All Forum Posts by: Sam Van Horebeek

@Alice K.

It really depends on what you are looking for - cash flow or appreciation, or a mix of the two. As you mentioned, the Bay Area has seen seen a steep price increase and might be a tipping point now. However, in the long term, SF has seen a good increase in prices and could continue this trend.  From our perspective here in China, most Chinese buyers tend to focus on long-term appreciation numbers so they still want to buy in places such as SF (for reasons such as immigration, schools, etc.). Furthermore, if you are able to leverage, the numbers might still work. 

Obviously, as someone else pointed out, cash flow will be limited in SF and other coastal cities.  As such, if you are focusing on achieving annual cash flow, places in the mid-west or south tend to produce much higher returns. Appreciation levels might be more modest but you could be making a good 10% net rental yield per year.

We have seen investors from Asia looking more and more at second-tier cities in the mid-west and south as well.  There is an education process that these investors have to go through indeed but that is exactly what they are doing, especially after realizing that the rental yields are attractive.  We have assisted with investors buying in Cleveland, Memphis, Austin, Chicago, Westchester, Orlando and many other cities. 

Each city is quite different from a cash flow or appreciation perspective, so once you know what kind of returns you like to achieve, it will be more clear what city could be suitable for you.

@Lola Moiseeva

Welcome! Buy and hold is a great strategy and many investors here on this platform have shared knowledge on many cities that you can consider for that strategy.

As there are many options for you to consider, you might want to decide first on the return that you are looking to achieve, what amount of risk you are willing to take, budget and time horizon.  

We have had several investors from Dubai looking for the same type of strategy and answering these questions typically helps narrowing down your search in an efficient way. 

Also, I am not sure you are originally from the US (or have at least visited some cities in the US)? If so, having some knowledge yourself on the local market is sometimes a suitable way for investors to narrow down the list of options. 

Lastly, we have noticed that in many cases, working with a local team that you can trust is often more important than the absolute returns you can theoretically achieve in other cities. 

Good luck!

From our perspective in China, I can say that the majority of Chinese are investing in the US real estate market for long-term appreciation. However, over the last 6-9 months, we have seen a significant increase in requests for cash flow generating properties.

Regarding location in the US,  Texas remains a secondary location for Chinese investors (compared to West Coast and East Coast).  Over the last 6 months, within Texas, we have seen requests for Houston and Austin.

Hope this gives you a perspective

@Marz Junior

welcome - you might also consider first what type of return versus the amount of risk you are wiling to take. When we talk to foreign investors for the US real estate market, often they do not understand well that every market/neighbourhood (and property) has a certain (expected) return but also certain risk.  Every investor is different so you might need to determine your preferred style of investing in property and that will drive which city you should look at. We have done this over the last years with many foreign investors and they seem to appreciate this way of tackling the US real estate market. 

@Kellen Canfield

welcome! If you are interested in foreclosures in the midwest, there some great opportunities there.  We have seen many Asian investors buying foreclosures and renting them out. Just pay attention to the team that you are using to acquire and manage these properties. Good luck!

@Ben Hubbard

If you use financing, the bank likely will ask you to have the closing documents certified (which you can do at a US consulate). After certification, you can send all documents to closing attorney. There might still be some other documents signed on closing day itself so you probably need to give the attorney Power of Attorney too.

An LLC might be appropriate but my recommendation is talk to a tax accountant as there are several tax implications on the annual income and at the exit.

I agree with Brian that the overall percentage of international buyers in the US real estate market is still small (although that there are a few neighbourhoods indeed that see a much higher percentage of international buyers e.g. Arcadia).

To give some perspective, the amount of international buyers spent on US real estate in 2011 was 66 billion USD. This number has grown to 104 billion USD as of March 31 2015.  As such, there is certainly a strong growth in the international buyers, but international sales is at the moment only 8% of total US homes sales.

Having said the above, our team in China has noticed a growing interest from Chinese clients for US real estate so I think that the demand will continue to go up.  This probably would cause a continued demand for popular cities such as SF, LA, NYC.

@Sebastien Hitier

Welcome to BP - I am also based in Hong Kong and focused on property investments in the US.

We are aware of several turnkey providers in Florida so feel free to PM me if you have any specific questions. 

Depending on the returns and timing you are looking for, Florida might indeed be a good investment option. Good luck!

@David Gregory

We are only working with overseas clients (predominantly investors from Hong Kong, Mainland China, Taiwan and Singapore) so I could you give a perspective on what type of experience these international buyers of US real estate have had/are looking for.

Success factors:

- The US is a large country and most international buyers only have been to a few cities such as NYC, SF, LA,... if at all.  Some believe that they should only invest in what they know and as a result, we see many of them continue to flock to these large metropolitan cities. In almost all cases, these international buyers focus on long-term capital gain.  In the words of one overseas investor, they are looking for "an anchor place" to put their money. For these investors, success is achieved when they buy a house in a prime location in a top tier city in the US.

- Over the last few years, we see more and more international buyers looking for second-tier and third tier cities in the US. Not only do they focus on capital growth but they are keen on cash flow as well. 

My personal advice around identifying an investment location in the US is to write down on paper what return you are looking for in the short term (annual cash flow) and in the long term (appreciation), the risk you are willing to take to get these returns, and your budget. Once you have written down those numbers (in essence your "investment goal"), you can be much more focused, and, I believe, more successful.

Challenges:

- Financing for overseas investors who are looking to buy US real estate is a challenge, but a few US banks have been opening up their financing to foreigners (albeit of course with some requirements). There is a significant amount of paperwork to be submitted but besides that, foreigners can now get financing for certain types of US real estate investments.

- The tax filing requirements for non US residents is cumbersome but once the overseas investors understand the obligations, they realize that, compared to other countries, the US market would still be an interesting location for investment.  For example, during a seminar organized by American Chamber of Commerce and Canadian Chamber of Commerce in Hong Kong two weeks, we put together 4 guest speakers to talk about overseas real estate investing. We compared investing in the US real estate market with investing in Canada, UK and Australia.  Many Hong Kong investors approached our US team after the seminar because the US returns (including the issues with US tax) were still attractive compared to other countries.

- Time difference is and will remain a challenge. Overseas investors (especially the ones in Asia) are facing more than 12h time difference with the US. This is a bit of a problem as the properties are located in the US, the acquisitions and closings occur in the US, the property management is done in the US, etc. This means that overseas investors need to find local teams that they can trust during every step of the acquisition and management of the property. Making trips to the US to meet with local teams is expensive and time consuming and in most cases, overseas investors won't do it (just think about the impact on your ROI by traveling to the US for just a week). Based on feedback we have received from overseas investors, most sales people coming to Asia to sell new developments in the US only know the building they are selling and the positive factors in the neighbourhood. Clearly, they are not incentivized to give you a true picture of the area or the long term factors that an overseas investor needs to consider.

- Time requirement to make a US investment is another factor to consider. Clearly the more research the overseas investor is doing, the better off he/she will be. However, there is a balance between the time it takes you to do research and complete a transaction, versus the return an investor can make on a property investment. In essence, every day you put into research is an investment cost that lowers your ROI (relatively to a property investment in your local neighbourhood in the country you are currently living in - which you probably know well)

These are just the main factors that we continue to hear from overseas investors but hopefully helpful to you. Good luck