Why we are investing in the US property markets
When investing in property, cash flow is king. Capital appreciation, whilst profitable, should never be relied upon. When you invest in any property you can control your yield – Simply make money when you buy (equity within the property) and have strong monthly cash flow. Neither of these are achieved investing in the UK markets right now but are available in some US markets.
I agree that our target markets in the USA such as Detroit, Memphis and Orlando have seen unprecedented falls in value over the last five years as much as 70% in some cases. Like any market it is at this point in the cycle when investors make more money than in any other.
Consider some of the emerging European markets of the last 10 years that saw huge capital rises in a short period of time and yet so many investors lost huge amounts of money, but how? The reason is that investors bought for the wrong reasons. They relied on capital rises and financing with no consideration to cash flow – the back bone of any property investment. Subsequently, they couldn’t keep up monthly repayments and couldn’t find anyone to rent their property.
The USA markets are different. They are not emerging markets. They are well established, urban residential areas with a large population of locals who all need a place to live. Rental demand is strong, and there is also a healthy balance of owner occupiers and renters. There are no promises of 100% capital rises, only steady, sensible, organic rises over a medium period whilst all the while giving a high return to the investor of over 13% and also limiting the investors exposure as prices are so low.
The key to successfully investing in the USA is knowing where and what to buy and having the right team in place to manage your investment. Get this right, and your investments will achieve returns far superior to anything you can achieve in the rest of the world.
And it’s well worth it.