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About o2bsure

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    HPC Newbie
  1. I think the key issue here is the % of GDP that the debt represents and furthermore the type of economy that underpins that GDP. Germany has huge industrial muscule, money flowing in like never before, talented young people are also now moving to Germany for work (real work not FIRE industry), cheapest interest rates, a very competetive work force even at 1.30 to the USD (German industry has been going through boot camp for 15yrs and is now a lean mean machine), is geographically better located to utilise resources from the Russia etc, has very large gas reserves that have as yet to be tapped and has no housing bubble to prop up. Compare the above to the outlook in the UK where practically everyone is connected to the FIRE industry and its current inflated property values. London has become the money laundering capital of the world. All hot money flows straight into London with no questions asked (that wouldn't happen in Germany) and every politician owns multiple investment properties (who in the UK is likely to upset the status quo.... Boris Johnson lol?). What does the future of the UK look like if the financial industry is ultimately forced to shrink in size in graphical terms the tail on the dog instead of the reverse? As for handing my money over to a group of people to manage in the venture capital arena. Well we all know that something like 80% of venture capital investments end in a 100% loss. You need to have a strong stomach and be risk adverse to want to be involved in that. How do you know for instance they won't do a Goldman Sachs on you and let your account assume the loss making ventures whilst channeling their own funds into the winners?
  2. I share Hendrys expectation that the Euro will drop and the USD strengthen. Thats the prime reason for my overall strategy to only hold leveraged debt in income generating real estate (only in Germany) and invest cash in the US. Natuarally diversification is key.
  3. I think your strategy is good and the concept is correct but I personally wouldn't feel comfortable buying in Leipzig or Chemnitz. The sheer number of units available for rent in the under 5 Euro m2 is humbling. For me that means a lot more work for less money that I could earn from a unit in a West German city. I can buy a 50-60m2 unit in good locations (although not city center) around Cologne / Bonn for between 50-75K euro that yield 8+%. If I really wanted to I could buy units around Mönchengladbach that yield 20% but that area is a dead zone and I wouldn't touch it. Currently I have a flat for rent and its been in immobilenscout24.com for exactly one week. The ad has has had 1064 hits, 12 applications and 10 phone calls. This has been the case with all of the units I have to date. They rent within 24hrs and I have no void periods ever. I would rather that level of income security to higher yielding but less desired locations. I think too many foreigners concentrated on suppossedly high yielding East German cities only to find its an apples to oranges comparison to West German cities in terms of security, ease to rent and void periods. I admit on the surface of it Leipzig is a desirable city (albeit small at only 550K) but the rental competition and resulting permanent pressure on rental rates makes it unattractive to me. As I wrote earlier, you can find 8+% around West German cities but its really tough sledding and you need to react quickly. If I could change anything about my strategy it would be to take out 20yr loans instead of 10yr because the rate difference is now so small. I honestly believe rates in Germany will be considerably higher in 10yrs time (perhaps in 3-5yrs time) and I'm already planning my strategy with that in mind by making extra yearly payments (sonder tilgung) as my loans allow this (up to 10% per year). Ultimately I think the whole thing collapses anyway because I simply don't see any viable solution to the global debt crisis. But in the meantime I'll go with Chuck Princes, "When the music stops, in terms of liquidity, things will get complicated. But as long as the music is playing, you've got to get up and dance."
  4. Its amazing isn't it. Crisis actually presents opportunity. Numbers don't lie, people do. Show me the numbers, let me see the location, employment levels, average wages, historical price per m2, taxes, fees etc etc. I absolutely exhaust myself with data and questions and sometimes in the final hour after weeks of investigation I see a bug and I change my position completely. Thats the ways you have to be. If you see a bug, dump it. As I see it, there are only two countries to buy real estate right now, German and selected US. But the next years will present opportunities in many other locations. Credit will likely become harder to get except in safe haven countries like Germany where the banks are awash with Euros coming in from the rest of Europe. This worries me because its a recipe for bubble formation. Cash only deals such as short sales in the US weed out the fluff. In other words, you're buying for a price that is not inflated by cheap credit and the ease of obtaining it. I often wonder what house prices would be if they could only be bought with cash and credit simply didn't exist. Artifically low rates and easy credit has become the source of all evil in terms of real estate pricing. When we finally see that scenario reverse is when we are also likely to see realistic property pricing reappear in places like the UK, Australia and Canada.
  5. I would categorise it as 'bottom top end'. I'm going to start monitoring the Hawaii market starting July 1 as thats when the moritorium on foreclosures will end. I expect that will lead to lower prices but it will take time to manifest (and may not). By the middle of 2013, I will start to look at the Sydney market. Its a tough nut to crack and to squeeze a good deal from an ozzie is like prying a gun from Charlton Hestons cold dead hands.
  6. Yes there is, plenty. Thats why I qualified my statement to - 1. Miami beach + Fort Lauderdale 2. Ocean view 3. High floor 4. Cash Flow positive There is a jetset and wealthier class that will always frequent those locations. Russians, Canadians, Latinos, Europeans and better off Americans all appreciate and are attracted to particular locations in South Florida (and I also mean particular buildings). I wouldn't touch Miami downtown for instance.
  7. Well certainly not from me. The rents I charge are dead in line with the Mietspiegel (Rentmirror). In other words, the state issues an official document that renters can use to calculate the correct rent for a particular unit based on size, location, age, fittings, heating type, extras. If the landlord tries to charge over that calculated level, the tenant can challenge it. I think thats quite correct and fair. I appreciate the system in German as it stands because it promotes stability and fairness. I hope a bubble does not appear in prices. I'm not interested in speculation, I'm interested in income and stability. As to Florida, well its always been a wild place to invest in real estate. It has a very long colourful history.
  8. Basically I've concluded as you have that the best ting to do is to leverage in EUR to buy well located German properties with high yields. I started buying at the beginning of last year and I've just concluded my final buys last week. My average yield is now 8.5% financied with 10yr 3.5% fixed with 1.5% tilgung. I plan to make sonder tilgung payments each year to substantially reduce the principal by year 10. I will only make extra payments towards the principal while savings rates are lower than my 3.5% mortgage rate. The units and building I have bought were all 20% under the current market prices for similar properties. In some cases I missed out because I believed Germans themselves are in general asleep to the under valuation, only to find I was out bid. Its been an interesting experience and somewhat like finding nuggets of gold amongst large mounds of tailings. Sometimes you simply can't believe whats on offer at the price its being offered... but you need to react quickly when such opportunities present themselves. Overall, I invest cash in the US and use leverage in Euro to invest in Germany (only). Last month I bought two ocean view condo units in Fort Lauderdale that are cash flow positive (5%) and proving to be very attractive from a capital gain perspective too. I don't know if you are aware of how hot the Fort Lauderdale and Miami beach markets have become. Trying to buy high floor units with views in selected buildings is like watching a shark attack.
  9. - German leaves the Euro and the Euro weakens. The value of the buildings in Euros would rise relative to the debt which remain in Euros. _________ This won't happen. I've talked to Deutsche Bank about this to get the low down on what would happen should Germany go back to the Dmark. They said all euro loans made on Germany property would be reconverted back to Dmark ...in other words there would be no advantage. As to using a GmbH to borrow and invest in property. That can of course be done but it means you would have to either create a GmbH yourself (require 25,000Euro start up capital) and run it , that means creating a company balance sheet each year and the huge amount of burocracy that goes with it. Or you could buy an existing GmbH. Generally banks aren't too happy about loaning to GmbH's unless they have 6 years of tax history (that show a profit) because they have less security (they will probably want 100% Grundschuld). The cost of running a GmbH is also not minimal. An accountant will take about £5,000 a to do the daily book keeping without the balance sheet preparation. Add to that the costs of having the building managed for you, plus the cost of having the tenants managed for you and the 8% yield will quickly become 4-5%. Buying in Germany also involves 10% initial costs (notar, tax, commission). I wouldn't buy a commercial/residential property that only yields 8% because you can find that for a pure residential building that presents far less risk. I have one and the business tenants are a pain in the ****.
  10. Sorry, but you will have to show me a link to such a rate for me to believe it. I am speaking from an investor perspective. Plus, send a link to an 8% yielding property. You will not find 8% yeilding properties in large city centers. You will if its commercial real estate but this risks are much higher and so is the mortgage rate. So please clarify what you are referring to. Residential or commercial? Which city? Which bank? Do you self manage? How high were your commission costs 7% or 3.48%?
  11. 3.93% for a 20yr fix in Germany doesn't exist. The best 20yr rate today is 4.1% and you'd need at least a 10% deposit and be a model client (AAA level). Banks are happy to lend fixed on a 10yr but anything longer than 10yrs they don't carry on their own balance sheet ..its passed over to and carried by the state (Landesbank). Furthermore, if you find an institution that will give you on a 20yr fixed then I highly doubt the rate will be 4.1%. If such a rate is to be found you would not only need a 10% deposit (minimum) but also 6yrs of constant tax returns as a permantly employed person. If you're not living in Germany or don't have a provable German taxed salary for at least 6yrs then either you will simply not get a loan or you will pay considerably higher rates to have one. 1. Typically you can add 0.5% not permanently employed by a large company. 2. Below is the extra you need to the interest rate depending on your deposit. Basically to get the lowest rate you need a deposit of over 60% Finanzierung über 60% bis 70% 0.1% über 70% bis 80% 0,20% über 80% bis 85% 0.35% über 85% bis 90% 0.5% über 90% bis 95% 0.7% über 95% 1.0% 70% of all mortgage applications are rejected. Getting a loan is not an entitlement in Germany, you need to prove you're worth it. The BundesBank has just created a 5 man team to investigate and permanently monitor real estate pricies in Germany with the mandate to prevent a bubble. There is evidence that prices are inflating too quickly in some major cities Hamburg, Berlin, Munich, Frankfurt.
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