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Archive for the ‘USA Property’ Category
I read an interesting little article today on realtytrac, which is very similar to the philosophy Torcana have been following in Florida these past 2 years. I´ve summarised the main points below.
“Buy low. Rent smart. Sell high.” It should be every real estate investor’s mantra in today’s market. It is for investor, author and educator Andy Heller.
“I think the entire country right now is for sale,” said Heller, who recently founded the newly launched social networking website RealtyJoin. “A few areas are marginally better because they experienced greater falloff, so they have greater growth potential.”
To Heller’s way of thinking, the best strategy for investing in real estate today comes down to three ingredients: buying at a significant discount, buying the right type of property to attract the types of tenants you want to rent to, and lastly…location.
“To me, for investors the bigger issue – as opposed to what parts of the country are better than others – is all parts of the country are great so long as you can buy low enough,” added Heller. “ Today the investor should be buying property between 30 and 60 percent off.”
Based on data from RealtyTrac, National Association of Realtors (NAR) and Bureau of Labor Statistics (BLS), all of the metro areas on the list below had an average discount of at least 35 percent on foreclosure purchases, positive year-over-year growth in median home prices and relatively low unemployment rates.
If you´d like to see how to apply these principles to our newest investments, please get in touch with us today.
Kind Regards
Colin
Great news below on the Sunrail Communter train in Orlando from the Florida Trend.
This could be a real game changer for people owning properties on the new line (see map below). Construction could start as early as June on the first phase of the SunRail commuter train that eventually will carry commuters 61 miles through Volusia, Seminole, Orange and Osceola counties. A mass transit package that Gov. Charlie Crist signed in mid-December breathed life into the $1.2-billion regional project, which had stalled after failing to win support during the Legislature’s 2008 and 2009 spring sessions.
But a lot has to be done quickly to begin construction in four months: The state Department of Transportation still has to wrap up the nearly $500-million purchase of 61 miles of track from CSX and secure a commitment from the federal government for more than $300 million to help pay for the project.
The project is expected to create thousands of jobs over the next 30 years and billions in economic activity.
The construction industry will get the biggest boost initially, in a region where the jobless rate has climbed above 11% during the recession. The Florida Department of Transportation awarded the design and construction contract in February to a joint venture led by Archer Western Contractors of Atlanta and RailWorks Track Systems of New York City.
In addition to upgrades to the tracks and signals, the project includes 17 rail stations. The first leg will run between DeBary in Volusia and Sand Lake Road in Orlando.
“This is a game-changer for our community,” says Orlando Mayor Buddy Dyer, part of a coalition that fought for the project. “If we’re going to be competitive, we have to have rail transportation.”
Supporters say SunRail will provide an option to driving along congested I-4 and help support the development of regional urban centers. They expect the project to help further a rail system connecting Orlando, Tampa and other points along the I-4 corridor. The state has been seeking $2.6 billion from the Obama administration’s $8-billion mass transit program.
Along with SunRail, the state approved money for south Florida’s Tri-Rail system and for setting up a statewide rail authority.
Opponents, including state Sen. Paula Dockery (R-Lakeland), said the state is paying CSX too much for the 61 miles of track. They also say the deal, which shifts freight rail traffic onto a different rail corridor, unfairly penalizes parts of the state that will see more freight trains. The commuter line, they say, is likely to have only limited ridership.
Sunrail Map
People predicted dire consequences for the dollar during the height of the recession, most of which never materialized. Then again, history has taught us several times not to underestimate the incredible strength and resilience of the US economy.
Over the past two years the €/$ rate has varied from $1.24 - $1.59, with an average of $1.41. It is now $1.27, more or less the same as it was in Oct-Nov 2009 and in Feb-March 2010.
Despite the unpredictability of all this, our feeling is that the euro will continue to weaken against the dollar for some time. It´s difficult to think about how this can be used to your advantage in the abstract so let´s use a Mosaic property costing $75,000, which is priced 65% lower than its peak.
Three months ago it would have cost you €55,000 to purchase $75,000. Now it would cost €59,000. It´s tempting to think that you´ve missed the boat as the price has “gone up” by €4,000 and/or that you´re not getting a 65% discount anymore. Both are misleading.
Look at it the other way. You pay the €59,000 and in a few months time the US/EU exchange rate moves from $1.27 to $1.17 (very possible). If you convert your $75,000 back to euro you´ll get €64,000. Have you lost €4000 or gained €5000?
Put your money to work
There´s also the rental income you can earn (good luck getting 10% in an EU country from a €60,000 property), the capital appreciation potential (prices have still plenty of room to fall in most EU countries) and above all, the fact that your money is working hard in an appreciating asset in a recovering economy rather than languishing in a bank in a slow economy generating 1-2% interest. Isn´t it better to read positive news about the US economy when you have assets there?
Florida property provides a lower cost asset, at a higher yield and significantly better capital appreciation potential than anything comparable in Europe.
More importantly, it is vital that investors start thinking about diversifying away from euro assets and into income generating assets in other currencies. You do not want to have all your money in euros when the US market is thriving and the euro currency outlook is weak and uncertain due to rogue member states.
Kind Regards
Colin Murphy
Torcana.com
What if Mr. Buffett´s prediction is right?
Let´s assume for a moment that his prediction of a US housing recovery sometime in 2011 is correct and let´s also bear in mind that people who have betted against him in the past haven´t done so well.
Is it better to wait until 2011 and start investing in property once prices start recovering? Or might it be worth using some money sitting in a (very) low interest savings account to purchase well priced high quality properties while they are still available?
It´s been a crazy 18 months in the real estate business, but as the Sage of Omaha himself said “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”.
Translation: These fluctuations caused a flood of motivated sellers to appear. They won´t stay so motivated indefinately.
Kind Regards
Colin Murphy
Investors and property agents were jumping for joy last week when billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011.
According to Buffet’s latest annual shareholder Letter, “the industry is in shambles for two reasons, the first of which must be lived with if the U.S. economy is to recover. This reason concerns U.S. housing starts (including apartment units). In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data.
Paradoxically, this is good news. People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses.”
Jokingly, Buffet offered three ways to adjust the imbalance:
1. Blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program.
2. Speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers.
3. Reduce new housing starts to a number far below the rate of household formations.
“Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious,” he said. “Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.”
Kind Regards
David Shaw
Sales & US Sourcing Manager
Following my recent extensive trip covering the four corners of Florida looking for the best property investments I felt it would be useful to take some time to give you an update of the property market from the ground. This will be the first of three blog posts concerning Florida.
Firstly there are many amazing investment and lifestyle opportunities in the State of Florida, it is the 4th most populous US state, with an incredible infrastructure, hugely diverse economy and an abundance of natural beauty, unspoiled beaches and wildlife. The people are very proud of their state and I can see why.
There has been a lot of contradictory media attention about the US housing market, one day you might hear property prices are rising, the next that they are falling.
The reality is that just like the UK or Ireland, the property market in Florida is local and should be looked at on a micro level rather than taking investment decisions on a macro, state wide information.
Torcana work in the distressed market, which is quite distinct from the regular market. Within this market we concentrate on taking advantage of distressed sellers and developers who have relatively small amounts of unsold properties within very well run and well built resorts. These properties can be purchased for less than their construction cost. It is a very active and aggressive market and this type of distressed inventory is down nearly 50% year on year.
Kind Regards
David Shaw
Torcana Sales Manager
I hear this question daily, all that shines is not gold so please let me outline my view of the Florida property market.
A new build 900 sq ft 1 bedroom sea view condo in Miami cannot be measured against a 15 year old timber frame 550 sq ft 1 bedroom/studio in Ft Myers. It is essential to measure apples against apples.
It seems obvious when phrased like that, but it isn’t stopping both amateur and professional investors of falling into the trap. Whether property prices are increasing, stagnant or falling – you still tend to get what you pay for.
Picture the town / city / village where you currently live and imagine there are many distressed sellers. Would your first reaction be to hunt down the very cheapest property available just because it is cheap and tenanted? I’d imagine the answer for most of you is no, and that many would prefer to pay a little extra to get a discounted property in a nicer part of town, where the tenants are solid and a resale market can be clearly visualized. This is how we feel about Florida.
Not everybody takes this approach. Over the last few months I have seen UK and Irish agents engage in what I can only describe as a “race to the bottom”. There is real pressure in this business to source the very cheapest distressed deals possible with scant regard to the ABC’s of smart investing.
It’s a pretty risky strategy for an agent to engage in, and it is not one that would be of interest to Torcana. No doubt the commission will come rolling in for a few months, but these agents will quickly reach a point where they either have to ignore large numbers of client complaints or they will have to dedicate ruinous amounts of company resources to solving messy aftersales issues.
It is our view that investors should not be satisfied with an agent who just sources property. A good agent is an essential service for a non professional as they help him/her (a) find the smartest long term investments available, (b) ensure the pitfalls of buying in a distressed market are avoided and (c) assist with a smooth transfer of ownership.
Looking forward to your thoughts.
Kind Regards
David Shaw
Torcana Sales Manager
I’ve been making quite a big effort over the past six months to emphasize the speed at which the Florida market has been recovering from the credit crunch and property slowdown. Yesterday morning I received two graphs from one of my main contacts on the ground that will illustrate this far more clearly than my words have ever done.
Graph 1: Supply in Florida has been falling dramatically for almost a year. This is because developers are not starting new construction projects and prices of existing stock have been slashed by up to 75%, thereby boosting consumer and investor demand (with a little help from US subsidies for first time buyers).
Graph 2: The market bottomed out in December 2007 and it took another 15 months before activity reverted back to late 2006 levels. Over the past six months, it has been quite frantic, which huge volumes of new contracts being issued to a wide variety of buyers.
Breaking through the pain barrier
In short - developers, banks, agents, investors and homeowners all had to go through a world of pain between September 2006 and September 2009. Their counterparts in Ireland, Britain and mainland Europe have had it easy in comparison.
Prices are still low, but they are not going lower, of that I am quite sure. There will always be good deals out there for the shrewd and well connected buyer, but the days of snapping up a high quality unit for $50-60k that used to cost $200-$230k are numbered.
The Villas at LaCita is one such untapped gem, and we’ve only 20 units to sell. They are tenanted, they are cash flow positive and they are in a great location. Some have very high rental yields and some have modest rental yields.
If you want to take your pick of the very best, please visit http://tinyurl.com/torcana-lacita and contact our offices for further information.
Kind Regards
Colin Murphy
Torcana.com
Good afternoon all
We are very excited to be launching a brand new project on Florida’s Space Coast.
The development is called Villas at LaCita: the location is stunning, the prices are terrific (from $53,000) and the rental yields on the best units are a rock solid 7-8%.
Like our previous Madison, Tradewinds, Waterside and Flora Ridge developments, these are high quality tenanted units with long term leases in place & available to investors at up to 75% below previous sales prices. You’ll find full details by visiting http://tinyurl.com/torcana-lacita
Kind Regards
Colin Murphy
Torcana.com
The bad news is that opportunities for easily purchasing a property at the very bottom of the US market are gone. This isn’t necessarily making front page news in The Times but statisticians and reporters tend to print yesterdays news.
There are two fundamental market forces at play. There is the “real market” which comprises 90% of existing US residential property. This stock may have lost significant value in the last few years but it is neither distressed nor foreclosed and the vast majority of it is not for sale.
The other, temporary market is the “distressed market” which completely undermines all efforts of the real market to sell surplus stock. This is because the “distressed market” as you will guess, is comprised of foreclosed and distressed property from banks and developers.
This market is the only show in town as far as bargain hunters are concerned, and it is our knowledge of the main players in this market and the process by which we help clients purchase, tenant, maintain and resell these assets that makes Torcana.com stand out from the crowd.
Kind Regards
David Shaw
Sales & US Sourcing Manager
Torcana.com
