The Holiday Spirit
On-line Opinion Magazine featuring annoyed rumblings from the leading edge of the Baby Boom firmly tied to a reality-based world.
Established: 21 November 2004
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20 comments
Okay, that’s typical holiday spirit for a cat — cat’s reaction to pretty much anything that isn’t a full belly or an ear scritching is “bah humbug” — but what’s with the pups? Usually they’re all overjoyed by all the Christmas cheer — or at least the Christmas leftovers. Hmm, something wrong this Christmas, methinks…
– Badtux the Holiday Cheer Penguin
.-= last blog ..World’s biggest liar loan =-.
There are a lot of things wrong with this Christmas, and anyone with the IQ of a cat would know it. Unfortunately we don’t have anyone meeting that criterion in charge.
Boy, is that ever true. I’d put Samantha in charge of the economic recovery in a New York minute, and she doesn’t even have a degree in economics…
.-= last blog ..How Many Quid Pro How Much Quo? =-.
There are a lot of good people out there who have doctorates in economics and have been consistently correct for years, but no one will put them in charge. It’s not like we don’t know what works; it’s not like we haven’t solved this problem before. This should have been a boiler plate response, i.e. institute all of the FDR programs that worked, and let them work again. Instead, let’s try some more tax cuts. I have a hint for these idiots – if you don’t have a job, a tax cut is worthless.
I’m I alone in figuring out that tax cuts are only really going to help the idiots who got us into this mess in the first place, because they almost all kept their jobs.
The current affairs program ‘Today Tonight’ here had a story on Aussies buying up houses dirt cheap in the USA. Sure does show how bad things are there.
Property investors look to the US
An Aussie company started up a few years ago that basically does all the work for a moderate fee.
HousebuyersUSA
Sign of the times I guess.
“We get $800 a month in Australian for a $25,000 investment,” Shaun said.
Sounds like “Shaun” has bought into a Ponzi scheme. Even at current rock-bottom mortgage rates and exchange rates you’re going to get nowhere near that kind of return with current vacancy rates (which are over 15% in some markets because people who’ve been evicted have ended up moving back with their parents or doubling up with other people to stretch their unemployment checks) and declining rents. This is especially true when you consider management fees, which will lop 10% off your income right away (properties do not manage themselves!). There simply is no legitimate investment that will give you a return of $8,000/year for a $25,000 investment. Consistent 30%+ returns don’t happen outside of scams.
But we were reading all sorts of articles like that in our own press during the run up of housing prices and then during the early stages of the collapse, articles that read like they were written by real estate marketers and Ponzi scam artists rather than by people who had looked closely at the fundamentals, so it’s no surprise that the Aussie press is now starting to print those kind of articles. After all, scam artists are international nowadays. Just ask the Nigerians ;).
– Badtux the Scam Penguin
I would have thought that Wallaby-Madoff Investments Pty would have been a hint 😉
If it sounds too good to be true…
You run it for a year to maximize your take which includes two-thirds of the money from the initial investors, and more from everyone else, plus what ever interest the numbered account is paying, minus your start-up costs. Easy, straight-forward and profitable, especially if you can sucker a few greedy media people and/or sports figures.
As someone who has spent a lot of time helping a friend who buys up and renovates properties priced under $100K, you are going to make $800/month in rent on places in that range, and you still have to pay taxes, insurance, and management fees.
Houses are being sold for very cheap prices these days because of foreclosure, but $25K would be cost of renovations to bring a foreclosed house up to the $1200/month level of rent required to return $800/month.
I looked at the numbers last time I was in possession of a house that I was in the wrong geographic location to live in (back in 2003), and dumped the house as quickly as I could because I estimated that my *outgoing* cash would be approximately $400/month on the house if I rented it out. Granted, that was a mortgaged home rather than a straight-cash purchase, but point is that buying a rental property is a long-term play, not a short-term play. If I’d held on to the house for five years I might have started turning positive cash flow, but that depends on rent inflation, which in turn depends on overall inflation — neither of which are happening at the moment, in case nobody’s noticed ;).
– Badtux the Finance Penguin
.-= last blog ..Rock bottom =-.
Lots of great buys in certain areas down here, but you need the insurance, and have to pay the taxes. If you aren’t nearby you need someone to manage the property, which is a 30% hit in this area. The only reason it makes sense for my friend is because he does it with cash, not borrowed money, and almost always cuts a rent-to-own lease with tenants. Enough people buy out the lease that he gets the operating funds for the next deal.
I don’t think he will do it anymore, even though the prices are really dropping because he is too old, and so are the people he used to do the rehabs, me included. The rental pricing has dropped when the unemployment went up, but insurance won’t come down, and taxes have stabilized. Until there are jobs, it is not worth the money and effort to do it.
According to the report, costs are:
If these are accurate, it’s not a bad investment. Still, I’d take the Professor’s advice:
The numbers are bogus. I assume “rates” is what we call property taxes. The property taxes on a building lot in mostly rural Santa Rosa county on the Florida Panhandle were $250/year. Property insurance is totally dependent on your postal code, but I don’t know anyone who is below $100/month. If the $60/month fee is real, that is an unbelievably low price.
I don’t understand why they want people to set up a US company. Canadians own houses and condos all along the coast, as do Germans, so there is no problem with foreign ownership. As a rental property there may be other taxes that will apply at the local, state, and Federal level for any income from the property. This sounds fishy from the get go. The pricing is just too low, and the expected rents too high.
No way is any bank letting go of a foreclosed house for $30,000, except in rural places of Wyoming and Montana where you’ll have trouble finding renters able to pay $250/month out of their meagre Social Security checks, nevermind $800+ per month. But in someplace where you can get $800+/month rent? Crap, the *lot* is worth more than $30K in those areas. Banks would rather sit on it for years and wait for the lot to appreciate in price before they would let it go for $30,000.
Regarding property management fees, when I investigated renting the house out I was looking at a *minimum* of 10%. And that’s a minimum, with a property manager that I knew. He took one stroll around the neighborhood, guessed in his head what the house could rent at, asked me what my monthly mortage+tax+insurance payment was, told me what he thought he could rent it at (which was much lower) and what his minium fees would be and said “Sell it.” And he would have been making money off the deal, but he wasn’t interested in watching me go underwater further (an honest man, imagine that!).
The setup described above is a scam, a classical Ponzi scheme, pure and simple. There’s no friggin’ way the numbers work.
.-= last blog ..Tighty righties want to sell guns to terrorists =-.
Yup. Rates -> Property tax. 🙂
I was curious about the ‘US company thing’. Might have to ask LadyMin about that. I know Delaware have some nice reasons to minimise tax registering there (I was considering registering a company via a Delaware Management company when I had a need to have a US bank acc’t and required a US company address. But the need evaporated. 🙂 When I was doing the research, the costs and ongoing management fees etc. were very reasonable.
Anyway, as I said, I wouldn’t get involved without a LOT of very serious research. If it works for the people doing it now, good luck to them! 😀 *shrug*
I did do a quick ‘Google* for foreclosures in Kansas (which was used for the examples in the story). One site had foreclosed houses for sale in Kansas City starting at US$15,500:
Kansas Foreclosure Homes for Sale
Another site ‘RealtyTrac’, has foreclosures in Ellis County (Antonino) starting at US$11,000!
RealtyTrack – KS Forclosures
There appears to be some 8 real estate companies specialising in foreclosed properties in Ellis County alone with over 67,000 properties listed!
There were a few interesting stat’s there (for Kansas):
Foreclosures Sold: 66,511
Down, Sep 2008: -25,998 vs Sep 2009: -28.10%
New Foreclosures: 332,292
Down, Sep 2009: -11,346 vs. Oct 2009: -3.30%
Foreclosure avg. Sales Price: $203,851
Oct 2008 vs Oct 2009: $3,032, up 1.50%
So, there are definitely very cheap properties. Whether they are any good or not… *shrug* 🙂 (also, the company selling the deal here says that the properties they sell are all *renovated*, whatever that means!) 😛 😆
Since your anti-SPAM hates me… 😛
This is appropriate for your graphic at the top of this thread: 😉
I see that PRwatch are not impressed (nor should anyone be) about Obama’s latest *tough* rhetoric:
Tough Talk Is Not Enough on Loan Modifications
BTW, I came across PRwatch looking for a story published in AFR (Australian Financial Review) here (which requires registration to read, and I have enough spam thank you). One of our big companies got caught being very naughty (well, downright unethical. SOP of course, so, a normal corp!)
Another Brick in Boral’s Wall
There’s a link to the ABC story with a little more detail in that article if anyone’s interested.
At least the regulator’s here will do something when the crap Corp’s pull every day becomes blatantly obvious to blind Freddy! Seems that in the USA, even if a Corp admits they are evil bastards, either nothing will happen or they get a fat Gov reward! 😈
Bah! Humbug!! Indeed.
There are quite a few in Kansas City going for under $20k.
Wyandotte County Foreclosure Homes Results
(sort by ‘Price’… duh!) 😉
I got curious and looked at ‘Melbourne, FL’ 😉 I was surprised to see a couple there under $20k, and several under $30k.
Brevard County Foreclosure Homes Results
Property ID: F1244543
Type: Foreclosure
Address: MONROE ST NE, Palm Bay, FL, 32905
BD/BH: 3 / 2
Price: $18,000.00
Have to register to see the details though.
yeah, the spam filter caught me a while ago too, kryten, and i didn’t even have any links! come to think of it though, it was right after talking to you. hmmm…
houses in my neighborhood and surrounding neighborhoods dropped by about 20-30% of their bubble prices and stayed there for awhile, but the speculators seem to be moving in now. this is about what happened last time prices crashed around here: they almost got low enough for real people to start buying homes to live in, but just before that happened the house flippers swooped in and snapped up all the affordable fixer uppers and resold them at unaffordable prices.
.-= last blog ..My inner cryptobiologist lol’d at this one =-.
The big blocks of houses sound like failed subdivisions which are often in various levels of completion. The key would be the number of bathrooms. If there is only one in a house with multiple bedrooms, it is an older house that might be well built, but it isn’t marketable these days. Another possibility is a blighted neighborhood.
Actually, the best deals are tax sales, but you have to be their to bid, and have the cash ready.
It just occurred to me that another problem with foreclosures in the US, is that there may be other liens on the property that won’t show up for a while. Banks haven’t been very good about keeping track of the paperwork, and it is coming to light that the bank that forecloses may not actually hold the note on the property. You would need solid title insurance and a fund for attorney’s fees.
The whole thing is just too risky for anyone who is sane.
I just have to say that I love this picture….lol
.-= last blog ..Michael’s Cryin Over Spilled Milk =-.
Kryten, if you dig deep you’ll find that those “foreclosures” are actually pre-foreclosures, and are listing the amount of money owed on the home, not the amount of money that a bank would want for the home. Furthermore, the majority of those homes are in such poor condition and in such bad neighborhoods that you’d be lucky to get $300/month rent for them. It’s the same geographic problem I talked about with North Dakota and Wyoming — yes, you can buy homes for cheap up there, but you can’t get much rent for them either. And the management fees are a killer.
– Badtux the Worked-the-numbers Penguin
.-= last blog ..Wednesday morning guitar music =-.
After the kitten stage, many cats want life to be dull, Moi, so I can appreciate the sentiment.
I would think the first check would be the unemployment rate for the county involved. That normally tells you all you need to know about the property. If there are no jobs, there is no rent to be had.