We own a 300+ unit apartment complex 1/2 north of Dallas in Denton, TX. OK results so far .. but not (yet) WOW !
US purchases in general: high risk for the un-informed .. OK in some economically strong sub-markets like AZ or TX if you know what you are doing and have a 6+ year view .. and while prices for apartment buildings are in the 40`s to 60`s/door for decent assets there are many issues such as: cash-flow is not all that great, higher interest on commercial mortgages than in Canada (to the point of inability of getting finance for some assets or some areas) .. taxation is higher than in Canada, tough to expatriate $s out of US tax efficiently, many foreclosures, tough mortgage market, different landlord tenants laws that differ widely by state .. but the upside is INFLATION so any asset you will buy will go up in US $s eventually ! .. but will it in Canadian $s ??
Inflation will be huge going forward in the US: Why ? As long as we live in democracies, with elected officials that have to respond to "the people" stating "bail me out", "build me a new hospital", "provide me with cheap child care", "lift my RRSP savings, i.e. the stock market", "don`t let the car industry fail" we spend and spend and thus, to make the pain easier we print more money to deflate the debt. Money supply is up significantly and they even stopped publishing it. Estimates are around 17% to much much higher like 50%+ in 2008.
So, this means that either interest rates will rise significantly or the US dollar will plummet and since high interest rates kill the economy the US dollar will slide.
The money supply shock: If $6T to $8T is sitting in money market funds plus a few more $100`s of billions (of bailout money) on bank’s balance sheets, sooner or later people (or banks) will realize that a 1% or 2% interest bonus isn`t all that great and they’ll invest it in mortgages, bonds, equity, real estate, stocks or spend it !!
This is EXACTLY what the US government is doing right now: flush out the $s into the economy thus forcing real estate values up or at least flat and spending or investing by massively devaluing the $ !!! In fact this model is being embraced by a number of large countries, including China and most European nations. This is the main reason why we have put our US purchases which we had envisioned as recently as this fall ON HOLD for the time being, as the exchange rate risk is significant.
However, since many other nations are doing the same the US dollar might not get hammered quite as much relative to the Euro or Yen or Swiss Franc but money relative to REAL assets will get less and less valuable so things REAL will go up: gold, real estate, oil, nickel, uranium, ... and that is called inflation!
