were selling for $50,000 or $60,000 with rents in the $750 to $800 range. “Once I started showing it to them, and we had the full turnkey system, it was almost like just a complete overnight—shot out of a cannon—change in our business,” he says. His business with Aussies turned out to be a currency and cultural play, as the dovetailing of a strong Australian dollar and a similar culture and language made for good business. At its peak, Australian customers represented 80 to 90 percent of Jennings’ business. The strengthening U.S. dollar has brought that figure down to about 20 percent. Investors who bought when the U.S. dollar was weak are still prospering now that it’s strong. Those who sell are seeing healthy profits, as prices have risen and benefiting as well, according to Jennings, as they’re renting in the same strong U.S. currency. The strengthening dollar has slowed Canadian and Australian investment in U.S. real estate, but the Chinese are still investing heavily in American property. SINGLE-FAMILYOR MULTIFAMILY? YES Experts say investors’ appetite for a certain type of residential property de- pends on several factors, with familiarity and the buyer’s reading of the market- place being the two most important. First-time Chinese buyers, for exam- ple, tend to buy multifamily as “the pro- cess of buying apartments is much easier to comprehend, because it's what they know from their own experience back home, where most people are urban and live in apartments,” said Charles Pittar, CEO of Juwai.com, a company that helps Chinese invest in U.S. real estate. Cadman said Canadians were very practical and bought single-family after the Great Recession because it was “on their sales proceeds will be brought home in the now- strong U.S. dollars. And those who are still renting their U.S. properties are
sale.” By 2013, they were looking at mul- tifamily because single-family prices in the United States had normalized. Foreign buyers can have an effect on housing prices in certain neighbor- hoods, effectively bidding up prices. “This typically happens in premium areas that attract a large number of new buyers from China and where supply is constrained,” Pittar says. “In areas where new supply can be created, Chinese buyers often spur new construction and thus enable local markets to more than meet the new wave of demand." OUTLOOK FOR FOREIGN INVESTORS Experts say that once the dollar drops in value, international investment in U.S. residential real estate will pick up again. “So when the loonie starts to rebound, regain strength against the U.S. dollar, you’ll see the level of interest from Canadian investors spike up again because of the opportunities made available in the U.S.,” said Cadman. Pittard said Chinese buyers will become even bigger players on the international scene as they’re making up for lost time. "Despite Chinese buyers being the biggest buyers these last few years in global real estate markets, China has far to go before it arrives at ownership lev- els of foreign assets consistent with the size of its economy. It’s trying to catch up,” Pittar said. “A big driver is massive pent-up demand for overseas invest- ment, because they just couldn’t do it at all until very recently." With the shifting fortunes of the dol- lar, it’s hard for U.S. investors to com- pletely depend on foreign investors for the bulk of their income, yet many have profited by seeking out foreign investors and helping them find U.S. residential investment properties. •
RESOURCES BUY CASH FLOW PROPERTIES WWW.BUYCASHFLOWPROPERTIES.COM 813-435-1551 -
BUY MEMPHIS NOW WWW.BUYMEMPHISNOW.COM 901-417-8427 - INVESTAR USA WWW.INVESTARUSA.COM 855-456-3223 -
JUWAI WWW.JUWAI.COM 646-281-7322
to buy and manage investment prop- erty. One way is by providing turnkey investments, with the company finding the investment property, assisting with the purchase and providing property management services to the investor. U.S. regulations and tax laws are dif- ferent, and some companies have done a good job helping international investors understand the differences so they know what they’re getting into. IT’SALLABOUTTHE DOLLAR When the dollar is weak, as it was as recently as 2012, U.S. real estate can be a very profitable investment for foreign investors. Australians and Canadians poured money into U.S. real estate when their dollar and loonie, respectively, were strong in the early part of this decade. When Jennings heard about how strong the Australian dollar was becom- ing relative to the greenback, he started cold-calling Aussie real estate agents. He says they “could not believe” U.S. houses
Robert Springer is a regular freelance contributor to Think Realty Magazine. Contact him at rtspringer@gmail.com.
16 | think realty magazine | may :: june 2016
Made with FlippingBook Online document