Credit cards or your home? – which would you prefer to hold on to?

I was reading a very interesting statistic the other day about borrowers in the US that use credit cards in every day life – that’s a lot of people.

The column went on to say that in a recent survey , since 2008, Americans would rather hold on to their plastic then their home.

“Since 2008 credit card delinquencies have been lower than mortgage payment delinquencies and that this “flip” is representative of the change in the conventional wisdom around the payment heirarchy.”

Basically, since the recession took hold, average Americans are devaluaing their own home in favour of their credit cards just to stay afloat. There is definately a shift in the way people think about repossessions and the stigma surrounding that. It seems that Americans are no longer afraid of being tarnished with the foreclosure brush.

Does this give us investors any advantage?
Well, if Americans want to walk away from their homes in favour of plastic it means there are a lot more foreclosures on the bank’s books, this much we already know. And as the banks are so desperate to release cash from these empty assets, it means bargain properties are available to us investors!

So long as we can keep renting these houses back to those defaulted owners – which we can as they will be seeking housing benefits to pay their rent, then we have a very unique situation.

Bargain basement prices & a market flooded with tenants looking for quality homes under the governments’ rental assistance scheme is a perfect scenario for investors.
Will house prices rise?

Of course they will. I can’t say exactly when but the signs are there. Obama’s 8k homebuyers credit is taking affect now, and more lenders are dipping there toes back into the markets.

The situation is like this:
• Owner defaults on their mortgage in favour of credit card payments and loses home.
• Investor buys home at bargain price as the banks are desperate to release funds.
• Defaulter seeks rental assistance from government.
• Rents rise in value as demand soars.
• Investor takes on tenant from a huge pool of available tenants.
• Obama’s 8k credit assistance goes into overdrive.
• More lenders move back into the market.
• As more people start to buy property again prices start to rise and a sellers market returns!

Investor has a high yield, tenanted property, increasing in value and with a solid exit strategy should they decide to sell.

A very unique cycle. And as they say “Only in America!”

USA ranks 12th most profitable housing market

A worldwide survey of the best (and worst) housing markets has been released by some economic boffins in a library somewhere and the USA ranks 12th overall.

Quarterly Rank: 12
Quarterly Price Change: 1.3%

comments:
The U.S. was mired in recession for most of 2008, spelling doom for its housing market. Vacancy rates skyrocketed, with Los Angeles reporting a rate of 10% at the end of last year. But the U.S. is starting to see signs of recovery. Asking prices in several housing markets across the country increased in August, particularly in San Jose and San Diego, which experienced jumps of 1.7% and 1.3%, respectively. What’s more, inventory levels declined in 22 of 26 markets, with San Francisco reporting a healthy contraction of 5.1%.

These findings marry up to our own. All the markets we invest in, Detroit, parts of Florida like Orlando, Naples, Kissimmee and others have all shown signs of recovery. Prices are stable and in many areas competition for investment property is driving values up.

Bottom line, whilst values are still extremely low and rental yields are high investors will continue to buy.

Is now the time to enter the Detroit market? Top real exec’s think so

Detroit (MI) – The Detroit housing market is losing its edge in the buyer’s eye. The rock bottom prices which have attracted buyers over the past few years are now starting to creep up.

Real estate executives around the country agree that now is the ideal time to enter the Detroit housing market. Excellent real estate resources for buying investment properties include USA Property Investor.com (usapropertyinvestor.com), a website which assists clients in purchasing hard-to-find Detroit housing investment opportunities.

Ollie Booth, CEO and founder of USA Property Investor says that “We have begun to see a slight increase in housing and investment property prices in the Detroit area. Getting into the market in the coming year could be a much costlier endeavor than right now.”

Property values in Detroit have been on a drastic decline since the automotive industry’s deterioration began decades ago. As Motor City’s auto industry has shrunk, the number of investment opportunities has risen. And now is an ideal time to invest in Detroit real estate.

Real estate firms such as USA Property Investor seek to help clients take advantage of Detroit real estate investment opportunities. By giving real estate and property investment advice, USA Property Investor has set itself aside from the competition.

“We offer low cost, high yield property investments in Detriot. All of our properties have a guaranteed 13% minimum net yield. We guide our clients through to completion and beyond including help with property insurance and property management – a real turn-key service.”

Mr. Booth’s positive outlook for future investors is not unique. However, he too knows that now is indeed the time enter the Detroit housing market before the once highly profitable investment prices rise.

financing vs. cash purchase

Some of my clients invest in our properties for cash, other’s want to use finance.

What does this mean?

does it mean a cash buyer is wealthier? No, course it doesn’t…

Our mantra has always and will always be ‘to invest in property for high cash flow.’

So if your paying cash for a property that nets you £350 a month, and the property only costs £16k, the return is simply phenominal!

If you use finance to buy the same property your cash flow will be less as you have a mortgage to pay, lets say £200 a month – not bad!

However, your entry costs are massively reduced – by 80% in some cases. Using finance to buy property is a process called gearing in other words maximizing your buying power with your existing capital to buy more property.

Lets do an example with a investment fund of 19k:

Cash purchase:
Purchase Price: £16k
costs to buy £3k
total 19k

Monthly cash flow; £350 (less than 4 years to repay your entire investment capital!

Gearing:
Purchase Price: £16k
costs to buy £3k
Mortgage at 80% LTV (loan to value) deposit; £3200
total £6,200

Monthly cash flow; £200

Using your 19k investment capital you could now buy another 2 properties and increase your cash flow by £400 (£200 per property)

NET income a month = £600

And now you’ve got appreciation on 3 properties!

That’s the power of gearing or leverage…

So what’s the conclusion, which method is better?

Well…both! It really all depends on your own personal wealth, your lifestyle, whether or not you want to be a seasoned investor or just buy 1 to leave the kids in later life.

So first figure out what you want, get a calculator and do your sums. If that fails contact us and let us help