I have access to foreign investors. What would you do?

30 Replies

I have access to a lot of high net worth people in Asia looking for investment opportunities. 

I don't know what percentage of them would be interested in U.S. real estate but I was wondering if anybody has advice on how to approach them. 

Depending on which nation we are talking about, a large percentage of them will be interested in US real estate, The Chinese are all over it because it is a great hedge against inflation. 

I would contact them with real deals, no theory, Here is property X, it is currently cash flowing Y dollars per year. Here are the real NOI ROI numbers. Are you interested in deals like this? If so just let me know and I will find them for you, either as your partner of you may pay me a fee to acquire property for you. Either way, we both win.

I hope that helps

Josh

@Josh Caldwell

This is really amazing advice. Thank you so much Josh!
What are the numbers in Pennsylvania looking like right now? 

Allan

Pittsburgh is the #1 cash flow market in America.  we can do 10 cap properties all day.  they arent hard to find if you have buyers. 

To your success

Josh

@Josh Caldwell

Sounds like fun and lots of potential. 
Thanks for the comments Josh! We should talk.

@Josh Caldwell

You need to be careful about taking foreign money for a number of reasons.  First, if you are planning to get mortgages, it will increase your workload with the bank, which will need to know all of the people in the ownership chain under the "know your borrower" laws.  The burden of background checks, which the banks will charge to you, will be greater when the investors are overseas.  I know this from experience, as some of my investors are from Japan.

Second, there are some major tax hassles involved under FIRPTA and FACTA.  If you have foreign investors, you need a "blocker".  In other words, they must set up a domestic corporation through which to invest to "domesticate" their investment.  The issue here is that the US government does not want money flowing from your deal back to a foreign country where it cannot be taxed.  So, these investors will need to establish a US entity that is subject to US taxation.  Otherwise, you will need to do withholding from the distributions you pay them, and you will have to withhold at the maximum rate.  This is an administrative headache and your foreign investors won't be too happy about the withholding either. 

There are a lot of issues involving foreign money.  Please do your research.

@Jonathan Twombly

I do my best to avoid most of the complications. I dont partner, I dont stay in the deal. I get paid an acquisition fee on the HUD 1 and call it a day. My foreign investors are cash buyers, so they need to prove thier funds to the gov, but there are no mortgagues in play. that would be too much of a pain. I set my business relationship with foreigners as a humble guide and advisor. I show them the deals, and they buy. I let the lawyers, and bankers play with all of the hurdles.

I hope that helps. 

@Josh Caldwell and @Alan Leal.  My apologies.  My response was supposed to be to Alan, not Josh.  Sorry about that.  Alan is still not working with auto link.   

Originally posted by @Josh Caldwell :

Allan

Pittsburgh is the #1 cash flow market in America.  we can do 10 cap properties all day.  they arent hard to find if you have buyers. 

To your success

Josh

 What kind of properties are you buying at a 10% cap rate and what is the market paying for comparable properties?  Is there any profit buying at a 10% cap?

@Bob Bowling

a 10Cap is pretty much market price for single family rentals. There is not a lot if any money to be made reselling if you are buying at that price. On a good note, we can buy those deals off of the MLS. There is nothing special about a 10 Cap in my market.

We are not a hot market, never have been.  You dont invest in Pittsburgh if you are looking for appreciation.  We are all about cash flow.  This is good and bad.  good because the next crash will not affect us much, just like that last one didnt.  The bad is that, you are not going to buy a property at market price and sit on it for 6 months to make a profit.  We have to look at getting creative or looking long term

I hope that helps

Josh

Originally posted by @Josh Caldwell :

@Bob Bowling

a 10Cap is pretty much market price for single family rentals. There is not a lot if any money to be made reselling if you are buying at that price. On a good note, we can buy those deals off of the MLS. There is nothing special about a 10 Cap in my market.

We are not a hot market, never have been.  You dont invest in Pittsburgh if you are looking for appreciation.  We are all about cash flow.  This is good and bad.  good because the next crash will not affect us much, just like that last one didnt.  The bad is that, you are not going to buy a property at market price and sit on it for 6 months to make a profit.  We have to look at getting creative or looking long term

I hope that helps

Josh

Where on earth would you get reliable cap rate comps for SFR? If you can't see the operating expenses a buyer analyzed to arrive at their purchase which created the cap rate comps it's just a wild *** guess. You should not invest on wild *** guesses.

Originally posted by @Bob Bowling:
Originally posted by @Josh Caldwell:

@Bob Bowling

a 10Cap is pretty much market price for single family rentals. There is not a lot if any money to be made reselling if you are buying at that price. On a good note, we can buy those deals off of the MLS. There is nothing special about a 10 Cap in my market.

We are not a hot market, never have been.  You dont invest in Pittsburgh if you are looking for appreciation.  We are all about cash flow.  This is good and bad.  good because the next crash will not affect us much, just like that last one didnt.  The bad is that, you are not going to buy a property at market price and sit on it for 6 months to make a profit.  We have to look at getting creative or looking long term

I hope that helps

Josh

Where on earth would you get reliable cap rate comps for SFR? If you can't see the operating expenses a buyer analyzed to arrive at their purchase which created the cap rate comps it's just a wild *** guess. You should not invest on wild *** guesses.


Cap rate is pretty basic math, you need an NOI, and you need a price. The property will generate either a current or a pro-forma NOI. I am telling you that we can buy 10 caps all day. 20% + cap rates exists in my market but they are a bit harder to find. You dont need a magic cap database to find these deals. Go to the Pittsburgh MLS and compare prices with the income data on Rentometer.com Hit the county tax site and you can get the rest of the data from there. There is no need to guess at anything

Originally posted by @Josh Caldwell :
Originally posted by @Bob Bowling:
Originally posted by @Josh Caldwell:

@Bob Bowling

a 10Cap is pretty much market price for single family rentals. There is not a lot if any money to be made reselling if you are buying at that price. On a good note, we can buy those deals off of the MLS. There is nothing special about a 10 Cap in my market.

We are not a hot market, never have been.  You dont invest in Pittsburgh if you are looking for appreciation.  We are all about cash flow.  This is good and bad.  good because the next crash will not affect us much, just like that last one didnt.  The bad is that, you are not going to buy a property at market price and sit on it for 6 months to make a profit.  We have to look at getting creative or looking long term

I hope that helps

Josh

Where on earth would you get reliable cap rate comps for SFR? If you can't see the operating expenses a buyer analyzed to arrive at their purchase which created the cap rate comps it's just a wild *** guess. You should not invest on wild *** guesses.


Cap rate is pretty basic math, you need an NOI, and you need a price. The property will generate either a current or a pro-forma NOI. I am telling you that we can buy 10 caps all day. 20% + cap rates exists in my market but they are a bit harder to find. You dont need a magic cap database to find these deals. Go to the Pittsburgh MLS and compare prices with the income data on Rentometer.com Hit the county tax site and you can get the rest of the data from there. There is no need to guess at anything

 OK, you are buying at 10 caps and pissing off other investors because they are buying at market caps of say 12%.  See how you are over paying by making up your own cap rates since you obviously can't get cap rate comps?

@Bob Bowling

  you really arent getting this.  Try to imagine a world where you could buy the average house and rent it, and that house would be a 10 Cap.  That is the city I live in.  You should come visit.  Our median house is 126k.  No investor cares that I can get a 10 cap property because they call all do it here.  That is what I am trying to tell you and for some unknown reason you are having trouble understanding. 

I dont make my offers targeting a 10 cap.  I can buy war zone property and get 20-30 caps if I had the desire to own in the war zone   Cap comps arent how we track or evaluate property.   Price comps will tell me if the property is market price, what I am trying to tell you is that at market price, there are a ton of 10 caps out there to be had by pretty much anyone.  This is not magic.

Originally posted by @Josh Caldwell :

@Bob Bowling

  you really arent getting this.  Try to imagine a world where you could buy the average house and rent it, and that house would be a 10 Cap.  That is the city I live in.  You should come visit.  Our median house is 126k.  No investor cares that I can get a 10 cap property because they call all do it here.  That is what I am trying to tell you and for some unknown reason you are having trouble understanding. 

I dont make my offers targeting a 10 cap.  I can buy war zone property and get 20-30 caps if I had the desire to own in the war zone   Cap comps arent how we track or evaluate property.   Price comps will tell me if the property is market price, what I am trying to tell you is that at market price, there are a ton of 10 caps out there to be had by pretty much anyone.  This is not magic.

 Gosh Josh I'm not sure what you think I don't get.  I went back and read your posts.  It seems like you are trying to sell @Allan Leal 10 cap properties because you think a 10 cap represents some measure of profitability when in fact that number does not.  Then you can't even provide ONE cap rate comp. "Trust me Allan, I'm selling you 10's and everyone knows 10 is the best."  You are either ignorant about cap rates or very unethical in your business dealings.  

Do you have any questions for me @Allan Leal?

@Bob Bowling  

@Josh Caldwell

Thanks for your input I'm still new to real estate investing and I'd be lying if I claimed to understand 100% of what you and Josh are talking about. 

If you can't find cap rate comps for SFR's, how would you go about calculating if a property is a good investment in that market? I'm looking for my first deal for myself so I'd benefit greatly to learn more from you guys.

@Jonathan Twombly

Thank you for bringing up these issues for me to research and think about. The investors I have in my network are mostly from Japan. It sounds like taxes will become an issue even if they're all cash, and I wouldn't want to help them get a property and tell them the rest is their problem. Do you know anybody that could lead me further in the right direction? 

Allan, try using this and get to the point that you can enter a reasonable number for any category.  I look for profitability NOT initial cash flow.  Most investors have no clue about appreciation (they call it gravy! LOL ) or rent growth.  

If you don't understand a number ask.  AND then listen to the answer.  If it doesn't make sense then it probably is a bullsh*t answer.

http://www.mortgage-investments.com/resources/onli...

I suggest you make contact with a CIPS or Certified International Property Specialist, it's a international designation for people that have the knowledge you are looking to find.

We have a number of clients that invest in foreign real estate. 

Allan,

I wished I'd see  your post earlier.  I just finished a round of funding from Asia, structured correctly you can avoid US withding taxes for your investors.  Don't give up it is dooable.

Anthony He 

@Bob Bowling  WOW, just WOW

Lets start off with investing for appreciation.  That is what fools do.  Ask anyone who get destroyed in 2008 how that strategy plays out over a long term.  All of the "investors" who rushed into the hot areas right before the bubble popped used that brilliant strategy.   I still remember the kid I met in San Fran who had a 40 year interest only mortgage and was proud of his "investment".  Im guessing he lives under a bridge now. 

Cash flow is the only metric worth looking to build wealth  Markets will go up, markets will go down, but if your cash flow is strong you can deal with any storm, while Bob goes bankrupt. 

If Bob could read, he would understand that a 10% cap rate is normal where I live and where I invest.  It is not some golden carrot.   Investors in places like HI and CA cant get those sort of return very often.  Sure those deals exist, but they are not normal in those places.  Which is why investors from places with bad cash flow invest in places like where I live. 

There is a simple metric to look at. Price is not it. The cost per month to own a property vs the income that the same property provides per month. We call this number cash flow. For example if you can but a house for (real example of one that I bought in May) $19,000, with owner financing none the less, paying out $549 PITI w water and sewage in that number, and you can rent it for $850 per month, then you have positive cash flow. This is not a great deal in the short term, that is why it is nothing exciting. Now if that same house rented for $1200 then it would be exciting.

Originally posted by @Josh Caldwell :

@Bob Bowling  WOW, just WOW

Lets start off with investing for appreciation.  That is what fools do.  Ask anyone who get destroyed in 2008 how that strategy plays out over a long term.  All of the "investors" who rushed into the hot areas right before the bubble popped used that brilliant strategy.   I still remember the kid I met in San Fran who had a 40 year interest only mortgage and was proud of his "investment".  Im guessing he lives under a bridge now. 

Cash flow is the only metric worth looking to build wealth  Markets will go up, markets will go down, but if your cash flow is strong you can deal with any storm, while Bob goes bankrupt. 

If Bob could read, he would understand that a 10% cap rate is normal where I live and where I invest.  It is not some golden carrot.   Investors in places like HI and CA cant get those sort of return very often.  Sure those deals exist, but they are not normal in those places.  Which is why investors from places with bad cash flow invest in places like where I live. 

There is a simple metric to look at. Price is not it. The cost per month to own a property vs the income that the same property provides per month. We call this number cash flow. For example if you can but a house for (real example of one that I bought in May) $19,000, with owner financing none the less, paying out $549 PITI w water and sewage in that number, and you can rent it for $850 per month, then you have positive cash flow. This is not a great deal in the short term, that is why it is nothing exciting. Now if that same house rented for $1200 then it would be exciting.

 Josh you are just rambling here.  Let's stick to the OP's discussion about cap rates.  I am just trying to educate him and you if you'll listen.  

You said, "a 10% cap rate is normal where I live and where I invest. It is not some golden carrot."  Yet you cannot provide one cap rate comp analysis!  So how can you stand behind this unsupported statement?

Also what "return" are you selling based on cap rate?  Is your 10% cap better (more profitable than my 5% cap rate? The market is saying EXACTLY the opposite!  Let's discuss that.

All your other crap is pretty much wrong also but best to be discussed/debated separately.  Let's stick with cap rate now.  

http://www.propex.com/C_g_capvs.yld.htm

This post has been removed.

If you are still looking for advice, please PM me. I have ideas and solutions and experience

Originally posted by @Anthony He :

Allan,

I wished I'd see  your post earlier.  I just finished a round of funding from Asia, structured correctly you can avoid US withding taxes for your investors.  Don't give up it is dooable.

Anthony He 

can you share how to structure it?  thank

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