advantages/disadvantages of finding a foreign investor for real estate?

Question

:D If you are a bird dog and come up with a foreign buyer (in my case a Canadian buyer or any other country) what are the good and bad aspects of such a deal? Currency advantages to the buyer? I am in the Detroit area a very distressed market would this not make it attractive to a foreign investor because of falling US dollar? Have any of you done such a deal? Thanks

Account Closed · Answer

I have not sold a deal to an "active real estate investor" who is based abroad but I have gotten passive investors from outside the US to lend their money to me for me to buy US real estate. You may want to consider this approach. It's more advantageous because as the owner, you get to benefit from the long term appreciation and income from the property. Disadvantages are hassles and hazards of ownership, specially if you buy the property in the wrong manner - e.g., paying too much for it.

Cherie Livni · Answer

@ Karen M. I am an American/Israeli citizen and the majority of the funding will be cash of Israeli citizens who are interested in putting their money into american real estate as a long term investment. I'm not talking about homes or apartments that these people plan on using personally, they will be rental properties.

Mike Jakobczak · Answer

Advantages:

Most are cash buyers, or at least access to fast cash, line of credits, etc.  This is because most banks wont be able to finance foreigners.  So fast closings.  Also exchange rate may be in favor of buyer, making it more attractive investment.  Depressed markets will have a good profit margin compared to where the foreign investor may be currently living/investing.

Disadvantages

Uneducated buyers of area, may take awhile for them to feel comfortable in purchasing.  If keeping it as a rental, and are borrowing funds, frequent exchanges of currency may shrink profit margins and maybe even take them right out. Owning property which they can't visit without getting on a plane may discourage them.

Joel Owens · Answer

I deal with local investors,out of state investors,and foreign investors.

The downside with foreign investors is sometimes they move very slow in purchasing a listing even if it is a good deal.The reason is the logistics of them having to learn the area and do the due diligence.

They also want to buy distressed stuff even below what it is trading at because they want to price in risk if they make a mistake.

Compare that to the local investor who knows the areas block by block,knows exactly what they will pay,have lending lined up,and all the local inspectors and title (attorney) to close.

The benefits to working with foreign investors is the exchange rates and also the fact that sometimes they will pay more for performing property than a local investor because what they can get abroad doesn't compare.

Example local investor wants a 10 cap when things are trading at a 9 cap in the area.Foreign investor is willing to buy at an 8.5 cap because where they live there are security issues,and stability of the economy.They could also just have an area where things trade at a 5 cap and is appreciation driven.

So just like any buyer you have to see if they are a good fit or not.You have to educate the foreign investor in what the local market is doing.

Karen Margrave · Answer

@Cheri I see that you are from Israel, so can you please clarify, are you living in Israel and will be using investors from other countries (USA) to fund the purchase of properties in the U.S., or U.S. investors to finance your purchase of U.S. properties, etc.

Bill Gulley · Answer

Absolutely, foriegn individuals and entities may hold title to US property, if they are not on the embargo list with the State Department as to transacting business. Currency is not that big of a deal as it can be exchanged to or from dollars. Communications might be and don'tforget the time differences, I don't think I want to stay up til one in the morning for a discussion with my German investor.

SEC regulations still apply and you may want to brush up on the issues of money laundering and keep a good papaer trail on the source of funds.

Cherie Livni · Answer

Hi I'm just starting out but I'm looking at using foreign investors. Is it possible for foreigners to own a house in the US?