Thursday, July 30, 2009

Top 5 Short-Term Real Estate Investments

Although real estate investment often requires a long-term view, the recent chaos in property markets throughout the world have produced some attractive opportunities for short-term return. Liam Bailey recently shared his top 5 short-term real estate investments at Overseas Property blog.

1. Repossessed Properties in Florida

Some people frown on what they see as profiteering from other people’s misery, but the way I see it is: these properties have already been repossessed and whether someone buys them or not the banks are not going to sympathetically give them back to their original owners. That aside we can look at the potential profit.

Florida has always been a massively popular place with overseas property buyers, but in recent years property had become so expensive that it was out of reach for most people. Florida in the present reality has been one of the worst affected regions by the housing crisis in the US and there are currently thousands of repossessed properties being sold at up to 50% less than their market value.

3, 4 and 5 bedroom (mansions) villas with private pools; the properties that you or I could only dream of are now within reach of the masses. Buying a property with 50% instant equity leaves buyers with only one question: will they ever regain their market value. In Florida’s case the answer is a resounding yes.

When we can talk about the international downturn and housing crises in past tense once and for all, Florida will regain its popularity with international buyers, and as things recover Florida residents will once again be buying houses in the normal way.

This isn’t going to happen overnight, the property is not going to regain its market value immediately after the recovery. But 2-3 years down the line you should be able to resell quite easily for a 20-30% profit, and possibly more and sooner on the particularly special properties in the most popular areas.

2. Repossessed Properties in Spain

These are pretty much the same as Florida; Spanish properties being sold at up to 50% less than their market value.

In Spain’s case though, the question of whether they will regain their true value needs to be looked at more closely. Spain was massively over-developed in the last few years; at the height of the boom more properties were built in Spain than in Italy, the UK and Germany put together. This has translated to massive over-supply problems that will plague the Spanish market for many years to come.

You simply need to consider who is going to buy the property from you when it is time to sell. If you are buying in one of the areas most popular with expats, and plan your exit strategy based on expatriate buyers, then you must avoid the most over-developed areas; sunbathing is not a spectator sport, and most people will want a half-decent view on at least one side of their holiday properties.

Negatives out of the way: Spain remains one of the most popular countries with overseas property buyers. Several major portals have put it in the top 5 most popular in the last few months, including Property (2nd, 1st in May), The Move Channel (2nd) and Prime location (2nd), and this is expected to start turning back into sales by the end of the year. So if you choose carefully, you should be able to resell a property you buy now for at least a 30% profit in 2-4 years.

3. Repossessed UK Property

You wouldn’t expect to find me recommending the UK for property investment, as I usually favor emerging markets. But over the long-term UK house prices are on an upward trend, and during the last boom prime properties, especially in London grew in value faster than emerging market property. The problem was it was out of reach of most people then.

Now that the downturn has caused thousands of UK properties to be repossessed, you can get some real bargains that are almost guaranteed to be worth their true market value within 5 years. That means a profit of 30% - 50% in five years depending how big a bargain you get.

Repossession became such a big problem in the UK that we attracted the major US repossessed auction house, the Real Estate Disposition Group, REDC, who have come to stack our properties high and sell em cheap. However I went to one of their auctions and wrote an article for First Time Buyer magazine comparing REDC to the other UK auction houses selling repossessed property, and found that the latter offered the biggest bargains.

4. Luxury Off Plan Property in Emerging Cities

Off plan property in emerging markets is usually sold at a discounted price, in lieu of the potential risk that exists when buying a property that only exists on paper. So, this always meant that potentially a profit could be made on the property immediately after its completion. This is why so many people got stung in Dubai; people were buying off plan property and then selling it weeks later for a profit, as prices grew exponentially the potential profit when the properties were completed was immense, until it emerged that some would never be completed and those left holding the hot-potato got their fingers burned.

The purchase of property off plan has been marred by the sudden onset of the international credit crunch, but if you do your own due-diligence and go to great lengths, it is still potentially one of the most profitable investments around.

Suggested steps to take include several trips to the country to make sure that the development is not funded by proceeds from off plan sales, research the developers’ track record and make sure that all the proper permissions are in place and that building is kept to what is permitted.

Buying an absolutely luxurious off plan property, i.e. a penthouse overlooking a waterway, in an emerging city like Kuala Lumpur, Rio de Janeiro or Panama City has the potential to grow in value immensely, both upon completion and as the city grows apace during the international recovery.

5. Off Plan Luxury Resort Property in Emerging Tourism Destinations
Some people will find it unbelievable that I have included this, because it is these that many of the people who lost out to the crunch had put money into. This is because on these investments you are putting all your eggs in one basket; you are reliant on foreign buyers when it comes time to sell.

For the people who tried to resell their properties off plan when the crunch set-in, it was worse; they were reliant not only on foreign buyers, but on foreign investors, which had all but disappeared.

Even at the worst point in the downturn, popular tourism markets like the Turks and Caicos were being kept afloat by foreign lifestyle buyers, who have remained active throughout. Lifestyle buyers are of course looking for completed property, not off plan.

That said, with high risk comes high reward: when you invest in a luxury resort property off plan in an emerging tourism market, you are buying a very special property at a knock down price. When it is completed it will be a high luxury property on a world class resort, which in a few years may well also be a world renowned resort. If you buy such a property now, you should be able to sell to a lifestyle buyer for at least twice what you paid when the resort is established 5 years down the line.

Article written by Liam Bailey of Property

This article has been republished from Overseas Property Blog, an international real estate investment blog.


Peter said...

Fair enough, repossession property is probably a good buy.

But most people probably want to prevent repossession before it happens :-)

If you want to prevent reposession before it happens then don't go to an estate agent - they are geared up for one kind of business only. Beware of rent-back schemes... most of those guys are crooks.

Your best bet is something like a lease option, where you can hand the keys back and walk away debt-free.

There are lots of good guys out there who'll evaluate all your options and help you
Check out My House Broker:
These guys are London-based and can help people to sell quickly for the best possible price, even with no equity.

Louise James said...

Great job in informing all your readers. We have definitely learned a lot from this.

Foreign Property Investment said...

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