As a result of my recent trip to the US I have a portfolio of properties that I currently don’t have the equity to buy. Here is the offer:
I will source for anyone with the available funds any number of properties with gross yields of between 20-30%. In all cases I will strive for over 25% which gives a comfortable safety margin. These yields are unattainable in Australia, at least at present and within my experience.
You should anticipate expenses (including debt servicing) of around 20% leaving a return before tax, before tax deductions and before capital growth of about 10%. The properties will be duplexes in the US$20,000 to $40,000 range. I will negotiate prices, provide a realtor who will act in your interest alone, provide contacts with an attorney, accountant, insurance broker and PM who I believe to be competent and reliable and organise contracts and property inspections. Legals will be extra, but probably below $1000 per property and if you wish to hold the properties in the name of a US entity, I will also organise an LLC (very like a discretionary trust) at cost. About $1000 to set up, plus ongoing registration costs (value for money only if you buy several properties, in my humble and unqualified opinion).
I will organise and interpret for you the property inspection (at which stage withdrawal from the deal is possible) and discuss with you any and all concerns you may have. I will not provide taxation, legal or financial advice – I am not qualified to do so.
All properties will be inspected by the realtor and I will have inspected most as well. All properties will be duplexes located in west Buffalo (not lower west), Riverside or in Niagara Falls. No property will require rehab, unless you ask for that (significant price reductions would apply) and you may specify whether you want a tenanted or clean and vacant property.
I will inform you of any success I have with loan brokers, but do not guarantee that you will be able to get US finance.
You may have to purchase fridges and/or stoves for the properties – if so, I will try to arrange a discount. The following is what I hope a typical investment would look like – note the 5% vacancy allowance and the 5% contingency allowance. Also, late fees are charged in the US and often form a significant part of income. I have not included these, so I trust my figures are conservative.
Price $34,000
Income
Rents $10,080
Less Vacancy (5%) -$504
Total $9,576
Expenses
Taxes $1,600
Management (8%) $806
Maintenance (5%) $504
Interest (Price * 7.0%) $2,380
Insurance $500
Water $170
Contingency (5%) $504
Total $6,464
Net operating income (NOI) $3,112
Return on investment (ROI) 9.15%
Cash on cash return. 26.15%
*assumes down payment is borrowed, rather than ‘free’ cash.
And you get tax deductible trips to the US. As I understand it, the ATO won’t let you, but the IRS will.
CAVEAT EMPTOR: Regarding the above figures, I am honest, but I can be wrong.
Other notes: see various threads about tax implications and consult professionals about implications for your particular circumstances. I will assist you to the best of my ability, but as in all investing there are no guarantees.
What can you expect to pay me? I will ask US$3000 or the first year’s expected net returns as calculated above (whichever is LESS) for the first property and US$2000 flat for every property thereafter. I will refund the fee in the case of an unsatisfactory building report, but do not propose to do so for any other reason, ESPECIALLY lack of finance. You must have your finances in place first. As always, I am open to discussion. You will still be liable for some legals expenses etc if you withdraw at this stage, but these will be reduced as some steps come after the building report, not before.
Finally, and please don’t think this unfair, I insist that you already own at least one IP and preferably more. This restriction is for your protection, not mine – this is not a starter’s proposition. Even better would be if you own IPs that are distant from where you live in order that you understand the problems of remote management. Many of the US bargains exist precisely because the present owners don’t understand how to deal with these problems. I don’t want to be the proximate cause of someone becoming a distressed seller. I do not intend to check anyone’s claims, but trust me and please do not apply if you are a newbie. There is time and I’ll be here for a while, as will the US.
Obviously, the more that are bought and the more time goes on, the fewer I will have personally inspected (until my next trip in March). However, as time and finance permits, I will also be continuing to buy through my realtor who knows what a cashflow-oriented investor wants.
You are free to search the site, but I don’t think you will find a better deal has ever been offered, in cashflow terms. I don't think I've left anything out, but if I have, let me know and I'll answer all questions.
Quiggles
I will source for anyone with the available funds any number of properties with gross yields of between 20-30%. In all cases I will strive for over 25% which gives a comfortable safety margin. These yields are unattainable in Australia, at least at present and within my experience.
You should anticipate expenses (including debt servicing) of around 20% leaving a return before tax, before tax deductions and before capital growth of about 10%. The properties will be duplexes in the US$20,000 to $40,000 range. I will negotiate prices, provide a realtor who will act in your interest alone, provide contacts with an attorney, accountant, insurance broker and PM who I believe to be competent and reliable and organise contracts and property inspections. Legals will be extra, but probably below $1000 per property and if you wish to hold the properties in the name of a US entity, I will also organise an LLC (very like a discretionary trust) at cost. About $1000 to set up, plus ongoing registration costs (value for money only if you buy several properties, in my humble and unqualified opinion).
I will organise and interpret for you the property inspection (at which stage withdrawal from the deal is possible) and discuss with you any and all concerns you may have. I will not provide taxation, legal or financial advice – I am not qualified to do so.
All properties will be inspected by the realtor and I will have inspected most as well. All properties will be duplexes located in west Buffalo (not lower west), Riverside or in Niagara Falls. No property will require rehab, unless you ask for that (significant price reductions would apply) and you may specify whether you want a tenanted or clean and vacant property.
I will inform you of any success I have with loan brokers, but do not guarantee that you will be able to get US finance.
You may have to purchase fridges and/or stoves for the properties – if so, I will try to arrange a discount. The following is what I hope a typical investment would look like – note the 5% vacancy allowance and the 5% contingency allowance. Also, late fees are charged in the US and often form a significant part of income. I have not included these, so I trust my figures are conservative.
Price $34,000
Income
Rents $10,080
Less Vacancy (5%) -$504
Total $9,576
Expenses
Taxes $1,600
Management (8%) $806
Maintenance (5%) $504
Interest (Price * 7.0%) $2,380
Insurance $500
Water $170
Contingency (5%) $504
Total $6,464
Net operating income (NOI) $3,112
Return on investment (ROI) 9.15%
Cash on cash return. 26.15%
*assumes down payment is borrowed, rather than ‘free’ cash.
And you get tax deductible trips to the US. As I understand it, the ATO won’t let you, but the IRS will.
CAVEAT EMPTOR: Regarding the above figures, I am honest, but I can be wrong.
Other notes: see various threads about tax implications and consult professionals about implications for your particular circumstances. I will assist you to the best of my ability, but as in all investing there are no guarantees.
What can you expect to pay me? I will ask US$3000 or the first year’s expected net returns as calculated above (whichever is LESS) for the first property and US$2000 flat for every property thereafter. I will refund the fee in the case of an unsatisfactory building report, but do not propose to do so for any other reason, ESPECIALLY lack of finance. You must have your finances in place first. As always, I am open to discussion. You will still be liable for some legals expenses etc if you withdraw at this stage, but these will be reduced as some steps come after the building report, not before.
Finally, and please don’t think this unfair, I insist that you already own at least one IP and preferably more. This restriction is for your protection, not mine – this is not a starter’s proposition. Even better would be if you own IPs that are distant from where you live in order that you understand the problems of remote management. Many of the US bargains exist precisely because the present owners don’t understand how to deal with these problems. I don’t want to be the proximate cause of someone becoming a distressed seller. I do not intend to check anyone’s claims, but trust me and please do not apply if you are a newbie. There is time and I’ll be here for a while, as will the US.
Obviously, the more that are bought and the more time goes on, the fewer I will have personally inspected (until my next trip in March). However, as time and finance permits, I will also be continuing to buy through my realtor who knows what a cashflow-oriented investor wants.
You are free to search the site, but I don’t think you will find a better deal has ever been offered, in cashflow terms. I don't think I've left anything out, but if I have, let me know and I'll answer all questions.
Quiggles