Tag: investment property

Maximize your vacation rental property income.

Outside of a pandemic, the demand for short term vacation rentals in Cayman is more than steady. As a coveted travel destination, second home investment properties in Cayman, provide consistent healthy profits for owners – often generating returns in excess of 10%.

The current landscape has undoubtedly disrupted the playing field. While tourists may be dreaming of our white sandy beaches more than ever, travel restrictions and our border closures mean those visits will, unfortunately, have to wait.

Recapping COVID-19’s impact on the Cayman rental market

At the onset of the lockdown period, we were inundated with calls and emails from anxious vacation rental property owners. To counter the closed borders and lack of tourism, we strongly suggested that these property owners switch from short term rentals (nightly or weekly) to long term rentals (six to twelve months). This strategy proved effective at attracting local renters, jumping at the chance to live on the beach at discounted rates. And although the return on investment would be less than the previous year, it prevented landlords being stuck with vacant properties.

Other property owners with more remote East End, Northside, and Cayman Kai locations, have reduced their nightly rates and offered specials to encourage local vacations. With residents unable to travel overseas, this has spurred Cayman’s very own ‘Staycation Nation’. A trend which continues as residents seize the opportunity for a change of scenery, at a discount. We know we are!

The end result? The COVID-19 pandemic caused the average price of rentals in Cayman to drop. This drop is a short-term response. We foresee a rental market rebound once Cayman’s borders reopen and we start welcoming tourists back.

Tourist High Season

In March and April, when property owners first made the decision to offer longer-term rentals and reduced rates, they were holding out hope for tourism to return in time for high season. The winter months, November through to April, when you can’t find a spot on the beach, let alone a vacation rental in Cayman.

Fast forward to today, we are now approaching the middle of October, and the borders fully reopening before the new year is looking less and less likely. The last few government press releases have made it clear that the risk tolerance, when it comes to potentially exposing the island to the virus from inbound travel, is minimal.

If you couple that with the end of the mortgage holiday, offered by the banks, it’s now time for investment property owners to employ a more long-term solution.

Cayman’s Global Citizen Program

The Cayman Islands government has announced they will start what is commonly referred to as a digital nomad visa. A visa specifically designed to attract employed individuals to the island. Bermuda, Barbados, and Antigua have already introduced initiatives similar to what the government is calling Cayman’s Global Citizen Program. The goal is to entice entrepreneurs and other professionals who can work remotely, to set up office on our beautiful shores. These digital nomads would provide an inject of money into the economy, without affecting the local job market.

Positive news for the rental market

After the rental market dip early this year, the Global Citizen Visa Program is definitely a win for Cayman landlords. The demand for long-term rental properties is going to increase, as more working professionals swap their home office for a temporary beach view. This will drive rental prices back up and make second-home, income properties more valuable.

Our advice: Minimize your risk

If property owners continue to hedge their bets on the return of tourism in time for the winter refuge from the north, they may be left disappointed with empty apartments and pockets.

Rather than rolling the dice, owners should consider listing their apartments in the long-term rental pool. This way, they can attract a digital nomad looking to live the beachfront dream while they work remotely in Cayman.

Yes, the monthly rental income generated will be a reduction from last year, but when amortized across the lifetime that you hold the property, it is relatively insignificant. And some money earned is always better than none.

If you have questions about renting your property long term, please feel free to contact us.

The Market Moves In Mysterious Ways

A completely reasonable and fair assumption dictates that during an unusually slow summer season, closed borders, zero tourists, and a reduced population count all resulting from a world pandemic we should expect ZERO sales right!? Well, when a market moves against all expectations it’s worth looking a little closer.

We have reviewed the Association movements between June and July 2020 (the new dawn) how it differed from July last year (the old world) and finally we also reviewed what we are seeing in August so far and what the latter part of the year will look like.

 

June 2020 Vs July 2020

40% up in Condo sales
150% up in House sales
25% down Land sales – but watch out got lots of August activity.
No change in commercial sales

 

July 2019 (old world) Vs July 2020 (the new dawn)

52% down in Condo sales
44% down in House sales
65% down in Land sales
66% down in Commercial sales


Property Cayman had 9 transaction sides in July 2019 Vs  4 in July 2020 – 44% decline. However that’s 4 more than we were expecting.


Observation:
This decrease is expected however it isn’t what you could have expected with a pandemic underway. Also note it’s only a temporary shift. Despite internal and external pressures, transactions and demand are still very clear and present. This level of activity is returning with gusto which is a direct testament to local confidence. Many are seeing the opportunity to lock in (with the help of pension withdrawals in many cases) a new home or long term investment before the borders open and population with demand increases again.

With a steady incline of new listings, new contracts and a decline of the Back on Market listings, the August/Sept/Oct pipelines are filling up nicely. 

Source: CIREBA

August 2019 (old world) Vs August 2020 (new dawn)

24 Condo sales last August and 8 sales so far this August10 House sales last August and 1 sale so far this August32 Land sales last August and 3 sales so far this August0 Commercial sales last August and none this August… so far


Property Cayman had 10 transaction sides in August 2019 Vs 14 lined up to close this August 2020 (pipeline contracts) – 40% up and we have 3 weeks to go! Watch this space.


Observation:
Another summer season with record number of transactions? Despite a reduced July (year on year) there’s a surge of activity to rebuild the pre-covid momentum. It says a lot. Local demand and confidence is holding its ground and we can expect some good catch up this month.

August and beyond

With borders closed and pension withdrawals slowing down in the latter months of the year we can expect to see a decline in properties going to contract and a consequential increase in inventory (lowered demand with increased supply). We feel however that things won’t slow down and that when borders open up we can safely forecast new and positive influences on the market.

With open borders the market will quickly absorb any oversupply of inventory. With extended border closure into November we can expect pricing pressures to take effect but in reality it will be more of a stabilizing effect than a significant decrease in pricing.

Either way, whilst numbers are averaged down by 50%, most sectors of the market won’t see any significant decreases in pricing as seller’s continue to be patient. Markets ebb and flow over time so be sure to establish your big-picture property plan and consider the different chapters of YOUR journey. If you wait for a market to change to your advantage you will miss out on the opportunities currently in front of you.

This analysis is broad and general and more designed to spark the conversation. We would be delighted, as always, to assist you along your personalized property journey so feel free to reach out and let us know your thoughts, ideas and even concerns. We can cut through the noise and give confidence to your next move which every direction that might take you.

NB: ref: CIREBA stats

Why People are Seeking Sun, Sea & Safety in the Cayman Islands

All it takes is one visit to the Cayman Islands to fall in love. Of course our sandy white beaches, crystal blue waters and Cayman-kind smiles take a lot of the credit, but a few more critical factors make it a place that have people coming back time and time again. Especially now!

With the inevitable increases in taxes in the, U.K., U.S and Canada, and with “working from home”, now a realistic option more than ever as, it’s no wonder we are seeing an influx of family offices and high net worth families looking to move here. There was a trend pre-COVID from Canada and whilst this is continuing the inquiries are now coming in from the US, UK, Spain and France. C’est jolie ici.

Cayman is a tax-neutral, British Overseas Territory. We are a safe and sophisticated island, with excellent infrastructure and a high standard of living. Its ease of access to and from multiple major cities, including New York, Toronto and London make it easy for many to catch direct flights back home or to attend business meetings near and far. Sure you can meet on Zoom, but the work-life balance movement is real.

We have top rated international schools, excellent medical care, first world amenities, low crime rate, a top-class and fantastic culinary scene, and of course the endless recreational activities including golf, fishing, and all the water sports you can imagine, all right in your backyard. 

Buying real estate is a simple and straightforward process in Cayman. With no restrictions on foreign ownership, nor any property taxes, the prospect of owning a second home become feasible for many.

International buyers generally start out investing in a vacation condo/rental property, however given the direct impact of COVID on the world economy, we have noticed a (not so surprising) trend over the last few months with international buyers reflecting on their quality of life. So the shift begins; making the permanent move to enjoy life in a healthy and safe environment.  Why wouldn’t you invest in that?

New and/or existing buyers are either:

a) moving into their vacation home, with the intent on staying for longer and longer stints OR,
b) buying a primary residence with the direct intent on becoming a ‘Permanent Resident’ in the Cayman Islands, declaring non-residency in their home country, without impacting their current citizenship.

Owning real estate is by law a direct means to gaining Permanent Residency, so the concept of “living where you vacation” is being realized by many, now more than ever!

In conclusion:  We feel this is a trend we are going to see more and more of; COVID has highlighted new opportunities where ‘lifestyle migration’ is building momentum. Don’t forget there’s a reason why we live here. Ever thought of asking us why?

Bank Financing In Cayman – Explained

In these last few weeks we’ve seen a significant uptick in new buyers, both locally and internationally, wanting to invest in their own piece of Cayman.  They may be keen to get their feet wet, but many are unfamiliar with buying property in the Cayman Islands and most importantly what to expect when it comes to their bank financing options.  It’s so important for new buyers to educate themselves on what their options are and what they “qualify” for before they start to look at properties.  This ensures there is no guessing on what they can afford, what they may or may not be entitled to, and guarantee a smooth Closing process when they fall in love with a property and make an Offer. Senior Manager of Personal lending at Butterfield Bank (Cayman) Limited, Amanda Bodden, was kind enough to answer some of the most common questions we are asked at Property Cayman.

If you have any additional questions don’t hesitate to reach out to us to learn more.  If we don’t know the answer, we will ensure you are connected with the right person to give you the facts ahead of making one of the biggest decisions in your lifetime – buying a property!

 

Q. How do the bank’s loan terms vary when buying a primary home, investment property & raw land?

The risk profile of an owner-occupied property mortgage is different than that of an investment property or raw land. A person’s primary residence represents a lower lending risk than an investment property which may become less profitable or even loss-making, or raw land which would not provide any income to offset its borrowing costs. Because of this, banks will generally require higher down payments and/or shorter repayment terms on investment properties or raw land than they would for your primary residence. You may also see higher interest rates charged for investment properties and raw land to reflect the higher risk lending.

 

Q. How do terms vary depending on the borrower’s age?

Typically, most banks in Cayman will lend up to age 65, which is the local retirement age. The borrower’s age will therefore be a factor that determines the maximum repayment term. Where a borrower does not have a mandated retirement age (for example, self-employed individuals) we are able to be a bit more flexible on the repayment term of a mortgage. As lenders we must understand the repayment source and verify that it is reasonably going to be available to service the debt over the agreed term. Lending to age 65 is not a strict policy, but it is important for us to understand when and how a mortgage will be repaid when we consider lending beyond retirement age.

 

 Q. What if any are the differences in lending policy & immigration status? 

 At Butterfield, our lending policy is the same for Caymanians, PR Status holders, RERC and work permit holders. We do not have different policies; we have one local resident policy that covers everyone. Our non-resident policy differs in that we will require a higher down payment and likely a shorter repayment term.

Q. What if any are the benefits of paying your mortgage bi-monthly instead of monthly?

 Paying bi-weekly accelerates your mortgage repayment. If you pay half of your normal monthly payment every two weeks you will essentially make 13 payments each year instead of 12. On a longer-term debt this can save quite a bit of interest and repay the debt earlier. At Butterfield we offer weekly, bi-weekly, and monthly payment options.


*The responses to these questions are specific to Butterfield Bank (Cayman) Limited and do not represent the opinions/ lending policies of other banks. Buyers are free to use any lender of their choosing when buying a property. 

Insider’s Guide To Building Your Own Home

Author: Kate Ryley

‘Some buyers don’t even think about buying land or building their own home – they just assume it’s out of their league or out of their means. But all options are worth exploring and that’s why we’re here 🙂 I’ve been there personally, where I’ve been stuck with buying land vs. buying an existing home, and it can all feel extremely overwhelming. I took out a scrap piece of paper and started jotting down the pros and cons, and it really helped me wrap my head around it all. I figured if it helped me, it would be worthwhile to share my thoughts with our potential customers too!’ – Kate 

Pros to building a house: 

Competition:  When you build a home, the competition factor decreases. If you find yourself in a Seller’s market, there is lower inventory. This, combined with more Buyer’s in the market makes it harder to win that home of your dreams! 

Customization: When building, you’ll get to personalize all the details of your house when you construct from the ground up! This is one of the biggest advantages – from architecture to design to furnishings, you control it all.  

Satisfaction: It’s not easy work, so when you’ve completed your home it feels good! It’s an accomplishment in and of itself, and people say there is a feeling of an emotional connection living in a new home that you have created. 

Cons to building a house:  

Time/ Bridging: It takes an average of about 12 months to construct a new build. That time matters if you are relying on the sale of your previous home in order to pay for construction. Keep in mind that you may have to live in a rental until your build is complete (we all know how much we love moving! 😉 ) 

Variable costs /un-expected expenses: Compared to buying an existing home, the costs associated with the purchase and build are not always clear from the start. Expect out-of-pocket costs that are unplanned.  

Stress: Building a home requires patience. It’s not an easy feat! There will undoubtably be hurdles that will take you on an emotional roller coaster.  

Pros to buying a house: 

Convenience: We can simplify the process by helping you find verified properties, guide you through negotiations and assist you with deal paperwork and lawyers. You will be able to close on the property and move in as soon as possible, generally within 60-90 days. 

Turn-key: The fast rate at which you pay for a house and when you move in is incredibly exciting. Plus, you know exactly what you have purchased. You have touched it and felt it – you know what you are getting! 

Costs: The costs associated with buying an existing home are more fixed than variable. This makes it much easier to budget and balance your personal financial requirements. 

Appreciation: The nice thing about existing homes is that there’s history: You can research the home’s previous sale prices, as well as prices of similar homes in the area (known as comparables) to get a feel for whether prices are rising or falling in your area. If the prices for your home and others in the area have been steadily rising, odds are decent that the trend will continue, which bodes well for you if you decide to sell later on. 

Cons to buying a house  

Perfect” may not exist!  You may not get exactly what you want, and you’ll have to forgo one of your checked boxes. You’ll have to prioritize what matters to you most, and stick to those when looking for a home. It is unlikely you’ll get absolutely everything – floorplans, architecture, kitchen design, flooring, ceiling heights, finishes to name a few! 

Appreciation: New homes, particularly in up-and-coming neighbourhoods, are more of a gamble. Without a proven track record of lots of comps, there just aren’t enough data points to really know what could happen down the line. This is also true for all the latest amenities you might request in your home (think self-cleaning toilets). Are you going to see this return in upgrades down the road? 

Efficiency: Existing homes are less efficient and may need various replacements such as windows, doors or heating/cooling systems. Replacements and updates may be our of your budget after purchasing your new home.