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Canadians Snap Up U.S. Properties

Rickson9

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[quote user=ChrisDavies]The tax systems and immigration laws which prevent you from doing any work on your property are just two big reasons why there's a lot of landmines down there.




Sorry, I was re-reading the thread and noticed this comment. Having been involved in investing in property in Phoenix, AZ for almost 3 years now I'm not sure why the U.S. "tax system" is a landmine? I've filed taxes for my properties for awhile now and haven't encountered anything yet. What should I be looking for?



Nor do I understand why "laws which prevent you from doing any work" is a landmine either. Personally I don't want to do any more work and am happy to pay my PM to do everything, but that might just be me. Perhaps the majority of people out there love screening tenants, doing evictions, repairing dry wall, fixing plumbing and all that, so I might be in the minority. Any clarification would be appreciated.



Giving the benefit of the doubt that you might have something useful to contribute.
 

Rickson9

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As a general rule, in the U.S., the red states are pro-landlord and the blue states are pro-tenant. The most well-known of the pro-landlord states are Texas, Arizona, and Florida. The most well-known of the pro-tenant states are California and New York.



http://en.wikipedia.org/wiki/Red_state



Eight Landlord-Friendly States



#4. Arizona




Arizona has strict
laws regarding noncompliance with rental agreement and nonpayment of
rent. For example, if a tenant provides false information on the rental
application, Arizona landlords have the right to deliver a written
notice to the tenant and terminate the rental agreement within 10 days.

http://www.investrent.com/blog/2012/04/03/8-landlord-friendly-states/



Arizona is becoming more landlord friendly with the following recent trifecta of rental laws:



1) The first allows landlords to enter a unit
without the standard 2-day written notice in the event of a needed repair.



2) The second bill deals with abandoned property. A
landlord will be able to enter a unit without giving legal notice if
needed to determine if the tenant has moved out. If there is no personal
property of `material value` left in the unit and a `reasonable person`
could determine that the renter has moved out, then the landlord can
take over the unit. The landlord will not have to store any perishable items.



3) The third measure, which may be the most controversial, rolls back
tenants` legal rights regarding appeals of an eviction order or judgment
for unpaid rent. This measure requires the posting of a much higher
bond than what is required under current law.



The Arizona Tenants Advocates are warning tenants that making a repair
request means giving up the right to notice of entry for the rest of the
lease; if a tenant moves out, they could be excluded from renting
somewhere else for the next 30 days; and, if a tenant legally terminate a
lease early, they still forfeit their security deposit.



http://www.american-apartment-owners-association.org/blog/2012/04/12/another-state-goes-landlord-friendly/



In addition, I have had questions about Phoenix's "primary industry" or "underlying economy".



Manufacturing. Major
industrial products manufactured by companies located in the
metropolitan area include aircraft parts, electronic equipment,
agricultural chemicals, radios, air-conditioning equipment, and leather
goods. Also financial services and
banking. Regional headquarters of: American Express, Chase Bank, Bank
of America, Discover Card Services, and Wells Fargo Bank. High
technology and aerospace firms hold a considerable share of the
manufacturing jobs.


Phoenix is currently home to
seven Fortune 500 companies: Allied Waste, electronics corporation
Avnet, Apollo Group (which operates the University of Phoenix), mining
company Freeport-McMoRan, retailer PetSmart and energy
supplier Pinnacle West. Honeywell's Aerospace division is headquartered
in Phoenix, and the valley hosts many of their avionics and mechanical
facilities. Intel has one of their largest sites here, employing about
10,000 employees and 7 chip manufacturing fabs, including the $3 billion
state-of-the-art 300 mm and 45 nm Fab 32.



The city is also the 6th
most populous city in the U.S. with over 4.2m Americans and growing.
Phoenix is located at the center of market areas stretching along
interstate highways from southern California to western Texas, Colorado,
Utah, and Mexico. More than 50 companies
provide motor freight service. Rail service is available from two
transcontinental rail lines. The Phoenix metropolitan area economy
benefits from air cargo service through Phoenix Sky Harbor International
Airport, where American Airlines and American West provide wide-body
freight service.


Hope this helps! All the best.
 

Rickson9

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" In June 2012, bidding at these auctions has become far more
competitive and 55% of these properties are now going to third party
bidders and only 45% reverting to the lender. With the number of
completed foreclosures also down 56%, this means far fewer foreclosed
homes have been added to the REO inventory."



"...within Greater Phoenix over 37% of the active listings already have a
signed contract, typically waiting for the lender`s short sale
approval. The number of active single family homes without an existing
contract was down to approximately 9,011 for the Greater Phoenix area as
of July 1. However 78% of this supply is priced above the current
median sales price and 23% is priced over $500,000, so the scarcity of homes for sale is most severe below the median sales price of $150,000."



"We can see that overall prices reached a low point in September 2011
and have risen sharply since then...The significant annual price
increase over the last 12 months has now spread to the majority of
Greater Phoenix. Examples include El Mirage (up 41% in average $/SF from
June 2011 to June 2012), Mesa (up 26%), Peoria (up 20%), Maricopa (up
32%), San Tan Valley (up 36%), Tolleson (up 37%), Buckeye (up 26%),
Laveen (up 24%), Litchfield Park (up 22%), Queen Creek (up 21%), Tempe
(up 21%), Glendale (up 25%), Phoenix (up 34%), Carefree (up 40%),
Avondale (up 25%), Florence (up 29%), Arizona City (up 30%) and Apache
Junction (up 32%)."



"Most homes below $250,000
that are priced realistically are
attracting a large number of offers within a short time, and offers will
often exceed the asking price. It is still quieter in the luxury market
and active adult sector where supply is adequate but now falling to
levels that are below average."



"As prices increase, returns on investment for landlords diminish and at some point in the future
we expect to see investor demand diminish
also. This will accelerate if vacancy rates start to increase. However
there is still no sign of any significant new supply of homes coming on
to the market and those who anticipate a flood of bank owned `shadow
inventory` are likely to be very disappointed
."




https://docs.google.com/open?id=0Bwb1PD4476rPcWxKSHB0TjROVzQ
 

Rickson9

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Money managers such as BlackRock Inc, hedge fund Angelo Gordon & Co
and real estate investment firm Starwood Capital, are beginning to
cash-in on so-called shovel-ready residential land-tracts with most of
the pre-construction and zoning approvals already in place.



"We are coming out of the mother of all housing cycles, and residential
land is the best way to play the ultimate recovery," said Michael Barr, a
Paulson & Co portfolio manager, who oversees the Paulson Real
Estate Recovery fund, which has under $500 million in assets for the
$19.5 billion hedge fund. "Land is the highest returning component of
the home building equation."



"These returns are back-end loaded, and more of an opportunistic, higher
risk strategy," said Dale Gruen, a senior portfolio manager for
BlackRock Real Estate, which has raised a fund that invests in such
lots. "Single family rental is one in which returns are a more
moderate."



The Paulson fund, whose founder John Paulson rose to fame and fortune by
betting on the collapse of the subprime mortgage market, got into this
market in 2010. Hillwood Development and Starwood got into the market
even earlier. But new entrants are joining the hunt all the time given
the ability to still buy land with development approval for as little as
30 cents on the dollar.



http://finance.yahoo.com/news/investors-cash-land-deals-u-050156394.html
 

Rickson9

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After losing 70 percent of their business in the housing crash, the
nation's home builders are breaking ground again. New orders for homes
are rebounding strongly, and housing starts have shown sustained growth
over the past year. The demand is there; unfortunately, in some areas,
the workers to build these homes are not.



Dykstra sees buyers taking advantage of low interest rates and low home
prices. He is building about forty houses a month now, but says he would
build sixty if he had enough labor and contractor support.



It's the same for Stephen Brooks, CEO of Grand
Homes, also in Dallas. The shortage of skilled workers is hitting his
bottom line. `The
cost of housing going up very, very fast,` says Brooks. "You sell a
house, and you typically could deliver it within 6 months; now the cycle
time, today, with the shortage of labor it takes 9 months.



http://www.cnbc.com/id/48926517



Update: As I have posted, my DD on the 16 unit multi plex fell through as I didn't like the crime in that area. As a rule of thumb, an 850 sq ft unit should rent for at least $700 per month, any less and it's likely that the area is sketchy.



The search continues. Have 3 bids pending @ 1.5% "rule".
 

Rickson9

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Where is "Wealthyboomer"? I miss his insights.



He's quite the contrarian! He's posts were made as Phoenix real estate prices were hitting the best in history and shortly after he stopped posting was when Phoenix real estate prices spiked dramatically upwards! Fantastic call!
 

Rickson9

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[quote user=2ndstory]
QUOTE (Rickson9 @ Sep 13 2010, 04:05 PM)
Ultimately it will be fun to see who will be right - Buffett or the IMF!


Who's usually right?
<
Rhetorical question of course.





Buffett's Wager On US RE Pays Off



"I don`t know if he`s lucky, smart or patriotic, but it`s worked out for
him,` Cliff Gallant, an analyst at KBW Inc., said in a phone interview.



`For the last two years, I`ve seen everything except housing moving
forward in the economy,` Buffett, 81, told Betty Liu in a July 13
interview on Bloomberg Television. `In the last few months, the rest of
the economy actually has flattened out. Housing is picking up."



The number of available U.S. homes has been declining, a trend
Buffett has said was inevitable as new households form. Properties for
sale fell to 2.39 million in June from an average supply of 2.93 million
in 2011 and 3.22 million in 2010, data from the National Association of
Realtors show.



http://business.financialpost.com/2012/08/02/warren-buffetts-wager-on-u-s-housing-market-pays-off/
 

Darr

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Rickson:

As a US Real Estate investor, you will love today's following interview on Bloomberg:

And for those only interested in RE: fast forward to the 7m:05s minute mark.

http://bloom.bg/PhXCyt


PS, you're always running the risk to give a lot of profits back in the currency translation (repatriation). Then again, the BOC will monetize as well.
 

Rickson9

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[quote user=Darr]

Rickson:

As a US Real Estate investor, you will love today's following interview on Bloomberg:

And for those only interested in RE: fast forward to the 7m:05s minute mark.

http://bloom.bg/PhXCyt


PS, you're always running the risk to give a lot of profits back in the currency translation (repatriation). Then again, the BOC will monetize as well.





re: video @ 7m:05s. I agree. It's a sad state of affairs in the U.S. as those who were kicked out of their homes are unable to get financing to buy dirt cheap housing and are now my tenants; and as rates continue to get crushed, it continues to tempt me to borrow money in order to leverage into this advantage. But the opportunity is closing fast (if it hasn't closed completely already) as investors like myself may find themselves with nothing left to buy as prices continue to ratchet higher.



re: currency translation. That's been a factor ever since I started invested in U.S. assets after graduating from university in the mid 90s. Given that I hopefully have another 20-30 years until retirement I'm sure the needle will swing the other way at some time in the future. Either way I don't think about it too much.
 

Darr

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Re: The opportunity is closing fast



Don't sweat it. Italy, Greece and Spain (especially the later) are next and will have great RE opportunities. Although these will mostly apply to an alternative residences, they will be great deals all around. My "fearless forecast" (humour) indicates that a single country exit from the Euro by one of these debt laden countries will be too devastating for the aristocrats within. Consequently, the most probable solution will be to create a <Euro South> and exit simultaneously.



Following the rumour that a new currency will be formed (on a devalued FX basis from the <Northern Euro>), opportunities will abound.



PS. With a low Energy/Natural Resources/Food per capita (relative to Canada), the USD will never again see parity with the Cando in the long term (IMHO and once we get past the liquidity scare).
 

Rickson9

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[quote user=Darr]Re: The opportunity is closing fast



Don't sweat it. Italy, Greece and Spain (especially the later) are next and will have great RE opportunities. Although these will mostly apply to an alternative residences, they will be great deals all around. My "fearless forecast" (humour) indicates that a single country exit from the Euro by one of these debt laden countries will be too devastating for the aristocrats within. Consequently, the most probable solution will be to create a <Euro South> and exit simultaneously.



Following the rumour that a new currency will be formed (on a devalued FX basis from the <Northern Euro>), opportunities will abound.



PS. With a low Energy/Natural Resources/Food per capita (relative to Canada), the USD will never again see parity with the Cando in the long term (IMHO and once we get past the liquidity scare).






I hope you're right.



Waypoint Real Estate Group LLC, a major investor in U.S. foreclosed homes, has secured a $65 million loan from Citigroup Inc. to help add to its portfolio of properties, according to people familiar with the matter. Bankers and investors said the debt-financing deal is a milestone for the burgeoning business of renting out houses that were previously in foreclosure. Waypoint, an Oakland, Calif., investment firm, is working with Citigroup on a bigger, longer-term financing deal that is expected to close in the coming weeks, the people said.



Investors have spent billions of dollars in recent months snapping up foreclosed homes, betting they will profit from the rental income the properties produce. The strategy gained momentum earlier this year, after the Federal Reserve expressed support for the strategy as a way to clear the backlog of foreclosures that has slowed the U.S. housing market's recovery



http://online.wsj.com/article/SB10000872396390443720204578000570020723746.html
 

Rickson9

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Rents rising fast...

"During that time, median rent payments increased 19.6% to $871 from
$728, outpacing inflation. Some metro areas greatly exceeded that.



"The number of renters rose nationwide, increasing
demand for rentals. While housing vacancies overall remained flat, the
national rental vacancy rate fell to 7.4% in 2011 -- its lowest point in
five years.



"'More demand with little new
supply means rising rents and shrinking vacancies,' said Jed Kolko,
chief economist with the real estate website Trulia. Data from 2012
indicates the trend has continued, he said, with strong job markets such
as Houston, Seattle and the Bay Area fueling double-digit average
rental cost increases from August 2011 to August 2012.



"'Despite the strong affordability for owning, there are severe barriers
to home ownership - and those won't change quickly,' he said. 'Lots of
people are in no position to qualify for a mortgage or save for a down
payment, so that will keep a lot of people who might want to own as
renters.'"



http://www.usatoday.com/money/business/story/2012/09/20/more-renters-burdened-by-higher-costs/57809010/1



U.S. housing recovery advances...


Home resales rose in August to their highest rate in more than two
years and groundbreaking on new homes also climbed, signs that a budding
housing market recovery is gaining traction.
The National Association of Realtors said on Wednesday that
existing home sales increased 7.8 percent last month to an annual rate
of 4.82 million units.



http://finance.yahoo.com/news/housing-starts-fall-weak-multifamily-123546648.html



My timing to get involved in US RE and US stock has always been profitably lucky. Funny that. RE and stocks, the two best wealth-building tools in the world. My biased opinion only.
 

Rickson9

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Home Prices Rise In 20 Major US Cities, Steady Gains Nationally.

"Prices in the Phoenix, one of the cities hardest hit by the housing
bust, have increased 16.6% in the 12 months ending in July. Prices in
Minneapolis and Detroit have risen more than 6%."

http://business.financialpost.com/2012/09/25/a-key-measure-of-home-prices-shows-rise-in-20-major-us-cities-steady-gains-nationally/



Phoenix Home Prices Surging


"While Valley home prices surged 22 percent, Houston`s second-place
ranking -- 6.3 percent -- wasn`t even close. Washington, Dallas and Los
Angeles then followed closely behind one another with year-over-year
gains of 4.8 percent, 4.3 percent and 4 percent, respectively, according
to the report."

http://www.bizjournals.com/phoenix/news/2012/10/02/phoenix-area-home-prices-surge-22.html



The mistake many individuals make when it comes to investing is that they only feel comfortable deploying capital when they see "light at the end of the tunnel". That's too late. The market doesn't work that way.
The market goes from Pitch Black to Bright White. There is no
gradient. Those who were willing to invest in US RE during the Pitch
Black of 2010 and 2011 are now being rewarded. Those who wait for
"light at the end of the tunnel" are always late to the party because
they're waiting for something that doesn't exist.
 

Rickson9

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Change is coming.



Although I've been losing bids for property in Phoenix for a year now, I'm still trying.



The real estate landscape is changing in a (significant?) way in the coming year. Currently banks are handicapped financially every time they take back a property for a non-performing loan due to reserve requirements and banking regulations.



I don't know specifically how badly this handicap is, but apparently it's bad enough that regulations are now making it easier for banks to sell their delinquent notes (mortgages) to private investors.



In short, banks will be able to sell off their bad loans individually or in bulk to private investors or large hedge funds at a large discount. At this point note buyers can choose to either turn the loans back into performing loans by renegotiating the terms with the homeowner, or foreclose on the property.



The thinking is that private investors do not face the same level of rigor when it comes to regulations and restrictions as the banks do, and will be able to purge the market of non-performing loans faster.



A web site will be set up in the 1st or 2nd quarter of next year where the notes will be listed. My agent is looking forward to giving me access to this site to see what kind of assets I might be able to find there.



Last, but not least, some readers know that I am loathe to take out loans to purchase investments. Whenever I hear a suggestion to use leverage I can't help but think of the following quote by Warren Buffett:



"When leverage works, it magnifies your gains. Your spouse thinks you're
clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people
retreat to more conservative practices."




On the other side of the coin, as property values continue to shoot to the moon in Phoenix I can't help but think about how to extract my equity should an opportunity arise in another asset. Especially now that the returns on equity on my Phoenix properties is bad and getting worse.
 

Thomas Beyer

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[quote user=Rickson9]

"When leverage works, it magnifies your gains. Your spouse thinks you're
clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people
retreat to more conservative practices."

great quote .. I will heed (and to a degree already heeded) this very important lesson !



[quote user=Rickson9]On the other side of the coin, as property values continue to shoot to the moon in Phoenix I can't help but think about how to extract my equity should an opportunity arise in another asset.


Nothing wrong with taking some (profitable) chips off the table once in a while while the going is good !!
 

Rickson9

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For those looking to buy in Phoenix today, this is what we're competing against. It's terrible.



Investors Scoop Up Phoenix Houses



So far this year, metro Phoenix's three biggest housing investors
have purchased more than 3,000 homes and continue closing deals. Those
three largest investors, according to an analysis by The Arizona
Republic, are:



Blackstone Group LP of New York, working through a Tempe buyer. Its
focus has been in the southeast and northwest Valley and central
Phoenix...Blackstone has acquired more than 1,000 houses so far this year through Tempe-based Treehouse Group.



Santa Monica, Calif.-based Colony Capital, working through a Phoenix partnership. It has focused in the West Valley...Colony Capital plans to acquire $1.5 billion of rental homes by the end
of next year. The privately held company has purchased more than 600
houses in metro Phoenix. Its new Scottsdale operation will manage its
new home-investing business nationally.



American Residential Properties, based in Scottsdale. It has focused on the west and north Valley...American Residential completed a private offering for $224million in
May. The original offering was for $220million, but more investors
wanted in. The privately held firm built its Phoenix housing portfolio starting with 12 homes in 2008...American Residential hasn't sold one of the 1,000 houses it has
purchased in the Valley. The company recently expanded to California and
Las Vegas.



New York-based global investment firm KKR has raised $85million
through a private REIT offering to buy rental homes through a new firm
called Beazer Pre-Owned Rental Homes. The new division is based in
Phoenix, where it has purchased more than 100 houses
so far. In early
October, it paid Talon West of Gilbert $1.5 million for more than a
dozen houses.



The Scottsdale-based Empire Institutional Investment
fund, led by
Richard Felker and Geoffrey Jacobs, has purchased more than 100
investment houses
this year. The company said it has purchased 1,000
foreclosure houses since 2009.



Nevada-based Oceanside Funding
has purchased more than 80 houses
this year.



The owners of the diamond store Moda Fina also are investing in metro
Phoenix houses under the partnership Ariel Global Investment
. The group
has bought more than 65 houses
this year.




http://www.azcentral.com/arizonarepublic/business/articles/2012/10/20/20121020biz-investors.html?nclick_check=1
 

Rickson9

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I noticed this when I shopped for property in Atlanta earlier this year. No stone is going unturned.



Phoenix Picked Clean. Atlanta Next.



Peter Horbulewicz started noticing investors from New York and
California at Atlanta-area foreclosure auctions about four months ago.
Working for private equity firms such as Colony Capital LLC and Blackstone Group LP (BX), they`d clutch plastic folders crammed with cashiers` checks and astonish locals with how much they were willing to pay.



`If
you go head to head with them, they always win, because they always
overbid
,` Horbulewicz, a Polish immigrant turned American house flipper,
said during a foreclosure auction outside the Gwinnett County
courthouse, northeast of Atlanta.



Colony, Blackstone, Waypoint Real Estate Group LLC and American Homes 4
Rent have converged on Atlanta in search of low-priced properties to buy
and rent out, after helping drive prices up 34 percent in Phoenix
from a
year ago.



http://www.bloomberg.com/news/2012-10-17/private-equity-in-atlanta-after-picking-phoenix-clean-mortgages.html
 

Darr

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Can Canadian investors obtain a US Fixed Rate, 30 Year Conventional Mortgage to finance the purchase of a US property? If that`s possible, could you share your views about the details & hurdles involved?
 

Rickson9

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[quote user=Darr]

Can Canadian investors obtain a US Fixed Rate, 30 Year Conventional Mortgage to finance the purchase of a US property? If that`s possible, could you share your views about the details & hurdles involved?





I don't know if it is possible for a Canadian investor to obtain a US fixed rate 30 year conventional mortgage. I've never read about being able to, but that doesn't mean much.



I never used a mortgage to make my purchases in Phoenix. I paid all cash.



From my limited experience a mortgage was a hindrance since they are trumped by the overwhelming amount of all cash bids.
 
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