All Topics / Overseas Deals / TEXAS VS FLORIDA An Example of different US Property Markets

Viewing 20 posts - 1 through 20 (of 30 total)
  • Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    I wanted to examine where these two markets are placed and how they arrived at their current destination.

    During the boom in the property market it is important to realize that finance was treated differently from State to State. In Texas in most cases even to buy the family home you would need a 20% deposit before you would qualify for a loan. Once you received your loan and then purchased a house it was important to keep up with payments. Texas has some of the toughest foreclosure rules in the United States. As soon as you are three months behind in repayments your property is foreclosed and your property is auctioned on the courthouse steps on the first Tuesday of the month.

    During this period the state government of Texas worked aggressively in getting companies to relocate to Texas by offering long term tax breaks. As such there are more fortune 500 companies in Texas than any other state. Just one example was Toyota re- locating their truck manufacturing division to San Antonio employing more than 6000 people.

    When the GFC occurred in 2008 the end result was that in Texas, property prices held very well experiencing very little in the way of property price reductions. It is my view this happened because of the strength of the Texas economy. That many people had equity in their home therefore many people were able to hold on and not sell.

    If we look at Florida during the same period there were no such controls. Here we saw non-recourse loans at their worst. In Orlando we saw Condos selling for $300,000 that were in reality only worth $150,000 and after the GFC we saw the values fall to $75,000. In other words we saw people paying far too much prior to the GFC causing a significant price fall after the GFC. This was a massive over reaction in the market place. At the time unemployment also increased because much of the tourism industry flattened out.

    However in Orlando job growth is on the move again. It is tipped to have the 8th highest job growth in the United States over the next 5 years. According to Forbes magazine it is also predicted that Orlando will be in the top 10 boom cities in America over the next 10 years. It is also worth noting that all of the Texas major cities are also up there in the top 10.

    Now here is where it gets interesting. If you were going to buy a commercial property or apartment complex in Texas you would be doing well to get a 7 or 8% net return. However in Florida it is still possible to buy the equivalent property, receiving a 14% net return. That’s why I think that these complexes are still good value because in today’s market I cannot see why there should be such a large difference in values between the two states. Therefore, buying larger properties in Orlando will not only provide great capital growth but also strong cash flow.

    <moderator: delete advertising>

    This is my experience I would love to hear the experiences of other investors from other states. Perhaps Alex could add some comments about his state.

    Regards

    Nigel Kibel

    http://www.propertyknowhow.com.au

    Join the Property Know How Club today

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    Profile photo of John-USA-CommercialREJohn-USA-CommercialRE
    Participant
    @john-usa-commercialre
    Join Date: 2012
    Post Count: 50

    242 new homes scheduled to be built in Bradenton, Florida…  Why Florida???  Why not!!!

    John-USA-CommercialRE
    Email Me

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    John i hear finance markets are opening up a little in Florida.

    We have been helping UK clients buy in Florida for years but i understand that Australians can now qualify for finance on soome of these smaller apartment blocks.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of John-USA-CommercialREJohn-USA-CommercialRE
    Participant
    @john-usa-commercialre
    Join Date: 2012
    Post Count: 50

    Hi Richard,

    That is correct.  Obviously since the 2007 fall out in the banking system here it became extremely difficult to obtain financing for even the domestic "A" credit people but that is behind us for now.

    I am literally in the thick of this industry day in and day out and I am seeing more and more leeway with lenders especially in the non-institutional side of commercial financing.  As a matter of fact it appears that the commercial lenders are easier to work with than then residential lenders as it pertains to foreign nationals.  Of course this goes back to the fact that the lender will be looking to the asset liability more than the borrower themselves.

    Just as of yesterday I set down with a local community bank here in Central Florida with a foreign national (Chinese businessman) who I am structuring a 70% LTV loan on a $6.8M retail center.  As a local community bank there is two stages to the approval process so yesterday was simply a meet and greet between lender and borrower and we addressed a few questions the bank had to prepare for today's first level of approvals.  Here locally it is called the bank loan committee meeting and there is high expectations of a full approval on this deal. 

    Back to the main point; even though the local banks are entertaining a foreign national (by the way this has been very difficult prior to the last 12 months) the bank is performing a lot of financial and market due diligence with the property itself.  Of course it is always helpful when a foreign national has good liquidity and a good track record.  The other positives the banks look for is the borrower's overall investment plan.  The bank wants to see the long term investor verses the buyer who will simply flip a deal.

    I will stay in touch and update everyone as to the various lenders and how they are becoming easier to work with.

    John-USA-CommercialRE
    Email Me

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    Hi Rob

    I quite agree

    What we are seeing is finance options finally becoming available. Because of this I would expect to see the property markets improving. Therefore the time has come to focus on quality property that will not only cash flow but also provide capital growth and with at least 60% funding available Australians can now leverage to get into the US market.

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    investToSurf
    Participant
    @investtosurf
    Join Date: 2005
    Post Count: 21

    Hi Nigel and Rob,

    Just a couple of questions as to how the nuts and bolts of securing a us property. How does it differ from securing a loan in Australia. ie;

    find property.

    organised through broker or bank loan based on;

    – value of property,

    – expected rental yield,

    – equity borrower already has and any cash funds and

    – finally current income and loans that borrower already has.

    Does having equity in Australian property allow us to secure and purchase property in the US? Do we need to have established a loan here in Australia first or simply just have the cash?

    Thanks in advance,

    Invest2Surf

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    You could invest in America from a line of credit. Currently the loans we are dealing with are at around 60% which are non recourse or a little like no docs. The banks are basing the deal on the property. It is a safe bet because you are putting down a 40% deposit.

    In terms of returns these type of properties are returning around 14-17% net cash on cash returns

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    investToSurf
    Participant
    @investtosurf
    Join Date: 2005
    Post Count: 21

    Thanks for that Nigel. The issue I have is securing the 40% for the deposit against the properties I have in australia. I havn't asked the my bank but Im assuming they won't lend it to me without the details of the property in the US. 

    I'm assuming that the banks you are talking about are US based banks? Can we deal directly with them? ie can they use the equity in my australian property as the deposit (40%) and then borrow against the US house the remainder 60%?

    Cheers. 

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    It would be a matter of arranging a line of credit with your banks. However I would tell  them that you were going invest without telling them where you were going to invest. Frankly what you do with your money is your business. I had a client who told his bank that he wanted to invest in property development and was then asked for the 10 page document.. 

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    investToSurf
    Participant
    @investtosurf
    Join Date: 2005
    Post Count: 21

    So this would only need to be for the 40%? 

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    That's correct we have been told that 60% funding is reasonably straight forward. We have been told that it is possible to get a higher loan however that will depend on your own financials.

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    Profile photo of mattstamattsta
    Participant
    @mattsta
    Join Date: 2011
    Post Count: 604

    Thank you for the interesting post. I prefer Texas property. I agree Texas tough laws, but economy is much better in TX. I was just checking out TX and saw increase  number of people buying houses in TX. 

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    I have been based and even lived in San Antonio before. I love Texas. However Texas has been performing well, prices did not fall. In Florida they did fall and the difference in returns especially in apartment complexes is a lot. You may get 4-5% more of a return in Florida.

    There are also strong signs that the Florida economy is now improving. I have the view that in Orlando there is there a great opportunity of not only cash flow but also capital growth over the next few years. As the economy improves we are also seeing more and more finance options becoming available. This represents opportunity.

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    Profile photo of SamDanielsSamDaniels
    Participant
    @samdaniels
    Join Date: 2013
    Post Count: 10

    Interesting point on Orlando vs Texas. One reason for the discrepancy in prices for residential property is that evictions can be pretty slow in Florida as the laws are a bit too tenant friendly. It's not a deal breaker, but something to consider. Also, with Florida being a judicial foreclosure state there may be a bigger backlog of foreclosures to work through the system which will keep a lid on price gains keeping yields high for now.

    Profile photo of John-USA-CommercialREJohn-USA-CommercialRE
    Participant
    @john-usa-commercialre
    Join Date: 2012
    Post Count: 50

    Texas takes a jump ahead today.  Over 12,000 jobs and there will be over 40,000 jobs in North Houston. Also, in today’s Houston Chronicle there is a front page  article in the Business section about the new Exxon Mobil campus. 

    John-USA-CommercialRE
    Email Me

    Profile photo of jayhinrichsjayhinrichs
    Participant
    @jayhinrichs
    Join Date: 2011
    Post Count: 1,177

    Ah what is better invest in a market that got crushed and is poised to bounce back massively , or a market that never really fell a lot but may not rise eieither I think the stats John points out are great… But Texas has no shortage of land so sprawl is the name of the game there

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    Hi Jay

    I love Texas, however thats why I am now in Florida, its a great market with great potential capital growth. Especially when you compare property returns between Texas and Florida. There is bond to be more growth in Florida because it is coming from a low base. 

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    Profile photo of jayhinrichsjayhinrichs
    Participant
    @jayhinrichs
    Join Date: 2011
    Post Count: 1,177

    Net cash flow of 14 to 17 %.      Not in today's market unless extreme high risk.  See many post of those losing there rear ends

    Profile photo of jayhinrichsjayhinrichs
    Participant
    @jayhinrichs
    Join Date: 2011
    Post Count: 1,177

    Nigel my point exactly and I made that point over a year agos

    Profile photo of CheevesFinancialCheevesFinancial
    Participant
    @cheevesfinancial
    Join Date: 2010
    Post Count: 201

    Jay –

    I agree with you that 14-17% net cash flow don't exist much unless in the dumps (we know what happens on pro forma vs reality).  I think Nigel was saying 14-17% Cash on cash which is reasonable.  From what I gathered he was saying 60% loans so your 14-17% ROI would be based off of the 40% down plus acquisition costs. 

    Funny, someone said to me the same thing the other day comparing TX to FL and said the obvious comparison was land mass and how much is available.  LOL.  Come to Florida and try telling the Armed Corp of Engineers that you want to cut down some wetlands to build a development.  They will pull your pants down and spank you so hard you won't know what hit you.  In SW Florida, the amount of developable land is WAY WAY less then what the aerial shows on a map that is vacant.  You can't kill owls, panthers, birds, pigs, deer, etc….Look up what "protected mangroves" are in FL.  If you even so much as brush up against one and a leaf falls off, you are facing 100000000000 years in prison!

    CheevesFinancial | Cushman & Wakefield - Commercial Property SW FL
    http://www.CommercialRealEstateVoice.com
    Email Me | Phone Me

Viewing 20 posts - 1 through 20 (of 30 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.