Holiday Homes versus Cash – Part 3
Okay, so I am saying you’d be better off investing your cash anywhere but in a holiday home or a retirement home, so where am I getting my comparables from?
Let’s have a look at a couple of deals. I am not necessarily recommending any of these deals, but I am quoting them simply to show you what is available. I am deliberately not going for high returns which may also be risky ventures.
I have already quoted the 14%+ returns possible in investing in solar panels for housing association property roofs which is government backed.
Let’s keep with real estate for the first couple of examples. How about buying a fully managed and tenanted home in the US? The ad says “Properties direct from foreclosure agencies with 16.3% net rental yields”. Apparently the deals are government backed. The deal is that you buy a detached 3 bed house in North Detroit.
I am not a fan of the USA but a lot of people are. If you want me to give you the contact details just let me know.
And if you dont like the sound of Detroit, and I dont blame you, then how about this one in North Dakota? This is where the Bakken oil shales are being exploited, and a large influx of oil industry workers is expected (about 15,000). Here’s the blurb:
“We are pleased to offer for sale a unique investment opportunity in North Dakota which will produce fantastic annual yields of 43%.
Great hotel room investment opportunity in area with 15,000 oil workers requiring accommodation. Pre-launch price of $37,000 if reserved before the end of January 2012. At the official launch on 1st February 2012 the price will be $47,000 – save $10,000 by reserving now.
Massive annual rental returns predicted to be around 43% gross. Net yield 37.4%. Rental income supported by multi-national oil companies. Great income from month 4.”
I’m also looking at another US rental deal which guarantees 20% net income. But there are other kinds of deal available.
I am particularly interested in investments based on essential commodities. They dont tend to lose value over time. So I have invested in green oil, in particular, jatropha trees. That investment pays out 10% in the first year, and then gradually increases to 30% by year five.
I’ve also invested in bamboo. That pays peanuts for the first four years (about 5%), but then it starts to pay off big time. With the jatropha investment I am getting returns now, but my bamboo investment is recent and so I haven’t yet had a payout, but I’m looking at returns of about 25% in year five, and rising from there.
I am not licensed to give investment advice so I am not advising anyone to go into these deals. This is merely a heads-up showing you what alternatives there are.
Another deal that is being touted around at the moment concerns carbon credits. One is supposed to be able to make 30% a year on those, but I have a bit of a problem with the idea. I cant see how the deal is based as there is no dedicated exchange, and the validation of the credits leaves a lot to be desired. I think that is an investment for those with an appetite for high risk.
Obviously I am not going to give a long list of possible investments in a short blog but these deals are available now, are relatively secure, and pay out anything from those pathetic 5% initial returns to 43% and more. There is no reason why you shouldn’t do the maths on any alternatives to a holiday home by assuming you could get long term returns of 15% plus.
To remind you, that would give you £15,000 a year return on £100,000. That return would pay the rent on two two bed apartments in Spain or the Algarve for a year. And you’d have no maintenance or taxes to pay. Think about it next time you look at that apartment for €93,000. And prices will be going down for the foreseeable future. Prices in southern Europe have dropped about 15% over the past year. They are still dropping.
You tell me: what is that apartment worth? Is it really worth the equivalent of £15,000 a year in rent?
Of course, if you are still working, bringing up kids, and all that, then you are in a different category altogether. I am only talking about holiday homes, and retirees.