US Jumping in the US market in 2018

Discussion in 'Where to Buy' started by Tomm, 31st Dec, 2017.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Tomm

    Tomm Member

    Joined:
    16th Aug, 2016
    Posts:
    6
    Location:
    VICTORIA
    Anyone thinking about jumping in the US market in 2018?

    I've been fascinated with the previous post about the US market and the opportunities that exist there.

    Watched a youtube clip about this real estate wholesaler named Kyle Hosley talking about the Detroit area and requested some information and sent me three properties to view.

    Property 1
    Price: $33,900
    Back taxes $1130.94

    Property 2
    Price: $32,000
    Back taxes: $3274

    Property 3
    Price: $30,000
    Back taxes: $2472.27

    These according to Zillow.com and Trulia.com are above there estimates of around 4-5k. Are wholsalers to be trusted?
     
  2. Karina

    Karina Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    234
    Location:
    Sunshine Coast
    Tomm,
    I have been investing in the US market since 2010 and have purchased over 45 properties in atlanta for my portfolio as well as facilitated hundreds of transactions for international clients.

    Detroit was a fascinating market to study but I decided against investing there. For starters if zillow is telling you these properties are worth 4 - 5k and you are being asked 30k for them I would run, really fast!

    Detroit is a really tough rental market, you are dealing with a very low socio economic tenant. I have a friend that has been buying there. He is a really smart guy and I know will make it work but last time I checked in with him he was onto his 4th property manager. Something he said to me, "In detroit I expected 80% of people to be honest and 20% to be dodgy but I have found its the opposite" hence his continual change of property managers. He is buying some significant volume so I am sure he will work out the management issues. A small time investor though that may buy 1 - 5 properties has no leverage over these property managers. One thing thats worked for me in atlanta is that between my clients and myself we have over 500 properties under management with 1 company. That means our business is valued and our property managers business is dependant on making us money.

    Back to detroit one of the property managers my friend was using has an incentive for tenants to pay rent. They have a store room full of cans of food and if tenants come in and pay their rent on time they can select 5 free cans of food. Can you imagine having to using such an incentive to get tenants to pay rent each time.

    He also mentioned that every time a tenant moves out he needs to board up the houses until a new tenant is located. (or the home will likley get vandalised)

    Detroit property is not for the beginner or faint hearted investor. I wouldn't want to be an investor on the other side of the world dealing with these issues.

    What I look for in US property and this is absolutly key is a "manageable property". You don't want to buy the bottom of the bottom. You want to buy something that is manageable and that you will be able to collect rent on, a property that can attract a decent tenant, a subdivision/ area that is presentable where tenants want to live and feel safe.

    I would aim for a slightly better product. Most of the deals I secure are between 70 - 130k US + rehab as required.

    US properties are a great way to create a passive income. It was always my intention to buy cash cows to replace my income from the corporate world and I have achieved that as I know live off my rents.

    I wouldn't be deterred from investing in the US but you need to invest wisely.
     
    Last edited: 1st Jan, 2018
  3. Ed Barton

    Ed Barton Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,229
    Location:
    Brisbane
    No, but skipping perhaps.
     
  4. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,784
    Location:
    My World
    Just be mindful you can get ripped off in any market in USA, there are plenty of scammers.

    I would not buy in Detroit because for starters there are 3 taxes you must pay. Its a tough market as Karina mentioned.

    However, there are suburbs in Michigan that are booming at the moment and lower entry level than Atlanta with higher returns. If cash flow is what you are chasing dig deeper, growth will be the bonus.

    We are talking USA there are dodgy areas/suburbs in every State, that's just US market, so you need to mitigate the risk.

    Once again it will comes down to research and networking with good people on the ground.

    Many got burnt in 2011 because they did not understand the tools required to work out values etc. The property I recently purchased according to tax records the seller paid double the true value, more evidence of how investors got ripped off.



    MTR:)
     
    Last edited: 1st Jan, 2018
    Perthguy likes this.
  5. Karina

    Karina Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    234
    Location:
    Sunshine Coast
    Just keep in mind if you are planning to buy in detroit or michigan that they have extreme winters, snow etc. That brings a whole new set of maintenance costs and from what I understand tenants tend to move less during the really cold months so you could have higher vacancy.

    My friend that purchased in Detroit (and who also has a large atlanta portfolio) mentioned his detroit maintenance is way higher than his atlanta properties. That he has maintenance issues he didn't even know existed. When you combine that with a low rental rate that could eat into your entire return. Not saying it can't work just something to look into.

    I will never say never. Right now I prefer to stick to atlanta because its a product that works for me and I have a trusted team on the ground. It takes a lot more than just buying a property to be successful with US real estate. Its how its managed afterwards that will determine what sort of money you make so make sure wherever you go that you have a strong team on the ground to manage your properties. You need someone trustworthy.
     
    Coota9 likes this.
  6. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,784
    Location:
    My World
    Exactly

    There is no reason this can not be repeated in Michigan, if investors can buy more properties, source good property management and excellent product that is growing and lower entry level ......why not.

    I know someone who is doing this successfully, just piggy back I think, no need to reinvent the wheel if this is working.

    There are 50 States... there are opportunities everywhere.

    Still buying in Atlanta but I am keeping an open mind to other markets in USA that are booming and present same opportunities that Atlanta did in 2011, in terms of entry price point.

    I am not attracted to Ohio, lower entry, mid west/cold climate etc, for many reasons. I am selective, and I want both... cash flow and growth

    MTR:)
     
    Last edited: 1st Jan, 2018
  7. Tomm

    Tomm Member

    Joined:
    16th Aug, 2016
    Posts:
    6
    Location:
    VICTORIA
    Thanks

    I'll steer clear from Detroit

    The numbers look good on the surface but once you start to scratch the surface it appears to be riddled with issues.
     
  8. Knights of Ni

    Knights of Ni Well-Known Member

    Joined:
    11th Jan, 2017
    Posts:
    123
    Location:
    Melbourne
    Wow... are there still people spruiking Detroit? An absolute sht hole that has tens of thousands of dilapidated wrecks...... steer well clear of this place. I lived in the USA for 25 years. It's no secret you can buy houses for $100, but you will never find a paying tenant and you will never be able to sell it. You may even be risking your life to visit it. It's just a totally different market than Australia.
     
    JohnPropChat likes this.
  9. Perthguy

    Perthguy Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    11,767
    Location:
    Perth
    That's true for the bad parts of Detroit. I think it was an Australian property investor that was shot? Dangerous place in parts.

    Mh understanding is that there are good areas as well? For example, if you go to midtown, prices look similar to Perth or higher than Perth: Midtown, Detroit, MI Real Estate & Homes for Sale - realtor.com®
     
    GentleChief likes this.
  10. Karina

    Karina Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    234
    Location:
    Sunshine Coast
    I recall the story of the Australian investor that was murdered in Detroit
    Detroit lottery millionaire guilty of Australian's murder
     
    Perthguy likes this.
  11. LGP

    LGP New Member

    Joined:
    4th Jan, 2018
    Posts:
    2
    Location:
    Singapore
    14 months ago, we purchased a 20 year old 3 bedroom apartment in Farmington Hills, Michigan, a 25 minute drive from downtown Detroit, for US$65K. It helped that my wife grew up in Windsor, Ontario which is just across the river from Detroit, and that her dad still lives there. Also helped that we were referred to a top class agent, who had been working Farmington Hills for more than 10 years. One interesting thing the Agent told, is that a lot of Indian's are now attending Ann Harbor University, which is a 25 minute drive, and not Australian Universities due problems they are facing. This is providing a good pool of potential tenants, who pay on time and look after the place. We are happy with our investment, and are heading to Michigan in a couple of months to look for a second place, with the goal of building a portfolio and having a passive income. We are "unhappy" with the management fees and charges etc. One example, cars must be parked rear to the wall, so the number plate on the front can be viewed. Our tenant parked his car nose to the wall. Condo management snail mailed us a US$25 fine which took 2 weeks to arrive. By the time we received the letter, the tenant had parked nose to the wall again, and a second fine of US$50 was posted to us. Even though we called and complained, and said please email these fines, management declined, and advised they send everything by US Post. So we paid the US$75 fines, as it was just easier than annoying a good tenant, although we have advised them they will pay the next fine! For anything!!!
     
    GentleChief likes this.
  12. LGP

    LGP New Member

    Joined:
    4th Jan, 2018
    Posts:
    2
    Location:
    Singapore
  13. Karina

    Karina Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    234
    Location:
    Sunshine Coast
    GentleChief likes this.
  14. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,784
    Location:
    My World

    Great to hear you are making it work, here this market is starting to soar
     
    Last edited: 5th Jan, 2018
  15. Jordan Sinclair

    Jordan Sinclair Well-Known Member

    Joined:
    28th Feb, 2017
    Posts:
    62
    Location:
    .
    Many US markets can work if you have a strong team. If you connect with the right people and have boots on the ground, it can be similar to interstate investing.

    A good US CPA that understands foreign investors is a must also.
     
  16. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,784
    Location:
    My World
    Yes, needs...

    good property attorney
    good tax accountant ( in US) preferable
    good property management
    correct structure

    Most important factor is buying the right deals, its that simple where the numbers stack up and the market has potential for continued growth, a bonus but why invest in US you cant achieve this, makes little sense.

    I don't recommend anyone playing in any market in US unless these tick the boxes.

    MTR:)
     
  17. Knights of Ni

    Knights of Ni Well-Known Member

    Joined:
    11th Jan, 2017
    Posts:
    123
    Location:
    Melbourne
    Fluctuations in the exchange rate can also burn through potential returns....
     
  18. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,784
    Location:
    My World
    Its been great bringing it home for at least the last 4 years I think it will get better Westpac predicting Au to hit 68 mid next year
     
    GentleChief and SOULFLY3 like this.
  19. GentleChief

    GentleChief Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    291
    True - Detroit has some very rough neighborhoods. But it also has some very nice neighborhoods too like Sherwood forest, Palmer woods, Indian village, University District etc. In the last few months sale prices in some of these suburbs within Detroit has topped a record of 1 million USD for a single family homes.
     
    MTR and Perthguy like this.
  20. Perthguy

    Perthguy Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    11,767
    Location:
    Perth
    That's interesting because all we hear about is how bad things are in Detroit.
     

Build Passive Income WITHOUT Dropping $15K On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia