Is the Grass Greener on your Side of the Pond?

[Mo Gold]

Why am I crossing the Pond?

You woke up this morning only to realise the MLS has vanished. The ever reliable aggregation of a centralised listing service for 95% of National inventory is no longer!!

Sorry! Didn’t mean to send shivers down your real estate spine.

Get on a plane cross the pond to the UK, and the real estate investment playing field up and down the vertical operates without a central inventory listing service.

I am an experienced UK investor and I, along with my wallet, adore the level transparency of data, transactions and inventory in the US real estate market.

Say, you want to buy a SFR in the UK for the national median value of $300,000. Would you be prepared to do a deal without having access to robust comps. I buy multi-million dollar projects in the UK based on rudimentary, by comparison to the US, data in the hope that the ARV stacks up. In the absence of accessible up to date reliable data it is after all only a guide. Licking your finger and sticking it in the air to test the wind direction!

Now if you are a newbie then forget it. You are at a royal disadvantage. You are driving blind at expensive speed!

Let's leave the structural differences, of which there are many, in the two markets aside for now. Take a peek at the profitability benchmarks for the respective REI markets.

I will give you a headline stat to compare the UK-US. In the UK fix and flip market: the average prehab property price is circa $250,000. The average turnaround time of the project is 300 days, and the average annualised gross margin is 37%. In the US, the average price is $80,000. Average turnaround time is 102 days and the av. annualised ‘gross margin’ on equity is 58%. (*data from RealtyTrac)

So in short in the UK I would have to put up 3x more cash for 3 times as long to make ½ the margin. And don’t forget it’s always raining here. So I can't even rely on the charm of the weather!

The severe lack of transparency coupled with squeeze on margins and tough competition has a sad and regrettable effect. The psychology of the market in the UK, quite unlike the US, is much more adversarial.

Your gain is my loss! Let me keep my cards close to my chest so as to protect my (often) imaginary proprietary methods, processes and approach. Sadly, this prohibits camaraderie and invariably stifles innovation and growth.

So is the grass greener on your side of the Atlantic?

I would love to hear from you with your stories...