Praise be – it’s a fracking miracle! How modern drilling technologies are changing the face of the US buy-to-let market

• US house prices in March 2013 up 10.9% on the previous year (S&P/ Case-Schiller Index)
• Fracking has created new buy-to-let market in North Dakota’s Bakken Formation
• Up to 15% rental returns achievable from 3 bed single family homes

There’s no denying that the UK buy-to-let market is on the rise. Figures from the Council for Mortgage Lenders reveal that buy-to-let lending is up by 10% compared with 2011 and This is Money reported recently that around £1 in every £7 lent on mortgages last year went to landlords – a total of £16.4 billion.

While capital values in many parts of the UK have been falling or stagnating, average rents have been on the rise, increasing by 13.6% since 2009 according to Rightmove. The trend has led to increasing numbers of people viewing buy-to-let as their investment opportunity of choice.

Looking across the Pond, the US housing market has been stimulated of late, with the S&P/Case-Shiller Index reporting that house prices in March 2013 were up by 10.9% on the previous year. It is encouraging news, but many families are still nervous of committing to buy a property or unable to fund doing so, given the still-tenuous economy.

The situation in the US over recent years has created myriad opportunities for buyers from the UK and elsewhere to invest in buy-to-let holiday homes in areas like Florida, or run-down shacks in cities such as Detroit, where repossessed properties have been available for as little as £30,000 for a four bedroom home. Indeed, 2012 saw the Federal National Mortgage Association selling homes in bulk to investors in areas such as Cleveland, Chicago and Atlanta.

Now, with the expansion of America’s energy industry due to the use of new fracking technology in areas such as North Dakota’s Bakken Formation (which has led to US crude oil output exceeding imports for the first time in 16 years), is opening up a new kind of buy-to-let market.

Robert Gavin, Director and Founding Partner of leading international development company Property Horizons, explains,

“The US buy-to-let market is now about so much more than just holiday homes and repossessions. In North Dakota particularly, the massive influx of oil workers has led to drastic housing shortages and the rise of new kinds of buy to let investment opportunities. It’s an exciting development to watch and investors are keen to make the most of this up-and-coming area.”

Property Horizons has two developments in the area. Its executive hotel studios in the town of Williston, at the heart of the oil boom, house single oil workers in high-end accommodation with six residents per suite. Each worker has his own bedroom with queen sized bed and the suites also offer also offer a high quality, spacious and fully furnished living space, plus private bathroom, kitchenette and work/desk area. Workers are able to cook their own meals and create more of a home than is possible in traditional hotel accommodation. Investment ranges from $27,950 for a fraction of a studio, through $49,590 for a full studio, to $289,700 for a full suite of six studios (including a $10,000 discount). Projected rental yields are huge, at 46% annually and an optional five year rental assurance, at 25% NET per year, is also available

For oil workers whose families have followed them to North Dakota, Property Horizons is offering single families homes at Horizons Ridge. The 174 homes, each on its own 1-2 acre plot, have been designed to the highest standards, in a charming and peaceful residential development just outside of Williston. They are available from $300,000 for a 3 bed/2 bath property, to around $350,000 for a 4 bed/3 bath home. Buy-to-let investment opportunities have predicted rental returns of 13-15% for corporate tenancies and leveraged cash-on-cash yields based on net rental profit as a function of the down payment will be around 50-60%, with financing available.

With leading property analysts CoreLogic highlighting in their April 2013 MarketPulse report how the US’s constrained inventory in the single-family rental market is causing rental prices to rise, investment opportunities such as Horizons Ridge are becoming extremely sought after, with investors queuing up to get involved in this exciting emerging market.

For more information on developments in North Dakota, call Property Horizons+44 (0) 1908 888 999, visit www.propertyhorizons.co.uk or contact the team on info@propertyhorizons.co.uk