1997-2007: The Typical Investor Strategy
The profitable strategy of the past decade is fairly simple on paper - find a reputable builder, reserve in a great location with strong local demand which will be built in 2-4 years time, negotiate generous reservation and finance terms, get good legal advice, and wait for capital appreciation during the construction stage. Sell a couple on completion to get your deposits back, rent some out for a few years then sell them too, and keep the majority for the long term. The reality is way more complicated than that, but hundreds of thousands of people have been doing it successfully.
Same hardened buyers, completely new rules
Times are changing though, and these same hardened buyers are now pursuing a new strategy with equal vigor - instead of putting down small deposits on overpriced offplan apartments or condo hotels they are snapping up completely finished properties at discounted prices in prime locations.
Why? As we all know, just as global supply reached its zenith, finance dried up and demand fell off a cliff. Developers are really struggling to sell excess stock, which means they are under pressure from the banks that financed them. When reserves run out new cash must be raised. If the developer doesn't drop his prices dramatically to stimulate demand the bank will seize the properties and will do it for him. Pretty tough, but that's the business they're in and they knew the risks involved.
Which developers still have their heads in the sand?
Ireland's developers have more power than most over their lenders, so they haven't been forced to face this reality yet, but they will soon and a marketing brand called
Nama has been created to deal with it.
As you can clearly see from the
three projects below, companies and financial institutions in the USA and the UK have been facing their liquidity demons, and investors are only too happy to give them cash in exchange for the bargain of a lifetime. In Florida's case - 2000/2001 prices; and in Birmingham - half price on the current retail rate.
Investors can afford to be very choosy, and they need to be, because the truth is most distressed properties are simply not worth buying. If it's not in a great location, if it's not at least 70% sold, if the local demand isn't there, if there are too many similar properties nearby and if the build quality isn't good, then my advice is to stay away.
Where does Torcana come into all this?
Our job is to guide you through these hurdles (and more) and to make sure you get it rented out at a high yield. We also make sure that your legal, banking, currency, tax and accountancy affairs are all in order.
This is our market niche and we'd love to talk to you about it.
Kind Regards
