Buying in Atlanta

[MTR]

Guys thanks for the numbers. Very interesting to see.

I'm not sure what your expenses relate to, but I presume being here you have more accountant, agency fees and unforeseen costs. 7.7% certainly is strong, but definitely something that is replicatable in very good locations (as usual, 2km from CBD) in Sydney/Melbourne with some brain power and brawn power. 10%+ is a bit harder.

I guess the interesting thing from all this is that, the real value came from the capital growth. If you had leverage, presumably that's where the US market shines/shone.

I know that a lot of foreigners buying in the US was not able to get the cheap 3% rates the Americans got. Did people get around that? Or did you pay cash?

Hi Delta
Good question, no way around finance, very difficult to get these rates for foreign investors. Most of the investors I know paid cash, I also purchased when the Au$ was over 1.00-1.10

There are companies offering finance at much higher rates -8-12 % and everything I looked at was high risk.

Also these companies providing the loans to foreign investors were marking up their properties by as much as 50%, in effect you are actually paying for the loan, a claytons loan.

I guess the other attraction is to sell when the Au$ falls back to traditional levels ... seems like going the other way at the moment

 

[Deltaberry]

Thanks MTR. That confirmed my suspicion, and was one of the biggest deterrents against me looking heavily into US amongst other things including complicated taxation system.

Leverage is important to get that ROE up both from a rental and more importantly from a capital growth perspective.

Doubling real estate value is good. But one can similary achieve doubling of ROE with a 20% rise here, at 80% LVR.

Still, I think at the end, guys who bought in at the time you all did should be very happy with the outcome.

 

[karina]

Just got back from Atlanta. There is a lot of interest in the Atlanta housing market from home owners, investors (local and international) and hedge funds.
I just purchased another 2 homes. Properties can still be purchased at half the PRE GFC sale price and for half of the replacement value. (cost to build).
Multiple offers on most properties with the majority of good homes selling above list price. Sometimes you need to ignore the asking price when submitting a bid and go in with your best offer particularly on good quality homes.

 

[engelo10]

Just got back from Atlanta. There is a lot of interest in the Atlanta housing market from home owners, investors (local and international) and hedge funds.
I just purchased another 2 homes. Properties can still be purchased at half the PRE GFC sale price and for half of the replacement value. (cost to build).
Multiple offers on most properties with the majority of good homes selling above list price. Sometimes you need to ignore the asking price when submitting a bid and go in with your best offer particularly on good quality homes.

Thanks Karina,

There are still great deals to be had all around the US. Exciting time ahead.

Thanks

 

[chindonly]

Just got back from Atlanta. There is a lot of interest in the Atlanta housing market from home owners, investors (local and international) and hedge funds.
I just purchased another 2 homes. Properties can still be purchased at half the PRE GFC sale price and for half of the replacement value. (cost to build).
Multiple offers on most properties with the majority of good homes selling above list price. Sometimes you need to ignore the asking price when submitting a bid and go in with your best offer particularly on good quality homes.

Hi Karina,

Following your posts with great intent!

Given the jump in property prices, what would be your current estimate of gross and net yields for the better buys?

Alan

 

[karina]

Alan,

I work on Net yields when calculating returns and factor in all the fixed yearly costs, so Net of county taxes, 8% property management fee, any HOA fees and insurance + any rehab costs and closing costs.

Net of these things we are achieving 9 - 10%. The gross yields would be more like 13- 15%

Back in 2011 we were probably around 12% on most properties with some properties that were exceptional deals getting higher than this.

We are still achieving about 50% of the pre-gfc price (on the purchase price). You simply can't rebuild the homes for the prices you can buy them for. The homes are also a newer construction with most of the homes being purchased being built after the year 2000.

 

[MTR]

Alan,

I work on Net yields when calculating returns and factor in all the fixed yearly costs, so Net of county taxes, 8% property management fee, any HOA fees and insurance + any rehab costs and closing costs.

Net of these things we are achieving 9 - 10%. The gross yields would be more like 13- 15%

Back in 2011 we were probably around 12% on most properties with some properties that were exceptional deals getting higher than this.

We are still achieving about 50% of the pre-gfc price (on the purchase price). You simply can't rebuild the homes for the prices you can buy them for. The homes are also a newer construction with most of the homes being purchased being built after the year 2000.

When I purchased we were achieving 20% gross, oh yes the good ol' days

 

[karina]

MTR,

The deals you got were what I would call "exceptional" and purchased at the very bottom of the market. I picked up a few myself

We did pick up a number of deals during that time that were the lowest sale price ever recorded in a subdivision and still are to this day.

 

[engelo10]

Hey guys,

If you have some spare time have a look at a suburb in Kansas City called Ruskin.

Solid B class area with values prior the GFC of around $80,000 - $100,000.

Previously an owner occupier area and now its 50/50.

Some stellar deals are to be found with a low entry price.

Thanks.

 

[karina]

Engelo

What price do they sell for now and what age are the homes? How about rents?

 

[engelo10]

Engelo

What price do they sell for now and what age are the homes? How about rents?

Hi Karina,

They can be bought for around $30,000 and need around $15,000 in rehab.

They are 50-60 years old.

Rents between $900pm - $1,000pm. Section 8 is higher.

Taxes are around $700 per year and insurance $400pa.

Thanks

 

[MTR]

I had a number of items that needed to fit my criteria when purchasing in US.

1. Homes no older than 10 years
2. Homes larger than 1500 sq ft
2. Rents at a minimum of $1000 per month
3. Purchase price @ $18-20 sq ft. (actual build @ $60 sq ft, plenty of fat)
4. Buy in States where the weather if not as harsh, sunny States
5. Buy in good/well maintained family sub-divisions

I think buying the right properties in US will help reduce the risk and keep the maintenance issues down.

The cold States such as NY State, Kansas etc will equate to higher maintenance costs, also older homes also higher maintenance costs.

These States may be a lower entry level, however it will cost you more to hold these.

MTR

 

[engelo10]

I had a number of items that needed to fit my criteria when purchasing in US.

1. Homes no older than 10 years
2. Homes larger than 1500 sq ft
2. Rents at a minimum of $1000 per month
3. Purchase price @ $18-20 sq ft. (actual build @ $60 sq ft, plenty of fat)
4. Buy in States where the weather if not as harsh, sunny States
5. Buy in good/well maintained family sub-divisions

I think buying the right properties in US will help reduce the risk and keep the maintenance issues down.

The cold States such as NY State, Kansas etc will equate to higher maintenance costs, also older homes also higher maintenance costs.

These States may be a lower entry level, however it will cost you more to hold these.

MTR

Hi MTR,

Thanks for your post.

I am fully aware of all maintenance costs associated with these types of properties as I have lived and breathed them for the past year and work with a gentleman that has done the same thing for over 20. The numbers work very well in our opinions.

Thanks and have a great day.

 

[handyandy]

Hi MTR,

Thanks for your post.

I am fully aware of all maintenance costs associated with these types of properties as I have lived and breathed them for the past year and work with a gentleman that has done the same thing for over 20. The numbers work very well in our opinions.

Thanks and have a great day.

How about sharing some of your real life numbers?

By sharing we can all judge how well the numbers 'work'.

Cheers

 

[engelo10]

How about sharing some of your real life numbers?

By sharing we can all judge how well the numbers 'work'.

Cheers

Hi handyandy,

Thanks for your message.

Please clarify "real life" numbers?

Nothing to worry about guys. I'm not selling you anything lollol

The numbers mentioned in previous post are what an any investor could enter the market for and also complete the rehab.

Thanks

 

[handyandy]

Hi handyandy,

Thanks for your message.

Please clarify "real life" numbers?

Nothing to worry about guys. I'm not selling you anything lollol

The numbers mentioned in previous post are what an any investor could enter the market for and also complete the rehab.

Thanks

You say the number work for you so what are the real net numbers. It's all well and good to sit there and spout on about gross figures but in the end it's the net figure that matters.

In my analysis I have tried to arrive at the net figures for my properties in the USA and I feel that if you have 1+ years experience over there then you should be able to do a similar analysis and come up with a real net figure. (before interest).

In calculating the net figures you also need to take into account vacancy and relets, running repairs and also tenant change over repairs which according to all accounts from many different investors in this market tend to be horrendously expensive in relation to the rents received.

If you don't take into account the real running figures then you are doing no more that all the other USA marketers and fantasizing and what could be.


Cheers

 

[DavidMc]

Hey everyone!

What do we think will happen to US property if the US government defaults (or otherwise continues with it debt problems?).

I'm thinking they'll run the printing presses like crazy causing the USD to drop in value.

 

[engelo10]

You say the number work for you so what are the real net numbers. It's all well and good to sit there and spout on about gross figures but in the end it's the net figure that matters.

In my analysis I have tried to arrive at the net figures for my properties in the USA and I feel that if you have 1+ years experience over there then you should be able to do a similar analysis and come up with a real net figure. (before interest).

In calculating the net figures you also need to take into account vacancy and relets, running repairs and also tenant change over repairs which according to all accounts from many different investors in this market tend to be horrendously expensive in relation to the rents received.

If you don't take into account the real running figures then you are doing no more that all the other USA marketers and fantasizing and what could be.


Cheers

Sure mate,

I feel some tension in your post.

Lots of eye smudging from turn key operators. Sad to see foreign investors not shown the true net figures.

Estimate on "real life" figures below:

Purchase and rehab - $45,000
Rent - $900pm
Taxes - $700pa
10% management - $1080
Insurance - $500pa
Lease fee, 1 month rent - $900
Vacancy 2 months rent - $1,800


Net = $5,820
Net yield - 12.9%

I have upped some expenses and taken lowest rent. Never had a property vacant for more than 1 month even in very rough parts of town. The agreement with property management is if for whatever reason a tenant moved out within the first year he would re-let the property at no fee. Most tenants sign 2 year leases and have automatic extensions. The gentleman I have been working with here in KC owns 12 in Ruskin and has so far had 2 move outs and 1 eviction in the last 2 years. I am not quite sure as to the exact expenses on getting the properties rent ready and if any damage was caused but labour isn't too expensive here in KC and most times they would just need a clean up and paint. Personally I have been exposed to 7 deals in the Ruskin area in the past year but knowing the approx figures on the 12 house portfolio and just to be safe I would say that the above numbers would be around the average true net return over a longer period. Some years are better than others.

Thanks.

 

[engelo10]

Hey everyone!

What do we think will happen to US property if the US government defaults (or otherwise continues with it debt problems?).

I'm thinking they'll run the printing presses like crazy causing the USD to drop in value.

Hi DavidMc,

I believe these guys will figure something out.

There are some smart cookies here in the US hahaha

Have a great day.

 

[chindonly]

Nice net yield.

Well done Engelo