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Old 25-11-2018, 05:26   #16
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Re: US property

Investment income properties are the best of both worlds. Long term you get growth and income. I have had several, the one I have now I have owned for about 35 years. Unless riding an upswing, you can't always count on an easy exit. I would say 60% loan ratio is the highest to return income. However, PM's can eat into profits. Take into account lost income from vacancy, legal fees from tenants that turn out to be less than good, maintenance, surprise repairs. The PM get's a percentage of all the expenses, probably not including legal fees. The occupancy is also at the whim of the economy and local situations. It can be the easiest money you ever made, or the biggest headache you have ever had.
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Old 25-11-2018, 10:49   #17
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Re: US property

Yes, rental properties can be a dream or they can be a nightmare. You have to be OK w that for this type of investment.

I had a property turn into a major nightmare a few years ago. Very low LTV (about 25%) help to weather the storm. It was a very unpleasant and expensive "storm", but the skys cleared on the other side and it sold at a substantial profit!

I think rental property nightmares are a bit like heavy weather sailing. Once you build some experience you can avoid most of the bad weather and you know how to handle it when caught by it. Building experience is of course the potentially painful part because real experience requires you to weather some storms. A good experienced PM can provide guidance to avoid the storms and advise you on how to weather the unanticipated ones.

You also want a PM who will stick with you when times get tough. Ive had PMs bail on me when things got interesting...just making things more interesting. Ive also had good ones ride out the storm with me...they got a bonus for that!
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Old 25-11-2018, 11:30   #18
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Re: US property

My son is in this business
His secret, you have to make money on the buy side.
Sellers aren’t stupid and will sell at a CAP rate
which is a ratio of rental income to cost.
So a cap rate of 10 would be 10,000 of income
on a property cost of 100,000
Then there’s all your costs,
My son only buys all cash and usually walks away
with 5-7 percent per year of purchase price
(positive cash flow)
Not a killing but solid income with little risk
and better than CDs with an upside
that value might increase and rents may rise
He buys in solid blue collar areas
and charges a bit less than going rate.
50 bucks less a month buys him solid tenants
who stay long term and eliminate the
vacancy costs
Cheers
Neil
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Old 25-11-2018, 17:41   #19
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Re: US property

Nothing in real estate is "low risk". Not saying not worth it, but don't kid yourself.
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Old 25-11-2018, 23:55   #20
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Re: US property

Hi John, all investing has risk, you could argue the no risk 10 year treasury has some risk!

My experience with rentals is you can lower the risk by purchasing well, not being greedy and having a good property manager. So far I've been lucky, hope it continues.

I mentioned earlier the difference between speculative investors and cash flow investors, cash flow investors imo tend to carry less risk due to the sums adding up from the start, buying with enough margin on the deal to handle the inevitable problems along the way.

When you purchase a negative cash flow property with little down and counting on prices going up forever then your gambling imo. The deal has to make sense now and later.

Cash flow investing along with value investors have been few and far between for the 15 years or so, speculation due to crazy monetary policies has been the order of the day. Of course speculation has stolen value from most asset classes.
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Old 26-11-2018, 07:02   #21
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Re: US property

Consider commercial real estate. I hear parking lots are doing really well.
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Old 02-12-2018, 16:37   #22
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Re: US property

Surprised to hear the talk of Austin....I own a property there, bought it 14 years back in a bad area, but it had two incomes and the return was good. Now it's a good area, gentrified. $$$yeah baby!
I see it now much like Sydney, numbers are stupid!
I wouldn't live there either, not for love or money. The traffic is just ridiculous.....which I do sorta love as it drives the prices even higher for down town property....mine
I totally agree on the PM, but to be honest have not found a good one yet. I did however find one with a contractor that I trust totally. But thats awfull hard.

I also bought a place in San Antonio, poor side of town, bought it on the high before 08, but the numbers were good. If I tried to sell it in 09 I would not have gotten %50 back, but the income was good and stayed rented , now it's worth a good %40 more than I paid and been paying good return the whole time. It's actually my best earner.
Occupancy rates dont fall during downturns, they go up if anything.

I also own multiple properties localy and look after everything myself, which is really the way to go .......but obviously not while cruising.

Military bases are a good place to be around, but like already stated local knowledge is a must. And don't trust a real estate agent.....not one....not ever...never ever,.....NEVER!!!

And I have to say one other thing. You always hear about the horror stories......but not about the decades of good tenants in multiple properties, which I can attest to.
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Old 03-12-2018, 11:29   #23
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Re: US property

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Originally Posted by Allied39 View Post
Surprised to hear the talk of Austin....I own a property there, bought it 14 years back in a bad area, but it had two incomes and the return was good. Now it's a good area, gentrified. $$$yeah baby!
I see it now much like Sydney, numbers are stupid!
I wouldn't live there either, not for love or money. The traffic is just ridiculous.....which I do sorta love as it drives the prices even higher for down town property....mine[emoji3]
I totally agree on the PM, but to be honest have not found a good one yet. I did however find one with a contractor that I trust totally. But thats awfull hard.

I also bought a place in San Antonio, poor side of town, bought it on the high before 08, but the numbers were good. If I tried to sell it in 09 I would not have gotten %50 back, but the income was good and stayed rented , now it's worth a good %40 more than I paid and been paying good return the whole time. It's actually my best earner.
Occupancy rates dont fall during downturns, they go up if anything.

I also own multiple properties localy and look after everything myself, which is really the way to go .......but obviously not while cruising.

Military bases are a good place to be around, but like already stated local knowledge is a must. And don't trust a real estate agent.....not one....not ever...never ever,.....NEVER!!!

And I have to say one other thing. You always hear about the horror stories......but not about the decades of good tenants in multiple properties, which I can attest to.
Ive done the same in Austin, buy in not so good, but well positioned, fringe neighborhoods and wait for them to turn.

I was feeling the same way about Austin until I visited Sydney. Holy crap! There is no comparison...Sydney valuations are many times that of Austin for comparable properties. Valuation based on rent revenue is many times less than market value in Sydney. In Austin, with a bit of effort, you can still find properties w valuations supported by rents.
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Old 03-12-2018, 11:37   #24
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Re: US property

OK, true. I was reading last night median house price in Australia (not even Sydney, which is the worst) is $820,000.
Yup, Austin is no Sydney....but it is certainly heading in that direction, especially when compared to similar cities in the US.
Austin is rated one of the best places to live in the US.....but that is obviously from some demographic that is very different from me. Perhaps it's the man bun gender confused metrosexual demographic? Who knows?
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Old 03-12-2018, 12:55   #25
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Re: US property

Dale, sit tight my friend. I am in the Bay area of San Francisco. With the Federal gov't banking puppeteers....interest rates are rising. Real Estate inventories are expanding like crazy...which means a buyer's market is now emerging. Talked with a Las Vegas realtor a couple of days ago. He said the inventory in Vegas has expanded 300 percent in the last six months. We are seeing a possible turn into recession????? We no longer have the play fast and dirty banking we did before the last blow off in 2008-2010. Which means we can't stuff the cracks with fake buyers and credit challenged want-to-be rich kids. There are houses for sale in my neighborhood that have retreated almost 20 percent on their asking price over the last half year.

I totally agree with your buying a place that will generate profit. In the USA most banking will require a minimum of 20 percent down. For example...a 400 K home will cost you 80K down. Which will leave you at 320K financed. Interest rates now sitting at about 5.25 % You might be able to rent a 3 bedroom+2bath home for about 2500 dollars in a decent neighborhood. Figure your property tax with bonds...etc...to be around 1.2% of selling price. You will be in a positive cash flow.

Loan calculator shows a payment of about 1700 dollars a month. Add the property tax of approx 400 a month plus insurance of another 100 dollars a month...and you are at 2100-2200 a month. Which leaves you around 300 month profit. So, 3600 divided by 80,000 =4.5 percent.

If you buy now...in current american situations you could be caught on the wrong side of the market as it slides south. No one knows if this is a minor correction or a major correction. Like the Clint Eastwood movie "Dirty Harry" Inspector Callahan states to the punk..."Well, do you feel lucky?"

On our disaster in 2008-2010...I got caught buying at peak of the market and suffered for years from it. Sounds like the Australian market is going to go through it's own disaster. For sure....the deep pockets will come in and snap up every morsel of chum left in the water before the bait fish like me can get the courage to attack.

My advice...wait for awhile and see what is going on with market direction. The other thing i forgot to mention...States like Texas, Nevada, Florida...etc are tax free states...which affects things....Texas...i.e. Austin went through it's own melt down during those dark days. It can be tricky business....as you well know. Wish you luck Dale.
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Old 03-12-2018, 14:07   #26
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Re: US property

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Originally Posted by daletournier View Post
Thanks to all that have replied.

As an Australian I've been watching this craziness for years, some how Australia thinks it "different" and fundamentals don't apply to us.

As Bob said its due to loose credit and tax incentives over the years, it's coming to an end. The Royal banking commission has and will continue to have a major effect on availability of credit. I follow the data and many would be surprised at the extent this has had on credit availability.

The real eye opener to me has been the perception that many in our country have about getting rich. I was always looking for cash flow, capital gain was a bonus if it happened. A deal had to make sense NOW, meaning the return had to throw of cash. If it didn't throw of positive cash then I saw it as a liability, not an asset.

Yet, many I know in the 35-45 age group have known nothing but, byu something and it goes up, no effort either mental or physical required, money just comes. And this stupid "real estate doubles every year crap!!" Australia hasn't had a recession for 28 years this has lead to major complacency.

I've actually sold my business, got completely out of debt and live with in my means as I'm 100% convinced the current situation in Australia is unsustainable and will end badly. We have the first or second highest household debt to income ratio in the world. When to greater percentage of a societies income is channelled to servicing debt bad things happen, public household debt has greater consequences on a nations prosperity than government debt. The economy needs people (us) to consume.

Debt is simply bringing future prosperity to now, a debt to be repaid in the future by others.

Australias economy is propped up by mining, housing and banking, they are tightly intertwined a major housing downturn will effect our economy greatly.

I hope there is a soft landing, my bet is it will be quite rough.

This was the US prior to 2008 and we saw how well that ended for us! 10 years later and finally seeing economic growth.


Someone mentioned Austin. I'm in Houston and this is a booming market. There is plenty of opportunity here.


Quote:
Originally Posted by belizesailor View Post
Wow, Lake Charles, LA tops the list...whodda thunk!

Highest jobs growth during period of study, but lower end jobs.

We were there two weeks ago. Whodda thunk indeed!
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Old 03-12-2018, 14:17   #27
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Re: US property

We have a 4 unit apt building/brownstone in center city Philadelphia. We bought it about 30 years ago, lived in one unit until a 3 years ago. Now it’s fully rented out with a PM as we are cruising.

There is an old saying that you make your money when you buy, not when you sell. That means it’s all about the right property at the right price.

We have had other properties that did not do nearly so well as this one. Principally because if location.

Also, we bought at the tail end of a depressed RE market in Philadelphia. So our purchase price was pretty good. It also helps to buy when interest rates at HIGH. Why? Because properties are afforded on a monthly cash flow basis. When rates are high purchase price is depressed. When rates are low property values go up. If you buy with high rates your capital outlay is smaller and you can refinance when the rates improve.

The property has done well for us. I cout ourselves as lucky. Lots of sweat equity went into it. The first year we spent $2,700 on paint, not painting, PAINT. Scraped and sanded all 3 floors (12’ ceilings) inside and out, redid hardwood floors, etc. Did all maintenance except plumbing myself.

Now just to live long enough to enjoy the payback.

About 18 years ago I had a small inheritance and thought of trying to buy another property but I could not find a property where the capital/rent ratio made sense. And anything we could afford was a dump that needed lots of work. So I bought a boat instead.
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Old 03-12-2018, 14:49   #28
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Re: US property

Sorry,I misquoted in my previous post. correction;
The median value in each city at the end of November was:

• Sydney $821,438

• Melbourne $656,163

Brisbane $493,041

• Adelaide $433,464

• Perth $448,336

• Hobart $451,039

• Darwin $426,141

• Canberra $596,141

• National $535,481

Yup, much better...LOL.

I do have to say, I would like to see interest rates rise somewhat, you have not had any type of a recovery without interest rates coming back up....and to be honest.....money is too cheap.
I dont want to start a pretty chart/data/graph war so think I will leave it there
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Old 03-12-2018, 15:28   #29
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Re: US property

My rental property was valued at $112k when I took control of it 5 years ago. I put $25k into it to make it livable. It makes $19,200 per year but Uncle Sam takes $5500 in property tax. Insurance is $1200 and repairs for last year were another $1200. My nominal tax rate is around 25% so I paid another $2700 in income tax. Net of taxes I make around $8500 a year on a $137k investment. However, we experienced a housing boom so in 5 years it has appreciated from $137k to 270k for an average $26k per year in capital appreciation.

The moral of this story ... it underperforms the S&P500 with regards to cashflow but greatly outperforms the S&P500 when unrealized gains are considered.
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Old 03-12-2018, 15:29   #30
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Re: US property

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OK, true. I was reading last night median house price in Australia (not even Sydney, which is the worst) is $820,000.
Yup, Austin is no Sydney....but it is certainly heading in that direction, especially when compared to similar cities in the US.
Austin is rated one of the best places to live in the US.....but that is obviously from some demographic that is very different from me. Perhaps it's the man bun gender confused metrosexual demographic? Who knows?
Yes, the median home price in many metro areas in AU/NZ is close to $1M. They are struggling not to exceed that price point. To that end, NZ recently inacted legislation to prohibit foreign speculative investment...over simplified I think, but it is one variable in the equation.

There is also an inventory crisis...too many people and too few affordable housing options.

Tough situation for first time home buyers. Actually probably good the high prices keep them out...I think anyone buying in the Sydney market now is likely to lose their ass.
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