So many opportunities...

[cedase]

For those that are interested in the opportunities that are presenting themselves in the USA, you may find my investigations of some use.

My partner is a US citizen and we have been monitoring the US real estate market for quite sometime with a view to "grabbing a bargain or two".

After 18 months of zealous due diligence and another trip over there to set up infrastructure, we have now put in offers on 3 houses.

We have chosen a specific city in the southern states that fits our pre-determined parameters and our intentions are to build a portfolio (more than 1 or 2 bargains) in and around that city.

Our target is freehold houses that will owe us <US$30k renovated and ready to rent.

We have found the market for rental properties in the US$400 - US$700/month region is woefully undersupplied. We have also discovered that there is a US Government rental subsidy programme known as "Section 8" that will guarantee us our rent for the term of the lease.

Our infrastructure includes an in-house property management team, a Realtor and the handiest handyman east of the Mississippi.

All our number crunching tells us that the ROI should sit at around 23%/annum.
From OTP to completion will be around 6 weeks.

The numbers: (just one example)

purchase price including all fees $15,000.00
repairs + contingency $12,000.00
Total $27,000.00

Rent per annum less management fee $6,200.00

100% ROI after 53 months

Obviously these figures are based on 100% occupancy but we have researched our way out of most transient areas so we believe we can expect somewhere close to this result.

These houses are, in some cases, almost 100 years old. This means that in some instances the house only has 10 or 20 years life expectancy. We expect that if we still own the property at that time it will A. owe us nothing, B. have increased in value and C. have a "land only" value that is sufficient to cover us for a coffee or two at Starbucks.

We established this process as a result of us creating our own SMSF and wanting a diverse portfolio. As a result of our work we are now looking to establish a small investment company in the US to take even more advantage of this huge market.

Anyway..that's our story and if there is anyone interested enough we will post a follow up once our first tenants have shifted in and the rent cheques are flowing.

 

[craigb]

sounds wonderful, enjoy ! keep us up dated , with the ride!

 

[Chris.R_WA]

Good luck with it, hope you get the high returns commensurate with the risk

Sounds like you've done the research yards...let us know how it goes !!

Rgds,

Chris

 

[Bill.L]

Cedase,

On most of your posts you include the "drop us a line" comment, could you please give some more info about what you are up to??

For example, what are the taxes owing, and yearly taxes on the properties you purchased, and why not state the city you have purchased in??

In discussion on this forum most people tend to indicate not only the city but the suburb they have or are interested in.

bye

 

[Aaron Sice]

FUNK YEAH!

this is what i'm talking about - there are STILL fundamentally strong cities in the southern states that are undervalued compared to long term averages.

you talking USD or AUD? i assume USD.

i'd love to chat more in private if possible. i'll PM you my email if you care to share stories.

cheers.

 

[Mooze]

Have spent the last two weeks in the US (now in Ca). More bargains starting to come through, however I was looking further north. Biggest issue is land taxes - looking at around 5k per year in land taxes alone (then need to add subdivision fees (each suburb is divided into subdivisions, each one has their own by laws etc, as well as their own fees)).

Definitely some good stuff around though

 

[cedase]

Cedase,

On most of your posts you include the "drop us a line" comment, could you please give some more info about what you are up to??

For example, what are the taxes owing, and yearly taxes on the properties you purchased, and why not state the city you have purchased in??

In discussion on this forum most people tend to indicate not only the city but the suburb they have or are interested in.

bye

Hi Bill,

thanks for the interest.

I have had a couple of people drop me a line so i guess it's easy enough if you want to do it.

We are primarily interested in bank foreclosures so the overdue taxes have been removed from the equation.
Annual taxes are based on approx 5.5% of the counties or states assessed value of the property. An example of one property we looked at was a list price of US$10,000.00 with an assessed value of US$7625.00 and annual taxes of US$408.00.

As far as being specific regarding states, cities or suburbs, I have a number of prospective investors who would rather that information remained our I.P.

As you would appreciate, a significant amount of time, money and effort goes into these types of projects and we would like to see a significant return for that investment. Having said that, there is plenty of information I am happy to share which is generic in nature and can help interested parties to travel the same road we have but hopefully with less corners!!

 

[Aaron Sice]

thanks for the PM.

yes the taxes aren't as large as most people think - in some cases it's LESS than the rates you pay in Aus.

 

[cedase]

It's been awhile since I posted on here. My USA project took longer to kick off than I expected (or planned) but now we are up and running.

A synopsis of my project is the freehold purchase for resale or rent of houses that, after renovation, owe around USD$30K .

The first house has been purchased and is partway through renovation as I write. I am looking for the second property now.

After months of false starts and personnel changes, we finally purchased our first house the last week of November 2009.

We employ our own Property Manager (on a part time basis) and have a very solid group of contacts on the ground there for all other parts of the transaction. We have changed Property managers once, Realtors twice, Contractors once but now are quite comfortable with the mix.

This first house we are going to flip when it is ready, approx Feb/March.

A few things I recognise already as a result of this exercise to date:

1. After 18 months homework the theory is different to the practice.
2. If you don't have 2 people on the ground there that you can trust implicitly, think twice.
3. Their laws and processes are significantly different to ours, as are their taxes and interpretations.
4. A cheap house in the wrong area is not a good investment.
5. There are lots of wrong areas.

Having said all of that, entering the US Real Estate market with your eyes wide open and fully prepared can give you significant returns on your money in the short (3-6 month) term. Well prepared and well priced homes in the right areas are selling reasonably easily even in the atrocious conditions the US are currently experiencing.

If I can get the time over the next few weeks I will create a small website showing before/during & after photo's and a spreadsheet of work done/money spent.

I notice there are a number of people interested in doing something over there and I hope my experiences help give you a heads up!