All Forum Posts by: Dmitri L.

Fantastic story and congrats on all the hard work and success!

Funny about renting to the insurnace co - if a couple had just had their house burn down, I'm not sure I would have liked them staying in my newly rehabbed property :)

All the best for deals 7 through 700!

-Dmitri

And while you're at it, can you please share your best kept secrets, too?

I kid.. but this is one I have not seen any specific answers to in all the threads that have asked. You really need to call around and find a lender that "clicks" - get a list of small local banks and credit unions, and good luck!

-D

As one of my friends likes to say, "there is no steak falling from the sky". If no one wants to buy up the cheap homes locally, there is a good reason for it..

It's the same as a CA investor getting off the plane in the midwest and thinking everything is a killer deal because they're being offered homes for 60k instead of 600k. With some more experience they may learn that those homes were actually worth 30k, and there was a good reason that no one local was buying.

In general, prices in a local market will adjust to reflect a reasonable return that investors will want based on the prevailing conditions. As @Bill Baldwin mentioned, interest rates as well as expenses tend to be lower. However, so are the cap rates - it's typical to see 5-6% gross for a recent building in a good area - on an NOI basis, that would be a cap rate in the 3-4% range. Yes you have very low interest with potential for 30-35 years fixed at 2%, 1%, or maybe even lower. But the building will also depreciate over time.

As with anywhere else, you need to learn what is a good deal within the local market - the truly great ones are just as rare here as they are in the US. 

That being said, there are some potential uses for older homes in the countryside. If you're looking for a good place for early retirement for example, that could be an option - cheap homes will also be accompanied by relatively lower cost of living compared to the big cities.

Enjoy your time in Japan! Truly an awesome place to be. Just don't by any houses ;)

I don't think the word "cracked" belongs anywhere near "normal wear and tear". Nuff said

@Shane Woods

Great post! Thanks so much for the detailed step by step!

 My 2c - this is the wrong question to be asking. 

You should be thinking about how to make sure the job gets done, gets done correctly, and gets done on time. For this you should probably expect to pay a little more than if you were local on the ground and could track everything yourself on a daily basis - if someone has to do that work on your behalf, your gonna pay for it up front. Or if its not done, you're gonna pay for it later ;) Just factor that into your deal analysis as a cost of doing business in a remote market

My only advice is to understand how everyone in the transaction is getting paid, and make sure their incentives align with yours. Good luck!

D

Was very close but ended up passing on this building. Shady owner putting lipstick on a pig and leaving some sucker holding the bag (painting over rusted steel structure, cement over cracked foundation blocks, etc). It may be a decent deal once it comes up in the next owner's foreclosure as a tear down and rebuild. Potential 5mil+ spread for a condo build on the site, but that's not a project I'm willing to tackle just yet. 

Looking for the next one now. One way or another though, it will happen!

Close on an apartment building in Japan by fiscal year end (which is actually April 2016).

Good luck!

It works reasonably well for properties in the ~1000/mo rent range, I think. People get in trouble when they try to extrapolate too far from that range, on either end but especially on the low end. Just because you bought a house for 30k and rent it for 600/mo, doesn't mean that those 2000sqft of house are somehow magically cheaper to maintain. A roof is a roof, and if you want to leave with that water heater, you need to pay Home Depot in real $s, not %s of rent.

I'm working on acquiring an apartment building in Tokyo at the moment. Due to various factors like being built with reinforced concrete (pretty much the only capx is waterproof coating of the flat roof), and more respectful tenants, buildings here are underwritten to about 20-30% expense ratio. And 0.7% rent:price is a screaming deal right now in a good suburb of Tokyo. But for Dallas SFH rentals my cutoff is more like 1.25%.

As always, "rules of thumb" like the 50% or 2% rules give you just enough rope to hang yourself with. What no one ever says is that the math is by far easiest part of the overall process of analyzing a deal. The "inputs" into your analysis are soft factors that only come from experience and knowing your market. And being off by a small amount in each category can totally kill your cash flow.

This is why another piece of advice, "look at 100, offer on 10, buy 1" - while just another rule of thumb - is so useful, since it gets you in tune with your local market.