Discussion of syndications, realizations and real estate companies marketed to Israelis
Original publication date on the United States Real Estate Forum on Facebook:
2017-06-03T02:55:30+0000
Discussion of syndications, realizations and real estate companies marketed to Israelis
The responses to the post can be read at the bottom of the page and join the discussion
- Yogev A good way to circumvent the restrictions of foreigners is to invest in the syndicate del Multi-Union and there they take ownership with the Americans' rites that attract commercial loans from Fannie Mae and Freddie Mac
- Friends Question - In the era before your investment control. Has anyone here worked with American Eagle Properties and can have an opinion on them?
- http://invo.co.il/?gclid=CjwKEAjwsLTJBRCvibaW9bGLtUESJAC4wKw1YCjnTax6aqjjsmlCT8RD1_yaQbDMLQGffbsmbou9jBoC5o3w_wcB#main
- What are the main advantages in realizing that now there is a prospectus? That everything is more visible and controlled?
- Ok thank you. Because they are so excited by this fact, but I asked them why I had not received an answer yet. Maybe this lowers the limit of 35 investors that is now controlled. I know that they worked for a long time with the Tax Authority that everything will be done properly. With all due respect to Inbo Krembo and others like them, he relies only on fulfillment.
- You're right that a prospectus doesn't have a limit of 35 investors. The cost of issuing the prospectus is around NIS 2 million, which means the company works to the highest standards of the Israel Securities Authority.
- Hamashmah and Avi Katz have a lot to lose, so they will fight hard at least to return investors to the fund in their investments, and they also have deep pockets for legal battles or supplementing funding if necessary. However, every investment must, of course, be examined and made as logical as I mentioned in the past.
- I also had money there that in the worst case if I lost it would not ruin my life. They themselves mention it. I will not take funding for that and no money I saved for the children to the university or I need to live. As well as in the realization of the risks can be spread in small investments in different markets.
- http://www.globes.co.il/news/article.aspx?did=1001183954&fid=8297
- Like anything you invest in, you want to understand the business and the audience. Tourist real estate is something that requires more maintenance and marketing because of the changing audience compared to residential real estate where people can live for years and not rely on you for anything in the property.
- Hello friends
I want to consult
Maybe someone happens to know / hear.Regarding investing in tourist real estate, bdp company deals with it in several places in the world
This represents a return of approximately 5-8% net in Europe - Germany
Does anyone know / hear?
What do you think of a tourist realtor,
How dangerous?
Are the return rates reasonable or too low? - Under what terms of fulfillment are they raising the money on the stock exchange? What interest?
- What do you say about investments through Hap in New York?
- What Negro Realization is actually is that investors' money is used as a down payment for the contractor / entrepreneur they work with to take out loans from the bank. The entrepreneur undertakes to obtain a loan by the end of a predetermined date. If it does not succeed, there are guarantees to exit the deal.
- I guess you worked through safe future and indeed one of the problems there is the competition that is created at the end of construction because there is a temporary "flood" of vacant houses for rent in the area
- http://www.safefuture.us/
- Safe Future is the first real estate company to offer you a very attractive, solid and lucrative investment channel.
Responding to market trend changes
The US real estate market is recovering from the crisis and changing rapidly. Safe Future was the first Israeli company prepared for the new market situation and developed new and unique investment directions, led by real estate entrepreneurs in new construction.
Over the past decade, most Israeli real estate investments in the US have been aimed at acquiring existing assets, usually from banks and conferences, but this market seems to be exhausting. The real opportunities are diminishing, and many of the assets left on the market and offered at low prices are traps for the novice investor.
However, the real estate crisis has given rise to new opportunities. A side effect of the crisis was an almost complete halt to new construction. In some areas, there is a real shortage of vacant homes, especially new middle class homes.
The crisis has left many developers and contractors with land for construction in desirable areas, sometimes even after full environmental development and infrastructure construction, but with no financial capacity to build on them. Sometimes the property is already in receivership or bank owned, or a candidate for it. This is where Safe Future comes into the picture. - There are companies that deal with US real estate such as SDB and others for entrepreneurship because they say the opportunity has exhausted itself and the next opportunity is entrepreneurship.
- I did not understand the difference - are you talking about the fact that existing assets have reached the potential and therefore it is better to build? I definitely see that. On a parking lot in Harlem became a poaching investment or HAP - I went to see them all.
- Yes. Because property prices are rising and they are less attractive and the yields are falling, so they have moved to initiatives such as the fencing of buying plots and building them, and I know how many others have started to do so.
- I received a response from the realization about the change with the one now under prospectus -
The change in the prospectus is not big. The same inspection, the same supervision - only the securities authorities examined and gave its permit as issuers of shares or bonds
(Good for those who do not know the field or the fulfillment and want to feel safe under the supervision of the authority).What's more - it eliminates the limit of 35 investors - and then hundreds can enter into one investment, so the lower entry amounts - from 30 thousand dollars
- About the Wapsap discussion on HAP - I also met with them. The disadvantage of my idea was that the work was directly with the entrepreneur. Fulfillment is a middleman who has saved a lot of deals that have been complicated by entrepreneurs with strong contracts. Also the yield they offered did not look attractive.
- https://m.calcalist.co.il/article.aspx?guid=3714378
- What to look for in companies that provide properties with a tenant and manage the property for you - Turn-key Providers:
1) Are you the actual owner of the property or are you just marketing it to someone else? (You're trying to find out if you're talking to a middleman)
When researching turnkey sellers, you'll find that many of them don't actually own the properties they're selling. They are simply marketing properties for others, acting as middlemen between you and the true owners. There's nothing necessarily wrong with this concept, but it's your job to try and find the direct source. Doing so cuts out all the fat and gives you the best possible return on your investment.
Finding the true owner can be tricky, however, because middlemen are pros at disguising themselves as the actual owners of the properties they're selling. Not only that, they'll often insinuate they're principals of the management company that will be managing your property. Be careful you're not referred to a management company that is one of their affiliates. If a seller refers to a person or company as one of their affiliates or partners in regards to the purchase, sale, renovation or management of a property, then you must know that the middleman has limited or no control over that aspect of your investment.
The essential thing to remember about a middleman is that you won't know you're dealing with one unless you know the right questions to ask.
Middlemen don't own the properties they're marketing and get paid 1 of 2 ways:
They get a big kick back from the true owner. A typical example: A seller wants $ 50,000 for his property. A middleman comes along and says “Hi Mr. Owner, if I can bring you a buyer who will pay $ 60,000 for your property, will you give me $ 10,000 at closing? ”Mr. Owner says “Sure, why not, what do I have to lose? I suck at marketing anyway. ” Middleman says, “Hey, do you mind if I take pictures of your property and put some details on my website?”… You get the picture.
The second way middlemen make money is by finding cash flow rental properties, putting them under contract with the owner, and marketing them at a higher price. Once they have a buyer on the hook, they do what's called a simultaneous closing. This means they buy the property hours, if not minutes before you do, usually without your knowledge. The middleman makes a handsome profit and you have received no value from the increased sales price.
Even though all middlemen are not dishonest, you should be on the lookout for misleading statements such as “We are so proud of our renovations” and “The quality of our property management is so high”. While they may be marketing a quality product, they will have to do so at a significant mark-up if they want to make money on the transaction themselves. You'll do much better if you buy from the same source they do, the actual owner of the property.
2) I see that the property at 123 Maple Street is located in Memphis, TN. Do you live in Memphis, and if so, how long have you lived there?
It is impossible for a turnkey seller who lives in a different market as the subject property to be efficient as a local turnkey provider.
There are many components of being a turnkey rental provider. A turnkey seller who does not live in the market where they are buying, renovating, selling and managing property will suffer from loss of efficiency in every step of the process. Their inability to manage their business in person increases the cost of production (and thus the cost of the product) and most importantly diminishes the performance of management after the sale.
3) How long have you been a full time turnkey investment provider?
Typically the longer someone has been in business the better the business will operate. The main thing you want to make sure is that your turnkey provider is a full-time professional. There is no way to run this type of business and hold down another job.
4) Have you ever lost any of your investment properties to foreclosure?
I know asking someone if they have ever lost a property to foreclosure is a tough question to ask, but it is very important not to take advice or do business with someone who does not have a basic understanding of how to make this business work. Do your homework. Ask sellers the tough questions, and then do your own research to verify their answers. This is your hard earned money we're talking about. Protect it. Many investors bought properties before 2007 when rental properties could be bought and financed at 100% loan to value. Most of those investors are now bankrupt. Their downfall was about leveraging. They simply did not buy their properties and put loans on them for the amount of their investment. They made a poor business decision and participated in what has rightly become the dirty word in banking nowadays. They did cash-out refinances. A cash-out refinance is a type of loan in which the owner refinances a property they'd previously purchased. Upon closing on the refinance, they eventually "cashed out" removing the equity from the property. This was bad for several reasons:
Because they pulled cash out on the refinance, they incurred more debt to service, which decreased their cash flow.
All of the closing costs associated with the second closing were rolled into the amount of the new loan. This added even more debt to service, further diminishing cash flow.
The owner now has an over-leveraged property that according to federal guidelines must now pay mortgage insurance as part of the monthly payment. This again further decreases cash flow.
Cash out refinance loans received higher interest rates because they were riskier. Higher interest rates = higher monthly payments = less cash flow.
Investors kidded themselves into thinking the borrowed funds from the cash outs were profitable and would float the negative cash flow from their rentals. Because cash out refi's were easy, a lot of investors jumped on the bandwagon. They increased their lifestyles by doing as many of these as they could, and lived off the borrowed funds. When the music stopped and the cash out refusals were no longer available, a lot of investors found out the hard way that their business models were very flawed. Their properties did not have cash flow in the long term because they could not withstand the occasional vacancy and repair associated with investment property. The only way their business model could sustain itself was through continued cash outs with new acquisitions. Needless to say, investors with this business model ultimately met with financial disaster. Most of these investors were never particularly good at renovating or managing property. They simply bought them, removed the equity with a cash-out refi, and handed their properties off to a third party management company. Today, you'll find a lot of these same individuals posing as successful turnkey real estate investors. Most of them still do not renovate or manage property. Their forte is now just good marketing. Because they are no longer able to secure financing, they market other peoples properties as their own, increasing the purchase price while rarely providing any additional value.
5) How many rentals do you personally own?
You want a turnkey seller who walks the walk, not just one who talks the talk. If a turnkey seller believes in the product they're selling, they will own a lot of rental properties themselves. Keep the cook who does not eat his own cooking.
6) I see that your business model is selling properties that are in distressed condition, promising a quality renovation after my purchase. How can I be sure the renovations will be done in a timely manner, with a high level of quality, and without going over budget?If you purchase a distressed property from a seller that promises a good renovation after your purchase, please be very serious about your due diligence. Unless you are a very seasoned pro, I suggest you spend a few hundred bucks and hire an inspector to give you a detailed report on the condition of the property and an estimate of the cost of renovation. This is how I bought my very first house. Armed with the inspection report and an estimate of the cost to rehab the property, I revisited the seller with a much lower offer. I saved about $ 10,000 and a lot of heartache.
7) Since I can't get a 30 year mortgage on the unrenovated property you are selling, I will have to borrow money from a private lender and then do a second closing once the property is habitable. What are the pros and cons of this type of transaction versus buying a property that is already renovated and cash flowing?
I'll admit that this is a loaded question because there's hardly any comparison between the two options. Without a doubt one of the biggest ways new or out of town investors get into trouble is by purchasing distressed, vacant property based on the seller's opinions of the following:
The supposed condition of the property
The hypothetical cost of renovation
The proposed market rent
The estimated length of time between your purchase date and the day the property becomes occupied and cash flow
Even if you are dealing with an ethical seller, any of the above factors can easily incur overruns or do not go as expected, costing you money and lowering your anticipated return on investment. If everything was to go exactly as projected, you are still looking for several months without cash flow and the risks associated with vacant property. See question 15 for more info on the dangers of vacant property. In addition, if you are borrowing money from a financial institution, you will have two closures, consequently doubling your closing costs. In short, if you are going to buy distressed property outside of your own market, please be extremely careful and certainly do not compare it with a true turnkey investment.
8) What kind of guarantees do I have regarding the overall quality and depth of your renovations?
Look for a turnkey seller that offers a one year home warranty. If you are buying a property, especially if you are from out of town, this should not be negotiable. If your seller is not confident enough in their product to offer a home warranty, you should at the very least insist on a detailed home inspection from a third party inspector. Home inspections typically cost $ 350- $ 500 and are a must-have if your property does not come with a one year warranty. We highly recommend Amerispec Home Inspections, a national Home warranty company. www.amerispec.com 1-888-634-9861 for more information.
In question #12, we address the importance of your seller and property manager being one and the same, keeping all the accountability under one roof. Nothing is worse than finger pointing between the seller and property management company over repair and warranty issues.
9) I've noticed that there are properties in your city selling for $ 125,000 with a $ 290 / month cash flow, and there are properties that are selling for $ 62,000 with the same $ 290 / month cash flow. What are the pros and cons of these two different types of investments?
What you need to consider when comparing two investment properties with similar cash flows, but different purchase prices is this: What ultimately determines your overall return is the cost of your initial investment combined with the cost of vacancies over the long term.
I advise each and every investor I counsel to treat their investment property like a business. One aspect of this is understanding that at some point in the future, your property will experience turnover. In this graph we compare a typical $ 62,000 investment property with a typical $ 125,000 investment property. You may be surprised by how two properties with identical gross cash flows have such a large variance in returns. Notice how the difference in square footage and initial down payment drastically affect the return.* This Graph is based on 24 months of occupancy and 1 month of vacancy
** This graph assumes that all features and amenities are identical. However, the typical $ 125k rental property will need to come with a stove, refrigerator, microwave, dish washer, garbage disposal, and often an automatic garage door opener. All of the above are maintenance-heavy items and are not offered in lower end rental property. Continued service of these items over the life of your investment will even further decrease your return on investment B, beyond what is shown here.* This Graph is based on 24 months of occupancy and 1 month of vacancy. Annual ROI = 12 months of cash flow divided by your initial investment (down payment).
As you can see, identical cash flows do not create identical returns.
10) What type of neighborhoods are your properties in?
The main thing you are trying to discern is whether or not the properties are in what investors call the "war zone". Different investors have different goals in terms of investment property. Some investors are more interested in long term appreciation, while others are looking for the highest cash flow possible. No matter what market you're interested in, all major cities will have neighborhoods you don't want to invest in, regardless of the price of the property. I've passed on property that was literally offered to me for free.
If one end of the property spectrum is the war zone, the other end is the million dollar neighborhoods. Neither of these neighborhoods tend to be desirable from an investment perspective. In the question above, we addressed how investors can get into trouble on the high end of the spectrum. The war zone is of course the low end of the spectrum. Somewhere in the middle is what we call the sweet spot.The relationship between purchase price and market rental rates varies from city to city, and is one of the biggest determining factors for how your property will perform. It's your job to research and find the sweet spot in the market you want to invest in.
11) Do you own the property management company that will be managing the property you are selling?
The answer needs to be yes. If it's not, keep looking. Besides the purchase price of your property, the quality of management is the number one factor in how well your investment is performing.
The best performing properties experience positive returns because of the quality of the property, timely maintenance service and accessibility to management. When dealing with separate sellers and managers, there is often finger pointing from seller to manager and back again in regards to faulty performance. Do yourself a favor and leave the accountability in one spot under the same roof.
Another small but distinct advantage of buying from a seller who owns the management company that will manage your investment is that the maintenance will most likely be performed by the same crews who performed the renovation. If this is the case, their familiarity with the property will eventually save you money on repairs down the road.
12) I know that the quality of property management will ultimately determine how well my property is performing. Tell me what your company will do to maximize the return on my investment?
There is no way to overstate the importance property management plays in how well your investment will perform. Great deals can be managed in disaster with the wrong property management, and conversely, marginal deals can be managed to success, given enough time and quality management. You should spend as much time and effort researching property management as you spend researching the property itself.13) I see that 123 Maple Street is rented for $ 725 per month. Is $ 725 at, above, or below market rent?
The best answer you can receive is that the property is rented at slightly below market rates. Keeping rents slightly below market increases the likelihood of a long term tenant. Vacancy, not slightly reduced rent, is the biggest killer of return on rental property investment.
For example, if market rent for a property is $ 725 / month, it is wise to market and rent that property for $ 675- $ 700 per month. Although $ 25- $ 50 per month is not a lot of money to us investors, it is a lot of money to the tenant. This small difference, when combined with a rental that is in top condition, encourages lease renewals and will keep your property occupied and cash flow for years to come. Utilizing this strategy will increase the return on your investment well above the additional $ 25- $ 50 per month you would have received in rent.14) Is the property currently occupied?
If you are considering purchasing a vacant property you should be aware of the many potential problems associated with this type of purchase. Some of the problems that accompany the purchase of vacant property are:
A) It is impossible to know how long the property will be vacant before becoming occupied. Vacancies are the biggest killer of return on real estate investment. It's a bummer to start your investment off with several months of vacancy, putting your ROI in the hole right from the start.
B) One of the biggest "gotcha's" of purchasing vacant rental property is finding out market rental rates are significantly less than you were led to believe. Your purchase decision was based on a cash flow that was unattainable. Regardless of whether or not the property you are about to purchase is vacant, you should check market rents to make sure the proposed rent of the subject property is on par for the area (or preferably slightly below. See question # 14). For market rents, visit www.rentstalker.com or websites that offer a similar service.
Typically, the only reason a tenant will pay above market rent is because they are unable to rent elsewhere. Most tenants paying above market rent have worse than average credit, often times with multiple evictions. These are not the types of tenants you want in your home.
C) The potential for vandalism and theft increases exponentially when the property is vacant, regardless of the quality of the neighborhood.
D) Most Landlord insurance policies have an 30 day vacancy clause. Unless you have a specific vacant property insurance policy, your property will be exposed to liability for fire, theft, vandalism, acts of God, etc.
If you are going to buy a vacant property, don't close unless you have a vacant insurance policy. Get ready for sticker shock. Vacant insurance policies cost up to four times as much as a regular landlord policy.
A true turnkey investment will provide cash flow within a very short time of closing and be free of the potential pitfalls associated with vacant property.
15) What is your occupancy rate?
This is one of the biggest indicators of how a property management company is performing. A good turnkey seller / manager will be able to tell you how many vacancies they currently have on their books without flinching, and more importantly their percentage of occupancy. Regardless of the answer, prob as to how they market, average length of vacancy, what their criteria is for occupancy, etc…16) What is the longest vacancy currently on your books? (If they can't tell you, this should be a red flag)
If a property has been vacant for more than 45 days, there is a potential problem. You're trying to figure out what the problem is. Is it a two bedroom and the market is for three bedrooms? Is it an undesirable part of town? Find out what the problem is and make sure to avoid purchasing similar properties. Sometimes a property that has a special price also has a special problem.
17) Do you charge application fees to potential tenants?
You can't allow this question to be a deal breaker when you're shopping because unfortunately, the overwhelming majority of turnkey outfits are going to answer "Yes". This is because application fees are a huge profit center for management companies. However, if you're lucky enough to stumble across a management company that absorbs the cost of applications, you've found a good one.
A management company that absorbs the costs of screening applicants ensures that the maximum number of individuals will apply to rent your property. Having a larger pool of applicants to choose from allows them to select the absolute best tenant for your property. This type of management team is focused on not finding the best quality tenant, (the lifeblood of all real estate investments)
making money on application fees. This is the hallmark of an owner-focused management style.
18) Do you accept aggressive breed dogs?
This is a sticky liability issue, and we are in no way real estate attorneys. However, in the author's opinion, proper due diligence would include asking to see the lease the management company uses. If specific breeds are not allowed, it will be stated in the lease. Do a little research and you'll find that other investors have had legal trouble over this issue.
19) When my property has a major repair or turn over, will you send me a video of the repairs needed?
This is an especially important question for out of town investors and you should expect nothing less. Handheld HD camcorders are now available for under $ 150 and any property management company worth its salt should offer this service to its investors.
If a picture is worth a thousand words, then a video is worth a million. There's nothing like a detailed video explanation to give you confidence and understanding of the work being done on your property. As the saying goes, locks keep honest people honest and video doesn't lie. Insist on it.
- https://www.prodigynetwork.com/
- Yogev Lifchin
I would love to hear about the experiences of people with a fulfillment fund, and the differences between it and investing with local syndicates in the US. Lior Liorchik - Wow a historical post from a year ago 🙂 You brought back memories of my past. Someone here dug deep into the forum - well done. By the way he felt another lot of great material from a year ago and also two years worth looking for.
- By the time of the discussions on fulfillment, I guess today the media is less than caring about their projects.
From my small acquaintance with the company, they also have better and less good projects. So my approach to all those who asked - check out not just the company, but as Lior Liorchik said here in one of the comments - check out the project itself.
What matters with these companies is the examination of the project and its risks / prospects. They have projects that their investors praise and they have projects that… how to say it… less than praise.
By the way, like any body that has been operating for many years.
As for SDB and what they said, I personally agree with the approach to entrepreneurship. We only work in entrepreneurial projects. There are many advantages to this (and of course, quite a few drawbacks), but in entrepreneurship you can reduce the risk in some categories (renting, renovation, “ongoing” problems, etc.).
As real estate prices have risen and investors are starting to get more and more mortgages again, there is a growing demand for new construction at second hand and this is one of the key considerations for entrepreneurship in the US today.
Thank you for sharing us...
I have someone for you...
Saar Atias 074-7033933
It's a personal phone to him
https://alaw.co.il/
By the time of the discussions on fulfillment, I guess today the media is less than caring about their projects.
From my small acquaintance with the company, they also have better and less good projects. So my approach to all those who asked - check out not just the company, but as Lior Liorchik said here in one of the comments - check out the project itself.
What matters with these companies is the examination of the project and its risks / prospects. They have projects that their investors praise and they have projects that… how to say it… less than praise.
By the way, like any body that has been operating for many years.
As for SDB and what they said, I personally agree with the approach to entrepreneurship. We only work in entrepreneurial projects. There are many advantages to this (and of course, quite a few drawbacks), but in entrepreneurship you can reduce the risk in some categories (renting, renovation, “ongoing” problems, etc.).
As real estate prices have risen and investors are starting to get more and more mortgages again, there is a growing demand for new construction at second hand and this is one of the key considerations for entrepreneurship in the US today.
Wow a historical post from a year ago 🙂 You brought back memories of my past. Someone here dug deep into the forum - well done. By the way he felt another lot of great material from a year ago and also two years worth looking for.
Yogev Lifchin
I would love to hear about the experiences of people with a fulfillment fund, and the differences between it and investing with local syndicates in the US. Lior Liorchik
https://www.prodigynetwork.com/
What to look for in companies that provide properties with a tenant and manage the property for you - Turn-key Providers:
1) Are you the actual owner of the property or are you just marketing it to someone else? (You're trying to find out if you're talking to a middleman)
When researching turnkey sellers, you'll find that many of them don't actually own the properties they're selling. They are simply marketing properties for others, acting as middlemen between you and the true owners. There's nothing necessarily wrong with this concept, but it's your job to try and find the direct source. Doing so cuts out all the fat and gives you the best possible return on your investment.
Finding the true owner can be tricky, however, because middlemen are pros at disguising themselves as the actual owners of the properties they're selling. Not only that, they'll often insinuate they're principals of the management company that will be managing your property. Be careful you're not referred to a management company that is one of their affiliates. If a seller refers to a person or company as one of their affiliates or partners in regards to the purchase, sale, renovation or management of a property, then you must know that the middleman has limited or no control over that aspect of your investment.
The essential thing to remember about a middleman is that you won't know you're dealing with one unless you know the right questions to ask.
Middlemen don't own the properties they're marketing and get paid 1 of 2 ways:
They get a big kick back from the true owner. A typical example: A seller wants $ 50,000 for his property. A middleman comes along and says “Hi Mr. Owner, if I can bring you a buyer who will pay $ 60,000 for your property, will you give me $ 10,000 at closing? ”Mr. Owner says “Sure, why not, what do I have to lose? I suck at marketing anyway. ” Middleman says, “Hey, do you mind if I take pictures of your property and put some details on my website?”… You get the picture.
The second way middlemen make money is by finding cash flow rental properties, putting them under contract with the owner, and marketing them at a higher price. Once they have a buyer on the hook, they do what's called a simultaneous closing. This means they buy the property hours, if not minutes before you do, usually without your knowledge. The middleman makes a handsome profit and you have received no value from the increased sales price.
Even though all middlemen are not dishonest, you should be on the lookout for misleading statements such as “We are so proud of our renovations” and “The quality of our property management is so high”. While they may be marketing a quality product, they will have to do so at a significant mark-up if they want to make money on the transaction themselves. You'll do much better if you buy from the same source they do, the actual owner of the property.
2) I see that the property at 123 Maple Street is located in Memphis, TN. Do you live in Memphis, and if so, how long have you lived there?
It is impossible for a turnkey seller who lives in a different market as the subject property to be efficient as a local turnkey provider.
There are many components of being a turnkey rental provider. A turnkey seller who does not live in the market where they are buying, renovating, selling and managing property will suffer from loss of efficiency in every step of the process. Their inability to manage their business in person increases the cost of production (and thus the cost of the product) and most importantly diminishes the performance of management after the sale.
3) How long have you been a full time turnkey investment provider?
Typically the longer someone has been in business the better the business will operate. The main thing you want to make sure is that your turnkey provider is a full-time professional. There is no way to run this type of business and hold down another job.
4) Have you ever lost any of your investment properties to foreclosure?
I know asking someone if they have ever lost a property to foreclosure is a tough question to ask, but it is very important not to take advice or do business with someone who does not have a basic understanding of how to make this business work. Do your homework. Ask sellers the tough questions, and then do your own research to verify their answers. This is your hard earned money we're talking about. Protect it. Many investors bought properties before 2007 when rental properties could be bought and financed at 100% loan to value. Most of those investors are now bankrupt. Their downfall was about leveraging. They simply did not buy their properties and put loans on them for the amount of their investment. They made a poor business decision and participated in what has rightly become the dirty word in banking nowadays. They did cash-out refinances. A cash-out refinance is a type of loan in which the owner refinances a property they'd previously purchased. Upon closing on the refinance, they eventually "cashed out" removing the equity from the property. This was bad for several reasons:
Because they pulled cash out on the refinance, they incurred more debt to service, which decreased their cash flow.
All of the closing costs associated with the second closing were rolled into the amount of the new loan. This added even more debt to service, further diminishing cash flow.
The owner now has an over-leveraged property that according to federal guidelines must now pay mortgage insurance as part of the monthly payment. This again further decreases cash flow.
Cash out refinance loans received higher interest rates because they were riskier. Higher interest rates = higher monthly payments = less cash flow.
Investors kidded themselves into thinking the borrowed funds from the cash outs were profitable and would float the negative cash flow from their rentals. Because cash out refi's were easy, a lot of investors jumped on the bandwagon. They increased their lifestyles by doing as many of these as they could, and lived off the borrowed funds. When the music stopped and the cash out refusals were no longer available, a lot of investors found out the hard way that their business models were very flawed. Their properties did not have cash flow in the long term because they could not withstand the occasional vacancy and repair associated with investment property. The only way their business model could sustain itself was through continued cash outs with new acquisitions. Needless to say, investors with this business model ultimately met with financial disaster. Most of these investors were never particularly good at renovating or managing property. They simply bought them, removed the equity with a cash-out refi, and handed their properties off to a third party management company. Today, you'll find a lot of these same individuals posing as successful turnkey real estate investors. Most of them still do not renovate or manage property. Their forte is now just good marketing. Because they are no longer able to secure financing, they market other peoples properties as their own, increasing the purchase price while rarely providing any additional value.
5) How many rentals do you personally own?
You want a turnkey seller who walks the walk, not just one who talks the talk. If a turnkey seller believes in the product they're selling, they will own a lot of rental properties themselves. Keep the cook who does not eat his own cooking.
6) I see that your business model is selling properties that are in distressed condition, promising a quality renovation after my purchase. How can I be sure the renovations will be done in a timely manner, with a high level of quality, and without going over budget?
If you purchase a distressed property from a seller that promises a good renovation after your purchase, please be very serious about your due diligence. Unless you are a very seasoned pro, I suggest you spend a few hundred bucks and hire an inspector to give you a detailed report on the condition of the property and an estimate of the cost of renovation. This is how I bought my very first house. Armed with the inspection report and an estimate of the cost to rehab the property, I revisited the seller with a much lower offer. I saved about $ 10,000 and a lot of heartache.
7) Since I can't get a 30 year mortgage on the unrenovated property you are selling, I will have to borrow money from a private lender and then do a second closing once the property is habitable. What are the pros and cons of this type of transaction versus buying a property that is already renovated and cash flowing?
I'll admit that this is a loaded question because there's hardly any comparison between the two options. Without a doubt one of the biggest ways new or out of town investors get into trouble is by purchasing distressed, vacant property based on the seller's opinions of the following:
The supposed condition of the property
The hypothetical cost of renovation
The proposed market rent
The estimated length of time between your purchase date and the day the property becomes occupied and cash flow
Even if you are dealing with an ethical seller, any of the above factors can easily incur overruns or do not go as expected, costing you money and lowering your anticipated return on investment. If everything was to go exactly as projected, you are still looking for several months without cash flow and the risks associated with vacant property. See question 15 for more info on the dangers of vacant property. In addition, if you are borrowing money from a financial institution, you will have two closures, consequently doubling your closing costs. In short, if you are going to buy distressed property outside of your own market, please be extremely careful and certainly do not compare it with a true turnkey investment.
8) What kind of guarantees do I have regarding the overall quality and depth of your renovations?
Look for a turnkey seller that offers a one year home warranty. If you're buying a property, especially if you're from out of town, this should not be negotiable. If your seller is not confident enough in their product to offer a home warranty, you should at least insist on a detailed home inspection from a third party inspector. Home inspections typically cost $ 350- $ 500 and are a must-have if your property does not come with a one year warranty. We highly recommend Amerispec Home Inspections, a national Home warranty company. http://www.amerispec.com 1-888-634-9861 for more information.
In question #12, we address the importance of your seller and property manager being one and the same, keeping all the accountability under one roof. Nothing is worse than finger pointing between the seller and property management company over repair and warranty issues.
9) I've noticed that there are properties in your city selling for $ 125,000 with a $ 290 / month cash flow, and there are properties that are selling for $ 62,000 with the same $ 290 / month cash flow. What are the pros and cons of these two different types of investments?
What you need to consider when comparing two investment properties with similar cash flows, but different purchase prices is this: What ultimately determines your overall return is the cost of your initial investment combined with the cost of vacancies over the long term.
I advise each and every investor I counsel to treat their investment property like a business. One aspect of this is understanding that at some point in the future, your property will experience turnover. In this graph we compare a typical $ 62,000 investment property with a typical $ 125,000 investment property. You may be surprised by how two properties with identical gross cash flows have such a large variance in returns. Notice how the difference in square footage and initial down payment drastically affect the return.
* This Graph is based on 24 months of occupancy and 1 month of vacancy
** This graph assumes that all features and amenities are identical. However, the typical $ 125k rental property will need to come with a stove, refrigerator, microwave, dish washer, garbage disposal, and often an automatic garage door opener. All of the above are maintenance-heavy items and are not offered in lower end rental property. Continued service of these items over the life of your investment will even further decrease your return on investment B, beyond what is shown here.
* This Graph is based on 24 months of occupancy and 1 month of vacancy. Annual ROI = 12 months of cash flow divided by your initial investment (down payment).
As you can see, identical cash flows do not create identical returns.
10) What type of neighborhoods are your properties in?
The main thing you are trying to discern is whether or not the properties are in what investors call the "war zone". Different investors have different goals in terms of investment property. Some investors are more interested in long term appreciation, while others are looking for the highest cash flow possible. No matter what market you're interested in, all major cities will have neighborhoods you don't want to invest in, regardless of the price of the property. I've passed on property that was literally offered to me for free.
If one end of the property spectrum is the war zone, the other end is the million dollar neighborhoods. Neither of these neighborhoods tend to be desirable from an investment perspective. In the question above, we addressed how investors can get into trouble on the high end of the spectrum. The war zone is of course the low end of the spectrum. Somewhere in the middle is what we call the sweet spot.
The relationship between purchase price and market rental rates varies from city to city, and is one of the biggest determining factors for how your property will perform. It's your job to research and find the sweet spot in the market you want to invest in.
11) Do you own the property management company that will be managing the property you are selling?
The answer needs to be yes. If it's not, keep looking. Besides the purchase price of your property, the quality of management is the number one factor in how well your investment is performing.
The best performing properties experience positive returns because of the quality of the property, timely maintenance service and accessibility to management. When dealing with separate sellers and managers, there is often finger pointing from seller to manager and back again in regards to faulty performance. Do yourself a favor and leave the accountability in one spot under the same roof.
Another small but distinct advantage of buying from a seller who owns the management company that will manage your investment is that the maintenance will most likely be performed by the same crews who performed the renovation. If this is the case, their familiarity with the property will eventually save you money on repairs down the road.
12) I know that the quality of property management will ultimately determine how well my property is performing. Tell me what your company will do to maximize the return on my investment?
There is no way to overstate the importance property management plays in how well your investment will perform. Great deals can be managed in disaster with the wrong property management, and conversely, marginal deals can be managed to success, given enough time and quality management. You should spend as much time and effort researching property management as you spend researching the property itself.
13) I see that 123 Maple Street is rented for $ 725 per month. Is $ 725 at, above, or below market rent?
The best answer you can receive is that the property is rented at slightly below market rates. Keeping rents slightly below market increases the likelihood of a long term tenant. Vacancy, not slightly reduced rent, is the biggest killer of return on rental property investment.
For example, if market rent for a property is $ 725 / month, it is wise to market and rent that property for $ 675- $ 700 per month. Although $ 25- $ 50 per month is not a lot of money to us investors, it is a lot of money to the tenant. This small difference, when combined with a rental that is in top condition, encourages lease renewals and will keep your property occupied and cash flow for years to come. Utilizing this strategy will increase the return on your investment well above the additional $ 25- $ 50 per month you would have received in rent.
14) Is the property currently occupied?
If you are considering purchasing a vacant property you should be aware of the many potential problems associated with this type of purchase. Some of the problems that accompany the purchase of vacant property are:
A) It is impossible to know how long the property will be vacant before becoming occupied. Vacancies are the biggest killer of return on real estate investment. It's a bummer to start your investment off with several months of vacancy, putting your ROI in the hole right from the start.
B) One of the biggest “gotcha’s” of purchasing vacant rental property is finding out market rental rates are significantly less than you were led to believe. Your decision to purchase was based on a cash flow that was unattainable. Regardless of whether or not the property you're about to purchase is vacant, you should check market rents to make sure the proposed rent of the subject property is on par for the area (or preferably slightly below. See question # 14). For market rents, visit http://www.rentstalker.com or websites that offer a similar service.
Typically, the only reason a tenant will pay above market rent is because they are unable to rent elsewhere. Most tenants paying above market rent have worse than average credit, often times with multiple evictions. These are not the types of tenants you want in your home.
C) The potential for vandalism and theft increases exponentially when the property is vacant, regardless of the quality of the neighborhood.
D) Most Landlord insurance policies have an 30 day vacancy clause. Unless you have a specific vacant property insurance policy, your property will be exposed to liability for fire, theft, vandalism, acts of God, etc.
If you are going to buy a vacant property, don't close unless you have a vacant insurance policy. Get ready for sticker shock. Vacant insurance policies cost up to four times as much as a regular landlord policy.
A true turnkey investment will provide cash flow within a very short time of closing and be free of the potential pitfalls associated with vacant property.
15) What is your occupancy rate?
This is one of the biggest indicators of how a property management company is performing. A good turnkey seller / manager will be able to tell you how many vacancies they currently have on their books without flinching, and more importantly their percentage of occupancy. Regardless of the answer, prob as to how they market, average length of vacancy, what their criteria is for occupancy, etc…
16) What is the longest vacancy currently on your books? (If they can't tell you, this should be a red flag)
If a property has been vacant for more than 45 days, there is a potential problem. You're trying to figure out what the problem is. Is it a two bedroom and the market is for three bedrooms? Is it an undesirable part of town? Find out what the problem is and make sure to avoid purchasing similar properties. Sometimes a property that has a special price also has a special problem.
17) Do you charge application fees to potential tenants?
You can't allow this question to be a deal breaker when you're shopping because unfortunately, the overwhelming majority of turnkey outfits are going to answer "Yes". This is because application fees are a huge profit center for management companies. However, if you're lucky enough to stumble across a management company that absorbs the cost of applications, you've found a good one.
A management company that absorbs the costs of screening applicants ensures that the maximum number of individuals will apply to rent your property. Having a larger pool of applicants to choose from allows them to select the absolute best tenant for your property. This type of management team is focused on not finding the best quality tenant, (the lifeblood of all real estate investments)
making money on application fees. This is the hallmark of an owner-focused management style.
18) Do you accept aggressive breed dogs?
This is a sticky liability issue, and we are in no way real estate attorneys. However, in the author's opinion, proper due diligence would include asking to see the lease the management company uses. If specific breeds are not allowed, it will be stated in the lease. Do a little research and you'll find that other investors have had legal trouble over this issue.
19) When my property has a major repair or turn over, will you send me a video of the repairs needed?
This is an especially important question for out of town investors and you should expect nothing less. Handheld HD camcorders are now available for under $ 150 and any property management company worth its salt should offer this service to its investors.
If a picture is worth a thousand words, then a video is worth a million. There's nothing like a detailed video explanation to give you confidence and understanding of the work being done on your property. As the saying goes, locks keep honest people honest and video doesn't lie. Insist on it.
https://m.calcalist.co.il/article.aspx?guid=3714378
About the Wapsap discussion on HAP - I also met with them. The disadvantage of my idea was that the work was directly with the entrepreneur. Fulfillment is a middleman who has saved a lot of deals that have been complicated by entrepreneurs with strong contracts. Also the yield they offered did not look attractive.
I received a response from the realization about the change with the one now under prospectus -
The change in the prospectus is not big. The same inspection, the same supervision - only the securities authorities examined and gave its permit as issuers of shares or bonds
(Good for those who do not know the field or the fulfillment and want to feel safe under the supervision of the authority).
What's more - it eliminates the limit of 35 investors - and then hundreds can enter into one investment, so the lower entry amounts - from 30 thousand dollars
Yes. Because property prices are rising and they are less attractive and the yields are falling, so they have moved to initiatives such as the fencing of buying plots and building them, and I know how many others have started to do so.
I did not understand the difference - are you talking about the fact that existing assets have reached the potential and therefore it is better to build? I definitely see that. On a parking lot in Harlem became a poaching investment or HAP - I went to see them all.
There are companies that deal with US real estate such as SDB and others for entrepreneurship because they say the opportunity has exhausted itself and the next opportunity is entrepreneurship.
Safe Future is the first real estate company to offer you a very attractive, solid and lucrative investment channel.
Responding to market trend changes
The US real estate market is recovering from the crisis and changing rapidly. Safe Future was the first Israeli company prepared for the new market situation and developed new and unique investment directions, led by real estate entrepreneurs in new construction.
Over the past decade, most Israeli real estate investments in the US have been aimed at acquiring existing assets, usually from banks and conferences, but this market seems to be exhausting. The real opportunities are diminishing, and many of the assets left on the market and offered at low prices are traps for the novice investor.
However, the real estate crisis has given rise to new opportunities. A side effect of the crisis was an almost complete halt to new construction. In some areas, there is a real shortage of vacant homes, especially new middle class homes.
The crisis has left many developers and contractors with land for construction in desirable areas, sometimes even after full environmental development and infrastructure construction, but with no financial capacity to build on them. Sometimes the property is already in receivership or bank owned, or a candidate for it. This is where Safe Future comes into the picture.
http://www.safefuture.us/
I guess you worked through safe future and indeed one of the problems there is the competition that is created at the end of construction because there is a temporary "flood" of vacant houses for rent in the area
What Negro Realization is actually is that investors' money is used as a down payment for the contractor / entrepreneur they work with to take out loans from the bank. The entrepreneur undertakes to obtain a loan by the end of a predetermined date. If it does not succeed, there are guarantees to exit the deal.
What do you say about investments through Hap in New York?
Under what terms of fulfillment are they raising the money on the stock exchange? What interest?
Hello friends
I want to consult
Maybe someone happens to know / hear.
Regarding investing in tourist real estate, bdp company deals with it in several places in the world
This represents a return of approximately 5-8% net in Europe - Germany
Does anyone know / hear?
What do you think of a tourist realtor,
How dangerous?
Are the return rates reasonable or too low?
Like anything you invest in, you want to understand the business and the audience. Tourist real estate is something that requires more maintenance and marketing because of the changing audience compared to residential real estate where people can live for years and not rely on you for anything in the property.
http://www.globes.co.il/news/article.aspx?did=1001183954&fid=8297
I also had money there that in the worst case if I lost it would not ruin my life. They themselves mention it. I will not take funding for that and no money I saved for the children to the university or I need to live. As well as in the realization of the risks can be spread in small investments in different markets.
Hamashmah and Avi Katz have a lot to lose, so they will fight hard at least to return investors to the fund in their investments, and they also have deep pockets for legal battles or supplementing funding if necessary. However, every investment must, of course, be examined and made as logical as I mentioned in the past.
You're right that a prospectus doesn't have a limit of 35 investors. The cost of issuing the prospectus is around NIS 2 million, which means the company works to the highest standards of the Israel Securities Authority.
Ok thank you. Because they are so excited by this fact, but I asked them why I had not received an answer yet. Maybe this lowers the limit of 35 investors that is now controlled. I know that they worked for a long time with the Tax Authority that everything will be done properly. With all due respect to Inbo Krembo and others like them, he relies only on fulfillment.
What are the main advantages in realizing that now there is a prospectus? That everything is more visible and controlled?
http://invo.co.il/?gclid=CjwKEAjwsLTJBRCvibaW9bGLtUESJAC4wKw1YCjnTax6aqjjsmlCT8RD1_yaQbDMLQGffbsmbou9jBoC5o3w_wcB#main
Friends Question - In the era before your investment control. Has anyone here worked with American Eagle Properties and can have an opinion on them?
Yogev A good way to circumvent the restrictions of foreigners is to invest in the syndicate del Multi-Union and there they take ownership with the Americans' rites that attract commercial loans from Fannie Mae and Freddie Mac