Mr Sceptic,
Thanks for posting. Again. I actually enjoy differing viewpoints, but lets be adult about this.
I find it frustrating "debating" an investment and finance structure, with well meaning folks I am sure, who have no idea of the real facts of some of the subject matter they feel obligated to try to save the investors from being ripped off
Give us an idea of the facts please. That is what this is about - and it is only the facts we are after.
I feel obligated (in the US case) to tell people my experiences, I actually started this thread on this site originally some 13?? years ago - but no one was interested back then
- but you can still find the posts.. I don't like the word 'save' I would prefer 'point out' to people where the rip offs are. Especially when they are as basic and easy to see as the current group. Publicly I would rather shy away from words like 'rip off', but in the case of a number of these US deals it seems an inescapable conclusion. I am counting on the likes of myusaproperty investors to provide a good argument as to why that may be incorrect. I very much liked Amadio's words something along the lines of 'breathtaking naivety'. Amadio also made a great quip about US real estate and banks actually working... Although my US friends say I am unfair and have no idea, I have EXACTLY Amadio's views
I know where I will be in 5 years. That is in writing, documented by a fully legal document researched and signed off by a USA Attorney, on properties that have independant appraisals, documentd by before and after photos of property renovations, documented by independant building and pest inspections, etc etc.
As long as it is in writing thats great
To continue to read comments like why pay $49,900 when you could have bought it for $14,000 and spent A very small amount on it ($2,500?) I find compounds some of the absurdity I have been reading. Do you think American buyers would fall for this garbage?
That is absolutely not absurd. I am sure BevK will come up with exactly that result. It happens all the time. And they generally AREN'T selling to locals because locals (real locals) won't pay that much - by default with that argument, if they did you wouldn't own them.
I am really interested in all of this, but especially the finance that MandyH first (here) mentioned and that it seemed you received.
I haven't been home yet to do any querying (and its not that I can't be bothered, but I am in London and will when I get home).
I am not sure you got my point initially about the 5 year time frame. You mentioned cashflow and that you have that covered. Provided the tenants are half reasonable then I don't doubt that, my concern (and it is something anyone NEEDS to be aware of) is the time limit. You will either need local finance or finance from AU when the original finance time frame is 'up'. I think that will probably (not certainly) be VERY hard to do in the US. If it is AU finance, the dollar will have a very big part to play in that. It is not a killer, but it does need some thought.
Suffice it to say, Net yield is 12% plus, on a 5 year principal and interest loan, it is cash flow positive, including the taking into account the monthly bank repayments, at 7.75% interest fixed.
Assuming an $80k property (or being facetious for humour value ONLY, a property that you paid $80k for) the P&I repayments over 5 years are $1,612 per month alone. That is pretty high rental for an $80k property - and that wouldn't cover management and taxes etc etc. Is this correct?? If not, you can easily give us all the finances without anyone knowing the address.
I do think there are avenues that may be available (sub-prime style) to make that finance very exciting. I have very big concerns (which, reformedsceptic, I see as MAJOR advantages from my end) about the veracity of these valuations. So far it looks very sub-primey to me. I think they are absolutely in cloud cuckoo land financing what they are, but my issues end when I understand something. I then move onto how to make it work for me. If (as I said before) my suspicions are correct, then deals such as I mentioned to WG will be possible - just a matter of finding the 'right' property to make the numbers (and safely - WG!) work. And that idea wasn't even getting warmed up! The last loan I closed pre-sub prime was at an office in the Kilroy Center building in Orange County. I have since watched a documentary that mentioned that building as being 'ground zero for the sub-prime loans industry'. I didn't 'deal' with those particular guys as they wouldn't deal with me (my credit was too bad)
but it was funny to have actually been there..
I will be devoting considerable time to working out the limits of what these guys are prepared to do, or how far they will go. At this stage, I am cautiously optimistic.
On a personal note, thanks for not just saying 'you're all wrong - cos you are!' and leaving. I always respect people with differing views (although they are all obviously wrong) but we only learn from people who see things a different way.