Real Estate Investor Magazine South Africa April 2014 | Page 57

OFFSHORE
based on facts, fundamentals and research. Using
this model, we are currently investing our wealth
in Atlanta as we are buying property at 40% to
50% below replacement costs. This gives us a great
indication of intrinsic value and reduces the risk
dramatically. On top of this we can fix our financing
at 6% for 15 years and we are getting net yields of 8%.

last seven years in America, although I have always
like London for this reason as there has always been
strong demand, there are just better fundamentals in
Atlanta at the moment according to The Economist and
its research.

According to David Brown, commercial director
of LSL Property Services, “…buoyed by low interest
rates and Help to Buy.” The numbers only work
because the interest rates are low and I am not sure
if people are aware but they are the lowest in the
over 300 year history of the Bank of England. You
don’t need to be a PhD in Economics to know where
interest rates are going and yet at best you can only fix
them for three years. You net yields are 3% to 5% best
case, and even a slight adjustment in interest rates will
leave many people with negative cash flow situations.

on the quality of your management agent and how
much the tenants fight, it can take as long as South
Africa to remove a tenant. In Atlanta, the state of
Georgia is landlord friendly and therefore if a tenant
fights you it takes 30 to 45 days to evict them legally.
Now this not the case in every state and you need to
know which are the best states in America to invest.

“Offshore Investment is easy –
you need the right information
and the right partners and if
you have these in place then you
will be successful.”
The two opportunities cannot event compare
On top of that the European economy is aging. As
Clem Sunter says, “If you could put a roof over an
English village, you would have an old age home.” In
comparison the American population is growing and
along with Australia is the only first world country with
a youthful and productive workforce which is growing.
On top of this in Atlanta alone it was voted the
number one place in America to live in 2013 because
of affordability, weather, job opportunities, lower tax
and standard of living. It is the fourth biggest city in
America, has 75% of the Fortune 500 companies based
their offering wide economic employment and is the
heart of the South East of America which is the fourth
biggest economy in the world.
The fundamentals of supply and demand cannot
be compared and there has been zero supply for the
www.reimag.co.za

The last fundamental is the rule of law. In the UK,
the law is in the favour of the tenant. Depending

Finally it is also about the returns. We always
weight income with a 70% weighting and capital
growth with a 30% weighting. We have already spoken
about this above, but the bottom line is that Atlanta is
outperforming London, but at least two to three times,
just on yields and then another two to three times on
capital growth.
The last factor is that people don’t take into account
is the net return. From the 1st of April the UK has
changed the tax and capital gains tax for non residents
is changing from 13% to 28% which is more than
doubling and eroding any returns you might have. It
is critical that people understand this and the impact
it will have on foreign investment which has been
one of the major drivers in the London market in the
future. On the other hand Atlanta was voted the most
tax friendly state in America in 2013 and property is
treated very favourably in terms of state taxes. They
continue to encourage foreign investment because they
understand it is a major driver of the economy.

Offshore Investment is easy – you need the right
information and the right partners and if you
have these in place then you will be successful.
Hopefully we have given you some insight into the type
of information you need to know. For more information
and to understand 16 other countries, then read the
book Property Going Global which can be found at
www.propertygoingglobal.com

REALE ESTATE BUSINESS DIRECTORY

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April 2014 SA Real Estate Investor

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