Tag Archives: usa investing

An Obama New World?

It was a fascinating time being here for the US elections.  If you aren’t American you have no idea how involved, passionate and well, frankly, bizarre the yanks are about their politicians. I personally thought Obama would get back in purely because I could;t see America, which calls itself a Christian nation voting in a Mormon but it appears Romneys defeat is almost the end of the world. Honestly if I showed you many of the tv shows here covering post election news you would think Armageddon had occurred, and we lost! However the real news is: What impact does the election have on US real estate investing? Well firstly Obamas win means the nation was not as concerned about things as many thought so that is a good thing for market sentiment. Secondly the uncertainty over who would win is now over, which is good. Thirdly and surprisingly the markets, which one could argue are fundamentally Republican didn’t bat an eyelid. I was sure the dollar would tank post election and basically it was yawn city. I think the biggest single thing we should take from the election as investors is that business as usual means a longer recession and recovery keeping prices down and yields up. And that is GREAT news. Make no mistake the USA will have inflation coming, big time! But as the current government was either too afraid or lacking insight to tackle the US problem this means n oohing is likely to change in the next little while.  We can expect more socialism, attacking the rich and trying to force the poor out of their mindset.  We know from 9 years of Helen in NZ that this will fail and it will keep house values down whilst the attacks on the rich and investors will cause rents to rise. The other thing that is a major change here is hedge funds have suddenly realized that they can avoid the issues they helped create by going berserk with real estate notes and actually own the real estate. So for the first time in recent history real estate investment is going to be popular in America. And that should mean upward pressure on prices and rents as large professional organizations hit this market and “make it” perform. There is still an enormous backlog of inventory owned by banks which will also keep prices subdued for a while. (What you read about most of the foreclosures being finished is nonsense, in Memphis anyway). SUMMARY: Real estate today in the USA is still depressed in value, yields are high and all the early indicators are showing some shoots of improvement. Obama’s return probably means a 2 to 3 year window of great buying instead of a much shorter window if things had changed in government. Investing now means we maximize the currency benefits, pick up most/all the upside and get in position to enjoy inflation. In other words NOW is the time to get in if you haven’t and you want at least 10 to 20 properties to really set yourself up here. We are primarily buying to order for clients now and we are delivering super high grade stock at C class yields by being physically here to run deals down. I don’t know exactly how long it will last but it is here RIGHT NOW. Just one example of a recent purchase: Northwind Dr Memphis 3300 square foot home Purchase price $52,000 Value $100,000 plus ( next door property, much smaller, currently on market for $104,000) Rent minimum $1000 probably closer to $1095 Net yield at minimum rent = 13% At likely rent = 14% net return after all expenses A typical wholesaler would sell this in the high 70′s to 80,000 range or retail it to a home owner for 100K plus. But our client can own it for under 60K all in: Continue reading

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An Obama New World?

It was a fascinating time being here for the US elections.  If you aren’t American you have no idea how involved, passionate and well, frankly, bizarre the yanks are about their politicians. I personally thought Obama would get back in purely because I could;t see America, which calls itself a Christian nation voting in a Mormon but it appears Romneys defeat is almost the end of the world. Honestly if I showed you many of the tv shows here covering post election news you would think Armageddon had occurred, and we lost! However the real news is: What impact does the election have on US real estate investing? Well firstly Obamas win means the nation was not as concerned about things as many thought so that is a good thing for market sentiment. Secondly the uncertainty over who would win is now over, which is good. Thirdly and surprisingly the markets, which one could argue are fundamentally Republican didn’t bat an eyelid. I was sure the dollar would tank post election and basically it was yawn city. I think the biggest single thing we should take from the election as investors is that business as usual means a longer recession and recovery keeping prices down and yields up. And that is GREAT news. Make no mistake the USA will have inflation coming, big time! But as the current government was either too afraid or lacking insight to tackle the US problem this means n oohing is likely to change in the next little while.  We can expect more socialism, attacking the rich and trying to force the poor out of their mindset.  We know from 9 years of Helen in NZ that this will fail and it will keep house values down whilst the attacks on the rich and investors will cause rents to rise. The other thing that is a major change here is hedge funds have suddenly realized that they can avoid the issues they helped create by going berserk with real estate notes and actually own the real estate. So for the first time in recent history real estate investment is going to be popular in America. And that should mean upward pressure on prices and rents as large professional organizations hit this market and “make it” perform. There is still an enormous backlog of inventory owned by banks which will also keep prices subdued for a while. (What you read about most of the foreclosures being finished is nonsense, in Memphis anyway). SUMMARY: Real estate today in the USA is still depressed in value, yields are high and all the early indicators are showing some shoots of improvement. Obama’s return probably means a 2 to 3 year window of great buying instead of a much shorter window if things had changed in government. Investing now means we maximize the currency benefits, pick up most/all the upside and get in position to enjoy inflation. In other words NOW is the time to get in if you haven’t and you want at least 10 to 20 properties to really set yourself up here. We are primarily buying to order for clients now and we are delivering super high grade stock at C class yields by being physically here to run deals down. I don’t know exactly how long it will last but it is here RIGHT NOW. Just one example of a recent purchase: Northwind Dr Memphis 3300 square foot home Purchase price $52,000 Value $100,000 plus ( next door property, much smaller, currently on market for $104,000) Rent minimum $1000 probably closer to $1095 Net yield at minimum rent = 13% At likely rent = 14% net return after all expenses A typical wholesaler would sell this in the high 70′s to 80,000 range or retail it to a home owner for 100K plus. But our client can own it for under 60K all in: Continue reading

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Understanding USA rentals

When you invest in another country it is difficult, ( I would say almost impossible), to not overlay your own countries rules on that investment. I have seen this a lot in the USA where foreign investors assume that tenants are the same as their own country. The USA investment strategy involves 3 components, rental income, currency movements and equity. Equity growth is a bonus in the USA but it is something we expect to see due to the massive collapse in values here.  It must always be considered a bonus in one sense but it is a genuine part of any current investment strategy here. Currency movement is a significant thing right now with the greenback at historic lows.  There are significant gains likely by putting money into the USA now/recently as the currency curves move as they inevitably will. And thirdly of course rental income.  This is the most obvious and sometimes the most problematic part of the equation because getting tenants to pay their rent is much more of a challenge than in most countries. And this is where the cultural shift makes it so frustrating.  In Memphis we have a 95% collection rate on rents, sometimes even 100% but that is through a lot of hard work by a lot of people.  In the USA not paying rent is often called a national sport.  It is the first thing many people stop paying.  And because bankruptcy is a non event over here many people will file to delay their eviction. So this is a brave new world that non Americans will never understand.  As a result vacancy and non payment of rent can and will be a problem sometimes.  And if you are unlucky it will catch you early on in your investing and really upset you. There are no real solutions to this problem, it just is what it is.  Being in better locations will help somewhat but the bottom line is this is a nother culture. The secret is to get your properties paid off as fast as possible then you can roll with the punches if the cashflow is a bit choppy sometimes. Another safe base level approach is to work on a minimum of 10 properties, 20 is even better then your cashflow evens out. When I look at all 3 profit centres the USA is unbeatable, and even with some variations in rental incomeit is still an outstanding market to be in but make no mistake IT IS NOT NEW ZEALAND, AUSTRALIA OR ASIA, their world is different. FOOTNOTE:  One thing I am learning specifically about Memphis is that if you are willing to sacrifice some yield on paper we can get into better neighborhoods, traditionally not investment areas where tenants and rent payments are significantly improved.  But it takes some work to uncover them and you won’t generally find them sitting around.  That’s why I go and find them for you Lagrange is a good example of this, close to the University in an area normally too expensive to find yield with same tenants for nearly 20 years.  THATS how to reduce risk and improve cash flow!! Git er done ~ Dean Continue reading

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Tell us more bad news

I was paid what I consider to be the highest possible compliment this week by a tour attendee.  On the last day he said he was expecting a hard sell event but instead was impressed with all the negatives I highlighted. “In fact for 2 days you mostly warned us what could go wrong and why we shouldn’t invest here.” As I say I consider this to be the highest compliment because I never want to hype people into investing. I have always tried to keep people safe and sometimes I have failed at that because we can’t predict everything, so I am even more concerned these days to minimise risk but still have investors improve their positions. So if you are an entrepreneur or sales person never be afraid of highlighting the negatives.  Tell the truth, let people make their minds up and they will stick with you through thick and thin. And if you are being sold to and it is all 100% positives probably a good idea to keep your credit card in your wallet Oh by the way I think there may be 1 or 2 units left at LaGrange, (INFO HERE) , email Zharna to reserve yours! Git er done ~ Dean Continue reading

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Exceptional Opportunity

Since losing Jim as a primary supplier and as I spend more time on the ground in the USA I am learning that the way to get the best opportunities is to hunt them down myself. This week I secured a property that would never be considered a “doable” investment area because the current values are simply too high. And that’s where the opportunities for you come in. Just have a look at this: The Location Point B on the above map is the University of Memphis.  The area is known as the “university” and is expensive and highly sought after real estate for owners and renters. Point A is LaGrange Cove. It is 1.4 miles from the campus and is quality rental real estate for staff and students of the university.  Average house prices in this area are 100,000 so the yields are generally unacceptable to rental investors. The Deal We have secured the entire cove which consists of eight 2 bed 1 bath homes all rented by professionals associated with the university.  In a city where it is common for tenants to leave after 12 months these homes have had the same tenants for 25, 22, 18 and 12 years.  I mean that just doesn’t happen in Memphis so you get an appreciation of the quality of the area.  These homes are known as “zero lot line” homes which simply means they are in sets of two with 1 common firewall. What we would call two townhouses.  There are only 8 available.  they ALL had new HVAC systems 2 years ago and all feature vaulted ceilings, fireplaces and decks. The numbers The properties are seriously under rented at $625 per month.  No rent increases in last 5 years.  Rents should be at around $700 per month but I have done the numbers on $625 so as to not oversell this opportunity. REmember that a typical property in this location would be producing a net return of around 5% because this area is too expensive to cash flow. Rent = $625 X 12 = $7500 Total expenses including taxes, vacancy, insurance, PM fees and maintenance = $3025 Net return after ALL expenses = $4476 or $86 per week Comparable Sales:  There are several sales in the last 12 months in the area and 2 of them are 2 bed homes so relevant to show you the value of the properties we have secured. 708 S GREER ST in MEMPHIS, TN 38111 (Distance: 0.13 miles) Residential – Single Family, Bedrooms: 2, Bathrooms: 1 Sale price: $58,000,  Sale date: 05/17/2012,  Year built: 1950 575 S REESE ST in MEMPHIS, TN 38111 (Distance: 0.17 miles) Residential – Single Family, Bedrooms: 2, Bathrooms: 2 Sale price: $119,000,  Sale date: 01/23/2012,  Year built: 1924 3248 SOUTHERN AVE in MEMPHIS, TN 38111 (Distance: 0.17 miles) Residential – Single Family, Bedrooms: 2, Bathrooms: 2 Sale price: $63,600,  Sale date: 08/29/2011,  Year built: 1982 580 ALEXANDER ST in MEMPHIS, TN 38111 (Distance: 0.14 miles) Residential – Single Family, Bedrooms: 3, Bathrooms: 1 Sale price: $130,000,  Sale date: 07/12/2011,  Year built: 1920 3250 SPOTTSWOOD AVE in MEMPHIS, TN 38111 (Distance: 0.14 miles) Bedrooms: 3, Bathrooms: 2 Sale price: $92,261,  Sale date: 04/27/2012,  Year built: 1932 581 S HOLMES ST in MEMPHIS, TN 38111 (Distance: 0.17 miles) Residential – Single Family, Bedrooms: 3, Bathrooms: 1 Sale price: $136,650,  Sale date: 03/10/2012,  Year built: 1950 Now most homes in the area, icluding the above sales are older, higher maintenance homes. Our homes are built in the 80′s so newer than all those sales and all in fully maintained condition How much? Purchase Price = $44,500 Yes FULL PURCHASE PRICE only $44,500 True Net return AT CURRENT RENTS today = 10.1% True net return after rents increased to market = 11.8% IN UNIVERSITY DISTRICT!! And they look like this! Continue reading

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Memphis, a city on a mission

It has been very exciting to see our market research in the USA bear so much fruit. We chose Memphis as a primary location for so many factors but primarily it was a combination of price/yield and unique employment growth driven by Fedex’s infrastructure that caused us to tick so many boxes. So 3 years on we are now seeing strong, strong growth in rents and prices and we now have 2 large hedge funds coming to town.  In fact one of Americas larger funds was in our offices this week and they are predicting the window to close sooner rather than later so are aggressively portfolio building in the city to catch the upside wave. I am telling you this because this is confirmation from well funded corporate American businesses that OUR research was on the money and now the big boys have come in to clean up. So the opportunity right here and right now is, as the Americans would say: Continue reading

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Memphis, a city on a mission

It has been very exciting to see our market research in the USA bear so much fruit. We chose Memphis as a primary location for so many factors but primarily it was a combination of price/yield and unique employment growth driven by Fedex’s infrastructure that caused us to tick so many boxes. So 3 years on we are now seeing strong, strong growth in rents and prices and we now have 2 large hedge funds coming to town.  In fact one of Americas larger funds was in our offices this week and they are predicting the window to close sooner rather than later so are aggressively portfolio building in the city to catch the upside wave. I am telling you this because this is confirmation from well funded corporate American businesses that OUR research was on the money and now the big boys have come in to clean up. So the opportunity right here and right now is, as the Americans would say: Continue reading

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Make Your Money when you buy

A little while ago I sent you a list of “cheapies” we had secured form a bank in memphis plus some stock from our main supplier. Well after a month on the ground here in Memphis I have now secured this package of homes directly from a private landlord. TO call this landlord a perfectionist is an understatement, these homes are AMAZING. So because they need absolutely no work and all have new roofs, aircon etc. I can just pass them on to you. They are all rented and in an area that rents like crazy with great growth potential. Pics below, email me if you’d like more details or to reserve one. I am finding the best way to get the best prices on investments here is to hunt individual deals down on a buy to order basis. So if you are waiting for a great deal and don’t like any of these, (which is just about impossible), let me know what you want and I can find it for you Just EMAIL ME CLICK HERE> > >   Email for info pack on any of these ………………………. or to place an order to buy! Continue reading

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Overcoming.

It’s interesting when you have a bad experience how much you have to fight to get back to where you were. Having been pretty fearless in the NZ real estate industry and then going through the last 4 years of hell I find I am having to really fight to not let fear consume me as I get more traction in the USA. Of course a different market in a different country is scary which I expect, but I didn’t expect to be battling the “what the $*!#^% do you think you’re doing” voices again quite so strongly.  And even though I am connected with the top people in this city t is still amazing how scary it is to sign a contract here. Which just goes to prove that we have to maintain change.  Our weaknesses will always be there, our choice is whether we learn to contain and manage them so they don’t rule us. But like anything, unless we maintain the new man, the old one is always there happy to come out for a visit! Dean PS: Our super cheap pack of homes is selling fast, I even had a wholesaler wanting them . GET THEM HERE Homes not yet sold on that list are: 4051 Arrowhead Dr 4306 University St 4983 Appleville St 1069 Poppen Dr 3027 South Perkins Rd 623 Frayser Dr 3917 Rangeline Rd 4315 Mountain Terrace 2286 Corning Ave 3603 Windermere Rd 4231 Coventry Dr Continue reading

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Massive/Turnkey Ezine 2012

Well it’s hard to believe it is August 2012.  It has been 7 months since I did my last real newsletter as I battled illness and financial dramas at home but I am glad to be alive I can tell you that! It’s taken a long time to get back into the saddle as it were and my last thing to recommence was my newsletters so here we go! Having not lived for several hundred years I don’t know if the world has fundamentally moved culturally in the last few years.  But it sure feels that way coming form the early 2000s till today.  I wonder what the next 12 months might bring? Continue reading

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