Is Flipping Right for You?

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A handful of shows on TV have featured house flipping as a way of life. They show the ups and downs of getting into the business. It looks like fun and you might be wondering if it’s something that you should get involved with.

You can decide if that’s the case by taking inventory or your personality and what you have to put into it. Flipping houses is going to be a pretty serious time commitment.

Though it looks quick on TV, reality is different. You need to be someone who has the amount of time that it’s going to take to dedicate to a project. If you’re stretched too thin right now, then you need to wait until you have the time or have someone Do it For you (like us!).

You’re going to have to hire someone to help you. To get involved with house flipping you need to have a team that you can work with. You may have an electrician, a plumber and several other people who can professionally do whatever task is needed. A general contractor can handle a lot of this for you

You must to look at the cost involved. You need to be able to know how to find a good home to invest in. A good flip home should be priced low enough so that after you repair what needs to be fixed, you have a tidy profit.

That means you can’t pay market value for a home. You will need to find the “fixer uppers” that don’t have serious issues in established or even high end neighborhoods that you can afford i, buy, bring the condition up and then sell.

You do have to be able to buy that house, which means you must have some sort of financing ready. This is a step that should be decided before you even look at homes to buy.

To decide if house flipping is right for you, you want to examine your reasons for going into it. If it’s because you think it’s something that’ll make you rich fast, then that’s a wrong reason. This is certainly a good way to make money, but takes time and effort for sure…

You can make a lot of money flipping houses, but it’s not something that you can rush. It’s something that builds your income house flip after house flip. Your first flip or two is to get you started.

There will always be risk involved in real estate properties just like in any other venture, but the rewards you stand to reap can be substantial. If you have some money already on hand that you can invest in buying a flip house, you’re a hard worker and you don’t give up easily when faced with challenges, then home flipping is probably right for you.

Give us a call, or hit us up on Facebook to discuss your options

Is Investing in Rentals still good in a softening market?

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The current state of the market both in Australia and the US is always a big talking point when I meet and chat to investors. Just this week, we held a workshop in Brisbane (great to have met a lot of you!) and I was asked if investing in rentals was still a good strategy if the market is starting to soften.

My personal opinion is “Absolutely!” From what I have found over the years is that in a softening market we have a number of factors at play. Firstly home owners can sometimes get nervous, particularly if the softening is also being accompanied with rising interest rates (which is what is happening in the larger markets in the US). These homeowners can then sometimes sell, and rent for a while, waiting for the market to improve and didn’t want to get stuck with a home that the value had dropped and/or couldn’t afford (the GFC has made many Americans very gun shy on owning homes). This puts more people in the rental market often increasing the demand and therefore, rents.

Second factor is that as some of the areas soften, the cost to get into rentals can get cheaper, more affordable as well, and with rents rising, this gives even more increased ROI on your investments!

Here is an article written recently by Abhi Golhar from Forbes Real Estate Council on this exact topic…Enjoy!

https://www.forbes.com/sites/forbesrealestatecouncil/2019/02/20/rental-real-estate-is-a-sound-investment-for-any-market/#60b7a5c72c26

For any more information on this or if you have any other areas you would like me to cover in these newsletters, feel free to book a call with me to chat!

Multi Family Property Investing Strategies

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I have been asked a lot about looking at Multi-family properties as options for investment, something that is relatively unique to the US. I have done a couple of articles here on this but also now going to run some small workshops on this topic on the East Coast. First one coming up will be Brisbane! We use an app called Meetup to manage these workshops, so if you haven’t already found us on Meetup under US Property Investors look us up! We have groups in Melbourne, Sydney and Brisbane so far and soon to open up in Adelaide and Perth!

Next upcoming workshop is in Brisbane on Monday March 11th, 5:00 pm – 7:00 pm at the Novotel in Creek St Brisbane. We do a 50-60 minute meet and greet/networking to start then around 6:00 pm start the workshop with a 15 minute Q&A at the end.

If you want to come along, click on this link below and sign up. It’s free and bring your business cards to network! We also usually have some seasoned US investors or experts in each of the their particular areas come along and are there to answer questions etc.

http://meetu.ps/e/GpmVj/BHqNf/f

The following one will be in Sydney in late March, dates to be announced, then Melbourne early April! So jump in whichever group is best for your location and stay tuned for updates.

Brisbane – http://meetu.ps/c/3ZFQv/BHqNf/f

Sydney – http://meetu.ps/c/3ZFN3/BHqNf/f

Melbourne – http://meetu.ps/c/3wzf5/BHqNf/f

For any more information on these or if you have any requests for future workshops, feel free to book a call with me to chat!

Infrastructure Growth – What is it and how to find it!

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I have spoken the past few weeks about tips to help when analysing a deal to determine if the area is good. One of the key points to look for was infrastructure growth. Areas where the City or council is spending money, enhancing the services, or upgrading roads etc can certainly help spark growth in the real estate sector in that area.

A number of websites can be used to research what growth is occurring in particular areas, including the city websites themselves, local news and current affairs sites, even entertainment websites for the regions. For serious investors, subscribing to a number of business journals like Forbes or Business Today (most are all online now, no need to get an actual magazine) these can link to articles in certain cities or regions that can give good indications on upcoming large business or projects going into a certain city.

As a lot of you may know, we do a lot of our work in Michigan, and attached below is an example of a recent article I flagged as important. It shows some of the growth corridors in Detroit, Michigan and which areas are under going good infrastructure growth. You will see from the link below that the regions undergoing the growth are also near a number of the ZIP codes, or neighbourhoods we invest in. Areas like 48224,48221, 48227 etc are all near a number of this growth centres. Downtown prices are starting to get too expensive to purchase but these outlying areas are perfect neighbourhoods to get into now and can help ride that wave of growth that new infrastructure can bring:

https://www.crainsdetroit.com/economic-development/greenways-shared-streets-detroit-revamp-7-business-corridors-starting-spring

If any of these areas appeal to you and you would like to look to add some properties in these neighbourhoods to your portfolios, book a call with us today!

Investing Strategy – Doing Due Diligence on a Prospective Investment

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You may have seen a couple of deals that we put through this week, we have had an amazing response of interest in these! It was fantastic to see so many people wanting to get more information. I did get asked a lot, that people wanted to do their due diligence and ensure the deals were good, but were not sure how to go about this.

There are a few key things to look at when analysing a deal to ensure that it would be a good fit for your portfolio. And remember, each of these criteria, and the importance of each is different for ever investor. One of the most important things you need to identify first is your “Risk Profile”. This is what level of risk in any investment are you comfortable with based on the return available. With any form of investing there is always some level of risk and each investor is happy with a particular level. Those that invested in crypto-currencies recently for instance, have a relatively high risk profile (that is they understand the risk is higher, but happy to take on board that risk given the rewards could be very high) and some have done well in this area. Others with lower risk profiles would look more towards blue-chip shares or real estate as lower risk investments. Even within each category there are various levels of risk. There is no “right” or “wrong” answer here, it is simply identifying what your risk profile is, so that you can ensure not to over reach yourself and get involved in a particular investment that is beyond your risk profile. If you want help to determine this, give us a call, we go through all this in our strategy sessions as well!

OK, so once you have determined your risk profile, there are a couple of key areas to analyse and ensure a deal is a “good” one for your risk profile:

1. Actual Return on Investment (ROI) after costs

I think always the first thing we should always look at is what is the estimated return we will get from the deal after costs are taken into account. This is essentially “running the numbers”. Confirming the costs and profits on the deals can be relatively easy, and I will run through a couple of strategies to determine this in the next few points. But we need to ensure that the return we are likely to see, conservatively, matches our risk profile and the risk of the deal. Don’t forget to take into account costs that may not be on any feasibility analysis – like vacancy rates, possible applicable taxes, and interest on loans if you are borrowing money to make the deal happen

2. Determining Comparable Prices

Comparables are one of the most popular way to determine the market value of a property. It is used in most real estate markets world-wide and the process is essentially the same. Look at what other properties are on the market for, and more more importantly, have recently sold for, in the same area of comparable standard (same number of bedrooms, bathrooms, similar size, same neighbourhood etc). In the US though, one other factor plays a huge part in comparables, and that is condition.

In Australia, we would generally see that most properties are of a similar standard, particularly in the cities and metro areas. In a number of areas of the US, the condition of the houses may vary so much as to have a dramatic impact on the price of the home. A particular home might be fully renovated to very high standard and be selling for $125,000.00. Next door the house might be gutted inside and need complete remodelling and be on the market or sold for $12,500.00.

This does not mean that the more expensive home is not worth $125K nor does it mean the “tear-down” is a steal at $12.5K either so be careful to ensure that you are taking into account the “condition” of each of your comparable properties. Websites that can be good for this are Zillow (www.zillow.com) and Trulia (www.trulia.com) but make sure also to look only a properties sold or on the market recently.

It can also be a good idea to look up in google a realtor that works in that area, and have a chat to them about the neighbourhood and get their thoughts on comparables. Bear in mind they may try to sell you other properties though too, so best to keep the discussion general as they may run down your possible purchase to try and sell you one of theirs instead.

3. Region demographics and area

Trulia (web address above) is also a good website as it can also give some regions demographic data. You can look at crime rates of the area relative to the surrounding districts; the median age of the households; average education level; average income level; percentage of owner occupiers vs renters etc.

All good data to review to ensure the area you are investing in, you are comfortable with. Remember, this is a region your are likely never to set foot in, so it it good to be comfortable with the demographics of the area. It can also be a good idea to search the address on Google maps and even scroll right down to street level and “walk” the streets some.

Make sure the property is not across the road from a factory, or refuse centre etc.

4. Rental rates and vacancies

Understanding the rental rates for an area is as important as determining the market value as this is the “profit” that the property will give you as a rental option. There is a website for US property rentals called Rentometer (www.rentometer.com) which is great in helping to determine what a property may rent for and other valuable data. The particular property you might be looking to purchase may already be rented, but its still important to understand the market rental value, in case your tenant was to leave, to make sure you can get the same rent return again, or is it possible to increase the rental return. This website reviews all properties within the neighbourhood of similar size and number of bedrooms, bathrooms etc to give you the average rent. Again you need to take into account condition. If your property is fully renovated to a high standard it is quite likely that you can get higher than average rent.

By also looking at the numbers of property currently available for rent in your area, and the length of time the rentals have been on the market, you can get an idea of vacancy. If the particular area in question has many many properties available and days on market for rent is 30+ or more on average, this can show a poor rental area. If there are only a few available, and days on market is low, this can indicate a better area. You can also look up in google a property manager that works in the area your are looking to purchase in and have a chat to them. They should give you a pretty honest appraisal of the region.

As we discussed earlier, if all these options are still good based on your risk profile, that can indicate it could be a good deal for you. If you are not comfortable with any of these areas, then might be worth looking around for another deal that suits your profile better. Remember, there is no such thing as THE deal. There is always another and never fall in love with any particular one, just analyse the numbers and determine your comfort level.

If your looking at starting or adding to your investment portfolio and would like to discuss options and strategies, or want help to determine your Risk Profile, book a call with us today!