There are a lot of misconceptions out there, and much of it is caused by internet misinformation. The internet is crammed with old, out of date and random opinions. Using the internet as an investment guide makes complete sense but relying completely on the internet can be a little like “self diagnosing”. You start with a pain in your thumb and end up with a terminal disease. This is a complex market and I think it is important to seek advice from people (not necessarily ourselves) who deal with it on a daily basis.  

With so many properties listed on the internet, it can seem that there is no shortage of great deals out there, but it’s quite difficult to find a bargain.

At least once a week a client will call me to say they have spotted a deal on the internet or through a US agent that seems too good to be true and they are either wondering if there is a catch or if I could help them secure it.  Sometimes I’ll have a closer look and within 20 minutes or so it’s usually apparent why it is being advertised at such a low price.

With countless millions of dollars lost to poor investment strategies over the past 15 years, it is more important than ever to consider the fundamentals of property investment before committing. I would never buy a property because it is cheap because value is very relative. I look at the location, the running costs, HOA dues, property taxes, insurance issues, crime statistics and the local rental market. Among other things, I will find out if it is new or recently converted, if it is timber frame or solid concrete build, if the HOA is solvent and the percentage of foreclosures in the community.  

I dedicate a lot of time to locating investments that do not carry these risks.   

 

Kind Regards

David Shaw

Sales & US Sourcing Manager

Torcana.com

I recently read a great quote from Noel Whittaker (Australian financial columnist). It struck me as particularly relevant for those who are unsure of where or how to make their next important financial move.

“Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to anybody. However, I can guarantee you one thing.. those who put an investment program in place will have a lot more money when they come to retire than those who never get around to it”

Apart from working, investing is the only method of generating long term financial independence. From a personal point of view, I’ve made more money from my investments than I have from the various salaries and dividends I’ve drawn over the past 15 years.

There was a lot of irrational behavior on display in Florida during the boom years. This irrationality forced prices too high and placed unwarranted trust in developers promising they would build luxury resorts that potential renters would flock to.

That property boom has bust, and the prices for certain properties in wealthy locations are completely irrational in the other direction – i.e. they being sold at too large a discount. While the instinct to wait for the macro economy to recover and “normality” to return before investing is understandable, it could turn out to be a counterproductive strategy if your aim is to create wealth for the future. 

There are still quite a few areas within Florida where high rental yields are available and the potential for capital appreciation is huge.

For example, I’m going to be a sizable chunk of this week speaking to clients about the twenty odd units we’ve available Flora Ridge. These three bed properties are tenanted, generate 9% net yields and used to cost more than $350,000 per unit. They are now available for between $114,500 and $115,500. I’m pretty confident these can be sold with a minimum of fuss in 3-4 years time for at least double that. In the meantime you’ll be taking home more than $10,000 per year net of all costs.

You’ll be hard pushed to find something better than that.

Kind Regards

 

Colin Murphy

Torcana.com

 

 

At the beginning of 2009, Florida seemed to have an unimaginably large supply of property: 23.6 months worth. It is now 8.4 months and because new construction activity is still minimal, it is set to fall further. A market with 6 months supply is considered by economists to be balanced between buyers and sellers.

 

Let’s look at it another way - the last nine months in Florida has been a little bit like one huge Brown Thomas or Selfridges sale. While there’ll still be products discounted at 60-70% in six months time, the best quality merchandise and the best deals will always be snapped up by those queuing to get in at the start. We know this because Torcana.com have been right in the thick of it all year and can see it happening everyday.

 

Kind Regards

 

Colin Murphy

Torcana.com

Most of you know that we’ve been selling foreclosed properties in Orlando since last autumn, and it is an excellent way of purchasing an undervalued buy to let asset. However it can be a frustrating experience as well, as clients are often bidding against several people for the same property, and once an offer is made, you usually have to wait 2-3 weeks to receive an answer. If the bid was unsuccessful we need to start again. Once a successful bid is accepted and processed, the management company process starts, with the lucky landlords finding new tenants within 4-6 weeks.

 

Torcana.com manages this whole process (and much more) from start to finish and we do our best to minimize the work a client needs to do. However, once we’d processed a lot of these units and established a very robust network of local contacts, it became evident that there was a much better way of doing this, both the agents and the buyer point of view.

 

As has happened in Ireland & the UK, when the credit crunch was causing misery for local Orlando developers quite a few decided to try and ride out the storm by furnishing and renting out the remaining units themselves while waiting for the market to turn. Makes sense right? But what if we could find a developer who owned and rented high quality units and was about to be foreclosed by a bank? Let’s say we find one who needs to raise $5 million in 30 days or the bank will seize his assets. Would he be willing to sell 100 of his properties to investors with tenants in place at a foreclosed price level (say $50,000) in order to avoid the excruciating foreclosure process? If you can convince him that you’ll be able to sell them, then yes, he certainly will, which is what our Tradewinds development is all about.

 

This ticks all the boxes in terms of location, quality, price and rental yield. It has all of the benefits of a foreclosed property (highly discounted price, v high rental yield) with none of the headaches (bidding process, red tape, finding tenants). Please contact us directly if you’d like to learn more.

 

Colin Murphy

Director

www.torcana.com

There’s quite a lot I can’t figure out about Ireland these days. Perhaps I’m spending too much time in Spain.

 

For example, why is the government so preoccupied with protecting the level of house prices when most of the people trying to sell are buy to let investors and property developers? Why are major banks cutting mortgage lending by 80% while average house prices have only fallen 20-30%? 

It’s a big problem in Ireland that people don’t seem to see foreclosures and fire sales as a necessary evil to stimulate demand and reduce supply. There is simply no way to recover quickly without it.

It reminds of of how the French always seem to sympathise with business owners rather than consumers.

Let me give you an example of how a more ruthless banking system can help stimulate a devastated property market. The property bubble in Orlando, Florida started in late 2006, and the banks were absolutely ruthless with people who got caught out - mostly investors and developers, but yes, ordinary people too.

The numbers of foreclosures increased dramatically, and the asking prices for them just kept falling and falling, first by 20%, then 40%, and eventually, in early 2009, by 70-75% from peak levels.  Initially, the supply rocketed and demand fell off a cliff.
 
Without a doubt, a weaker banking and political system or a stronger lobbying group would have put a stop to it. Didn’t happen like that though. You keep dropping prices, you get rid of the rot in the system, and eventually, guess what? People will start buying again.
 
Let’s compare Orlando housing activity in April 2009 with April 2008
 
- House prices have fallen 37%
- 48% more homes were sold
- 50% of all homes sold were distressed priced or bank owned
- Properties are selling 15% quicker
- There is 20% less inventory than a year ago
 
Source: Orlando Realtors Association

In an ideal world of course, we would politely request points 2, 4 and 5 above. But I can’t see that happening somehow.

 

All comments welcome.

 

Kind Regards

 

Colin Murphy

Director

www.torcana.com

I attended an overseas property trade show called OPP Live a few months ago. This was the fourth year I’ve been to the show and as usual it was very well organized and I met a lot of old friends plus a wide variety of interesting people who work in the industry.

 
The atmosphere at this years’ show was very different to the previous ones though. Previous OPP Live shows were all held in very different economic environments, where profit margins were wide, the public’s appetite for overseas property was insatiable, and financing for builders and buyers was very easy to come by.

 
As most employers reading this will no doubt agree - property companies who take too long to trim unnecessary overheads and refuse to adjust their product offering to suit a changing marketplace will soon find themselves out of business.

 
Meeting a Changing Markets Needs
We’ve certainly no intention of making those kinds of mistakes in my organisation, and judging by the recent media interest and the huge response to our Florida Foreclosure services, there is still a huge demand for property that buyers can identify as being a great value medium to long term investment. Some of our readers may also be interested in our Florida property of the week below.
Outside of the USA, Panama remains very popular due to its uniquely international economy, although there is a firm emphasis on purchasing developments that are already under construction.

Still The Best Asset Class
All in all, I remain convinced that property is by far the best asset class to invest in. It also remains a uniquely fulfilling experience. I just can’t bring myself to leave surplus cash in a bank account with meager interest rates and I certainly won’t be putting it in our ridiculously volatile stock markets.

But you have to choose carefully
Big profits are definately there for the taking in the property industry but your investments absolutely have to be in the right locations, at the right prices and you must research them thoroughly and examine your personal finances carefully before committing.
These are all fundamental rules to abide by in both booms and recessions. The difference is that people ignoring them will suffer a lot more now than they would have done 5 years ago.

 

Torcana Ltd is an investment consultancy which specialises in discounted property (USA & Germany) and renewable energy (Germany). For more information please visit: - http://www.torcana.com