Archive for US Property
I couldn’t stop laughing this morning reading the Herald article HERE about investing in the USA. It wasn’t the article per se that was funny but the incredibly ill informed comments by David. It is so common in NZ for people to just bag something they know nothing about and his comments certainly prove that.
And of course what the Herald doesn’t say is that because he runs a mentoring programme in New Zealand he needs people to invest there, not overseas or he can’t make any money out of them .
So just for the sake of some facts let’s respond to his comments and give you the truth instead!
1. ”I have heard horror stories of tenant issues with bad attitudes prevalent in the highest yielding areas in the US with very high unemployment, where paying rent is seen as voluntary,”
This shows a complete ignorance of the US market. There are no highest yielding areas in the USA. There are good and bad areas and streets, just like New Zealand. The only cities I can think of that he might mean are Detroit and Las Vegas and you would have to be insane to be investing in either of those cities anyway right now so they are no indicator of US investment.
This makes as much sense as saying we should leave New Zealand because we read about 2 murders this year so the place must be so dangerous.
2. “There are poor property management practices in the US – they are not as good as Kiwi property managers in general.
This is my favourite. It is patent nonsense. Given the nature of American society the average property management company in America is light years ahead of New Zealand. A lot of them are bent so finding honest property managers is critical but the average property management company we deal with has well over a thousand managements and run their companies like an army. If PM’s were as bad in the US as they are in New Zealand there would be squatters in every nook and cranny all over America. ( NOTE: Us computer systems are a bit backward but this is nothing to do with their management practices)
3. “What happens in the US is that if your tenant falls through the steps and injures themselves then you could face a whopping great lawsuit.”
Well this is at least close to being almost true. In theory you could get sued as a landlord in the USA but only if you are set up incorrectly and have the wrong sort of insurance. Providing you are structured correctly in the USA and have your property managers on your insurance policy then your risk of this is as good as zero. My main property manager has been in business for 35 years and has had exactly ZERO court cases by tenants.
4. “Then there is an exchange rate risk that could heavily erode returns.”
The NZ dollar is at unprecedented levels against the worlds reserve currency. There is a 99.999999% “risk” of the kiwi and OZ dollars falling against the greenback creating a non taxable currency GAIN. Nothing else to say
So there you go, the Herald once again proving any comment is as good as actual information.
Or even better join us and find out for yourself on our next Cashflow Tour
If your vision doesn’t make you laugh, cry AND change, then it’s nothing ~ Dean
This article is from John Talbott, a consistently anti property author and researcher. It is a must read regarding the US market.
I have been waiting for more than five years to offer this advice. It is now time in most cities across the country to buy a new home or refinance your existing home with thirty-year fixed rate mortgage debt. And this from the author of The Coming Crash in the Housing Marketpublished in 2003 and my 2006 book, Sell Now! The End of the Housing Bubble. Let me explain why.
Home Prices Relative to Peak Prices During Bubble
Home prices are off anywhere from 10% to more than 60% in cities across the country. There is no reason to believe that prices were “fair” during the bubble as we have seen they were largely caused by loose and aggressive lending by banks and non-banks. But, it is always better to buy at a discount rather than at a historical peak, and these seem like awfully big discounts. And by my calculations, in most cities across the country, real prices adjusted for inflation have just about come into line with where prices were in 1997, before all this crazy bank lending started, so there should be little additional downside risk by buying today. There are still some neighborhoods across the country that have not seen very dramatic declines in price, many of them very wealthy and expensive enclaves, but given the distribution of incomes lately heavily weighed toward the wealthy, these areas may never see a really large home price decline.
Home Prices Relative to Construction Costs or Replacement Costs
Homes in many cities across the country are now selling for as little as $60 to $70 a square foot. Depending on the quality of construction and the underlying land value, this represents a 50% to 65% discount to the costs you would incur if you tried to build a similar home today in these cities. While there is no guarantee that there will be a strong rental market in the short run, in the long run it just seems to make sense to buy if you can acquire assets at half or less of the cost of building them.
Home Prices Relative to Incomes and Rents
During the peak years of the housing bubble, entire cities like San Diego were seeing their homes priced on average at 11 times the area’s median family income. Such prices financed primarily with debt are by definition unsustainable. Now, because banks have pulled back on their lending formulas, homes in many cities are changing hands at three to four times average family incomes. Similarly, at the peak, houses traded at such large multiples of possible rents that it made the projects uneconomic from the start. Now, with homes trading at more reasonable multiples of rents, houses and condos can be purchased that are immediately cash flow positive in year one and enjoy all the upside of any appreciation that will occur as inflation returns.
Home Prices in Real Terms, Not US Dollar Terms
We still talk about home prices in dollar terms, which is silly because the dollar has lost 98% of its purchasing power relative to a more stable asset like gold over the last fifty years. If instead of pricing houses in dollars, we look and see what a home would cost in ounces of gold, we see that houses today are a real bargain. As a matter of fact, this graph shows that average homes, measured in the number of gold ounces it would take to buy them, are now trading at forty year historical lows.
You might argue that this is because gold is priced highly today. I would argue that gold’s purchasing power has changed very little over time, it is the dollar that is depreciating and thus giving the appearance that the price of gold is rising. Actually, gold is quite stable relative to other assets and commodities and it is the dollar that is highly volatile and declining in value due to the US funding its deficits by printing dollars.
The Real Bubble – US Treasuries and Future Inflation
The real bubble out there is longer US Treasuries and 30-year fixed rate mortgages for home-buyers. With US debt equal to its GDP and equal to more than four times our government’s total tax revenues and with annual deficits of $1.3 trillion and growing, it is amazing to me that people will lend to the US for thirty years for less than 3.0% a year. Even more amazing is that individual homeowners can borrow at 4.0% (around 3% after tax) for thirty years on a fixed rate basis, some 300 basis points better than Italy which has a lot more people and makes much better shoes.
Homes may not appreciate greatly in real terms over the next twenty years, but they don’t have to if inflation comes back, which is the only way the US and Europe are going to get out from under the huge debts on their countries and their banks. You may not make a lot in real terms on the house, but if inflation returns, you could make a killing on your investment as your thirty year debt becomes worth less and less in real terms. Run the numbers, but if inflation and interest rates go back to say, 7% to 8%, you could easily make eight to ten times your equity investment on the house because you locked in your borrowing costs and home appreciations historically have always correlated well with unanticipated inflation.
So, run, do not walk to your neighborhood banker and either finance a new home purchase or take out the maximum amount of money he or she will lend you on a home equity loan and buy hard assets, not financial securities, with the money. When inflation comes roaring back the only perfect hedge is to be a borrower, not a lender or investor. Shakespeare said, “Neither a borrower nor a lender be,” but they didn’t have huge government deficits and the risk of future inflation back in the Bard’s time.
Get Going and Stay Safe ~ Dean
(If you’d like any info on or help with investing in the USA drop me a line HERE)
I read with some surprise this morning in the Herald that Metlifecare’s profit has nosedived. It made me pause because the fact is that the retirement industry has every possible duck lined up. People can’t stop getting old because of a recession and the boomers retiring is making retirement operators profitable round the world.
So the lesson here is of course that even with everything going for you, one still need to use ones brain and manage ones affairs well.
This is true of investing also of course as well as business. I almost daily see people buying in the USA for example and based on the “Now is the best buying in US history” they blindly buy cr*p in terrible locations.
There is no such thing as a no brainer unless your brain also agrees. I was recently in a Realtors office covered with sold stickers for stock sold to foreigners in Detroit for example. Every single buyer, over 40 of them, just lost their money the day they bought the property. They did no homework, no due diligence and blindly believed an unscrupulous seller. Very sad and so avoidable.
Talking the US market I have always told people to take what I say and check it out for themselves. Interestingly more and more clients come back weeks/months later ready to buy because the reality backs up my comments.
I loved this comment from a Memphis Councillor in this article (Like the page while you are there I post stuff about the US market regularly)
“This was a well-thought-out deal,” Wharton said. “They’ve looked at us from every angle possible, and they see the potential in what Memphis has to offer. So I hope we’ll be able to use this as a model to attract others. That is, slice and dice us, look at us every way possible, take as long as you wish, and you’ll see this is a good place to locate your business – but most importantly, to grow and expand your business.”
So slice and dice your investment strategy today and the oportunities floating around and stick to the ones that stand up to scrutiny and time.
And keep away from them zombies…….
Get Going and Stay Safe ~ Dean Letfus
So here is an example of a package of 3 properties brought 13 months ago.
Purchase Price June 2010 = $133,900
Quoted Net Return = 12.1%
So how is this package doing?
Well actual return over 12 months = 14.81%, over 20% above quoted returns!
And I asked Jim what we could sell these for today to another investor, (not a retail sale but a wholesale sell).
Answer = $150,000.
Current Valuation is around $165,000
So in the worst recession in modern history in the worst housing collapse in USA’s history we have a 14% net return ACHIEVED and over 10% in capital growth plus around 30% equity.
This is not a hoped for outcome, this is actual results.
If you 50% financed these you would have put in say 70K in total including set up.
You could sell today and pocket around 25K, over a 30% return in 12 months. But why would you when you are getting nearly a 15% return and the properties will be paid off completely in 7 years if you put the cashflow into paying down the debt?
And if you wait for 2 years you can refinance, take all your cash out and turn the 3 houses into 9!!
Any reason why you shouldn’t be enjoying these results??
Get Going and Stay Safe ~ Dean Letfus
PS: We have a half share available in the commercial property and another larger residential project returning 16% net, email me if you’d like more info, email@example.com
well trouble or opportunity depending on your world view.
This excellent article in the Herald LINK observes the unwinding of global property markets and the required correction. This is of course on the one hand trouble as “wealth”, (whether notional or actual is up to you) vanishes in front of ones eyes if that wealth is tied into real estate, opportunity on the other hand as housing affordability improves.
What the article doesn’t say is that the USA is the only country where the prices have dropped so much that enormous cashflow opportunity is now present. A shift form 2% to 2.25% yield in Hong Kong or Singapore is better than nothing but a jump from 5% to 20% yield in the USA is something to get excited about I think.
As an example the property below sold in 1998, 13 years ago, for $82,000. In 2006 it would have sold for around 150 to 175,000.
Today it has just been fully renovated and is available for $54,000 with a genuine 17% NET yield after all expenses.
This was actually sold and I have been in this property but the buyer didn’t complete so it is literally available if you’d like it to warm your heart email me EMAIL
Get Going and Stay Safe ~ Dean Letfus
Every now and then you get a chance to see something really work. My recent experience in Memphis is one of those.
This report HERE today confirms Memphis as a Number 1 pick for growth in the USA and we are securing properties for UNDER A THIRD of the median price.
Investors are getting such good results, thanks to great buying and great management that I am actually able to help people retire with good cashflow literally overnight in some cases.
To see an actual path to retirement for under one million US dollars is like a dream, yet it is doable.
The team at Memphis Investment Properties are proving to be incredibly honest and the only company in the city who operate a cost plus model, giving the equity to the investor instead of lining their own pockets.
I’m telling you all this because I am really, really excited about this opportunity and want to twist your arm to join me on my next tour to check it out for yourself.
I am not offering any big bonuses or special gifts to get you to come. I am simply saying that if you want to see a genuine cash flow solution, I mean retire for life with 100K USD income and total investment of under one million USD then you need to to come and make an independent inspection of what is on offer here.
Out first tour made the US news:
But the real news is that the people who came confirmed that what we are saying is true and they are now enjoying the benefits of taking action.
So I hope you’ll join us as we explore Phoenix and Memphis and learn from some of the top lawyers, publishers, property managers and property finders how you can create stunning cash flow for life.
More info and booking at RetireFromProperty
See you at the airport
Here’s a sample of an actual property you could buy today……
Go on now, register your interest at RetireFromProperty and let’s get you retired ASAP
Get Going and Stay Safe ~ Dean Letfus
Remember US property is tax effective, still has depreciation and we have preapproved finance Best of all it is cash flow positive while you pay it off!!
My usual experience in NZ or Australia is to talk about the opportunities and risks etc. and then over time the occasional person will ask for more information or some assistance. But here in Singapore most of the room wanted to proceed on the spot.
I have just been swamped with requests to purchase investments.
And in talking to these investors nearly all of them already invest in 4 or 5 different countries. They all understand that you have to go where the deals are and right now the deals are in the USA.
I may not be conveying it clearly but the contrast with NZ investors is startling. I would say on average one in 20 or maybe even one in fifty kiwi investors will consider something outside of our own coastline. In Asia about one in fifty doesn’t.
And the Asian investors are far wealthier in a much shorter time as a result.
Now I’m not picking on my own, far from it. Really I am just asking the question:
How much does our culture affect our financial results? What do YOU think??
Get Going and Stay safe ~ Dean Letfus.