There are many alternative ways the play the property market and opportunities to achieve enhanced yield and returns
I am often asked what is my favorite property investment or whether I prefer residential or commercial property at this point of the cycle. With interest rates at generational lows and global quantitative easing causing money flows to chase property prices higher, there are plenty other "alternative" property sub asset classes that I believe are worth considering for a well rounded property portfolio and to enhance overall returns. My 5 favorites include:
1. Student accomodation
Student accommodation has been a good performer over a number of years and also is fairly defensive. Especially for quality properties Well located near university (must be walking distance). These days, purpose built student accommodation provides a very high level of services and specifications. This includes Wifi, modern and clean useable common areas, sense of community etc. Another strategy is to convert existing multi room houses into student accommodation (subject to council approvals) and with often just some basic floor plan reconfiguration and renovation. I have been able to achieve yields of 10% on some these types of student properties. What is even better is that Rental is usually paid up front and often guaranteed by students family. Providing excellent cash flow profile.
2. Self storage
Perhaps my favourite property asset alternative for 2015. There is a structural demand for storage as household sizes become smaller and we collect more and more stuff. There is also a structural lack of supply in the market for good quality storage units. This is especially the case for places like Hong Kong (where I currently live). Storage units operated by experienced managers, can be among the easiest set and forget investments generating high and stable cashflows. In some markets, I have been able to achieve 12% yields on a consistent stable basis.
3. Motels and budget hotels
Well located budget hospitality assets will often be in demand throughout the cycle. This is because in times of economic boom, business travel increases and in times of economic softening, people cut costs and trade down to budget. My best investments in hospitality have been near major infrastructure like highways and airports. In fact, airport hotels are some of my favourite alternative property investments as they are often modular construction (ie not very expensive to build and develop) and demonstrate almost infrastructure like returns. Apart from high yield +7%, often there are ancillary revenues shared from the food and beverage, conference, and car park.
4. Marina berths
Regulated infrastructure like investment often provides the best risk adjusted returns. Marina berths are perfect for investors given Low supply vs demand and high barriers to entry (ie governments generally do not approve many berths). Low maintenance and high cashflow. I have been able to achieve +10% consistently. However, coming across these investments not always easy to find as they get snapped up fairly quickly.
5. Medical centres
We all know the demographic trends of aging population and increased medical spending per capita as economies grow and develop. I believe Medical Centers are excellent investments for yield and defensive growth. I prefer centers that have a diversified tenant mix (ie pharmacy, doctor, pathology, dentist) and well located in areas where retirees are prevalent (eg Gold Coast and Sunshine Coast in Queensland). I have currently been looking at quality assets +7% yield in well located areas.
So as can be seen from the above, there are many alternative ways the play the property market and opportunities to achieve enhanced yield and returns. I continue to invest in these types of assets for myself and my clients. Connect with me on LinkedIn if you would like to know more.