USA Property Update

Hi TZ: 

I stand by 8% actual yields.  I can put together a pro forma based on fixed expenses, allowances, actual rents and come up with a 12% yield.  Look deeper into the thread.  Lehigh Acres duplexes are not warzone.  Affordable housing, yes, but hardly a warzone in comparison with warzones I see elsewhere.  I have documented ACTUAL yields in numerous areas of Florida where investors have bought double digit yielding properties on pro forma.  Not all, but 90% of them are getting single digit ACTUAL yields at the end of the day, albeit, still good returns, just not double digits.  This is my experience and based on honest results.  I'm not here to do the hype machine and tell people "I TOLD YOU I COULD GET YOU 15%!!"    You will never see me do that because I know the difference between pro forma and actual.

Got any properties you want to show some proof on double digit returns?  I'm not challenging you.  You don't have to if you don't want to but if you say that things are trading for actual double digit returns, let me see and I can make you a millionaire

Jay and WI:  I've never made 75% ROI on a flip inside of a year on apartment complexes but I will say that the PM side of things, I would not ever use a residential PM for a Commercial Multi-Family complex (5+ Units).  In my experience, I find that Residential PM's are more prone to make up repairs to make a quick buck.  The commercial PM's I work with don't have time to nitpick.  If something needs to be fixed they arrange, and they tack on 20% for themselves.  It's very black and white.  So a $500 water heater replacement costs you $600.  That's how it is and this is separate from their management fee off of the gross rent.  If you don't like the way they do that, I can promise you your complex gets very little attention if you bust their chops about it.

So…In conclusion:  Single digit ACTUAL yields are the norm in Florida.  Deal with it or don't buy    Sorry TZ…had to throw that in there.  I'm Cheeves and I approve this message.

Ilovehouses

I know  nothing about the Japan market.

 The reason I purchased in US was simply because of  the cashflow, 20% gross (15%+ net) and because I can purchase well below building costs at $20-30 per sq ft, once building commences I am expecting growth, however this is actually happening now/today. Obviously the yields are now diminishing as prices rise.

The risks you mention – war zones, property management etc. I was well aware of this prior to purchasing so just did lots of homework before purchasing any properties.

I am sure investing overseas regardless of whether it is Japan, US, Italy etc will not be risk free.

Cheers WI

Thanks for that lol There are quite a few members on here, in various stages of the pre, mid and post purchase with us, who can probably testify to the pros better than me, so I'll play devil's advocate to myself and, for the sake of integrity, list the cons, as well as the counters to them –

1. Japan is Asian, which to those unfamiliar with the vast differences between the various countries in the continent, seems alien and dangerous – ironically, people feel that an English speaking environment offers less risk – as you and others can unfortunately testify, this is probably as far from the truth as possible, and while they're probably correct in Indonesia and China, to name a few "dodgy" Asian countries, in Japan's case, I don't know of any business environment that offers a more regulated and honest purchase and holding experience (which, coupled with personal circumstance, is what drew me there in the first place).

2. The more realistic side of the language barrier, is that you'd need to have a Japanese speaker at your side, or use a multi-lingual proxy like ourselves, and people are usually concerned that, should we some day go out of business for any reason, they'd be stuck holding an alien language deed and trying to communicate with people who don't speak a word of English. While this is true for all future purchases, (when you want to expand/sell, you'll indeed need to contact a property-savvy multi-lingual realtor there, which would probably cost more than we do) – but considering the zero-maintenance management involved in Japanese properties, all you'd really need to do in order to continue and manage your portfolios in such a case is pay a Japanese foreign exchange student $10 an hour or so, to continue receiving reports on a monthly basis and read them to you, or when a tenant moves out (once every 4-5 years on average in Japan), ask them to "be your mouth" in front of the PM until the property is tenanted again.

3. Finance to non-residents just doesn't exist. On the upside, it's quite achievable through Hong-Kong and Singapore banks, who are more than happy to loan against properties overseas (providing you meet their criteria of course). However, the overhead in most of these cases (flight to HK/Sing, Incorporation fees, setup costs etc) would dictate a certain minimum portfolio size and yield, and profitability needs to be evaluated on a case by case basis – whereas if you're purchasing with cash, you can be quite comfortably profitable on even one tiny property in Japan without a problem (again, as mentioned above, very different from the state of affairs with US or other overseas property investments, where if you don't plan to hold a substantial portfolio, you wouldn't really want to venture).

4. Then of course there's the capital gain issue. While this seems to be improving, for the first time in almost two decades, it's still pure speculation – and for some people, even 15% (which can definitely be achieved in Japan, just takes a bit of digging) is not worth the hassle if there isn't the potential for CG. Personally, I don't like this casino mentality one bit – I prefer my cashflow reliable, stable and realistic (I'm boring and chicken like that) – but I understand the "get rich or die trying" mentality too. Some people just can't wait 5-9 years to get their principal back, if they can't get out with a large profit in 3-5 years they feel it's not worth their time. Takes all sorts.

TZ:

That looks good on paper, but I am a huge skeptic on condos involving an HOA which they all have.  Furthermore, the one's I am most skeptical about are those built during the boom years.  The reason is because in most cases, these units were bought by speculative investors.  Most of them lost them in foreclosure and seems like there are some investors who bought from distress and is now trying to sell.  The problem I see with newer HOA's is their health status which can crush values.  I see it all the time in FL.  HOA's require reserves.  Reserves are required to finance if you are a primary homeowner.  Without reserves and a good rating, buildings will be held back from what their potential would be if the budget was better.

There are always maintenance issues with condo complexes.  There is reoccuring, and unforseen.  I will tell you that the president of the HOA won't pay for it.  It will come in HOA monthly increases to the unit owner. 

Like I said, seems good.. But be careful with the status of HOA's.  When was the HOA's most recent "Reserve Study".  If none have been done in the last 5 years, this is a MAJOR red flag.  A Reserve Study will include bringing in a specialist to estimate how much work will need to be done to a pool, elevator, sauna, clubhouse, and everything else in the common areas.  The specialist will estimate an amount and a healthy HOA will have a minimum of 65% in its reserve account for that specific year.  I have seen TONS of newer complexes have less then 10%.  Then…..they got crushed.

I am not a condo guy so please don't take this as a knock against your Miami Oaks.  I'm just saying that would be my only concern if there is plenty of inventory available.

Not sure what you mean by senior, they are experienced investors in the US market and they are also selling their own product, no offence intended to either Jay or Alex.

As I mentioned I am  achieving great results in US 15% net yields, they are no longer there coz the market has risen. Timing is everything in any market.

.

As far as Australia goes I have started purchasing and there are plenty of opportunities. 

My  strategy is not growth as we are not seeing this now in Australia  as you mentioned

 I am purchasing properties with development potential, building a new property at the rear this actually gives me cashflow and also equity on completion of build. This is a very low risk strategy as I am purchasing at the lower end of the market, bread and butter areas. I would not give OZ a miss but perhaps review your strategy.

Cheers WI

Couldn't agree more, timing is crucial in every market. And since there's always some crisis happening somewhere, "the world's our oyster", so to speak. just invest somewhere you enjoy dealing with, is my motto, as you'll be dealing with a local team if you're going to be owning property directly.

Would love to hear more about the cash-flow you're describing in Aus. Existing pre-tax yields, ROI expectations, equity speculation, areas, etc etc etc, as much as you can spare the time to list. Always great to learn from successful deal breakdowns 

I haven't run across any area in Australia, even in recent years, which have definitely improved here opportunity-wise, that I was confident could generate sustainable positive cash-flow much beyond 6-7% long-term (which quite a few fund/bond/note setups, and even general everyday interest with some clever foreign exchange play can do with far less hassle).

The existing properties with dev potential and subsequent build sound interesting and like something that has potential to break this mold, and Australia's not a bad place to deal with as a rule – so I'd love to see an example of one of those (don't need identifying info of course, just area and type of residence, some numbers etc).

Thanks again for the tip!

Hi,

Yes, i keep to Florida and Georgia and have been really successful.  I never will do deals in Detroit for my clients.

Location is always key!

Regards,

Sparky

WI,

The 50% is what these guys paid for the house all in and the balance is in fact  just vendor  carry back financing. That's why it's only avaliable for properties they owm

This is very popular program in markets like.  Memphis, and KC as well detroit

When we can no longer buy we then sell ang

d take our profits

Ps.  This site does not work very well. Need to de bug it.  I think

Thanks for your comments Cheeves! There are 60 in total and there is just small number available (6) by the one investor who bought them low and has held them for cash flow for several years, so not plenty of inventory. Oh yes thorough HOA due diligence is a must. A client of mine was keen to purchase in a building near my home; I warned him that the building is currently standing a very real chance of condemnation by the city as the HOA, drained by lack of funds from owners who are either under water or in foreclosure, failed to keep it up to code: Now the car park is caving in under the weight of the apartments above it…Nasty stuff!!

Yup, hassle free is right. The Japanese are so spoiled with this hassle-free management, even the monthly property manager's "all is well" and rental income report and the annual tax-return hassle of communicating with an accountant is too much for them sometimes – we've now started receiving interests from foreigners living in Japan, of all places – people who work in Tokyo, but want to invest in Kyushu, and can't be bothered to research, communicate and "manage" by themselves (if you can even call that "management"). No complaints on our part