Residential Real Estate

Residential real estate encompasses several areas of the real estate market, including:

• Primary Residence
• Second homes and Holiday homes
• Buy to Let
• Fly to Let

Our initial interest at BRIC Group is to provide individuals as well as serious investors have the opportunity to see equity growth, cash flow or both. The Primary residence category is of huge importance in some areas as it represents the exit strategies for our investors.

Unlike most companies, we calculate the end user into the equation when designing developments. We are aware that a stunning property that does not meet local demand will never represent an exit for our clients, regardless of how nice it is or how affordable it may appear.

We endeavour to locate opportunities that can straddle market sectors, so that our liquidity and return and that of our investors remain as liquid as is possible within capital asset investments.

When designing the master-planned structure of our award winning beachfront development, The Coral Lake and Beach Resort in NE Brazil, we spent months investigating what Brazilian families wanted in a first and second home. We then married this information with progressive design formulas that are viable for investors.

This included floor-plan layouts, building materials, finishing, natural lighting and resort amenities, but also cost efficiency models, payment methods and estimated equity growth over 5 years. By strategizing at such a depth during the projects conception, we were able to create a unique luxury resort with a final end product development that was affordable to the growing middle classes of Brazil and at the same time generate strong returns for our investor clients.

Vacation homes, holiday homes and second homes

A vacation home, holiday home or second home was once the pride and joy of the wealthy few that could afford a nice villa in the sun, that could be used for a few weeks a year. Then budget airlines arrived with regular flights to previously unknown destinations that offered properties for peanuts; holiday homes in the sun that families could jet away to for a weekend, because it was cheaper than going to the theatre and having a nice meal with friends.

Sounds familiar doesn’t it! All of a sudden, everyone not only desired a place in the sun – they needed one and they needed it now. Prices went up, developers were queuing outside of architects offices and hey presto 12 months later Domingo’s worthless olive grove is well on the way to becoming the latest must have urbanization in southern Spain, with villas being offered with mortgages of just £200 per month.

Prices spiraled and everyone was a “paper millionaire” revisiting the banks to buy one, two and sometimes several more villas that they could eventually rent out. Then the economic crisis reared its ugly head, budget airlines were not so budget; owners decided to sell their property in the sun as it was a becoming a noose around their neck.  Unfortunately, it wasn’t 2-3 owners who decided to sell, it was hundreds of thousands and they were all competing to sell to a handful of potential clients.
“The buy back guarantee from the developer will save us” we heard them cry, but Domingo has closed up shop and moved away, no doubt enjoying a glass of sangria on the balcony of his million euro villa overlooking the sea, which, let’s face it, it a much better location than looking at a dusty hillside and more prone to be saleable when he decides to move because the property that he bought was within a short drive of employment centres, hospitals and major airports.

A second home is exactly what it says – a place that you and your family or friends visit several times a year. Yes it can bring in additional income through rentals and they can offer great savings for tourists when compared with hotels.

A second home, holiday home or vacation home is primarily a home. It is not an investment in the true sense of the word, there is emotion involved in the purchase, and it is decorated to your taste and should create hundreds of fantastic memories for you over the years.

Owners can benefit financially from buying a second home, they can see a positive net yield at the end of the year and they should watch their home increase in value over the years. If they chose their destination wisely, in areas of growth, employment and future demand, then they will be able to sell it to Domingo’s cousin, who didn’t build his own development but became a lawyer instead.

Should I buy a second home or holiday home?

If you have the funds available to pay 30% or more down on real estate and you have researched the area thoroughly, then yes you probably should be considering a second home.
The story is just an illustration of “getting it wrong”. At the end of the day millions of people own second homes and get great enjoyment from them. Investors that understand market dynamics and city/area expansion will recognize where they should be buying and where they should not.

Even if you do not intend to use the property on a regular basis yourself, if you buy in areas with strong growth, increasing tourism and good infrastructure, you can make holiday rentals pay and you can see excellent returns over just a few years.

Invest in properties that you can see yourself living in, retiring in or going on holiday to, because the likelihood is the family that will buy your property will want the same things. Developments that straddle sectors of the market- short term rental income plus future equity growth – are what you should be looking for. If there is an opportunity for you to rent out your property when it is not in use, fantastic, it can help pay the bills and maybe generate positive cash flow for a number of years up until the time comes when you wish to liquidate your assets and take your profit.

Buy to Let

Buy-to-Let properties were an almost iconic statement of wealth and power for several years, but as the bubble burst, prices fell and interest only mortgage rates increased, investors who jumped on the band-wagon after 2004 took hit after hit.
Investors, who have been in the market for longer, mostly have some equity left in the properties, have lower repayments and most probably a solid occupancy rate; and are able to fill unoccupied units swiftly due to lower outgoings. However, the question is now arising once again;

Is it a good time to become a landlord?

The answer is most probably yes, but not for everyone.

The predominant factors that lead to filed investment during the last 5-6 years were poor liquidity and mortgage terms. If you are buying a buy-to-let property, you should be prepared to pay at least 30% down. Ignore the 100% mortgages and the easy payments, because there is always a hidden cost or a balloon after a few years that can, and most probably will, come back to haunt you.

If you are buying older units, you will also need to have available funds to make repairs and replacements. Yes they are deductible, but only if you can pay for them first.

Many first time investors bought new off-plan developments with cash-back, discounts and 100% mortgages, which in an ascending market seemed too good an opportunity to miss. But where are these owners now. Even if they are still renting the property out, they are no doubt struggling. And where are the builders who offered 10 years guarantee? Long gone, illiquid or just bankrupt!

Experienced buy to let investors are experienced because they obeyed certain criteria when they bought their properties. Lots of others lost their shirts.

Cash Flow and high occupancy are primary factors with Buy-to-Let properties and they are reliant on the big three:

• What you buy
• Where you buy
• How much you pay

If the big three are wise choices, the cash flow is easier to generate – you should be aiming for at least 125% per month income – and occupancy rates, which are often determined by your perceived value for money on the market.

Our conclusion is now I a fantastic time to invest in buy-to-let properties, subject to our guidelines. The market offers some excellent prices and investors buying now, will be able to undercut their competitors in most markets, as their purchase costs will be lower, their monthly out-goings lower, which in turn means they can offer their properties at better prices and increase occupancy levels.

Fly to Let

Fly-to-let, became an obsession in the last decade, with many first time home buyers, priced out of the market, they turned to overseas markets in order to generate cash flow and hopefully some equity in the future.

Everything mentioned in our comments about buy-to-let notes, is applicable here to fly-to-let properties as well. Too many people envisioned an easy way to make a fortune, but refused to obey the ground rules; swayed by glossy magazines and “no money down” reservations and the now defunct self-certification mortgages there are hundreds of thousands that rue the day that they went overseas to invest or even invest at all.

Whilst experienced investors were buying up properties in major cities, with growing employment, strong industrial sectors and solid infrastructures, the inexperienced were buying 1 and 2 bedroom boxes in the sun that had to be furnished – at an extra cost - as they were sold as short term rentals - which would be occupied 45 weeks per year from day one - often in the middle of nowhere, in areas that didn’t have a cat in hells chance of attracting a local purchaser when they wanted to sell. Even areas of Europe, including Spain, Portugal, Italy and Greece, which are established could not sustain the numbers of properties being constructed. What chance did Turkey, Egypt, Morocco or Cape Verde have?

So the final question arises once again; are Fly-to-lets a good investment?

Yes they are, but only if you invest wisely. Research your destination, look for growth, demand, supply and potential future equity gain, but most of all make sure there is a buyer at the end of the line, who is willing AND able to buy your property from you when you want to cash in.

The market offers some excellent prices and investors buying now, will be able to undercut their competitors in most markets, as their purchase costs will be lower, their monthly out-goings lower, which in turn means they can offer their properties at better prices and increase occupancy levels.