Archive for March, 2010
March 31st, 2010 | 
Author: Does Investment Land Complement Property Market Investments In A Portfolio?
Mark Twains oft heard adage buy land theyre not making it anymore has been indirectly taken to heart by investors in the UK scouring the markets for the best investment. That is to say that in relation to the boom in the buytolet property market it is not the bricks and mortar which rises in value but the underlying UK land on which the development sits. Indeed the value of bricks and mortar deteriorates over time so in some senses a UK property market investment is actually a UK land investment more than anything else.
In this article we will look not at the relative merits of a land investment visvis a property market investment but at whether the two ie direct land investment versus indirect land investment complement each other in an investment portfolio. The former subject is too extensive to discuss here and at any rate since many people already have property market assets the pertinent question for them is this: does investment land complement property market holdings or is each investment opportunity best pursued in isolation?.
Of course much depends on what type of investment land is being considered. For instance selfbuild land investment is a natural bedfellow of buytolet property market investment since it is common for investors to develop small plots of UK land and then retain ownership in order to earn rent from the resulting property. However if your idea of the best investment is not one which involves buying land with planning permission or buying land without planning permission and then developing it out there are land investment alternatives.
One such is buying land on a professional property and development project. This is sometimes known as Site Assembly land investment and often appeals to the investor for whom selfbuild land investment is not suitable. The growing market for investment land is being in large part serviced by Site Assembly investment land because relatively speaking the number of people investing in land is growing but only a small proportion have the necessary skills and/or appetite for selfbuild land investment.
With this in mind we can refine the original question thus: does Site Assembly land investment complement buytolet property market investment or is each investment opportunity best pursued in isolation? since Site Assembly land investment is becoming more common.
The key considerations in land investment and in fact any investment are threefold:
Riskwhat is the chance of gaining/losing
Term how long is the investment for?
Liquidity how easy is it to exit the investment?
These criteria will help elucidate whether buytolet property market investments and investment land on a Site Assembly project are complementary. In investment terms ie land investment and otherwise complementary assets are those that provide diversity so the Risk Term and Liquidity should be different in each case.
Lets see:
Buytolet property market investment
Risk: Low
Term: Long
Liquidity: High
Site Assembly land investment
Risk:Medium
Term:Medium
Liquidity Low
Although these are generalisations the above broadly reflect the true nature of buytolet property market investment and Site Assembly land investment. Naturally some buytolet property market investments can be medium term just as some Site Assembly land investment projects offer moderate or even high liquidity but generally speaking the information above holds true.
It is therefore reasonable to conclude working from the premise that complementary investment assets display different profiles Risk Term and Liquidity that Site Assembly land investment and buytolet property market investment do complement one another in a portfolio.
This article has not attempted to assess the extent to which investment land is superior to property market investments or viceversa. What it has attempted is to consider the growing popularity of investing in land especially on an existing development projects and whether such a venture is compatible with a buytolet property market investment portfolio.
Rational analysis as setout above suggests that Site Assembly land investment and buytolet property market investment are complementary.
About the writer: Dietrich Elliot is a Land Investment expert who generously shares his expertise with novice UK Land investors. For more information about the opportunities and pitfalls in UK Land investment please visit http://www.landinvestmentuk.com
Posted in Fractional Ownership: The Way To Live Just As Multi-millionaires Do
Do you want a more plush way of life but lack the million in ready cash to finance it? You’ve worked hard and you’ve done well but the corporate jet the yacht and the 4 million seashore home are out of reach for now.
Fractional Ownership may be the answer to your dilemma! With fractional ownership a highpriced asset jet yacht vacation home classic car is owned in cooperation with several other individuals; each owns a percentage share of the asset and has defined rights and privileges pertaining to its utilization. A management company provides the continuity and organization to permit share owners troublefree and predictable access to the asset.
This concept works well with many types of assets that may be used periodically. As an example second homes are occupied by their owners 2 4 weeks per year on average. If you’ve visited a marina lately you’ve observed that the majority of the slips are occupied by boats i.e. they are not in use. Corporate jets sit idle until travel is required by the executives.
Fractional ownership provides you the share owner reliable access to that luxurious asset you desire or need but are not inclined to pay for 365 days a year. And because you are part of a group of owners all maintenance management upkeep and repair costs taxes and insurance are shared among the group. The management company provides a schedule for owners’ usage and takes care of routine maintenance accounting and repairs.
In short: you have what you want when you want it without the headaches expense and liability of full individual ownership.
Fractional ownership is being used more and more for ultraluxury items. Numerous corporations sell fractional shares of corporate jetsflexjet.com netjets.com; turboprop aircraft avantair.com; and helicopters heliflite.com sikorskyshares.com.
Fractional ownership of luxury boats and yachts both power and sail is widespread. Companies like monocleyachts.com eusamarine.com and seanetco.com provide fractional ownership of yachts on the East and West coasts in the Caribbean and in the Mediterranean.
Classic cars such as the Lamborghini Murcielago Lamborghini Gallardo Rolls Royce Phantom Bentley Continental GTC Aston Martin Vanquish S highend Porsches and the Ferrari 360 Spider are accessible through fractional ownership with such companies as extremecarshare.com curvyroad.com and clubsportiva.com. Fractional shareowners in these clubs might decide on a membership that lets them to alternate their possession of different cars in the fleet rather than only being the owner of a fractional share of one classic car.
RVs are another category of luxury item that often sees only episodic use so wisdom dictates fractional ownership here too. Both coachshare.com and sharerv.com offer fractional shares of Monaco luxury coaches.
Racehorses have long been owned by syndicates collectives of owners who join together to spread the expenditure and risk. Associates of syndicates were often friends or business associates who knew each other and privately set up the syndicate. Now fractional ownership models are coming into use. In Britain the 2005 Vodafone Derby winner made history in the racing world: Motivator the winning horse did not belong to a superrich breeder or famous person but by a syndicate of 230 people from the business classes.
The fractional ownership idea is being creatively expanded into many areas. Wine Estate Capital Management offers fractional ownership of vineyards in France and South Africa. Numerous art doners are finding it valuable to donate a fractional share of their art to the museum of their preference thus ensuring the museum’s continuing enjoyment of their collection for a portion of each year.
Luxury purses are now obtainable by fractional ownership so if you would like to diversify your collection without buying them all your dilemma is solved. Shouldercandy.com offers handbags by Chloe Balenciaga Louis Vuitton Prada Burberry Marc Jacobs Chanel and more.
The most widespread use of the fractional ownership idea though is in the vacation home sector. Because of the growing attractiveness of fractional vacation home ownership and the added challenge of dealing with real property this theme will be the subject of a subsequent article.
About the writer: David Yarian Ph.D. is a practicing Psychologist and a real estate investor specializing in fractional ownership of luxury vacation homes. He writes the blog Florida Fractional Ownership http://www.FLfractionalOwnership.com which covers the fractional vacation home market in Florida and around the world. His latest project Abaco Rose may be seen at http://www.AbacoRose.com. As a committed environmentalist he supports green building practices and sustainable development. His environmental resources website and blog are at http://www.SavingtheEarth.net.
The More You Borrow The Higher The Return?
Investing in real estate is all about financing. Even if you are cashrich it is always unwise to acquire a real estate investment with 100 cash. Likewise if you need to pay 100 cash for a real estate investment most probably it is not a good investment.
You may say “I dont like debt” “I dont want to mortgage my property” “I dont like to pay interest to bank” “I hate the commitment to monthly installment
Well there are always good and bad debts out there. In this article we will show you the difference between good and bad debts in real estate investment from two real cases in Malaysia.
In short good debts give you higher return with lower risk. The more you borrow the higher the return and the sooner you will take back all your capital. We call them real estate investments worth borrowing or leveraging.
You will notice that if a real estate investment is worth borrowing money from bank its return in percentage is definitely higher than investments that are not worth borrowing.
Its worth the debt
We found a condominium in Larkin area of Johor Bahru in Octorber 2008 selling at 160000 with existing tenant. Monthly rental income is 1400 while monthly maintenance cost is around 300 maintenance fee plus sinking fund plus quit rent. If we finance 90 of the purchase price to buy this condominium with interest rate 4.85 with a tenure of 30 years monthly loan repayment is estimated to be 760.
If we bought the condominium with cash total capital required would now be 168000 instead of 24000 including down payment legal fee and brokerage. Total monthly net income is 1100 rental income 1400 less monthly cost 300 that is a yearly income of 13200.
Though the total annual income is now higher than the case when we borrow 90 from bank 4080 the return in percentage of capital investment is only 7.9!!! That means we would need almost 13 years to get all the capital 168000 back instead of just 6 years if we borrow 90 from bank.
How can it be? We invested with more cash yet we get the lowest return of capital!!
Its not worth the debt
Now lets look at another real case of a shop house in Johor Bahru city. The double storey shop house is situated in Jalan Tebrau with 2 loyal tenants of years. Owner is asking for 10000 while current rental income is 4150. Estimated monthly expenses on maintenance insurance and tax cost about 200.
If we take up a mortgage loan for 90 of the purchase price with the same interest rate and tenure as the case of Larkin condominium monthly repayment will be 3850. Although in this case the shop house generates monthly cash flow of more than 100 the return is only 1.3 since the total capital required is almost 95000.
If we buy the shop house with 100 cash the expected return is 5.7. Obviously in this case we can only get higher return without borrowing.
Power of leveraging
From these and other real cases we discovered that real estate investments worth borrowing can get a minimum return of 7.5 even if you pay 100 cash to acquire them!!!
In such cases the more you finance the higher the return and the sooner you will take back all your capital.
So start looking for real estate investments worth borrowing investments with higher return if you borrow from bank.
There is no magic behind this and it is not a numbering game. Its all about the power of leveraging.
However do remember that NOT every real estate investment is worth leveraging just like not every real estate investment is worth investing. But when a real estate investment is worth leveraging just like the case of Larkin condominium it is certainly worth investing.
We are not talking about overstretching your capital or risking your money in gamble. We are talking about how to reduce your risk by making use of other peoples money OPM the ultimate invsesting skill. You can find out more about OPM from Lechter Michaels book OPM Other People’s Money.
Read more about real estate investment tips at http://reijb.com
We write regularly about real estate investment. Some of our featured articles include:
“How to estimate the value of a property?
“Why apartment can be the best real estate investment?
“How important is location to an investment real estate?
About the writer:nbsp;nbsp;Coming from a humble little town called Tangkak in north Johor state of Malaysia OngKL has chances to learn and work both in Johor Bahru and Singapore a conurbation with 6.49 million still fast growing population since year 1996. He is now having a chance to contribute back to the community by sharing what he sees what he knows and what he learns in this wonderful place.