Real Estate Investor Magazine South Africa Real Estate Investor Magazine - October 2017 | Page 50

Guaranteed
Returns
The Offshore Residential Opportunity
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.
A
ffordable housing is a highly
sought-after investment cat-
egory in the United States
(US) right now, as it is in many parts
of the world, including South Africa.
As a result of massive housing back-
logs worldwide affordable housing has
become a hugely popular and credible
investment category. In the US the
affordable housing we refer to will be
slightly different from what you’re
thinking about.
Affordable housing in the US us-
ing Low-Income Housing Tax Cred-
its (LIHTC) is one of the best-kept
secrets right now. This is primarily
because it requires more consistency,
more value enhancement and sophis-
tication compared to when buying a
standard Single-Family Home (SFH)
for rent.
48
LIHTC requires an experienced and
trusted team to be assembled, because
there are so many moving parts for the
acquisition, rehab, and property man-
agement for thousands of units. With
so many aspects to keep in mind, it’s
normally best left to the experts in the
know while still enjoying the benefit of
a hands-off approach with above aver-
age returns.
The best part is that these oppor-
tunities will never go away and the
government guarantees the rents. The
collection rate on all of these units is
over 98% month after month. The US
real estate market is changing as home
values are up and bargains are hard to
come by. Trends are shifting, but the
affordable-housing apartments always
seem to be a sure bet.
This goes against everything that I
have written about in the past 35 years,
since I’m a serious SFH investor. I still
believe that the hard asset of SFH real
estate in well-located areas can give
you positive passive cash flow, deliver
a hedge against inflation and replace
your income from an active job.
The affordable housing
market
It is true that rental income and oc-
cupancy rates at affordable properties
OCTOBER 2017 SA Real Estate Investor Magazine
are not affected by general market
and economic conditions. Data and
research has consistently shown that
the demand of qualified persons and
programs for subsidized housing out-
weighs the approved supply.
Currently 12 million Americans
qualify for government assistance and
there are only 4,5 million units avail-
able for rent. These factors make for
recession proof assets with attractive
risk-to-reward because returns are not
only based on existing in-place oper-
ations, but also on future rent growth
potential.
Personally, I sold 38% of my SFH
property portfolio to invest in LIHTC
affordable-housing properties to capi-
talize on this opportunity. In essence, I
would not recommend this if I were not
invested myself. I have now doubled my
annual returns just by repurposing my
portfolio into a new better performing
category. For me this is sound strategy
especially given the fact that afford-
able housing returns deliver consistent
double-digit returns, have an easy and
transparent exit plan with the highest
level of professional management.
South African investors can win big
on rand hedge vs. US dollar
Currently we have over 90 success-
ful investors from South Africa who