For most would-be real estate investors, the most difficult part is coming up with a down payment. In my experience trying to do real estate investment as an expat, the traditional function of a down payment is less relevant; when foreigners buy property, they almost always pay all cash. If you want to throw cash at an investment (no leverage), and you have low-expectations for rental yield, brokers will step forward to help you pay all cash for a low-yield property. But if you want a loan…
There seems to be no end to the delays in this process. Not just the loan, but at every step.
I’m inspired this week by some comments I heard on the Real Estate Rookie Podcast, from their guest, a syndicator named Andrew Cushman.
“If you are looking to… build a large portfolio and build a business out of it, making money yourself on your first deal or two is like goal #4.”
— Andrew Cushman, from Vantage Point Acquisitions
As Cushman mentions “a large portfolio,” that is absolutely what I am aiming for. Guys like Cushman are my role models, these are the guys I’m studying; I want to do what they do. He is talking about how to get started, and that is exactly where I am at.
Before I say more, I want to state clearly I really like my broker. I really do. And he has already invested many, many hours into this process with me. And good-heartedly done so. I am grateful.
But this week he pushed off what has become our weekly meeting. And he suggested a meeting 10 days out, which means we will have gone two-plus weeks without taking any action. It’s not me; I am so ready to go. I would do anything anyone asked of me, if I could just move forward.
The language barrier is a big part of the problem for me as I try to buy property in Japan. Perhaps (certainly) stubbornness is why I brush my lack of language ability aside – every single person on this deal besides me speaks Japanese. I am all-in for real estate know-how and the work and the street time. In theory, we should be able to do business without me being fluent. I stubbornly cling to that belief.
As it is, because I need an agent/broker that speaks English, there are very few options in my city. And even though I am a permanent resident, as I am non-native I’m still considered a “foreigner” by everyone in the transaction.
In a typical market, I could talk to multiple brokers at once. Someone, at some level, would be willing to really hustle to find a way for me to break into this market. I have a significant budget for a down payment. I didn’t write about it yet, but we had a good communication with a lender two weeks ago, giving me a (very) soft offer for money (with good terms; 35 year loan) on the kind of property I want to buy. We just need a property.
I’m frustrated this week that I don’t have more to look at. I am frustrated I can’t do more.
It is true of any market that there aren’t that many multifamily rental properties for sale. Within that set number of small apartment buildings for sale, most are sold off-market. There are a few apartments for sale online on the various websites that list real estate for sale in Japan. Of those listings, most of them are pretty terrible deals. I know, because I have looked at them.
Why are the deals found online bad deals? If the property was a good deal, it would have purchased by an agent or a preferred buyer in the community. I can smile when I say that; it’s a kind of progress that I have really learned that his is how it works. Eventually, I hope to be one of those insider traders in real estate.
The properties that are available online are low-yield, which is to say commonly “overpriced,” or in very poor condition, or both. It becomes the challenge of the new investor to find something in that scrap heap of deals worthy of some effort. I am that kind of buyer… which is not great for most agents, especially for successful brokers that aren’t overly hungry for a deal.
My goal – for now – is to accept my place in the hierarchy, and then to be the best version of that kind of client. High effort. I have 100 ideas for how I can take a mostly undesirable property (unattractive to other investors, and probably to most renters), and to improve that property. This was my goal months ago, but I’ve sharpened up my list of ways to “force appreciation,” I have a lot of very specific ideas (many I have never heard before) that apply to investments in my city.
(I think) I’m ready. I just need a property.
I know my broker would have gladly sold me an over-priced investment weeks ago. As we have gotten to know each other, I think he’s less likely to even want to do that. He is an experienced guy, senior, I assume he has plenty of real estate of his own, the relatively-small commission on my deal isn’t really a strong motivator. I may be a fool, but I think he is genuinely interested in my case at this point.
This week he cancelled our meeting; he doesn’t think we have much to look at on the market right now. He knows I need to produce a healthy deal. I cannot lose money on this deal. More so, I *must* produce a deal that looks healthy to a bank. My goal is to take a property that is relatively unattractive at a certain value, and then improve the property and operations, so it becomes relatively attractive at a higher value. If I could do that, I could earn a place in this market.
Here is Andrew Cushman again.
“#1, you’re looking for experience. #2, you’re looking to build that track record so that you can say, ‘Hey, I have actually done these types of deals before. You can get started without a track record, but it does get easier the bigger track record you have. The more you can go to the lenders and say, ‘I have experience, I have other loans, I’m in this market,’ those things build on each other.”
That is a really great quote that describes how an individual real estate investor gets started, about the process of breaking into the market.
That is what I want. I want what multifamily broker Beau Beery calls a “base hit.” I want to buy a property, make smart, simple improvements, increase the income – and probably sell it. The Japanese don’t really do “cash-out refis” (which is a story for another time), so to grow I think I’ll have to dump it, get the cash out, and trade up.
As I write this post, I’m three days into the 10-day wait until I can meet with my broker again, and maybe find a way to move forward.
I bet some readers are thinking I could just find another broker (or two). Again, if I were back in the United States, I could do that. In this market, there are so few agents and brokers that are willing to work with a foreign client – I promise you it is not as easy as it sounds. And, I like my broker. He has helped me a lot. I’m happy to show some consistency and loyalty.
My goal really is to begin some long-term relationships… it’s just been hard. And the waiting is killing me.
Last week, as prep for my meeting that didn’t happen, I suggested we expand our search to smaller buildings. Maybe I need to lower my expectations (again), and get a two-unit, three-unit, four-unit building. That means growing slower. It also means vacancy hits harder. But, that could open up more inventory to pick through.
I got to find a deal, a deal that works. I’m already imagining the on-set of winter. And then the New Year holiday in Japan. And then… the demand from lenders that I produce yet-another round of taxes. And that tax process, of course, means – more delays. If I don’t get moving, this “first deal” could roll into Spring… or longer. It’s killing me.
So that is my plan: This week I am going to use residential property listings and go look at two – four unit buildings, probably vacant, in my target neighborhoods. I can do this on my own, with no help from my broker. It will give me something to do, it’ll expand my knowledge of the market. Who knows… maybe I’ll find something.
“Goal #1 is to learn. You can learn a lot through podcasts and coaches and mentors and books, but there’s a certain point that you just got to do it, and learning through guided experience.”
My goal is to learn. But maybe I could buy a “triplex,” clean it up, get it rented out (possibly as a furnished rental, more short term clients – what they call “mid-term” rentals). Would the banks lend on a project like that? Possibly. Would that kind of experience count as “real investment property operation” such that, in the future, banks will consider me a real player? Will it provide the kind of demonstration of capability that will get local banks to give me better loans, with better terms, than the lenders that will consider me today?
I don’t know. But that is what is on my mind today.