US Property Investment Exit Strategy – US REAL ESTATE TV


I want to take you guys through now what a
lot of specialists in US are regarding as the most powerful exit strategy. If you’re
looking to get out of these investments in the next 12 months, 18 months, realistically
because the market is so soft, you couldn’t just put your house on the market and achieve
the sort of money that you might like. So, this is an alternative. Now the bottom line
in the US is that the government has created a phenomenal number of public policies which
was specifically designed to promote home ownership. Right now, the government are creating
loan programs so that people can buy their own homes using as little as 3 percent deposit.
Now investors can’t borrow, we’ve already talked about the fact that for us to go over
there and actually get money out of the country is near impossible. The option that you’ve
got is that you can buy a house and get a tenant in there and work with them to understand
the benefits of actually eventually buying that home. So, let me run you through a scenario
here, just so that it makes sense to you. You might have a property which is earning
you 800 dollars a month in rent. The person who’s paying that is obviously renting for
a reason because for whatever reason they’re not able to buy back into the market or they
can’t afford the deposit or whatever it is. All they need to buy into that market
is 3 percent, but maybe they don’t have that money for whatever reason. If you could
explain to your tenant, let’s say you paid 35,000 dollars for that property, it’s earning
you 800 dollars a month, now if you could explain to this tenant that 800,000 as an
equivalent mortgage is, you know, I don’t know, let’s just say it works out to 150,000,
I know it’s not that much it might be 120,000. And that what you can do is sell them that
property. Let’s say you decide to tell them, that you’re prepared to sell them the property
for 80,000 dollars, which is probably realistically the current market value of this sort of property.
You could argue to them that their rent on an equivalent mortgage is going to drop to
400 dollars a week, 400 dollars a month, sorry. So, what you’re trying to do, is you’re
trying to educate your tenant that really buying the property from you is going to be
a much cheaper way for them to get back into the market. It’s a slow process in terms
of you really have to educate the tenant on how this works but effectively they can go
from paying you 800 dollars a month down to 400 dollars a month and then they own the
property. Now if your tenant, for whatever reason doesn’t have the money, the 3% needed
to put towards the deposit, you could help finance that. You could take their rental
payments and put them in escrow until the point in time that it does equate to that
3%, and then help them go to the bank and get that loan. This sort of strategy, it takes
a little while to set up because it’s really about getting them to understand the process
and understand what you’re trying to do but it’s helping them get back into the
market, reduce their cost and it helps you effectively get out. Now this is an extremely
powerful exit strategy that very few people know about. Now what this means is if you
can get the right tenant and you can apply this, then you can be out of your property
within the next 6, 12, 18 months when most other people, most other investors will be
just sitting on them and waiting for their cash flow. Let’s say you had 3 properties
that you’ve bought. Let’s say of those 3 properties you try working with all 3 tenants
to try and get them to, you know, buy these properties but for whatever reason, 2 of them
just don’t get it. But let’s say 1 out of your 3 says, yup I’m in to it, I’m
going to buy your property. Let’s say you get 80,000 dollars, effectively you now have
80,000 dollars, you can either go again, go and buy yourself another 2 properties or you
can put that money against these 2 homes and have them be debt free if you’ve gone and
borrowed the money. If you haven’t borrowed the money to buy these properties, then you’re
just going again. You might be able to get 3 properties out of that, 2 or 3. The thing
in the market over there right now is that the value of a property to an investor is
completely different to the value of the property for the owner. In the US right now, the government
are trying very hard and creating all these initiatives to help people back into the market
so they’re creating what’s known as a secondary housing market. Effectively what
they’re doing is they’re saying to people, as long as you come up with say 3%, 3% as
a deposit, we will fund you the rest. There’s a lot of agencies out there helping people
clean up their credit, so effectively what they’re doing is speed up the process of
the market recovery and people getting back into the market. And if you can tap into this
as an Australian investor, you’re going to be streets ahead of most American investors.
If you tell a tenant, “Stop paying me 800 dollars a month’s rent, stop paying 400
dollars a month as a mortgage”, you know, it’s a bit of a no-brainer but it still
takes time to get them to understand that, you know, that this is a win-win. I’m saying
this is simple, this is effective, but as I said if you own 3 properties, 2 tenants
might just say no, look, it’s too hard, I can’t be bothered. Now this is an extremely
powerful strategy but it only is going to work in high yield markets, so you have to
understand that. There has to be an incentive for the tenant to want to have to take this
up and there has to be an upside for you. So if you’ve paid 35 and you can get 80,
that’s a huge upside. But if you’ve paid 80 and you’re only going to get 80, then
it doesn’t work, so it’s got to be a high yield market.

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