What about the people purchasing today at the 2001 prices? Where will they be in 10, 20 or 30 years?
 
Buying at historical lows means the rental yields will be high and once financing becomes available the supply of buyers (and property prices) will increase dramatically. If you purchase in 2010 at 2001 prices and sell in 2015 at 2005 prices, you´ve more than doubled your money.
 
However, the longer term view will depend a lot on interest rates and inflation too.
 
Unlike the Greeks, the US government can inflate its way out of trouble. Whatever your opinion is of the US debt (53% of GDP by the way), it´s ability to borrow is greater than any other country on the planet thanks to the unique status of the dollar.
 
Borrowing levels will have to stabilise though, and although there are lots of ways of doing that (some painful, others problematic) inflation is going to be a side effect. 
 
If inflation does take hold in the US, that means interest rates will go up, which means higher mortgage payments for people. That´s not good if you have a mortgage.

Historically, that has also lead to higher rents.

It has also led to higher property prices. 

So where will that leave the proud owners of distressed Florida properties with no mortgages in solid locations with steady renters?
 
Laughing probably, all the way to the bank.

Kind Regards

Colin Murphy

One of these ways, which Torcana identified more than two years ago, is to purchase highly discounted and undervalued properties from distressed sellers. To maximise the return and minimise the risk of these types of properties, they must be purchased
 
- in wealthy, democratic economies
- with a history of renewal and recovery from recessions
- in fundamentally sound cities and neighbourhoods
- where locals rent long term
- where locals have and are currently purchasing these properties

Apart from that, the properties must be fully completed, cashflow positive and in well located and well run buildings or communities.
 
I´m sure there are plenty of other types of properties that can make you a healthy profit, but these are the ones we´ve identified with the best risk/reward ratio. It´s difficult to see how these kinds of properties will give any serious problems over the next 5 years and the potential benefits are huge.

So our criteria is very strict, but we´ve found plenty of properties that tick all these boxes and the latest is Arbor Lakes in Orlando. Here you can buy for 30 cents on the dollar in a beautiful and pre tenanted condo with 7-9% net rental yields.
 
If you haven´t received an information pack, please send an email to investments@torcana.com and request one.

Kind Regards

Colin Murphy

France is a good example. There was a massive public uproar recently when the retirement age was increased … to 63 years ….in small increments between now and 2018. They´re getting no sympathy from me!   
 
Germany, on the other hand didn´t need to do anything nearly as extreme as the Irish because they are a conservative and prudent economy with low wages and high productivity. Between 2001-2006 they were drinking diet cokes while the Irish, French, British and Spanish were downing straight whiskies and margaritas. Their finances were fine and thanks to their awesome economy they can grow their way out of a recession a lot quicker than everybody else.
 
These are among the reasons we´ve started promoting multi tenanted German properties in key locations. 
 
Feel free to call or email me (investments@torcana.com) if you´d like to learn more.   

Kind Regards

Colin Murphy

Kind Regards

Colin Murphy

There are lots of commentators out there who seem very qualified and sound like they know what they’re talking about when discussing concepts like recapitalisation, debts, deficits & credit ratings and yet, with a few notable exceptions, when I’ve finished listening to them, I’ve usually forgotten what the question they were supposed to be answering was. 

Sound familiar? 

The BBC website has a great “jargon dictionary” for laymen. It can be viewed here if anybody would like to have a look.

Kind Regards

Colin Murphy

When the scheme was first launched at the height of the credit crisis in September 2008, the guarantee, which covers all deposits with certain named institutions, was due to last until the end of September of this year.

Then, last December, the Eligible Liabilities Guarantee Scheme, covering term deposits in qualifying institutions in full for up to five years was rolled out.

Now, following approval from the European Commission, the initial scheme has been extended until the end of December 2010. But what does the latest extension actually mean for savers and should they be worried about the security of their cash?

WHAT PROTECTION DO I HAVE ON DEPOSITS OF LESS THAN €100,000?

If you have money on deposit of less than €100,000, then the amendments to the guarantee scheme won’t affect you. Instead, you will be covered on amounts up to this figure by the Deposit Guarantee Scheme (DGS), which applies per person, per institution and has no end date.

So, if you have €50,000 deposited in three separate institutions, you would, if the worst came to the worst and all three banks collapsed, be covered for the full €150,000.

The scheme applies to: current accounts; demand deposit accounts; term deposit accounts; share accounts and deposit accounts with building societies; and share accounts and deposit accounts with credit unions.

Its reach extends to 16 deposit taking institutions in Ireland, or shortly 14, as both Postbank and Halifax are on their way out.

WHAT ABOUT DEMAND DEPOSITS OF MORE THAN €100,000?

While the first €100,000 of your money is covered as normal under the DGS, the latest extension to the guarantee scheme means that any balance in excess of €100,000 is also covered until the end of this December. 

Read the remainder of this excellent Irish Times article here. 

Kind Regards

Colin

“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

Whilst these bonds guarantee a standard rate of return, in reality, they are not offering anything new, with some of these incentives already achievable through various savings schemes already in place. The main points are –

1. Interest Rates are fixed at 1% per annum, and DIRT is payable on the interest earned.

2. Bonuses are the only part of the scheme which are not taxable and you must leave your money in for a minimum of 5 years to receive any bonus (10%), 7 years to receive a 22% bonus, and 10 years to receive a 40% bonus.

3. After 10 years, the net return after DIRT would be equal to 3.96% return per annum – which certainly isn´t enough to get me to part with my cash for 10 years.

Additionally, these figures do not allow for any inflationary indexing. In other words, as the value of products and services go up, the value of your investment remains fixed, and there remains the very real potential that any interest and bonuses earned will be dramatically wiped out due to rising inflation.

Further information available here

Compare this to the “bricks and mortar” test in Florida –

1. You will achieve an annual rate of return on your investment at a minimum of 7 to 8% net of all costs. Due to the allowances and deductions which exist, you should never reach the tax thresholds in the States where you are have an income tax liability on the net rental income achieved.

2. The rental leases are signed on an annual basis and you can expect them to increase year on year in line with inflation, thus protecting your net rental return from any significant inflationary increases. The bond scheme offers no such protection.

3. The capital appreciation potential in these severely discounted properties is very real in the medium term and would certainly have the potential to outstrip any potential bonus offered  under the government scheme (bear in mind you only receive a 10% bonus after 5 years, expect your condo to increase in value by more than this during the same period).

4. If you hold the property in Florida for the full 10 year government bond investment period, at a minimum you can expect a 7 to 8% annual rate of return on your investment every single year (a much higher rate of return than the bond scheme), and you will also benefit from significant capital appreciation after 10 years.

5. Your rental return will be in dollars, a very safe and strong currency at the moment, and certainly a lot less volatile than the “eurozone”. If the euro weakens any further against the dollar your rental returns will increase significantly in euro terms, as will the value of your investment.

6. Our Florida based investments are available for are approx 70% less than previous verifiable sales prices, and cost around 50 to 60% less than it would take to build the condos today.

7. Florida is an area of the States with excellent infrastructure, year round sunshine and lots of economic diversification. It is much better positioned to recover from the “bust” cycle than Ireland is at the moment.

Kevin Cross,  Torcana

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

Laws and tax breaks were installed to encourage rampant construction of apartments, offices and hotels in dubious locations. “Soft touch” regulation was all the rage and banks were competing with each other to see who could rubber stamp the most loan and mortgage application forms in the shortest possible time. Buyers were borrowing beyond their means to purchase overpriced property developments around the world.   

Too many thought they could keep on flying forever until finally, in early 2007, Icarus like, they soared too close to the sun and fell back to the ground with an almighty thud. 

While all that craziness was happening, there was one country that paid no attention to the excesses of its neighbours during the boom.   

Their banks didn´t get carried away with huge loan to value mortgages and their citizens generally saved more than they spent. Economic growth, rental rates and property price inflation were all stable and steady. It was and still is by far the most important economy in Europe and has been a profitable and safe haven for investors for decades.