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.
However the greatest sign of movement in certain sections of the market today is that we can achieve 80-90% finance on commercial properties which includes apartment complexes. The rates are around 5%. This makes buying property in the United States more affordable than ever.
I would love to hear other investors experiences and perceptions from other states in America. My real point is that headlines rarely tell the whole story. So when we read that the market has gone up or down it will vary across the United States.
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.
However the greatest sign of movement in certain sections of the market today is that we can achieve 80-90% finance on commercial properties which includes apartment complexes. The rates are around 5%. This makes buying property in the United States more affordable than ever.
I would love to hear other investors experiences and perceptions from other states in America. My real point is that headlines rarely tell the whole story. So when we read that the market has gone up or down it will vary across the United States.