Foreign Investment in US Real Estate…what are their top 5 areas of focus and who is buying.
As an investor, we always try to look for other avenues of revenue. A profitable niche that sometimes goes overlooked in our industry is foreign investors in the US real estate market. Foreign individuals and corporations are free to purchase residential or commercial real estate in the United States. In 2013, foreign buyers made up about 7% ($92.2 billion) of transactions in the $1.2 trillion U.S. real estate market (Source: Wikipedia). By comparison, foreign buyers purchased $74 billion dollars of residential property from April 2019 to March 2020 (a 5% decrease from $77.9 billion during April 2018 to March 2019) (Source: National Association of Realtors). Although there is some hesitation by foreign investors, there are still opportunities to serve this group of investors. The annual survey of the Association of Foreign Investors in Real Estate ranked San Francisco, which had been one of the top five global cities since 2011, at 11th place. It also ranked Washington, D.C. at 25th, up from 15th place last year. Furthermore, the survey revealed that New York City is no longer the only Number 1 city in the US that appeals to foreign investors; that title is now shared with Los Angeles which tied with New York in this latest survey.
5 Best Cities for Foreign Investment In United States Real Estate
According to an old survey of the Association of Foreign Investors in Real Estate (AFIRE), the United States was deemed the number one country for planned real estate investment and the 5 best cities for foreign investment in United States real estate (CRE) are:
- Los Angeles (tied with New York)
- New York (tied with Los Angeles)
- Washington, DC
- San Francisco
With 58% of respondents’ votes, the US remains the country that is considered the most stable for real estate investment and 86% said they plan to maintain or increase their investment in US real estate. Therefore, this speaks very highly of US real estate.
Residential Properties Purchased by Foreign Buyers in the United States
According to a report published in 2017 by NAR, Chinese buyers have been the top foreign buyers of US residential property for three straight years; this is the highest record yet.
The below data has been taken from the report published by NAR (National Association of Realtors).
- 2017 Profile of International Activity in US Residential Real Estate
- Foreign buyers purchased $153.0 billion of residential property from April 2016—March 2017,
- An increase from $102.6 billion from the previous 12-month period (April 2015—March 2016).
- The dollar volume of foreign buyer purchases accounted for 10 percent of the dollar volume of existing home sales, an increase from the eight percent share during the previous period.
- Foreign buyers purchased 284,455 residential properties, an increase from 214,885 during the previous 12-month period. The number of units purchased made up five percent of existing home sales, an increase from the four percent share during the previous period.
- Foreign buyers who primarily reside outside the United States (non-resident foreign buyers) accounted for 42% of all foreign buyers, while recent immigrants and foreign buyers who reside in the United States on work, student, or other visas (resident foreign buyers) accounted for 58%. This is about the same as that of the previous 12-month period.
- The average price of properties purchased by foreign buyers was $536,852, more than the average price of all U.S. existing home sales which is $277,733.
- The median price of properties purchased by foreign buyers was $302,290, also more than the median price of $235,792 of all U.S. existing home sales.
- China remained the top origin of foreign buyers ($31.7B), followed by Canada ($19.0B), the United Kingdom ($9.5B), Mexico ($9.3B), and India ($7.8B). The majority of buyers from China, India, and Mexico were resident buyers, while most buyers from Canada and the United Kingdom were non-resident buyers.
- Although foreigners purchased property nationwide, five states accounted for 54% of total residential property purchases: Florida (22%), Texas (12%), California (12%), New Jersey (4%), and Arizona (4%).
- Nearly half of foreign buyers purchased a property as a primary residence.
- 72% of non-resident foreign buyers made an all-cash purchase, while 35% of resident foreign buyers paid all-cash.
For the new foreign real estate investors, it is important to know that in the United States real estate opportunities are often found using a listing system shared by Real Estate agents using multiple listing services. Although this is a good system, it is not always the most productive or profitable. Organizations like Canterbury Investment Group and Royal Oxford Global Properties have created a network of boots-on-the-ground advisors in all the hot markets that allow access to discounted and distressed for sale by owner (FSBO) properties. Each state in the US has its own set of rules regarding the purchase of real estate, including the type of purchase contract used, the method of closing the sale, and even the duties and titles of the individuals involved. So, with that said, it is important to have an established experienced group of contacts that are familiar with the market area of interest. So, whether you are looking for:
- Single Family Homes (SFH)
- Single Family Home (SFH) Investor Bundles
- Vacation or Beachfront Homes
- High End Homes
- Commercial properties
- Mix Use
- Health care
- Retail and Sports entertainment
So whether you are an international investor or a domestic investor, there are still opportunities to find and source properties in this niche. Like in any great opportunity, it is important to work with the right team in the right market. Now due to the Pandemic, the next 18-24 months are crucial for maximizing your dollars that are spent on all new US property investments. From foreclosures to investor liquidations, this will be a great opportunity to invest despite the looming financial uncertainty as we begin ascending from the impact of the pandemic. Happy Hunting! 😊