Below are a few guidelines I've been following. I would be interested to hear others feedback and opinions about what they think of my guide for what to buy and what to stay clear of.
1. Avoid properties with a walkscore of less than 50 (please refer to http://www.walkscore.com)
- Stay clear of properties in areas with more than twice the national average rate of crime
Only buy properties less than 30 years oldAvoid properties with HOA like the plague. Or pay a maximum of 5% of the monthly rental value for HOA duesMonthly rental value must be at least 2% of the purchase price (eg $40,000 purchase price with an $800 monthly rental value)Don’t buy anything with more than 2.5% annual property taxes of the purchase pricethat would wipe out most of the deals being offered by companies lol
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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Yes I noticed that. When I look at what the various companies out there are offering I just thought 'scary' and no wonder why there is a bad reputation assosiated with investing in US real estate among some.
"more than twice the average national crime rate" – so up to twice is cool?
Ouch!
I'd probably add "forget about the whole thing if you don't plan to visit at least once a year or more"…it seems that, no matter how good your property manager (and the majority don't seem to be that good, from what people are saying), you'll always have some hands-on troubleshooting to do…is this impression correct?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
If the look at the crime data across the USA, basically all major cities have crime rates well above national average.
The areas with that are below national average are generally the small suburban towns.
Florida is recognised as a good place for investment currently. Literally every neighborhood in Orlando, Miami and Jacksonville has double national average crime rates. At least that was in the postcodes my property manager recommended as 'good areas'. Other areas she said to stay away from sat around 400 (100 being national average).To be honest I see more of the international clients now a cash lenders for a company like mine instead of buying properties. With the USA buyer back in full force I don't think the opportunity or the marketing will be with the international buyer.USA buyers are happy with 8 % honest return so something to keep in mind. I have been away from the forum the last few weeks making my rounds in the USA. So keep this in mind when looking at the USA.
Here you go
Below are a few guidelines I've been following. I would be interested to hear others feedback and opinions about what they think of my guide for what to buy and what to stay clear of.
1. Avoid properties with a walkscore of less than 50 (please refer to http://www.walkscore.com)
I just checked seven investment markets in the USA and all scored 40 or less major cities.( I like the site http://www.neighborhoodscout.com) Rental information is old but some of the other information is good.
So take this for what it is worth .Have a visit to the USA if you going to invest if not find properties close to home .
Stay clear of properties in areas with more than twice the national average rate of crime. Again this very misleading as they group areas in general in the USA one street to the next could be some thing totally different.Again if you plan on buying or investing a trip to USA or some one who has been to the USA that you can ( TRUST )Australian to Australian would be best start.I met some good people from this forum , look forward too meeting two of the Aussie posters who both happen to work in Atlanta in next few weeks.
Only buy properties less than 30 years old. Well this is going to be looked at two ways. For a novice yes only new construction for experienced investor who under stand renovations. This is comparing apples to oranges at the end of the day cash flow does matter. So the renovations , and numbers is more of a concern then age. I do prefer 1970 or better but mill homes in the South have been great cash cows if renovated property. Don't try to do it cheap put the money into the rehab new electric, plumbing, ac , water heat, then roof is most likely next , new windows( not always) again when we fix the bones and make them new .I hope you all can see the point .
Avoid properties with HOA like the plague. Or pay a maximum of 5% of the monthly rental value for HOA dues
I also think this is wrong find nicer homes in nicer areas and go after those. Appreciation is not going to be in lower end homes. I feel if and when the USA comes back the 2000 sqft and better will appreciate faster. Again if you look at real estate and investing as numbers you will learn to calculate this. I have rehabbed over 300 homes in last 5 years from $5k to $2,5m. I promise the HOA do not stop me if the numbers make sense I buy the homes .
Monthly rental value must be at least 2% of the purchase price (eg $40,000 purchase price with an $800 monthly rental value) Yes in make believe world this is possible in the USA with honest numbers not going to happen or very rare most likely in lower end areas. I'm can do this in lower end areas all day long but with those areas, come more head aches. In most major markets except Atlanta( GETTING HARD TO DO THAT THEIR EITHER) with nicer homes. Speak with the people who have rehabbed no less then 100 homes and see what their mind set is. This will separate the advice given from one who has done a few projects to a investor who is doing multiple projects at one time . I am not knocking any one but this is common.I went to a meeting in Charlotte NC and the lady teaching real estate has done 6 deals in 3 years. I wonder how much has she seen to be able to give accurate advice. For me I been in this game a bit but I still call ( actually I called Jay Hinrichs sat you all know on here with both from the USA. I discussed the ideas I had with Jay so getting a mentor more important then some of the advice above. This is a good start but again mentorship means alot in this business.
Don’t buy anything with more than 2.5% annual property taxes of the purchase price . This again is some thing that we battle here in the USA property taxes. I own a property have $26k in it rents for $600 month taxes $1900 a year. Fighting those as we speak. I own another property in Charlotte NC and have $76k in it. Rents $1k and taxes $1600 a year So taxes are being disputed in alot of areas in the USA.
just my two cents
1. Avoid properties with a walkscore of less than 50 (please refer to http://www.walkscore.com):
Walkscore is simply a gauge of how urban your neighborhood is and the more metro you are the better, per this website. That said, if you look at scores 50+ on Walkscore, ie…NYC, Hoboken, NJ, Miami, FL, Los Angeles, CA, etc… you will easily exceed everything you state below and price yourself out if you are looking for cheap properties.. These are actual urban cities with huge demand where prices easily eclipse 200k. Domestic investors like buying in these areas and are content with 5-6% returns. Prices too high, rents not enough to justify most people on this forum's interest in cheap properties / high returns. If you look for future upside, then good. Not a good gauge though for foreign investors especially on this forum who look for cheap properties. In my opinion, if I used Walkscore, I would gauge a higher score on my future upside and speculation. Cash flow will be minimal in 50+ scoring markets.
Stay clear of properties in areas with more than twice the national average rate of crime
Ok, I agree. Never been a fan of war zones. Problem is, most metro cities rate twice as high as the national average. Not a good gauge if you ask me.
Only buy properties less than 30 years old
Where are you buying? Florida? Vegas? Arizona? Yes, definately possible.
Avoid properties with HOA like the plague. Or pay a maximum of 5% of the monthly rental value for HOA dues
So if your condo rents for $1,000, according to your theory you would pay no more then $50 per month? I have never ever heard of a good condo complex that is stable charging this low. In fact, this would raise a huge red flag. Healthy HOA's would charge about $200 to $300 per month in healthy neighborhoods with rental rates around $1,000. You have to account for their reserves to fix things, insurance, common areas, landscaping.. I mean if you are paying this, clearly you don't want the responsibility of taking care of these chores yourself. That's why you pay an HOA. I do not agree with your 5% theory. I'd say if you aren't paying about 20% of your monthly rental value to HOA dues, the HOA is either not healthy or could be problematic in the future.
Monthly rental value must be at least 2% of the purchase price (eg $40,000 purchase price with an $800 monthly rental value)
Investors used this theory during the peak and it still didn't work.
Don’t buy anything with more than 2.5% annual property taxes of the purchase price
What Alex said.
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
Email Me | Phone MeSorry LIL, I don't think you understand the US at all.
Wish you luck but I see nothing but 'House of Pain' (can't do Kramer sounds:) for you….
My own home here in Australia just scored a 35 on walkscore compared to investment property in the USA which scored 51.
I am about 40 minutes drive from Melbourne CBD but i do agree with the assessment that it is a car dependant area. Gives some confidence though.
If you want true walkability, you are going to pay $225 per square foot, all the way to much much higher for places. I'm talking about a home where you can walk to Starbucks, Grocery store, etc.. Those areas rate 70 or higher. I buy and broker Jersey City, NJ. Located on the Hudson River across from Wall Street NYC. Jersey City, Hoboken, Weehawken, West New York…all of these areas score well on Walkscore. Asians and Indians are buying like crazy here. Why? Cash flow stinks. Returns don't exceed 4-5%. UPSIDE and I have preached this from the beginning. Speculation is what got some in trouble at the peak. Speculation on upside in good metro areas will pay dividends and in my opinion WAYYYY better then getting 10-12% on shoddy deals in non-walkable areas.
These areas I am referring to though is big money. Entry level prices for investors $170,000 USD. Want a good read on international investor cap rates?
CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
http://www.CommercialRealEstateVoice.com
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Ouch!
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