All Forum Posts by: Tracey B.

Sorry, yes: by yield I mean annual rent divided by purchase price (actually, market value).

Jon, I would think the "expenses being 50% of scheduled gross rental" rule would hold true where yields are 0.5% per month or less, but I don't think rules of thumb like this work when taken to areas where yields are extraordinary. Just because a property attracts twice as much rent per year, doesn't mean its expenses will be twice as much. Aussie investors tend to budget on about 2% of market value per year for repairs and maintenance, insurance, etc, regardless of the yield. Or 1/6% per month. My suspicion is that this is more valid than a percentage of income.

I agree that those very low yields in California and Florida, for example, were unsustainable. What is amazing is that Australia is like that EVERYWHERE, and there seem to be an incredibly small number of people who acknowledge that it's unsustainable and needs to change. We have a couple of generations of people alive now who've become accustomed to their house doubling in value every 10 years or less, and effectively funding their retirement with appreciation of their family home. Despite the recent turmoil - which of course has hit here as well - this mindset doesn't seem to have been dented; most people think that yields might go from 1/6% to 1/4%, for example, but very few seem to be suggesting that they'd go to 1/2%, let alone the 1% in your rule of thumb. I just wonder how much longer our bubble will continue. And I do think it's an unsustainable bubble, which is why I'm looking at high yielding properties in the USA, and not buying any more here in Australia.

It seems you agree that the reason why people don't buy rather than rent is a combination of 1) in many areas yields aren't high enough that renting is more expensive, and 2) many people can't get a loan.

I'm an Aussie investor researching your markets. Our yields in cities vary approx 2-4%, so I'm trying to come to terms with some cultural differences regarding home ownership.

In a recent discussion on an Aussie property forum regarding forecast flat or falling property values, many local investors put the view that there is a natural floor on values caused by the rent/buy decisions of current tenants. In the current low-yield environment here, it is clearly cheaper every month to rent rather than buy. One only buys in anticipation of appreciation, and for the lifestyle benefits (stability of tenure, etc), and this is what 70% of the market does. (Even without the tax breaks that you are fortunate to have! Our mortgage interest isn't deductible on our own home; only on investment properties.)

I estimate that the cost of ownership of a property in the US each year, if 100% financed, is around 10% of purchase price (6% interest, 2.5% property taxes, 1.5% repairs). Now I know from investigating your markets that there are many, many cities in the USA where yields are 10% or more for SFRs. When you factor in anticipated appreciation, it seems to me that anything close to 10% would cause tenants to prefer to be owners. Factoring in some modest appreciation, it's hard (from our perspective) to understand why anybody would pay more than 5% yield! When you factor in time - and that your mortgage payment remains static whereas rents increase - the balance swings even further towards ownership.

So my question is: why do tenants pay such high yields rather than buy the property themselves?

My guesses are:

* they can't get finance
* it just doesn't occur to them - home ownership is outside their expectations
* they are concerned that they won't cope with the bills (eg repairs)

My heartiest condolences, Tim. It sure sounds like a life well-lived.

I'm considering buying a multi-family property with approximately 100 doors. The NOI, based on the forecast provided by the on-site management (extrapolated from previous years), is $220K, though this is after $60K in management overhead has been subtracted. (I don't want to get into due diligence on the accuracy of the figures; please take them as true for the purposes of my query. :D)

I'm buying the property primarily for anticipated appreciation, and whilst the cash flow is nice, I have income from other sources. Far more important to me than maximum cash flow is for the property to be "as close to self-managing as possible", as I live in Australia.

What I'd really like to do is install on-site management who'll operate the landlording business, so that all the landlording becomes their problem. I was thinking I could rent them the entire premises on a NNN lease for, say, $170K pa, and they sub-let, repair, pay property taxes etc, and keep any profits they're able to make. This would mean that if they achieve the forecast figures, they'd make $110K pa profit (net income if management fees taken out is $280K), and I'd get my $170K as a NNN payment with no hassle, and only my mortgage payment to make. :groovy:

My questions are:

1) is this a common and/or legal arrangement in the USA?
2) is there a common terminology for such an arrangement?
3) in terms of risk/reward, how much do you think I could get for the NNN lease income on such a property - would my example of increasing the on-site manager's income from $60K to $110K be sufficient reward for the additional risk they take on with regard to vacancies and maintenance expenses?

Any other advice or suggestions?

I'm interested in purchasing a multi-family, $2M, > 80 doors, cap rate 10%. I have no SSN, no FICO - nothing in the USA yet :cry: But I believe I can get a 70% LTV no-doc commercial loan on the strength of the asset and the rental income, which is a great start.

I'd like to borrow the entire $2M, not just the $1.4M, and I have an associate who is willing to offer up his equity in an Australian commercial property to secure the entire loan.

So, if I can offer $3M of security - being the $2M US (Texas) multi-family, and $1M of equity in an Australian commercial property - are there any lenders out there who'd be willing to lend the $2M needed for the Texas purchase?

Welcome, Ankris. :D

And as you say you've not been a forum member before, please don't be upset if I politely tell you that it's considered bad manners (a breach of netiquette) to type in all caps, because it SOUNDS LIKE YOU'RE SHOUTING. Please don't be embarrassed; I truly am telling you in a friendly tone. :groovy:

Once again, welcome. Perhaps you could tell us something about the properties that you own (single family? where?) and what kinds of property you'd like to buy. Are you primarily after cash flow to replace your employment, or appreciation to build long-term wealth?

A few suggestions which I think would enhance biggerpockets (some taken from vBulletin), in no particular order:

* multi-quote - the ability to select multiple posts for quoting
* kudos - ability to register approval of a post, or agreement with a point, and then count these and somehow rate posters - just provides more incentive to share and try to be constructive and helpful
* ability to view the forum in wide screen format (maybe you can but I can't see how - the forum text only takes up about 30% of the width of my screen)
* more/better emoticons - happy to suggest some if you like ;)
* also I'd like emoticons inserted where the cursor is, rather than always at the end of the text (ie if you edit and want to insert an emoticon in an earlier para, you seem to be only able to do it by cutting and pasting the emoticon, which is always inserted at the very end of the whole post)
* I imagine this is related to the fact that whenever you format some text, your cursor is moved to the very end of the post; I'd rather the cursor be left where it was just prior to applying formatting (eg bold)
* ability to report/hide abusive posts, to try and stop conversations degenerating into slanging matches :roll:

Love the forum - thanks, Josh. These are, of course, intended to be helpful suggestions and not criticisms. 8)

Congratulations, Josh, and thanks for providing a great venue for learning and networking. :woohoo:

It's "om", a sacred symbol in Hinduism, Jainism, and Buddhism.

Originally posted by "rkblake":

Get in this business for real and quit chasing the "fast but short buck".

Or at the very least, stop calling it "investing"...

I agree; wholesaling, flips, rent-to-owns, etc are all property-based businesses, rather than investments. A business gives you profit for your risk and expertise, and has turnover; an investment gives you profit for owning and managing an asset. With a property-based business, each profit gives you a lump sum profit in a finite time period; with an investment, you get cash flow and appreciation indefinitely.

There's nothing wrong with having a property-based business, it can certainly be lucrative, but I don't consider that it's accurate to call it investing. It requires entirely different skills and a different mindset.