 Interview with David Shaw, Torcana Sales & US Sourcing Manager 
In this weeks issue, David discusses the direction the US property market is moving, the main day to day concerns of his clients and where he feels the next big property opportunities are going to be.
Q) Welcome to the newsletter David. What do you feel are the biggest challenges in your day to day position as Sales and US Sourcing Manager for Torcana?
A) Thanks Colin. My main challenge is communicating the furious pace of the distressed USA property market to clients. With property activity moving at a snail's pace in Ireland and, to a lesser extent, the UK, there is an understandable but hugely misleading feeling on this side of the pond that there is plenty of time to invest in distressed assets and that it is a "buyers market". As the monthly statistics have been showing, the reality is completely different.
Q) Why is this the case and what makes the US so different?
A) Well, for starters, the blind fear and panic of late 2008 and early 2009 are now distant memories. Investors are back and like all smart investors, they are ruthlessly snapping up the best properties in the best locations at the best prices.
Secondly, regular Americans with good credit ratings have been availing of large housing grants (up to $8000) and high LTV mortgages (up to 97%) to purchase their own homes at 10 year lows. This is having a profound effect on the market.
And finally, capital has been flowing back to private equity investors, pension funds and hedge funds. These are the silent whales of the market and they are literally hovering up thousands of foreclosure properties before they even register on a normal investor or property pundit's radar.
Total housing inventory is 40% down on last year and real bargains on high end foreclosure properties are like hens teeth. I have seen seasoned operators bidding cash on 5 or 6 deals before getting one of them accepted.
Q) Ok, so what's the market like right now?
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 has 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 and the process by which we help clients purchase, tenant, maintain and resell these assets that makes Torcana stand out from the crowd.
Q) There seems to be a lot of misconceptions about the US Housing market. Why is this?
There certainly 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.
Q) So how would a person know when they've discovered a bargain?
With so many properties listed on the internet, it can seem that there is no shortage of great deals out there, but it's actually quite difficult to find a decent property.
At least once a week a client will call me to say they have spotted a deal that seems too good to be true and they are either wondering if there is a catch and if not, could I 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 also find out if it is new or recently converted, if it is timber frame or solid concrete build, if the HOA is solvent and what percentage of foreclosures are in the community.
I dedicate a lot of time to locating investments that do not carry these risks.
Q) Very useful information David. Any final words of advice you'd like to offer to our readers?
Sure. 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.
Despite the frantic activity of the past six months, 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 spending a sizable chunk of this week speaking to clients about the twenty odd units we've available in 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.
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Many thanks to David for this, and please visit our podcast section for a downloadable audio version of the interview. David can also be contacted directly on david.shaw@torcana.com and +353 1 4433 991.
Further information on our Flora Ridge development is available below.
Kind Regards
Colin Murphy
Director
Torcana Ltd
Tel: +353 1 4433 991
Fax: +353 1 2586 016
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