We all know that today’s real estate prices in the U.S. are on the floor. But we are not so clear how to take this opportunity promises to be only for a limited time. This time, we show how the Real Estate Club IG allows you to take the opportunity in a very simple, economical and reliable.
During the past month, we met with several investors of all profiles and levels of expertise. They all present the strategy of investment in U.S. properties, because we believe that this is a unique opportunity for investors looking for a good annual income and also an excellent appreciation potential over the medium term.
Following these meetings and the initial investment, I want to share the five points that I found the greatest interest among investors who are joining in this new edition of Real Estate Club IG.
1 – Why did you decide to organize another club of investors this year and what are the differences with the club last year?
The Promised Land is still the United States. Prices are kept low and opportunities are still many. Investors know this and of course we are contacting you to invest and take advantage of this situation.
Added to this fact the market for the past nearly two years we have acquired many very valuable insights on the best ways to invest in U.S. property. We analyzed hundreds of investment opportunities, we have interviewed dozens of experts and real estate investment managers, we have studied all the legal and tax ways, and have experienced what it is, in practice, handling real estate investments in that country.
These two variables lead us to launch a new Club Real Estate Investors, a group different from the first, which plans to invest in new properties, with different features compared to the first. Now invest in properties that allow us to have higher returns, which are more stable and less risk. Properties to let us take this opportunity of smarter. Real estate projects that we call “High Value Added.”
2 – What kind of properties we will invest in the second Club Real Estate Investors IG?
In the U.S. there is something called “Multi-family Properties, which are complexes of between 200 and 400 apartment units in an area that is generally outside the big American cities. We are small departments may be in an average of one hundred meters and are not located in high rise buildings, but buildings that are usually flat, not more than two stories in average complex.
Multi-family generally provides common services such as pools and some sports facilities. Have security, common management, shared laundry and some additional services that are ranging from complex. One of the most important features is that each of these departments, which are within the multi-family, can not be sold separately. A single owner or group of owners, grouped in an American company owns the entire complex. And of course, the owner of the complex is responsible for administration and management of all property.
For those who follow us in real estate investments we are making, the idea of multi-family is similar to the property we bought last year in Orlando with the name of “The Landing”. This property is very similar to a Multi-family, with the difference that the apartments are sold separately. In this case we bought 4 apartments within the complex that left us very cheap, an average of $ 40,000 and they are giving very good income.
But looking at the subject well, we realized that buying a few separate departments within a complex business is not the best we can do. It is an easy and secure business but with a little more effort and creativity can make that same business more attractive to investors. And by that I mean something more profitable and less risk.
3 – How to get higher rents and lower risk by investing in U.S. property?
Directly owning the entire Multi-family complex. Ie, buying four or ten departments, but buying the whole complex of, for example, 200 apartments. In this way, we control the entire complex and in doing so, we can raise profitability and lower risk as we mentioned just a very important.
How to achieve this?
Mainly active management, professional and very creative and efficient throughout the complex. First and foremost our employees are going to rent all departments. Will choose the best tenants, better quality and can afford the best properties. Then they go to collect the rent every month, we will have an administrative office within the complex and we can establish a personal relationship with them. On this basis we can ensure that our property is in good repair that is attractive to our tenants and that if at some point someone is going, we can get a replacement quickly.
Our tenants are our customers; we get paid every month, so that the complex works to be as attractive as possible for them. In this way we can that the demand for rental units within the complex to grow and in turn, that the occupation of the complex ratio (number of rental units versus the total number of departments) is as high as possible. Once we get that the rents go up every year.
To obtain a high occupancy ratio and growth rates in the flow of funds from our investment will be much larger than the original. This means that if at the time of purchasing the complex occupation ratio was 60% and now the occupation ratio is 95% only that, the property will be much more attractive. And therefore the price will grow, regardless of whether market prices rose or fell.
Imagine if this improvement is added rents higher. And if these two factors, occupation and value, we add a third factor is the leverage, ie debt, increased property value can be much higher.
4 – Is clear as increasing the return on investment, but what about investment risk?
This is a very important point, since most of our investors take the business of real estate investments as relatively conservative. Favor the maintenance of capital over the potential for investment growth. And in this sense, the new approach to Real Estate Club IG also has significant advantages to offer. Let’s see how the flow of funds from an investment when you buy, for example, a complex of 200 apartments.
Consider first the issue of the occupancy rate of the apartment complex. This would be the main risk factor, because if properties are not rented we will not have income to afford the apartment complexes.
If it achieves 60% occupancy, this means that 120 apartments within the complex of 200 apartments are rented and pay your monthly rent. If 90% of the apartments are occupied this means that 180 apartments pay rent every month. That is, what varies is the number of apartments that are occupied. May be more or less, but we’ll never have negative cash flow, or rather is a very low probability, as it would have to take the rare event that most departments are not rented.
And as it is for departments that are working middle class is very rare that these properties are not addressed. And that especially at this time, these people have no access to mortgage loans and therefore can not buy property. The project may generate more or less cash flow, but there will always generate positive returns, especially if well managed.
The point is clearer if we compare this revenue stream to revenue stream that would be an investor if you buy a single department. What are the odds that this department will not be rented and generate negative cash flow? Higher or lower?
Undoubtedly higher, is much more likely that a single department that is not rented 200 apartments are not rented. Or rather the impact of low rent one is 100% if I own a single department and is only 0.5% if I own 200 apartments.
This is one of the factors that lead us to not recommend buying apartments in Miami on our own. The risks are higher and yields are higher. It is much more intelligent and profitable part of a large group of investors as we are arming IG.
5 – What is the expected return on investment in the new Real Estate Club IG?
Every year we hope to distribute a coupon of 7%. This means that from February 2012 and so on, always in the month of February each year we allocate 7% of the investment to the investor.
In the years that the case be smaller than give us the rent for the apartments, we will cover it with reservations and in the years that the box is larger, we will keep reserves to pay for low-income periods. This allows us to provide this rate every year.
Together these earnings to the final performance of the fifth year, when we sell the properties, we expect a total return of almost 90% at the end of the period of five years. This means almost double the initial investment for a term of five years. All these numbers are taking a medium scenario, without a very sharp price rises in the prices of U.S. property market. We hope that the increase surprised us positively and thus improve the numbers.
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