Cashflow in the USA our story

[ivanw]

I posted this somewhere else but thought it might be better in its own topic

We are going to have to come to terms with the reality non cashflow properties as we return to NZ! But we are moving back for the lifestyle not the money!

I thought some of you might find the deals we have made in the US over the last 2 years interesting.

For example in the US our latest purchase was a Double in Downtown Indianapolis (2 minutes walk from the city center) that we bought for $185,000USD. We are now renting this out at $600USD per week and have a positive cashflow of $1200USD a month. And on top of that we paid a low price for this property because it had no section. But we have since managed to purchase the adjacent lot for $20,000USD. At a low estimate this property is now valued at $300,000+

Another double we bought for $145,000, increased the rent to $400 per week cashflow of roughly $900 a month and then sold the property for $209,000

Another double we just sold was bought for $155,000 we increased the rents to $500 a week Cashflow of roughly $1000 a month. Then we sold at $218,000 within 3 months

We also purchased a bank forclosed single family cottage downtown in the most expensive area for $70,000 now the return on this was only $200 cashflow a month not that great but we just sold this property for $140,000 within a year and did almost nothing to it!

Considering I came to the US 3 years ago with a suitcase and 10,000NZD, If you do the numbers, we feel we have made a good return on our investment! We couldn't have done it without the help of the US government and their willingness to loan anyone money at low rates!

If anyone would like to know more about our US experiences let me know.

[Julian]

I, for one, would love to know more and I'm sure most of the forumites would too. There must have been numerous hurdles you have had to overcome. People, such as yourself, that go where others fear to tread are an incredible inspiration.
Give us the full story - if you have the time.
Julian.

[drelly]

Ditto!

[fudosan]

Hi ivanw,

Very interesting story. Go on. How did you find good deals?

[ivanw]

Honestly when I came to Indianapolis with my wife it was not with the idea of property investing in mind. We were coming here to spend some time with her family.

Our first house that we bought was a double and the reason we bought it was practical. basically we had no money! And the idea of someone else paying our mortgage appealed. The property was located in a historical distric in a neighbourhood with fountains and esplinades, Woodruff Place, which gave it a lot of charm. Highly sort after for artist types and young workers downtown. After talking to the owner we realised he had underpriced the rent on the house by quite a bit because he was sick of being a landlord and had no idea of what market rents were. purchased for $144,000. We moved into the side of the double that needed the most work, and set about fixing it up. At this stage we were living almost rent free! It was probably about then we got the investing bug! We could see a way to make money and make it fast! We basically started looking at every property that came on the market downtown just waiting for the next deal.

Our next purchase is what you could call an emotional one.. One Sunday we were walking down our street and there was an open house. This house was a small cottage and was the newest house in the area. An old couple were moving out and we fell in love with it.It had half an acre of land and cool things like a pool! Things that we would later find out would take up a lot of our time and resources. The owners were desperate to sell and we bought it from them for $155,000. We would later sell this property for $185,000. Whe decided to sell this house because of the time it took to maintain and the capital we had tied up in it would take away from our investing ability.

The next house we bought was the small cottage downtown. You wouldn't believe it but I saw the sign come up one morning on my drive to work! I called my wife and told her about it. But the next day the sign was gone. I called the agent and he said they had an offer on the table and the bank was probably going to accept it. For fun I said well we would give you $70,000 today if the take our offer instead. Turns out the other party did not have cash and so they took our offer! This house we just sold for $140,000.

The next deal was the one we bought when we sold the house with the pool. We were looking at doubles because they just made sense. One had been listed for over two years at $220,000 I was curious as to why it had not sold as it looked very good and the rents were good as well. So we called the agent and it turned out the house had no section at all just a zero lot line. After driving by I saw that there was an empty lot next door. We enquired and the owner said he had been trying to buy this lot for years but it was owned by a trust and they were not interested. I realised that if we could persuade the owners of the lot to sell to us we could get a very good deal here. Long story short. I had a contract to buy the land signed before we made and offer on the house for $185,000 which was accepted as well. So we have instantly increased the value and the saleability of the house.

So here we are sitting quite nicely and we are at a garage sale one weekend we see a little for sale by owner sign on the porch of another double in Woodruff Place where our original one was. This was much nicer than our one and we called the owners. Turned out they had terrible tenants and they were also moving out of state. One side wasn't rented and the other was rented at about $150 a week!! They were desperate to sell and we made and unconditional offer right then for $154,000. It was accepted and we immediately raised the rents to roughly $1850 per month for the whole property. We then decided to come back to NZ and put this on the market in December and sold for $218,000 in less than four months!

one of the main things that helped us get into the rental market and raise the rents was the website we started http://rentalindy.com which is another story all together!

Basically we have been lucky! But also we haved been obssessed and worked very hard..becomes good painters and have an eye for what would raise rents and help to sell.

Ivan

PS the numbers in here are not 100% accurate but are a pretty good indication. :-)

[Julian]

What's the situation over there with capital gains taxes, property taxes, rates, tenant rights and the like? How easy is it to get finance? Can any good old kiwi just go over to the States and buy property - like the Americans can here?

I don't know what it is about the States, but I just loved the place - the architecture, the people, the roading, the cars, and mostly the optimism, and the fact they are proud of their entrepreneurs. When a person falls here in kiwiland everybody gathers around and says, "I told you it wouldn't work! Who do you think you are?" In the States the feeling I got was they would say, "Bad luck. I think you were almost there. Why don't you give it another go?" It's inspiring.

Cops brandishing guns can be a bit scary, but then again we were driving along on the freeway with the roof down slugging on a beer (only one) - thought it was legal as long as you were under the limit - wrong!

Julian

[ivanw]

Capital gains are 15% if you have owned for more than a year. Or at your income level if not. We are not the type of people to worry about paying capital gains because we figure if you are making a profit why not pay tax. although to be honest we have not paid much here in 3 years. My wife being self employed helps with this.

As I have a greencard I am not sure about just coming here an buying but I am sure they would allow it! Them seem to support anything here.

The great thing about it here is everything seems possible but interestingly only some seem to to take advantage. Wheras in NZ it seems like everyone is trying to get ahead.

More later

[fudosan]

Thanks ivanw. Excellent post. I see that one of the reasons of your success is your ability to solve other people's problems.

[Josko]

Great to have you here ivanw.

We enquired and the owner said he had been trying to buy this lot for years but it was owned by a trust and they were not interested. I realised that if we could persuade the owners of the lot to sell to us we could get a very good deal here. Long story short. I had a contract to buy the land signed before we made and offer on the house for $185,000 which was accepted as well. So we have instantly increased the value and the saleability of the house.

What was the detail that gave you the edge for this, more money?, they didnt know you were buying the house next to the lot?, excellent negotiating.

[Edinburgh]

I guess one of the attractive features of US investment is the low interest rates. Add this to a huge market (little pressure, lots of opportunities) and a rentals to purchase price ratio we would kill for, and it is bonanza time.

Great story and inspirational - if you are in the US. Otherwise pretty frustrating.

I think you will find this Ivan when you return. If I was you I would stay in the US for 2-3 years more, to develop a nest egg that will set you up for life. Sounds like such a thing is possible.

By the way, I know that Florida homes are touted to UK citizens all the time as holiday investments so I am assuming there is nothing stopping a foreign citizen purchasing property (don't the Saudis and Japan own half the US between them?). Getting a US loan at low rates will, however, be more difficult.

[ivanw]

Hi Ivi, As it turned out our edge in purchasing the section was actually just aproaching the section owners! the seller of the house had made up in his mind that they would not sell to him and had never even asked!! Obviously we did not tell him we had a deal on the land before we purchased the house!

[ivanw]

Hi Edinburg, Yes it is frustrating to see that there is some parts of the NZ market which do seem unrealistic. For example it makes sense that if I buy a house that the person renting it from me should pay more than my mortgage would cost me because I am taking the risk! So if house prices move up I would like to see rents move with them! Something that appears to be lacking in Auckland for instance. I am not sure but with house prices so high in NZ now surely the property owners and banks will start to want an actuall return?

I know we could stay here and probably end up very well of in a few years but what we have done I feel good about and at my age (27) Its not bad to come back to NZ and have a passive income and a mortgage free house. I am also sick of the poverty, crime and crack hrs on every corner. America is the land of dreams and broken dreams for sure. NZ is the best country in the world though and I can't wait to come home!

Ivan

[Stevegoodey]

Wow fantastic story and thanks for sharing it with us.

What are you doing to add value to your houses, and Is it the same stuff as we do here in NZ to get increased rents.

Have you had ant properties in other parts of the States?

Cheers

Steve

[ivanw]

Hi Steve,

We have found that we have increased the values by doing some very simple things. We bought properties that needed modernising through painting and minor updates. Fixing up the kitchens with stainless appliances etc.

We have also found that if you market a property to people who are coming from out of town students, execs etc. They do not know the local market and will pay higher prices. Especially if you make the place look cool!

This is where our website really helped us. I would love to help out everyone back home with the website stuff and that is why I created http://nzmls.com and am hoping to build this up to support the property investing market in NZ. If anyone here would like to upload their properties for rent or sale onto the site its completely free and we are already getting many hits from international search engines which is the key! Problem is there is not many people using it yet so all the leads are being wasted.

Ivan

[David-Suzuki]

America is in trouble. And with George Bush at the helm, God help them.