Overseas Property
International Property
In addition to our UK property portfolio building services, we also have arrangements with carefully selected partners to provide well researched international property investments in strong emerging markets, supported by comprehensive due diligence.
Typical examples include apartments, town houses and villas in beach, golf or ski vacation locations such as Cape Verde, Morocco, Turkey, Crete, Cyprus, the Caribbean, Thailand, Brazil, France, southern Italy as well as residential properties in Bahrain.
In all cases, a comprehensive rationale has been produced, explaining the business logic of the investment. Typically these include airports, beaches, golf courses, marinas, theme parks, skiing, development grants, political changes etc.
For example, Bahrain. Following the diminishing of trouble in Iraq, the American 5th Fleet is relocating to Bahrain (a US friendly Middle East state) bringing thousands of US military personnel and their families who will need quality accommodation. We have secured high quality 2 bed apartments to service that need, providing long term tenancy opportunities producing strong cash flow and significant capital growth in this island state with a finite land bank.
These opportunities usually take the form of off plan purchases with a 2 year build cycle. As we write in 2009, significant discounts are available from developers along with creative financing; e.g. one of our developers is offering €1.33 to £1.00 for deposit payments (current rate about €1.10 to £1.00). This could represent an excellent opportunity to park cash whilst interest rates are very low and producing very little return.
In France, we offer the opportunity to exploit the French leaseback scheme, enabling investors to recoup the VAT on new build (19.6%) in return for depositing the property into long term rental schemes as well as enjoying a degree of personal use as well. How about a week skiing in the French Pyrenees every year for free?
Given the incentives available, this is an excellent time to consider international property as an investment vehicle in readiness for a market upturn in 2010/11, offering the opportunity to flip for a short term gain or hold for positive cash flow and long term capital growth.
Pension fund investments
One of the significant concerns of the credit crunch is the effect it has had on the value of pension funds. The property markets offer a wide variety of solutions for clients who wish to determine their own investment strategy via a SIPP (Self Invested Personal Pension). Access to pension funds for transfer to a SIPP is much easier nowadays including the removal of restrictions on “Protected Rights” funds (those who contracted out of SERPS).
Although the use of pension funds to invest in property is subject to certain restrictions (primarily in relation to residential property), the reality is that there is a plentiful supply of opportunities available in commercial property such as hotels and apart-hotels that represent excellent alternative investments.
These opportunities tend to fall into one of two camps, schemes and funds.
Schemes – the client (via their SIPP) purchases a specific unit within a hotel or apart-hotel complex and commits it 100% to the rental programme. One of the rules of SIPP investments is that there can be no personal benefit to the SIPP holder from the investment. Gearing is still possible via a SIPP investment although not to the same extent as normal cash purchases; typically a SIPP purchase would be 70% + 30% borrowing as opposed to 30% + 70% borrowing for cash purchases.
Minimum funds that would be required in your SIPP are in the region of £50,000.
Capital growth is targeted at a minimum of 15% pa along with cash flow from rental incomes to boost your SIPP account.
These investments are essentially hands off.
Funds – the client (via their SIPP) commits an amount of money along with others to a fund manager with a specific set of objectives and time scales.
Funds take a variety of forms but all exploit the need of developers for cash to develop (and therefore offer generous discounts), and significant added value at completion (providing significant capital growth).
In today’s property market, where cash is definitely KING, pension funds command significant clout in the right hands.
Investments normally last for 2-5 years, offering the client the opportunity to recycle their funds on a regular basis, with target growth of at least 15% pa.
Investors who contribute cash into their SIPPs can save up to 40% tax relief for their new contributions.
Current examples
Kalamon Fund – worldwide property investment fund exploiting a depressed market for 5 years growth; target return 75% (12% compound pa). Minimum investment £15,000 (SIPP or cash)
Romanian Dynamic Property Fund – specifically targeting this country’s huge appetite for residential property; target growth 18% pa over 5 years minimum investment £35,000 (SIPP or cash)
Coratina Fund – purchasing heavily discounted off plan properties in a Mexican golf resort to flip to American purchasers (retirees and investors) prior to completion. Anticipated return 50% over 2 years. Minimum investment £20,000 (SIPP or cash)
Caicos Beach Fund (Caribbean Island of South Caicos) – investment in 80 x 1 bed apartments to be placed in the private lodging plan with Vacation Management. Minimum investment £25,000 with a guaranteed exchange rate of $1.05/£1.00. Investment is a mix of capital (0.1%) and loan (99.9%). Medium term investment over 5 years with a forecast IRR of 17.77% pa.
For more information on International Property, Property Investment Funds or tax benefits from SIPP contributions or to arrange a free no obligation consultation, please contact your account manager at All Weather Equity.