Developing townhouses in USA

Hi Everyone,

I have been buying inner-city old houses and developing townhouses and holding them.

Does this happen in USA?

I am trying to find out, if this is a strategy in the USA (California), buying old houses and replacing them with new townhouses does it happen.

Thank you
Hari.

 

Hi Hari,

Yes, there is a lot of it happening there. I have been investing in such projects in the US for the last 6 years. And CA is in the list of states where I have investments. The key to success is the right team on the US soil that you can rely on and trust. Those relationships take years to build.

 

What is the difference between USA and Australia?

 

These are just some of the advantages I like in the US...

The market is not frenzy (though it is getting hot now it is not even close to that crazy market we have here in Australia). There are plenty of opportunities at any point of time. So you can shop around, sometimes take your time to think or request up 2-4 months for due diligence on certain deals. No auctions, no FOMO.

Significantly lower entry ticket to the market (except probably expensive ones like CA or NY). For construction you can go on scale and do a project of 10-15 units where in Australia you would hardly do a 3-4 unit one for the same costs.

Higher margins on smaller projects. For all the deals I came across here in Australia the profitability was not even near what it can be in the US.

Healthy rental yields if you are buying and existing asset or if you decide to keep what you built. Existing assets can generate you a good cash-on-cash return even being leveraged.

Big diversity of property classes available for small pocket investors (not limited to residential real estate).

Well developed market of commercial deals. Many institutional developers, investment funds and even independent investors with thick pockets are looking for and buying cash-flowing assets. Multi-family built-for-rent, for example, is just coming to Australia while in the US it has been a niche for a long time.

Significantly lower business setup and running costs, government fees, etc...

 

Have a look on the bigger pockets forum. There is also good info on yields stats etc on numbeo.