Where Do Yield Investors Put Their Money Today? Where can you find 10%+ Yields from property?

With the property markets now below-going correction from their highs in 2006-2007 across most of the created world, and savings rates at an all-time low, cash-wealthy investors are seeking returns on their capital like never prior to. Gone are the days of investments baked with the expectation of capital growth, investments now require to "stack up" in terms of cashflow from day 1. That's not to say capital values are becoming ignored, far from it. Investors increasingly seek stable investments that produce a measurable and common return. So markets will need to be in some sort of equilibrium in terms of provide versus demand, and capital values holding steady. In quite a few methods then, conditions are back to typical in quite a few respects for critical portfolio landlords.

So where are yield investors seeking today? Operating on the ProVenture team, we get to talk to yield investors each and every day from across the world and it is fascinating to pick up on trends in their strategies. We hear about where investors have placed their hard-earned cash in the past, and where and why they are searching to invest in the coming years. Inevitably, a large number of of the as a place to invest for the coming years as this is our main region of operation as property consultants. But increasingly, we discuss investments in eastern Europe, other parts of western Europe and the USA as viable investment locations.

Let's look at some numerous markets and locate out what is drawing investors to them at this stage of the economic cycle.

USA

What an intriguing market to look at, as we write this piece in August 2010. The USA is the property of raw capitalism, and this harsh strategy applies to the property market place in considerably the very same way as the cash and equity markets. Despite the assets in question being people's houses and security, they appear exposed to harsh write-downs more than other nations, and this brings sorrow and hardship for those shielding loses and inevitable possibilities for investors.

Taking a historical perspective on the market, we see that the USA has generally had an average level of owner-occupation between 1960-1990 of around 60%. Residence ownership was a realistic aspiration for quite a few, but not an imperative like in other markets such as UK or Spain exactly where owner-occupation rates have been as high as 85-90%. This led to, in most locations, a stable market to invest within and a ready provide of short to longer term tenants. The credit bubble of 1996-2006 changed all this.

During the period of low interest rates, sectors of the population who up till then could not aspire to house ownership at their stage of life, if at all, entered the industry on "teaser" loans, reasonably priced for the 1st couple of years of the loan but develop into crippling as the loan rates reverted to usual industry rates or higher. This greed on lenders parts, and their shocking lack of due diligence into individual's capability to pay, had a now popular global impact. At the moment, 14% of the population are behind on mortgage payments or are in foreclosure. This is an average, and some markets have double this rate. That's 9 million houses in difficulty, double that are households sitting on negative-equity. So where are we now, and is the USA a location worthy of investment research? It is secure to say, the market place is still largely bereft of confidence and sharp declines have been felt fairly substantially across the board. But are there areas that have suffered steeper declines than are justified?

Nicely, the USA is a substantial marketplace. Let's focus on 1 city, Orlando [Florida] as a case study.

The Orlando region derives much of its economic power from tourism, business enterprise conventions, medial and hi-tech study and the "grey dollar" or those retiring to the warm climes from far more northern states or from abroad. The property industry has grown with the huge rise in population, up 30% in the last decade alone. Typical in this region have been gated developments and condominiums expanding mainly to the south of the city and spreading at an alarming pace in the empty land. The city or downtown area is well-established with some property dating back 100 years or significantly more, broken up only by the high-rise developments which seemed viable in the course of the credit bubble.

Construction of property can be normal construction, or far more quickly built units from pre-fabrication section. Use of wood in structural elements is often seen.

Through the credit binge, Orlando was front and centre, financing and constructing homes to service both the nearby and tourist marketplace. Based on location and subdivision, property soared 200-300% from 1995-2005, unheard of growth rates in this industry which has no scarcity value and seemingly limitless land in which to develop. Commercial development went just as mad. Business enterprise plans for "strip malls", smaller malls by the road side took off. Some locations of the city boast ten Taco Bell franchised outlets in a 1km radius. All sectors of the property marketplace, even in downtown locations, could be stated to be very over supplied.