.
I take issue with you slamming our endeavours with no knowledge of us as people, as investors, or how much work we have put into this venture. And as to our posts conveying a lack of experience, an E2 visa is not only about investing $100,000 minimum in USA. It is about employment created in the USA, about leasing space, about a business plan that US immigration considers is likely to be boost in some way to the local economy.
I could go on.
Last but not least, we are honoured to be insulted in the same paragraph as Steve McKnight.
I am curious,,, If you cannot hold a job… and your not a real estate agent, and your do not charge up front fee's how do you make your money????
Are you buying your own wholesale houses then rehabbing them and selling them to others… ?
and how are you making out with the huge competition there in PHX I know the market has really moved in the last 6 months and rental yields be them gross or net are far lower than they have been in the last few years….
However for this to happen means there HAS been some capital growth… What the question is is it just the heard mentality, with no real basis under it… I know the Canadians are buying the heck out of the area.
Rental vacancies are defiantly and issue though in this market for lower end properties…
My good friend from Oregon has one of the bigger PM companies there over 1000 doors and its an issue he has picked up a huge swath of clients because of so many vacancies.
But I suppose a lot of the Canadians are really buying second homes and really do not care to rent them at all just want them avaliable when they want to get out of the frigid weather.
So anyway just curious on your revenue model if you care to share…. I am sure those considering using your services would like to know how your compensated.
We are managing fix and flips, mostly through joint venturing with our clients. That way, we have a vested interest in their investing success. Can I point out, the end buyer is the public, generally a home buyer. We are NOT selling rehabbed houses at inflated prices to unsuspecting Aussie investors who think they are getting a bargain.
As seasoned investors in Australia, we have a good understanding of the requirements and mindset of Aussie investors looking to invest in USA, and with a very good working knowledge of real estate in Australia, are able to point out a lot of the differences in the way things are done in the USA.
As you would know, the advantage to being on the ground, is that you are able to have a much closer sense of the movement in the market. As time goes on, we will continue to change our investing direction as the market moves.
In the meantime, we are brushing up on some further local education to position ourselves, and our clients, for success.
(Certainly some Canadians are buying winter homes for themselves, how many are purely investing is difficult to ascertain. I don't know if such statistics are available!)
so your buying homes and doing a retail rehabs…. and looking for investors to help you fund these deals.. This takes a keen understanding of both the market and what you need to do to compete… Ton's of competition from local contractor investors.
In the good ole days we could just paint carpet and basically clean a starter house up and sell it.. for a nice profit… Nice profit being 10 to 25k per deal….
Now to compete in the rehab arena , we have to upgrade carpet,,, Granite counters, stainless steal appliances designer paints fully landscape, up grade lights and plumbing etc etc. all for starter houses… As buyers have the advantage now. Pick wrong house and either over rehab or under rehab and your fix and flip quickly becomes a fix and flop… Most begineers are lucky to make money on 1 in 3 projects from what I see here in Oregon.
There is always a market for this especially now with all the short sales.. If you have a nice clean rehab,, that some one can move into and does not have to mess with short sale process, buyers think they want short sales… but soon get very frustrated in the process.
this is why our new construction here in Oregon is just booming… We have either pre sold or sell every house we build right now prior to completion… Its by far the safest highest returns one can get right now in the US… And SOOOOOOOOO much eaiser than dealing with rentals….. from the investors prospective.
Yes, your comments are not far from reflective of the current market in Phoenix.
Except the one in three profit from rehabs! Much better than that! That is where our own experience in property, combined with our local contacts with long-standing hands-on knowledge in the Phoenix market are a big bonus.
Aussie's will relate to the renovation models used in Australia, where stamp duty has to be paid on purchases, before rehab costs.And the purchase costs and materials and labour for rehabs are still way higher than in USA. In a flat market (18 months ago) we were making money in Phoenix. In a steadily rising market now in Phoenix, there is more competition, but more potential to profit. Rehabs that work in a flat market will do better, in general, with a market that is appreciating. However, we do not base our numbers on speculation fo market rising, but on the market right now. Good local contacts and careful monitoring of rehab progress, mean that we can get some work done at well below retail costs, which adds more perceived value than actual cost, representing a benefit for the end purchaser. New contruction is starting again tentatively in Phoenix, in limited numbers in certain areas. It will be a while until it gains strong momentum. And the rehabs are still a lot cheaper for the buyer, than a new house.
Some of our clients will chose to do their rehab in their own LLC, and that is fine, we will take a share in their profits.
We agree, DIY is exhausting and slow, the time lag negates some (or all) of the profits as compared to good tradies and labourers who may cost a bit more, (but way less than comparables in Aus!) and get the job done more efficiently. Plus, we need to use local workers to comply with our visa. Plus, to rehab without a registered contractor makes it very hard to sell to someone who needs a bank loan, as nearly all will.