Real Estate Investor Magazine South Africa April 2018 - 100th Issue! | Page 54

UNITED STATES
The Upside to Real Estate
Investment in the US
Why you should take the plunge
RJ PALANO
Turnkey operator in Atlanta,
Georgia, an author and marketer
and is an invited speaker for
the Information Management
Network (IMN) Conferences for
hedge funds and family offices.
M
y money follows my mouth,
and I love real estate. Even
at today’s prices, there are su-
per safe investment in the US in both
the single family house area as well as
commercial opportunities. The values
have gone up in primary areas of the US.
All you have to do is follow the people
as they migrate within the country and
you will follow the money. People move
for better job opportunities and quality
of life.
Follow the money
The areas they leave see a decline in
values as demand for real estate goes
down and the cost of services goes up.
Think about this: when people leave
an area, there is a domino effect in the
local economy. There are less people to
buy groceries, dry cleaning, landscaping,
building - anything - you name it. The
municipalities have less people to charge
for services, so they either raise the cost
for people left behind, or they cut ser-
vices.
52
Well, certainly there is opportuni-
ty to buy houses on these areas, but I
think it is a lot wiser to acquire and hold
properties in the areas where people
are moving to - and in the US, that is
primarily the Southeast and Southwest
areas of the country. Primarily, Georgia,
Florida, Texas and Arizona. These areas
currently have a terrific rebound in val-
ues and new construction is everywhere
to be seen in the major metro areas of
specific cities.
I personally live in Tampa, Florida
and I am shocked at the rise in values
and money being invested in the infra-
structure - mainly the airport and roads.
The same is true of Atlanta, Georgia and
parts of Texas. You see, our real estate
market has recovered in most areas from
the Great Recession, yet there are many
reasons why now is the best time to buy
US real estate.
Know your options
Many promotors of US real estate com-
plicate the process of foreigners acquir-
ing real estate here. Unless you are go-
ing to buy a lot of houses, you don’t have
to bother with the cost of a US Limited
Liability Company (LLC). Homeown-
ers’ insurance with liability insurance
protects your investment. For the small
investor, simply keep the property in
your name and use a local address in the
US for all your correspondence.
The US is a perfect investment op-
portunity for South Africa. There are
several reasons for this, including a less
volatile currency, rule of law to protect
investors, the safety of your wealth for
future generations, and tax advantages.
All cash purchases of well-located
single-family houses will produce a net
yield of five to eight percent. You can
get higher returns in low income areas,
APRIL/MAY 2018 SA Real Estate Investor Magazine
but the higher quality the house, typi-
cally the lower your yield will be. Many
people get caught up on “paper returns’,
sold by various promoters and it’s im-
portant to realise that paper returns are
different from reality because tenants do
move out and houses do require repairs.
But the thing about houses is that
they are the most liquid of all types of
real estate and the cash flow is fairly
predictable. If you owned ten houses
and needed some money for any rea-
son, it would be easy to sell one house
or borrow money on one house. It’s not
that simple if you owned an apartment
building or office building.
We have a plethora of opportunities
in the multi-family class of real estate.
However, the control over the invest-
ment lies with the general partner. You
would be a limited partner, not involved
in day to day decisions, which is not a
good thing in most cases. These assets
allow you to get terrific leverage and
double digit returns. As a limited part-
ner, you have no real control over the
asset. This used to be a big issue for me,
but I have recently invested in a limited
partnership of 104 units and my antic-
ipated return is 14.5% That’s the IRR
(Internal Rate of Return) projected on a
five-year exit plan.
I’m on a flight in Brazil right now,
having recently spoken at real estate
conferences in Rio de Janeiro and Sao
Paolo. The team I work with here sug-
gested to their investors to have both
limited partnerships on multi-family
projects, as well as single-family houses
with decent control for a balanced and
diverse portfolio.
If this is something that interests you,
send me an email or join me on an up-
coming webinar with Neale Petersen.