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All Forum Posts by: Sebastien Hitier

Sebastien Hitier has started 13 posts and replied 178 times.

Post: Vacation Rentals (Airbnb etc) Where would you do it in the USA

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

Nice numbers, 3 question

- what is actual occupancy?

- how much gross and net yield are we talking about?

- who is managing giving keys, checking property after and cleaning up? And how much they charge?

Post: Are rent control building worth pursuing?

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

The first losers to rent control are landlords. You get many limitations on how landlord can raise rent and also on evicting tenants.

Post: Are rent control building worth pursuing?

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

as a tenant, yes.

Post: Negotiating turn key properties

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

B class, how much does it rent for?

Post: Refinanced $800,000 Apartment Loan With Low Credit Score!

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

obtaining loan in the 7s in an emergency situation, congratulations Karen.

Post: Loan possibilities for a non-us resident to purchase rental(s)

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

Whst kind of rates a term and LTV are you seeing?

Post: Determining average vacancy rates in a certain area

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

mashvisor? Or it is still for metro areas?

Post: Real estate investment for foreigners

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

There are many moving parts here the main one it to know how much you will get taxed, unlike american residents, your income can get taxed much more if it is deemed too passive to be "effectively connected income". For instance, @Saul L. , I understand from this and the list of tax treaty that israel tax residents will get taxed 25% on dividends. I also was told that crowdfunding is deemed FDAP. For a definition of this FDAP vs ECI stuff, see explanations in Nolo Guide to Landlord. The conditions are similar to those that would make it possible to ask for a home office deduction.

The other moving part indeed is how much can you leverage, @Ariel G. When it comes to lending, HSBC does international mortgage up to 50% LTV, and their policy sometimes state that they only lend if you plan to live there. I saw others who would lend 50% LTV at around 4.5% floating rate. What I chose is to just borrow unsecured for 3-4% in Hong Kong.

There are many more moving parts. Properties at 60k are a bit rough as an intro to the US rental market. So here are some of my definitions:

Cashflow Properties:

Investing for Rental Income

Here is a typical example: a house built after 1980 with very basic fixture: carpet floors, linoleum floor in bathrooms may be found for 90k-140k in an area where it pays $900-$1400 per month. The house will not have the formidable qualities of the capital gain house, but its price is so low that nothing much can go wrong with it. The rent can compensate depreciation.

With a median annual salary of $51000, rents lower than $1400 are affordable for the majority of the US population. At such prices, it is possible to find investments with with month rent at 1% of the property price (that's 12% gross yield).

Investing for rental income is easier than for gain, as one just needs to find a property with an affordable rent, in an area with a healthy job market to be able rent it, there is no need to find a property below market price as in the capital gain business model.

At $900-$1400 per month, most tenants rent by choice as they could save to buy a better house. Perhaps they do not want to deal with calling contractors for home emergencies. Such safe income properties in this price range make sense when annual rent is 10%-12% of the property price.

High Cashflow Investments

Here is an example: wooden frame house build in the 70's, selling for $35k and rented $650 per month.

You should be aware that there is a qualitative gap in tenant sociological category when rents are lower than $900 per month. When you buy a property value below 90k, this is far below the replacement value of most houses and implies that the house is not generally desirable (it might be too ancient or in a bad neighborhood). At such prices, you see an increasing number of tenant who struggle through life, even if they pay the rent, they may have too many problems to take good care of the property they live in.

The term of trashflow property is the colloquiallism for such houses sold below $70k with yields above 14%. While houses between 70k and 90k value would be crossover between trashflow and cashflow properties. These investments are the most profitable of all when all works well, but with higher yields come higher risks. Anything paying more than 12% will require an exceptional property manager to keep the rent coming, you need to be monitor your property manager carefully if you get into that business. You will also need to consider whether the state has landlord friendly or tenant friendly laws, and buy such houses through a LLC to avoid big problems.

@Saul L.

@Ariel G.

Post: Deflation, Stagflation, Inflation, Hyperinflation and Uncertainty

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

@Ryland Taniguchi ... we may feel like they are latecomer to the party you've been having since 2008. To qualify the irr you achieved, this was not so easy in 2009-2011:

I remember in 2009-2011, we were all reading headlines about high unemployment and vacancy rates in Phoenix and Las Vegas. The narrative at that time was that Florida and and Las Vegas benefit from tourism and do less well during crisis. There was all these empty places with high HOA fee. Also, the narrative (from the press) was that areas like Phoenix or Atlanta had been overdeveloped in 2006.

So I wonder, did you have local knowledge, see a trend inversion and what was the catalyst, or you think you got lucky?

To get back to the thread. Houses are very good hedges against any form of inflation (whether QE, hyper,...) . Getting long term debt below 5% you can safely service will increase your irr in normal scenario and the debt will go to 0 if there is hyperinflation. 

How safely you can service it depends on whether you have other cashflow on the side. Pure RE companies usually operate at 1.60 debt equity leverage ratio, which corresponds to to a constant LTV of 60%.

Another topic I see emerging here is the flight for yield. Investors going from A to B to C neighborhoods. American society shows patterns of increasing income differentiation so [unless you forecast a proleterian revolution], the growth of an A market will beat that of B and C neighborhoods. 

It appears to me that this difference in income growth is priced incorrectly as a rental yield differential.

Post: Real estate investment for foreigners

Sebastien HitierPosted
  • Rental Property Investor
  • Hong Kong, Hong Kong Island
  • Posts 188
  • Votes 114

Hi Oron, welcome to BP,

I am a foreign investor myself.

Most developed countries allow foreigners to own land. US is one of them.

The market in the US is more transparent and open here than anywhere else in the world, and there are many services and online tools that will help you operate efficiently from oversea.