In the Investment Stakes, US Real Estate Comes Up Trumps. Here’s Six Reasons Why.
You’re In Control
If you like to make your own decisions, real estate investing is for you. A proactive landlord adds value. He researches and spots trends, invests in his asset and moves with the market. If a property proves difficult to let, he fixes it. He lays new floors and modernizes the kitchen. He refurbishes, extends, offers incentives to tenants, advertises more widely. It’s hands on, it’s creative. Even if he employs a property manager to handle the day-to-day stuff, he still has control. And, while he isn’t guaranteed to boost his property value, he has the power to help his own chances. Compare that to other asset classes, such as stocks or gilts. Anyone who deposits their nest egg in cash is at the mercy of the Bank of England. If it’s in stocks, corporate executives call the shots. And how creative can you be with a share certificate?
It’s Shock Proof
2012 was a rough year. By April, the FTSE had given up all its gain in the wake of the Eurozone crisis. Shares in Spain plunged to a three-year low. The European monetary union was in danger of “disintegration,” triggering fears of a global economic crisis on an unprecedented level. Interest rates across the West fell to nearly zero. The bonds market responded in kind, with British Gilts closing at their lowest rate in 300 years.
How did this affect the US real estate market? It didn't. The economy in Greece had zero impact on rents in Florida. If you buy smart, you don’t have to worry about “market shock” or “the crisis years.” In fact, they work to your advantage. According to data released by the Census Bureau, US home ownership is at its lowest rate since 1995.
When jobs become uncertain and personal income falls, people choose to rent rather than buy. Median rents are at an all-time high. According to a recent Wall Street Journal report, the median sales price for a three bed roomed home in Jacksonville, Florida is $90,000, against an average monthly rent of $1,198. After setting aside money for taxes, fees and voids, you can conservatively expect a net annual rent of $8,628 — a 9.59% yield. Best of all, Jacksonville is only the eighth-best performing city in the country.
Real Estate Means You Own Something Tangible
Unlike bonds or equities, real estate is tangible. You can touch it, walk around it, photograph it. You can survey it, value it, carry out a rental analysis, inspect the neighborhood, analyze crime records, verify the legal title. With a little expert help, you can get a feel for the viability of a project in a matter of hours. Can you say that about your ISA? How much due diligence can you really do on your share portfolio? Of course, as a tangible asset, property also needs to be managed, and there are associated costs. On the upside, how you manage your property asset can really differentiate its performance.
It Performs
All investments are risky. All asset classes have their ups and downs. But on the raw data, US residential property is outclassing UK equities, cash, bonds and UK real estate.
To put that into context, in 2012 the FTSE returned average dividend yields of around 3.7%. Ten-year gilts yields remain below the rate of inflation. Cautious savers, who keep their life savings in cash, are clobbered by the stubbornly low Bank of England base rates of 0.5%, giving negative inflation-adjusted returns. UK residential buy to lets return an average gross yield of around 4.7%, according to accountancy firm Smith and Williamson. There are regional variations, and the net yield can be much lower after costs, renovations and periods when the property stands empty. The sun shines brighter in Jacksonville.
Savills report that New York now offers the strongest gross residential yields of all major global cities, outclassing US government bonds by 6.2%. Rents there have risen for 24 months straight.
The Time is Right
The ultra-wealthy, as always, are ahead of the game. A recent report by the Stonehage Group reveals that US real estate forms the largest proportion of a typical ultra-high net worth individual’s portfolio, behind equities and fixed income. In some cases it accounts for 8 to 10% — double what they have in alternative investments, such as gold.
Why? Because you make your money when you buy, and you make the most money when you buy at the bottom of the market. All the signs suggest that the US residential market has finally turned a corner and is in the early stages of an upswing. Sales are up considerably. Figures released by The National Association of Realtor's show a 13.2% increase in total homes sales by August 2013, compared to August 2012. Sales are closing at their highest pace since February 2007, before the housing market crash.
Prices remain well down on their 2007 peak, leaving plenty of room for capital growth. The median sales price for existing homes in August 2013 is $212,100 (£131,911), up 14.7% on the same period last year. By contrast, UK sales prices rose 6.84%, to an average of £242,415.
The Options are Endless
The US residential sector is about as varied as it gets. One beds, multiple beds and shared housing in charming town houses (terraces), upscale condos (flats) and manufactured units (mobile homes). Letting provides a mix of capital and income, while other investment vehicles, such as real estate investment trusts (REITS) and fractional ownership (shared ownership) offer different income to capital profiles. Real estate is a favored class within the US tax codes, offering various incentives such as depreciation and capital gains rollover through “like-kind” exchanges. There aren't many investments that offer those kinds of incentives. Income Edu.
In the Investment Stakes, US Real Estate Comes Up Trumps. Here’s Six Reasons Why.
You’re In Control
If you like to make your own decisions, real estate investing is for you. A proactive landlord adds value. He researches and spots trends, invests in his asset and moves with the market. If a property proves difficult to let, he fixes it. He lays new floors and modernizes the kitchen. He refurbishes, extends, offers incentives to tenants, advertises more widely. It’s hands on, it’s creative. Even if he employs a property manager to handle the day-to-day stuff, he still has control. And, while he isn’t guaranteed to boost his property value, he has the power to help his own chances. Compare that to other asset classes, such as stocks or gilts. Anyone who deposits their nest egg in cash is at the mercy of the Bank of England. If it’s in stocks, corporate executives call the shots. And how creative can you be with a share certificate?
It’s Shock Proof
2012 was a rough year. By April, the FTSE had given up all its gain in the wake of the Eurozone crisis. Shares in Spain plunged to a three-year low. The European monetary union was in danger of “disintegration,” triggering fears of a global economic crisis on an unprecedented level. Interest rates across the West fell to nearly zero. The bonds market responded in kind, with British Gilts closing at their lowest rate in 300 years.
How did this affect the US real estate market? It didn't. The economy in Greece had zero impact on rents in Florida. If you buy smart, you don’t have to worry about “market shock” or “the crisis years.” In fact, they work to your advantage. According to data released by the Census Bureau, US home ownership is at its lowest rate since 1995.
When jobs become uncertain and personal income falls, people choose to rent rather than buy. Median rents are at an all-time high. According to a recent Wall Street Journal report, the median sales price for a three bed roomed home in Jacksonville, Florida is $90,000, against an average monthly rent of $1,198. After setting aside money for taxes, fees and voids, you can conservatively expect a net annual rent of $8,628 — a 9.59% yield. Best of all, Jacksonville is only the eighth-best performing city in the country.
Real Estate Means You Own Something Tangible
Unlike bonds or equities, real estate is tangible. You can touch it, walk around it, photograph it. You can survey it, value it, carry out a rental analysis, inspect the neighborhood, analyze crime records, verify the legal title. With a little expert help, you can get a feel for the viability of a project in a matter of hours. Can you say that about your ISA? How much due diligence can you really do on your share portfolio? Of course, as a tangible asset, property also needs to be managed, and there are associated costs. On the upside, how you manage your property asset can really differentiate its performance.
It Performs
All investments are risky. All asset classes have their ups and downs. But on the raw data, US residential property is outclassing UK equities, cash, bonds and UK real estate.
To put that into context, in 2012 the FTSE returned average dividend yields of around 3.7%. Ten-year gilts yields remain below the rate of inflation. Cautious savers, who keep their life savings in cash, are clobbered by the stubbornly low Bank of England base rates of 0.5%, giving negative inflation-adjusted returns. UK residential buy to lets return an average gross yield of around 4.7%, according to accountancy firm Smith and Williamson. There are regional variations, and the net yield can be much lower after costs, renovations and periods when the property stands empty. The sun shines brighter in Jacksonville.
Savills report that New York now offers the strongest gross residential yields of all major global cities, outclassing US government bonds by 6.2%. Rents there have risen for 24 months straight.
The Time is Right
The ultra-wealthy, as always, are ahead of the game. A recent report by the Stonehage Group reveals that US real estate forms the largest proportion of a typical ultra-high net worth individual’s portfolio, behind equities and fixed income. In some cases it accounts for 8 to 10% — double what they have in alternative investments, such as gold.
Why? Because you make your money when you buy, and you make the most money when you buy at the bottom of the market. All the signs suggest that the US residential market has finally turned a corner and is in the early stages of an upswing. Sales are up considerably. Figures released by The National Association of Realtor's show a 13.2% increase in total homes sales by August 2013, compared to August 2012. Sales are closing at their highest pace since February 2007, before the housing market crash.
Prices remain well down on their 2007 peak, leaving plenty of room for capital growth. The median sales price for existing homes in August 2013 is $212,100 (£131,911), up 14.7% on the same period last year. By contrast, UK sales prices rose 6.84%, to an average of £242,415.
The Options are Endless
The US residential sector is about as varied as it gets. One beds, multiple beds and shared housing in charming town houses (terraces), upscale condos (flats) and manufactured units (mobile homes). Letting provides a mix of capital and income, while other investment vehicles, such as real estate investment trusts (REITS) and fractional ownership (shared ownership) offer different income to capital profiles. Real estate is a favored class within the US tax codes, offering various incentives such as depreciation and capital gains rollover through “like-kind” exchanges. There aren't many investments that offer those kinds of incentives. Income Edu.