Archive for Cashflow Property
An Obama New World?
Posted by: | CommentsIt 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:
All brick in Lake Windermere
Possibly the largest Lounge I have ever seen
If you’d like more info on the USA or want to order some cash flow just EMAIL ME
Git ‘er done ~ Dean
Valuations, a mystical guessing game in the USA
Posted by: | Comments Americans call a valuation an appraisal. That is because it really is impossible to “value” real estate over here.
I would call it an educated guess in most cases. The problem is caused by the weirdness that is the US financial and real estate culture SHORT SALES: For example US banks often allow owners to sell at a loss. This is called a short sale because proceeds to the bank will be “short”. The sale price is being created by the sellers circumstances not the actual property value. FORECLOSURES: A foreclosure is where the lender, typically a bank, has repossessed or os repossessing the property due to no payment of loans or taxes and selling it. This sales price is largely set by the banks urgency to sell or desire to clean up its books and again has little if anything to do with the value of the property. (NOTE: I have over simplified the foreclosure explanation, there are several variations but the principle is the same). TRASHED HOUSE SALES: I see houses every week that I would not take for free because the rehab cost. So frequently a house may “sell” for $5000 but have a $15,000 rehab and $10,000 back tax bill. So the actual sale price of that home is $30,000 but will show as a $5000 sale. Basically all this means you cannot accurately value a house in America FULL STOP. You can estimate its value, you can assess it based on return and look for similar quality real sales in the immediate area but fundamentally America is about buying on yield and knowing one area well enough to know what the smart investors are paying. That’s why I am focused on Memphis because you just can’t know more than one market well enough to move quick. So I hope this helps you understand as a foreign investor why people think we are strange when our first question is: “Can we have a valuation”. Because they are thinking: “Why on earth would you want something useless like that! Do you want the house or not? Git er done ~ Dean |
Understanding USA rentals
Posted by: | CommentsWhen 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
Exceptional Opportunity
Posted by: | CommentsAs I spend more time personally 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!
There are only 8 so please contact me immediately if you would like to reserve one of them.
All are currently rented long term and 50% finance is available, book yours today!
Git er done ~ Dean
Never let facts get in the way of a good story
Posted by: | CommentsI received an article yesterday from a US marketing company. I guess you would call them competitors of mine, and I am not knocking them or even naming them, but the gist of the article makes me mad because it is putting sales ahead of facts.
The gist of the article is and I quote:
“Taking a look at the hard data it is crystal clear that the U.S. housing market in once again firing on all cylinders on a nationwide level. We are seeing all of the important numbers move in the right direction and the final piece of the puzzle – home sales volume, has finally kicked into place, confirming a recovery is truly under way.”
So just for the sake of clarity, this is patent nonsense. There are some markets that are doing OK, 1 or 2 markets that appear to be recovering and some smaller markets like Memphis, that didn’t have a big bust and don’t have a massive over supply of houses that are displaying good numbers.
But the banks have simply not released a lot of the “overhang inventory” and it is not included in the stats we see. As a leading economist rightly said:
“There are millions of homes either still tied up in the legal process surrounding foreclosure or which at some stage will be in foreclosure (mortgage delinquencies, while declining, are still very high), and these units are not yet recorded as available for sale,” said Josh Shapiro, chief U.S. economist at MFR. “The huge supply overhang of existing homes promises to keep pressure on prices and to weigh on demand for new homes and hence on housing starts.”
So whilst it is without doubt the right time to get into the US market you must be in the right city, at the right price and take a long term view.
As you see here the delinquent loans are GROWING and the biggest round of foreclosures are probably still to come. I personally believe based on being here in the US that we have probably reached bottom price wise. Memphis is definitely improving in price but it is one of a tiny handful of cities that has specific things going for it.
So my warning is do not buy anywhere just because it is cheap and any marketer trying to put you into a city that doe snot have STRONG employment and population numbers is lyin to y’all.
Git ‘er done ~ Dean.
Of all the things I have learned in my life, not allowing past regret and failure to control my future has been the most life changing!
PS: I still have one of my wholesale homes owned by the perfectionist landlord available, was my favourite of the 6 and is still available. EMAIL ME for more info
Time to enjoy the ride up!
Posted by: | Comments
It is amazing how quickly the Memphis market is tightening up. A number of less experienced wholesalers and smaller fund buyers have already left the city because they seem unable to find any deals anymore.
This is quite amusing because what they actually mean is that the market that had gold literally lying around now requires some effort and this is quite foreign to them .
As a kiwi I am used to the “Look at a hundred properties to buy one” and the work that involves so Memphis is just becoming my kinda town!
I am very fortunate to be able to work with several of the best experts in Memphis so am pleased to announce it is business as usual.
As I mentioned earlier we recently were able to put a package of homes together at unbelievable prices for our clients and that list is now available for you.
You will not find stock fully rehabbed in good rental locations for this sort of money again so if you have been waiting to be tempted this is it, GO LARGE .
Download the list HERE
If your vision doesn’t make you laugh, cry AND change, then it’s nothing ~ Dean
PS: The next Cashflow Tour is happening in October, check it out HERE
PPS: I have secured some outstanding packages of wholesale homes, if you are risk tolerant and this interests you please email me
Massive/Turnkey Ezine 2012
Posted by: | Comments
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?
PROPERTY UPDATE
It is impossible to talk about the property market as one market right now. There seem to be incredible contradictions in the media and everybody is keen to talk things up for sure but the reality is that we continue to live in a state of uncertainty and weirdness.
I have been involved in several property transactions in the last six months, mostly with Auckland clients and in the “investor” market as opposed to home buyer sales things are not good. Houses bought in average areas 5 to 7 years ago are struggling to sell for what they were bought for. The better areas are certainly doing better, white middle class Auckland especially is selling for good money and if it weren’t basically illegal now trading would be a possibility in the 450 to 750K price brackets.
A lot of my clients are buying cr*p in South Auckland for cash flow. The returns are certainly there but having owned a lot of that sort of property I wouldn’t touch it again with a barge pole. It just isn’t worth the tenant headaches and maintenance costs. I believe these people are still living in boom time mode where these homes increased in value significantly. Man I bought houses in Otara for low 100′s and had people fighting to buy them off me a year later, woo hoo!. But I believe those days are gone. It could take a generation ot forget this recession and it ain’t over yet!
I think a lot, and I mean a LOT of people are now gun shy having been burned through the recession and there is a significant exodus of investors from the local market which creates opportunity for those of us who are left, as there is less competition.
I know also mortgage brokers are doing a lot of preapprovals that never turn into loans as people think about taking action and then don’t.
Even though many of the things I saw coming are now here I have become much more, what’s the word, circumspect over the last 3 years about predicting the future and much less certain about many things. So when it comes to property investment in NZ today I think it is probably about 50/50. It is probably a reasonable time to jump in with low rates and relatively subdued prices, however the risk of further global problems is very, very real and there is definitely risk of downward pressure on prices again and certainly changes in bank behaviour.
So I guess if you’ve got safe long term employment and plenty of money buy here. If you can’t tick both those boxes I would sit on my hands or join us in the US market where the risk is lower over all and your own personal situation is not put at any risk at all.
USA UPDATE
Heading into our fourth year of the USA as an investment market all I can say is God Bless America.
It has been a good solid cashflow alternative and we are just starting to see some actual signs of recovery bringing capital growth to the party as well.
Oh before I forget there is some HUGE news coming out of one city next week. Join me live on my free webinar to get the low down. IF you have been sitting on your hands DON’T MISS THIS. It is a chance to get cashflow and growth with the guess work removed!
I am staying up all night to cover all 3 main timezones,
you can register for free at http://bit.ly/N05ofk
So as I said a year ago the USA:
“is without doubt the market to consider if you just want to retire young(er). We are forever learning more about this market and adjusting our strategies and info to handle the moving landscape that is the USA.
Overall though we are very happy with the portfolios we are building there for clients and just wish we had found this solution earlier. We are working in 3 main cities and 3 years in we now know the critical factors to consider before jumping in to this market. There is lots of money to be made and cashflow to be achieved in the US market but it is also very easy to get it very wrong.”
We are very excited to now be working with John Burley in Phoenix who has solved our acquisition problems for turnkey buyers and for the “phoenix strategy” and Memphis and Atlanta continue to be outstanding markets.
We now have a significant number of clients with growing portfolios who simply keep adding homes as they are able to and increase their cashflow. As they qualify for bank lending they can recycle ALL THEIR INVESTMENT FUNDS and retire, or buy more homes, or travel the world, fill in YOUR blank
Oh and don’t forget I will be in the USA from next week if you have any special requests . And if you have been thinking of coming to the USA to have a look I am running a tour here first week of October, more info and registration details at
We are more confident than ever of the US strategy, we get good results consistently, our clients are safely set up and buying at genuine wholesale rates and our finance options get better all the time.
MINDSET SCIENCE
As I split my time between NZ, Fiji and the USA I find it a very “grounding” experience. In the USA most people are worried about who the next president will be, the price of gasoline and making sure they can still buy the new car/tv/ or whatever.
In New Zealand we have definitely become a bit more negative and depressed and we seem to be pretty obsessed with turning victimisation into an art form. Everything is about our rights and how unfair things are and we rub our hands with glee whenever any politician or business man loses a battle.
In Fiji most people have a smile on their face but live with disease, early mortality, constant sickness and corruption in business and governance.
So give me Fiji anyday in terms of mental health . I no longer worry about why people lie to me or about me when people I dearly love are dying across the street from preventable diseases.
I no longer worry about world domination (financially), when many of my friends in Fiji earn $60 to $90 a WEEK!
In other words the so called big stuff in the West is really window dressing, smoke and mirrors.
Of course we want financial freedom and we should pursue it. Of course there is nothing worng with having the toys and the bling if that is what really turns you on, but none of those things will make you a bigger person inside.
I get more joy out of seeing the look on a childs face who I delivered a $3 doll to than I ever have out of a client making 100K on a property deal.
And watching a 39 year old woman die for no good reason wracked with pain because no decent medical facilities were available far overshadows the millions of dollars I have lost in the last 3 years.
So remember in the midst of the glory to reach down to those who live in the mire and remember this:
Your day down there may come, (again)!
Life, live it for something more than glitter!!
As always Stay Inspired and Stay Safe, Dean and the Team. (EMAIL ME ANYTIME)
PS: PLEASE PLEASE don’t miss next weeks webinar, if you have even a 1% interest in a small, (or large) investment in the USA you need to join me and Elvis in Memphis for this news!!
