Many are interested in the American real estate market,
But the information is so much,
How do we know what is reliable?
How do we know where the ideal market is for us to invest in 2022?
“No one is wise like someone who has experience” and that is why we will start this article far, far away in the 2008 crisis, because in order to understand what we are doing today, we need to have a broad perspective.
2008 crisis:
The year is 2008 and the real estate market is in one of the biggest crises it has ever experienced.
The “subprime” crisis, as it was called,
mainly resulted from promiscuous loans and in huge volumes and with variable interest (starts low and jumps up later)
which the bankers in the US gave to high-risk borrowers.
Those borrowers had no ability to repay.
Beyond that, they even increased making and issued these loans for trading on the stock exchange as mortgage-backed bonds,
As well as other advanced financial products that got out of control and were “marketed” to investors
As an investment tool with very low risk.
What did all this cause?
This caused real estate prices to be inflated to “bubble prices”
And a bubble? end to explode….
And she exploded…
And how did it explode…
Starting in 2007, the banks accumulated more and more “bad” loans and they started to collapse.
on Sunday, September 14, 2008
The giant and veteran investment bank, Lehman Brothers, announced
on bankruptcy and swept the entire stock market after him
to the biggest collapse he has known in 80 years.
More and more mortgages have become uncollectible
And forced the banks without any choice to take over a huge amount
of properties whose owners stopped paying the mortgage they took.
So that by mid-2009 the banks found themselves with
A huge amount of houses are owned by them and as you know the role of the bank is not to own the properties but to lend on them.
In addition, every asset the bank is forced to take reduces its ability to make new loans.
The banks had to get rid of these assets – and as soon as possible!!
They did so in many cases at dramatically lower prices
From the amount of the loan they gave at the height of the tide,
while bearing losses of billions
which were ultimately paid for by the American taxpayer.
We gave this move a name: “The Government Rescue Plan”.
From here began a long process of containment and then recovery.
The main markets recovered first,
Namely Manhattan, San Francisco, Silicon Valley
and to other regions that are the strongest in the US economy.
After them came the turn of areas such as Miami and Las Vegas.
Miami took about 7 years to return to the price level it knew before the crisis.
Then, of course, it is the turn of the markets in the third circle to start and rise.
This was the overview of the market situation during the crisis and a little after it.
and now? For those who forgot the title at the beginning, this is not a history lesson but an article about what we learned from the 2008 crisis and how to find the ideal market for investment today, so what did we do as entrepreneurs at this point?
In the first years, after the outbreak of the crisis, we invested in especially “bleeding” markets such as South Florida and the suburbs of San Francisco.
After they doubled their price
By 2014, we sold them and moved our investments to third-circle markets such as Memphis, Tennessee, the suburbs of Cleveland, Ohio, and in the last two years to Pittsburgh, Pennsylvania, which was late in the price increases and experienced double-digit percentage increases.
The market they entered at the beginning of 2021 was the market of the state of Oklahoma.
Emphasis on the largest city in the country – Oklahoma City.
After an in-depth market research (see a separate article on how to use market research) we found that this market is unusual in the US and very attractive for investing in residential buildings.
why?
Because the real estate markets in the US are divided into two main types:
Market type 1:
is the market where the current returns (Mishkad) on the investment are relatively low (4%-5.5%)
But the macroeconomic data are positive (positive macro data: such as positive immigration, an increase in jobs and an increase in income per capita).
Market type 2:
It is the market where the current returns from investment (Mishkad) are high (on average about 7% in the middle class areas and about 9% in the “blue collar” areas), however – the macro data is negative in some or all of them.
In the first type of market, we usually expect low current returns on the one hand
but on the other hand for a high increase in value of the assets over time
As a result of the economic parameters that push the prices
Upward, such as: positive immigration that increases the demand for housing.
In the second type of market, the current yields from SCAD are high
Mainly in “blue collar” areas as a result of a combination of low house prices relative to the average price of houses in the US
and a relatively high NIS that results from low-class tenants who cannot purchase houses, due to their financial situation, and are forced to rent
thus constituting a kind of “imprisoned customer”.
Now, what did we do from here on out?
When we did the market research to make a decision on the next market to enter,
We discovered that in the state of Oklahoma, with an emphasis on the centers of the big cities,
An unusual phenomenon is occurring for investors.
This is what happens there:
On the one hand, it provides relatively high returns from Shkad,
But at the same time – all its macroeconomic data are very positive and strong.
That is,
It can also be expected to have a high current yield on the one hand (to a large extent in renting apartments in residential buildings and to a lesser extent in renting private houses),
and on the other hand,
Also for a continuous increase in value over time that will result from its excellent economic data.
And this is important for investors to know:
The choice of investing in residential buildings in Oklahoma has already proven itself.
The market continues to show many strengths even today in 2022 and combines a constant increase in Sh.
That is, in the average income for a residential apartment,
And equally important – a constant decrease in the percentage of apartments that are empty,
Which means – that the occupancy rates in the residential buildings are at an all-time high!!!
And when investing? This is the recipe for success.
Choosing an ideal area for investment,
Then focus on the specific neighborhoods with the greatest potential for growth and improvement
And of course, a combination with professional and excellent property management.
By the way, when will we sell?
We will sell after exhausting price increases in the area and when current yields fall.
From there we will move our investment to the next suitable area. Already these days we are operating in the area on the border of Oklahoma and Texas, and we will surely write interesting things about that as well, but to the question:
