CityR Group // May 2015
News that the UK is officially in a deflationary environment means that it is unlikely that the Bank of England will raise interest rates until next year. Even then the rise, predicted to be mid-2016 at the earliest, will be relatively modest.
This may be good news for borrowers who don’t want to see mortgage rates rise, but it is bad news for income-seekers whose cash in the bank is earning minimal interest as a result. Those looking for decent returns may have to wait 12 months for any rise, and even then, it is unlikely even to beat inflation.
However, one group of investors have looked overseas for more attractive returns on their cash and have cracked the secret behind passive income by investing in US property. Current yields on British property are typically between 4-6%, while it has not been unusual to find yields in the 10% region in the USA.
Investors have been attracted to the opportunities offered by CityR, a company specialising in a particular sector of the US property market as it provides the investors a nice double digit passive income with the security of Bricks and mortar as well as a potential for capital gain which may not be the case anymore in the UK.
CityR gives UK investors the opportunity to be partners in buying US property, with the potential for 8-12% returns and capital gain – a very attractive proposition compared with the low interest rates available on cash and bonds in the UK, or UK property yields.
Here we talk to sales manager Julia Catz about the opportunities available to UK investors.
Q: What sector of the market do you invest in?
Julia: We buy existing multi-family residences, which are gated communities residential properties that have hundreds of units within them. We research opportunities in growing US states such as New York, New Jersey, Ohio, Kentucky, Alabama and Missouri.
Q: What do you look for when you buy?
Julia: We look for existing properties yielding double digit net yields from day 1 with a potential for capital gain. We also look for properties around employment hubs that assure us the retention of high occupancy these properties have (above 95%) along the holding period (3-5 years). The rent on the properties has the potential to increase annually – as the property’s facilities are improved and economic growth creates jobs faster than new housing in the area.
Q: The business model sounds interesting, so how does it actually work?
Julia: When we work with our investment partners we ensure that they receive steady rental income, which is paid every quarter. In addition, there is the potential uplift offered by selling the property in the future. In practice, this is usually after holding the units for three to five years.
CityR employs a unique model, operating neither as a brokerage or an investment house, instead investing 5-10% of its own equity into each property alongside investors while providing its partners a preferred return meaning the company would not get any profit of its investment in the property until the investment partners will make at least 8% year on year. No money is being transferred to CityR, but rather to a legally insured escrow account that purchases and registers the property on behalf of the investment partners. A major US bank is backing the purchase and provides 75% LTV allowing extremely high returns on investments.
Q: Can you tell me more about the history of CityR?
Julia: CityR is an international company. The company was set up five years ago. We are a registered company in the UK, and a member of the Association of international Property Professionals. We have additional branch in Israel and our headquarter is in New Jersey US.
Q: How do you choose regions and properties?
Julia: We look for regions where the economy is growing, and where there are a variety of employers, so that there is diversity and a spread of risk. In addition, we find properties which are near to major employers. We look for stable properties with over 90% occupancy along the years that with conservative management can turn into a big capital gain
Q: What is your next investment region?
Julia: We are very excited about our next investment which is Houston TX, the top city for job creation and the 2nd city in the US with the number of fortune 500 companies. The property has swimming pools, gym, recreation and picnic areas and a community centre. There is a strong property management company located inside the property and we believe it offers a fantastic investment opportunity.
Q: How can I invest?
Julia: If you have a lump sum of £36,000 or more to invest, and are looking for income and capital growth over the medium term, then you can find out more information from CityR. You can also download our 10% Report, which explains more about how the investment process works.