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Tuesday, February 02, 2016

Investing in U.S property


US Residential investment property

Some property gurus are currently trying to ‘flog’ investment properties sourced from the United States.

  The ‘property guru’ markets the attraction of these residential investment properties to landlords as being property investments that have:

    •    An unbelievably low price.
    •    A headline rental yield in double figures.
    •    A potential of uplift in the capital values that might occur as the area improves.

UK & US property ‘chalk & cheese’

On paper these residential investment opportunities may seem appealing.  However, anybody that knows anything about the US and the UK residential investment property markets and planning systems will know that they are very different property markets.

 What anybody may say about the UK property market is that it has one thing in it’s’ favour or should I say favor?  As Mark Twain famously advised “Buy land they are not making it anymore”.  He clearly had the UK in mind when making this comment.  It is obvious to any UK resident and landlord that we live on a very crowded isle where land supply is restricted.  This is particularly true of development land which is constrained by a restrictive planning system and the Green Belt.  These facts means that development land and therefore property will always be relatively expensive particularly when demand for accommodation from owners, renters and investors driven by high levels of immigration is so high.

In the United States the land market and planning system is very different.

    •    They have much, much, more of it.
    •    They don’t have a green belt or a planning system that is so restrictive, their system relies on zoning and then releasing big chunks of development land on the fringes of towns and cities.
    •    Land can be very cheap.

This means that U.S. towns and inner cities have suffered from inner city dereliction and decay far more than in the UK.  The middle class residents of a town moving to a new suburb leaving great sways of the old town and city to the working poor or crack dealers. Property in these locations may be ridiculously cheap but don’t expect an urban regeneration miracle any time soon.  Make sure you read our US Property Investment Warning.

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