Colli Real Estate

When performance put your money today? Where can you find yields over 10% of the property?

With real estate markets present are correcting their peaks in 2006-2007 in most developed countries, and the savings rate to the lowest level of all time, investors cash-rich are looking for return on capital as never before. The timing of investment in the oven with the projected growth rate of capital, investments must now "Stack" in terms of cash flow for a day. This does not mean that capital values are considered, much less. Investors look for investments providing stable and regular measurable performance. Therefore, markets should be in some kind of balance in terms of supply over demand values and constant capital. In many ways, therefore, the conditions return to normal in many respects to the owners of the major celebration.

So Where are investors looking for performance today? Task ProVenture, we come to speak to the return of investors every day around the world and it is worth reflecting on the evolution of their strategies. We hear that investors put their hard earned money in the past, and where and why try to invest in the coming years. Inevitably, many investors focus is spoken in Germany as an investment location in the coming years because this is our main area of operation of the property consultants. But increasingly, we discuss investments in Eastern Europe, other parts of Western Europe and the United States as a viable investment location.

Let some different markets, and what is coming at this stage investors cycle.

United States

What an interesting market to watch, as of this writing in August 2010. United States is the home of unbridled capitalism, and this approach is applied to a severe housing market in much the same way that the money markets and equity. Despite active issue, people's homes and security, appear exposed to a more severe deterioration in other countries, bringing pain and difficulties for the protection and loss of opportunities for investors inevitable.

In a historical perspective on the market, we see that the U.S. generally have had an average level of 1960-1990 tenure by 60%. homeownership is a realistic aspiration for many, but not required, as in other markets like the UK or Spain, where the rate Homeownership has been as high as 85-90%. This led in most places, a stable market to invest in the supply and tenants in the short term and long term. The credit bubble of 1996-2006 changed all that.

During the period of low interest rates, sectors of the population that previously could not aspire to owning their own standard of living, in any case, release of "teaser" loans, affordable for the first years of the loan, but stop the loan rate is up to normal market rates or more. This greed lenders parties and their total lack of due diligence, including affordability, Now everybody was a celebrity. Currently, 14% of the population is behind on mortgage payments or are in foreclosure. This is an average and in some markets are twice that rate. There are 9 million households in crisis, twice that households are seated negative equity. So where are we now, and the United States a place worthy of investment analysis? It is safe to say, the market is still largely lacks the confidence and the decline could be felt almost everywhere. But there are areas that have experienced steeper declines than are justified?

Well, the U.S. is a huge market. Focus on a city, Orlando [Florida] as a case study.

Orlando area derives much of its economic power of tourism, business conventions, the internal investigation and the dollar high-tech, gray or those who retire to warmer climates in several northern states or abroad. The housing market has grown with the huge increase population, 30% in the last decade. Typical of this region were blocked and the development of condominiums in more particularly to the south of the city and is spreading at an alarming rate in the wasteland. The center of the city or town is well established with a property that dates back 100 years or more, interrupted only by high-rise developments that seemed viable during the credit bubble.

The construction of the property can be built or more standard units quickly built from pre-production section. The use of wood in structural elements are often seen.

In the frenzy of credit, Orlando was the preliminary plan, financing and construction of houses to serve both local and tourist market. Depending on the location and subdivision, the property passed 200 to 300% from 1995 to 2005, an unprecedented rate of growth of this market has no shortage of land value and apparently unlimited in which to develop. Commercial development has happened so crazy. Action plans for the "shopping strip," the small villages on the edge of the road was. Some areas of the city has 10 points from Taco Bell franchise 1 km. All sectors of the housing market, even in parts of downtown could be considered wealthy.

In terms price, check out the price history of a 2 high end in the downtown district of the city by excellent zillo.com tool:

The graph shows that this unit was sold plan over $ 400k, now priced around $ 200k [or less Comparison Navigation in the foreclosure] Camino.

In terms of rental potential, the center enjoys high demand. About $ 1800-2000 is to be expected for months to healthly 12% or more efficiency.

Why buy it? Well, the current capital value is low compelling because the location of the unit at the center of the city that has a certain degree of scarcity value. It is an interesting proposal.

Why not buy? However, given lack of confidence in the market, financing is very difficult for the first years of the winery. Should be better considered a cash purchase, so that leverage not so easy here. Furthermore, it is really clear that capital values will go, but for a cash investor looking for a sustainable yield is an option strong.

The German market

During the past 10 years or more, the real estate markets around the world have experienced capital growth rates in general between 200 and 300%, driven by cheap and abundant credit. There are some exceptions to this trend, one of which is Germany. Since reunification 20 years ago, the housing market in Germany, especially in the Ancient Near East, has exploded out of step with other markets. Speculation by buyers, mainly from West Germany that fueled a boom ended around 1996. As investors chased the rents that are not feasible, the market Germany and sold in decline worldwide from 1996 to 2001. It was while most markets around the world have experienced its strongest growth for growth. Prices have stabilized in most of 2001 and showed a certain appreciation of capital in some regions, especially in good locations in large cities like Munich, Hamburg, Frankfurt and Berlin.

Market characteristics:

The residential market is very different from other places, with more tenant laws robust and typical residence. Normally, a house will be offered to leave completely empty, without furniture, kitchen equipment or floor, even. The new tenant will be provide all their own furniture and stay for a longer period, usually an average of 7 years. Tenants to sign a contract period, but in reality are on a lease for life from then on, just move if they are not regular in their payments or the owner (or similar) to occupy the unit. Tenants must give 3 months notice to quit and to repair and decorate the camera to a good original condition.

Finance for national and international buyers generally set the order of 60-80% of the loan value. The level of funding according to the customer's income and the rental value of the property. Typically interest is fixed for 5 or 10 years and about 1.3% above the euro exchange rate 5 or 10 years. Therefore, at the current rate is about 3% of a dose of 5 years and 3.8% for a dose of 10 years.

Typical prices:

Property, both commercial and residential tends to higher prices per square meter and not by the room or room number. Therefore, the investments can be easily compared by size, price and location. residential property to be purchased in a single purchase or a whole block of houses. The purchase of a complete block tends to reduce the price paid per square meter. Some typical price per square meter in large cities, depending on the size and location:

• Berlin – 1.000 to 2.000 euros psm
• Frankfurt – 2.500 to 4.000 euros psm
• Munich – from 3,500 to 5,000 euros psm

Places in East Germany (Dresden, Leipzig, Chemnitz, for example) have renovated properties in good condition from $ 500 PSM. exceptional value and most undervalued market in the world according to the OECD. The situation in terms of sustainability rent is crucial in these places.

As a building for example, is less than one unit Leipzig with 19 apartments. The purchase price is 420k euros and a net profit of around 12% is reached.

Typical yields

In the same way that the property is being marketed for sale, rent is a price per square meter. The rental accommodation is often broken down "cold" and "hot", with the rent income investor cold and rent a hot surface all the bills that land tax and maintenance Routine property. Rents start at about 4 cold euros psm parties at all flights from the cities in eastern Germany, rents cold cities like Munich euros psm to 12 and above in many cases. Yields range from about 5% for individual apartments in Munich, Frankfurt and Hamburg to 10-12% when buying in large numbers in places like Dresden, Leipzig and Chemnitz. Berlin offers the full range of income and is a very diversified.

Operating Expenses:

The cost of ownership are transparent and are relatively low. Most property management deductions are taken from the annuity " Hot expenditure "or incidental and should not be included in the calculation of returns. This includes basic maintenance, cleaning of common areas, insurance taxes buildings and property. Because net income, on the outskirts of unplanned maintenance, cost management to allow deduction primary. There are a variety of structures of management fees, especially to leave a fixed amount per apartment or a percentage of the rent charged. Leave management costs typically 5-10% of the income net, depending on the area and the selected tariff structure.

Positive aspects of the investment:

• investments of non-intervention – A long-term tenant, unfurnished propertyletting
• well regulated and strong tenant and property management practices
• High yields may hire, to suit all investors
• Good financing available at competitive interest levels
• Legal Insurance and a system of property registration
• General operating expenses

The negative aspects of the investment:

• Tough laws tenant – a tenant can not simply be removed unless you do not pay rent
• high costs of purchase (between 10-12%)
• properties high performance may be subject to a forced sale, and may be problematic to offer

See on the market:

Very good performance, supported by the legal system and high levels of funding. capital values are very low compared to any where in the developed world. Really good vacuum allows for bigger farms to be built in a relatively "form of non-intervention.

And then?

In terms of intellectual property in Europe, beyond Germany, returns investors are very few options. Markets are well stable yields, but production the order of 3.6%, or the falling value of capital and difficult to predict the word. Markets in the euro area and the UK a few years to run before you enter in the market for performance and stability in the value of capital. In places that have experienced massive capital falls, but stabilize in the coming years [with increased wages as a key index] should have a mind. The following sites may be worth noting in the coming years, with decreases recorded capital in the last 3 years:

• Lithuania [Vilnius, Kaunas] – lower prices by 55%
• Latvia [Riga] – lower prices 70%
• Ukraine, Kiev – reducing prices by 55%
• Further, the yields at 8% + can be found at:
  • Sao Paulo, Brazil 8.1%
  • Santiago, Chile 8.7%
  • Jakarta, Indonesia, 11.1%
  • Kuala Lumpur, Malaysia, 8.7%

Diligence should include an analysis of the available financial stability, deposit rates and currencies. Not good for a yield of 10% when the interest rate is 12%, or if the currency weakens significantly during the period of your expectations.

Good luck in your search for yield.

About the Author

Mat has been an active property investor since 1993 – with a portfolio of UK and German investments. The founder of ProVenture Property and a very nice man. In his spare time, when not buying property, or writing articles on property investment, Mat likes to visit properties.

Senate Session 2010-04-20 (10:00:14-10:49:55)

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