Invest in NZ - not in US properties is my mantra

[donna]

I started this discussion last week and it has 71 replies -worth a read.

cheers,

Donna

[damage]

Kerry,

"this market" is a bit of a over generalization of the US market. Can you be more specific? What cities?

Looking forward to hearing more about your 4 weeks "actual reseach" on the ground. All we have heard from the detractors is the odd gloom and doom generalization of the USA market. But then anyone can google a doom/gloom article on google, post it and say "seeeeeeeeeeee I told you USA property investment is crap to invest in".

It is going to be refreshing from hearing from someone that ACTUALY did some real research.

Shane

If you want to hear some real doom and gloom stories and opinions, take a look at this site. Full of LOL's

http://www.housepricecrash.co.uk/for...p?showforum=22

[speights boy]

I have just spent 4 weeks there researching this market? - am I wasting my time ?

Love your comments and opinions!

Depends on whether you are buying or selling .

Your USA Markets page needs a re-write; poor English composition, spelling and parts of it make no sense.. ( Indian staffing?)

[Orkibi]

( indian staffing?)

loll loll loll

[speights boy]

.... 4 weeks you must have concluded some opinion ....

Is this still your opinion ?

For all those with an investment budget, now is the prime time to move your monies offshore and in to this distressed markets of the USA to capitalise not just from rental income but capital appreciation in 5 to 10 years.

[Perry]

I have the idea that - in North America - residential rents
are paid monthly. Whether in advance or arrears, I know
not. If in arrears, a missed rent payment would therefore
have the potential to be more serious than one in NZ.

[Kerry Christian]

here is some of the information I found out.

I went to the USA, to do due diligence on the country, and the people. The opinions I have formed are my own.

I met with the following individuals while overseas - Andrew Waite and Dean Letfus. both of them gave me ideas and some food for thought. I am not working personally or in business with either Andrew or Dean - we mets as friends only). I also met with various companies because I do see an opportunity to invest in the United States. I read the newspapers here, but you need to go and stand on the dirt yourselves to form an opinion.

Their are a lot of different people offering different products and services, and some of them are frankly - not good. if you're looking for one-off purchases for yourself - I would suggest you go through a turnkey operator. I would also suggest that you should take a trip over there at some stage. If you have a group of people or looking to purchase a number of properties, then there is definitely the opportunity for you to find a turn Key operator that will pay you a commission.

I also wrote reports every other day, which I sent back to various people in New Zealand. ( both business associates, clients, and some of my mentors) and I have included one of those reports at the end of this thread.

The cities that I went to and researched were Phoenix and Memphis - I spent time with companies that sold - full turnkey solutions, and I also worked with companies where individual parts of the operation could be handled by myself. I met with banks and hard money lenders (people who provide bridging finance).

here are some facts that I have found out:

You can buy properties for about $30-$90 a square foot - these properties can be in a good quality rental areas ( Pakuranga and Mt Wellington). I went to, but decided to keep away from the lower parts of town) - I found Memphis, was a poor cousin in relation to quality of properties that could be found in Phoenix, however the cash flow was better. The capital growth potential of Memphis to me was nonexistent. The capital growth potential of Phoenix however was 1° above nonexistent - this was only due to the quality of the properties that were available.

however in saying this there are areas of Memphis that I thought had great potential, and I found turn key operator that works in this part of town - we are currently putting a business arrangement together.

an example of this is a 1880 sq ft house (approximately 180m2) that can be purchased for $25k US - add 10k. if you wish to do the work yourself or add 20k if you want a full turnkey solution. This house was 25 years old

regardless of which you go, this property will rent for approximately $875 per month - if you budget 65% of your rental as costs (including borrowing 50% of the purchase price through a mainstream bank) this will an idea as to the potential positive cash flow this property will produce. This property in Phoenix would be 10K. more expensive, however the house itself would have been built around 2005 (it comes down to your personal choice)

There is also a strong "flipping market" in the USA. I witnessed a 15oK that was rehab and flipped for 190K. Mainstream banking finance is harder to find, however by linking up with certain companies, you can have access to it. Hard money or bridging finance is very popular but you are actually paying 18%.

Rent to buy is also a strong exit strategy, that most rental managers use. It helps people having mortgages that are upside down. I met a client who had a $250,000 property. value now 90,000. The mortgage was $225,000 and was costing them 1400 month. They stayed in the property repurchased that property on a rent to buy for $120K - the rental/mortgage was reduced to $900 per month.

I could write a lot about what I've seen - however the question you are asking is would I invest in the USA - as a personal investor the answer is "yes" and I have already started. Should you - that is going to be your call. Should you go through a turnkey operation, or try and do it yourself - once again that is going to be your call. I will say this however they are not looking for people to do one-off deals (my personal opinion based on the people I have met and what I have seen) if you could get a group together or work with a group - economies of scale will help.

I will give you a list of the people that I'm dealing with, and you can deal direct with them if you want to ( and yes I do get a commission if you deal direct) or you are free to go and find your own suppliers.

here is one of the reports I have written



Some of this may be of interest to you.

Today, it was taking out clients for XXX - we had a group of eight individuals from Utah who were looking at investment property. I actually did not realize until later in the day that I was in the presence of sporting royalty. One of the people in my car was a former Phoenix suns professional basketball player. I now have the photos.

These people were looking for high-end properties through the foreclosure process, and this is what they ended up buying. Photo attached

The details on this property are as follows
Area of house 5000mts
Valuation $1.2M in 2008
¼ acre site, has the works – pool , spa, B/Ball court etc

Sold today US $450K –it will rent for $700 week (34600 pa)

They paid a $45k deposit and borrowed 405K at 7.25% = $30,456 (Exc Closing costs, Ins, rental management etc) They plan to flip this property.

As you can see I was a little blown away. I think of properties that I sell for 530K in New Zealand (my two-story house in Bradnor Meadows) which is approximately about the same price Vrs this house- it tells me two things. New Zealand is very overvalued as a country, or the problems in the USA are very far-reaching.

We went to see a number of properties that averaged from 200K up to 500K.. All the houses were on the foreclosure list. We also went to a couple of HUD properties, these are properties that are owned by the banks who are in the market trying to sell them independently. They are trying to sell at mortgage value. They are offering deals the same way motor vehicles are advertised on TV. Zero money down, 24 months interest free period, and we will throw in a return holiday for two to Honolulu, for the person that buys - once again I saw aspects to banking that I have never seen before.

My companion was telling me that if I was to purchase this bank owned property I would be paying 40 to 50% more than foreclosure price. What was also interesting was they were able to go online, download information of that particular street, and find out which houses were going to be put up for foreclosure (mortgagee sale). In the case that I have a house two doors down from the bank (HUD) house, was due on the market in little over a week.

I was taken to a number of gated communities, a number of these were out in an area called Seville. The one particular community that my client specializes in, they were buying homes at foreclosure for approximately 150 K. To me this was like a hotel resort, it had a golf course swimming pools, movie theaters, everything you could think off, was available as part of the package when you purchase. The land was not leased. I have included two photos from the outdoor area – note: these areas are available to everybody who lives in the gated community

Another observation I am starting to realize, is that the average American citizen, does not feel that the country is in a state of depression. They know the market is down, they know that the mortgages are upside down, but they see that as an opportunity, to get out of a house that is upside down financially and go and purchase a better house in a better area for more money. The problem they face is under the foreclosure rules their credit record is stuffed. I was told this is only for a period of two years, however when I spoke to the bank yesterday, they seem to take a different view. It was almost as if they were going to be vindictive against people who foreclosed. (This was more of a personal observation and probably not fact).

Today I'm going on a tour with a rent to buy company. One of the things that I need to work out is if I invest in the USA, I need an exit strategy. I need to know how and when I am going to sell the property and repatriate those funds back in New Zealand. Hence the idea, of purchasing property and putting on a lease option. This should be a very interesting day,

I'll file this report later on tonight and this will be my last one for the next few days, as it is Memorial weekend over here. I am being taken to a “Diamondback baseball game” and going away with their family for a couple days.

Anyway that's enough of my thoughts for now


Kerry

[donna]

So you too are setting yourself up as a 'property promoter' of US properties Kerry. Well why not aye - there's other Kiwis doing it and there's Kiwis willing to use these services.

It's certainly going to be interesting to see how it all works out.

cheers,

Donna

[Kerry Christian]

Donna

Get your head out of the papers and get your bum on a plane - then form an opinion and post it. This way I can decide if your opinions are based on some facts or not.

That is all I did.

[speights boy]

Hang on Kerry.

You are in AZ doing your DD because you expect to be doing business over there.
That is fair enough, and exactly as it should be.

However, for the rest of us down here in Whangamomona who are not doing so, we have no intention of traveling to Phoenix.

In your opening post you said " Love your comments and opinions "
If you only wanted these from people who have gone over there to walk the streets and enjoy the 43 degree desert heat then you should say so.

[halfempty]

Geeez tough crowd...

[TheLiberalLeft]

Yeah, but it's a dry heat hahahaha

[DaveW]

http://www.biggerpockets.com/forums/52/topics/63701-property-management-memphis

[damage]

The details on this property are as follows
Area of house 5000mts
Valuation $1.2M in 2008
¼ acre site, has the works – pool , spa, B/Ball court etc

Sold today US $450K –it will rent for $700 week (34600 pa)

They paid a $45k deposit and borrowed 405K at 7.25% = $30,456 (Exc Closing costs, Ins, rental management etc) They plan to flip this property.

A few thoughts on the above
Why would someone rent this property if it was cheaper for them to buy it? If they cant get a mortgage, can they afford to pay the rent?
Who are they going to flip it too? If it was that good a bargin, I am sure it would have been "snapped" up a long time ago.
To service $700 per week in rent, the gross income for the household would need to be at least $100k which from my research is well above the average for the area.

[speights boy]

This way I can decide if your opinions are based on some facts or not.

That is all I did.

" I bought a couple from one of those "turnkey" companies. They go on and on about what a great rental market memphis is. What a large rental pool there is there... etc. You find out later why. Because the people there are financial basket cases.

As stands now, there is a huge market in Memphis to sell rentals to out of state, and foreign investors. They are not being leveled with in regards to the overall quality of tenants, IMHO.

Unfortunately, there is a lot of "incest" in Memphis between turnkey vendors and pm's. You can't trust any of them. It's a big "duck" club. And if you are out of state or country, guess what? You ain't a duck. "

This guy certainly has an opinion.
From the forum link DaveW posted.