As turmoil continues to mount in Hong Kong and beyond, Chinese investors have fixed their gaze on the American real estate market to secure their assets. Although overall, New York City remains one of the most attractive locations, investors are not necessarily looking at condominiums and co-ops in distinct real estate markets like Manhattan. Instead, States such as Florida appear to be attracting as much as 20% of all international buyers.
“Cities like New York and Miami are traditionally more expensive, but even in these areas, profitable opportunities can be found,” said Rena Kliot, broker and founder of Pulse International Realty in Florida and New York. “U.S. remains one of the safest havens for investments.”
The U.S. government is committed to policy that foreign buyers can count on.
The policy that the U.S. government is committed to is their Visa program which helps foreign investors gain citizenship, establish businesses and buy property. In fact, Chinese investors purchased some 183,100 properties that totaled a whopping $77.9 billion from April 2018 to March 2019. California and Texas capped the top three states at 12% and 10%, respectively. “My clients have questions about language, culture, climate, topography, government—you name it, but they are confident their money is safe,” Kliot said
To make the most of their money, international investors need to be well-informed of the various options offered by the U.S. government. That’s where Kliot steps up as an expert advisor. A high-level brokerage owner and businesswoman with a track record spanning nearly two decades and more than $1 billion in sales under her belt, Kliot co-hosts a popular American TV show called “American Dream.” Though a coveted prize, the American Dream is still achieved by those possessing not only good fortune but also tenacity, and expert guidance. Kliot specializes in helping others achieve the American dream by connecting them with opportunities in real estate. “I have developed relationships with professionals with whom I feel secure,” Kliot said. “I have a responsibility to offer the best possible outcome for all my clients, which is why I screen professionals in advance.”
Because it can be daunting to invest in a country with which a client is unfamiliar, the 20-year real estate veteran scouts for deals and matches investors with properties and/or partners based on a common purpose. Return on investment depends on the neighborhood, but in a nutshell, Kliot estimates 5% to 6% is a realistic and achievable rate of return in today’s market. “Don’t forget about Tax Credit programs in the U.S.,” Kliot said. “Given these safeguards, real estate literally provides investors with a solid foundation.”
The first step is to create a budget and establish a strategy. “When a client is looking for upside on a resale, then I will target a lucrative opportunity that we can flip and make a profitable return on it,” she said. “Something that is currently undervalued by the seller for a variety of reasons or a property that I sense I can deeply negotiate for my buyers, offering them an upside day one. You make money when you buy. You need to buy right.”
While the U.S. has always provided foreign investors reliable tools to realize their dreams, such as a stable and welcoming market, a transparent legal system, various tax programs, and superb infrastructure, in recent years, the American dream has become more challenging to attain. According to Stuart Anderson of the National Foundation for American Policy, the number of temporary visas issued in 2019 dropped 7% while visas for those seeking permanent residence declined 5%.
Participating in the EB-5 visa program can help tremendously. Out of 10,000 allotted by the government in 2018, there were 9,602 EB-5 visas issued and status adjustments for immigrants worldwide, according to a Statista study. “The U.S. government spent millions of dollars developing incentive programs,” said Kliot. “The EB-5 visa seems to be the best win-option as you not only invest in real estate but potentially also make a profit and increase the chances of securing a U.S. green card.”
Unlike the difficulty to obtain an expensive H1B visa, the initial investment into real estate that the EB-5 visa program requires can reduce or entirely remove the immigration challenge while generating a return on investment. “There are students and business people from Europe, Asia, Africa, and the Middle East who easily spend $100,000 to $200,000 per year on their education, living, and traveling expenses,” Kliot said. “Even upon graduating, many still struggle with getting a working H1B visa. As they potentially continue to rent for approximately another three years, the total cost of housing, the legal rates for obtaining a visa, and travel for visa-extension requirements add up.” To participate in the program, up to $1 million is required upfront but when investing in Targeted Employment Areas (TEAs) program, which mandates the creation of 10 full-time jobs for American nationals, the amount can be reduced to $500,000.
“The EB-5 is a lengthy application process that requires a real estate expert and an attorney’s stamp of approval,” Kliot points out. “It’s also not a guaranteed way of securing a green card. However, you still get a visa and invest in the economy, so you aren’t losing anything.”
Despite the obstacles, the program has a 90% success rate and every year, the United States gives away 55,000 green cards, also known as permanent resident cards, to winners of the Diversity Visa Lottery to foreigners ready to try their luck at pursuing the American Dream, according to the American Dream website. “There are numerous opportunities depending on the individual’s needs,” said Kliot. “For those interested in renting recently acquired properties to tenants while they are living outside the U.S., there are attractive opportunities in New York and South Florida. Still, an investor needs to know when and where to find them. That’s where hiring an expert is key.” Because real estate is not immune to cycles of volatility, investors must be aware of market timing as they seek the best opportunities to match their strategy.
Since the arrival of the Dutch in the early 1600s, entrepreneurs and investors worldwide have been drawn to New York City to try their luck in the fascinating metropolis and to realize their full potential. However, New York is known as an exorbitantly priced city in which to live and own property.
Nationwide, Manhattan tops the U.S. charts in terms of price per square foot on residential property. According to CNBC, real estate sells for $10,000 per square foot on some Manhattan properties and the average price per square foot is somewhere in the realm of $1,770 per square foot. As recently as 2017, New York City real estate was traded on an average of $2,065 per square foot, making it the third most expensive residential property market in the world. Seeing as prices have gone down a little we have been observing the opportunity to better negotiate and seek competitive pricing in the NY market as it is inevitable that at some point prices will rise again. “The current opportunity to achieve a better price per sq foot will not be as easy to achieve, hence, I believe, it is a perfect time to buy property,” Kliot notes.
“The circumstances should enhance the temptation for investors that are interested in a longer hold of their investments,” she said. Among the risks that international investors ponder is whether the 2008 crash will happen again. Luckily, Kliot doesn’t foresee another such crash on the immediate horizon. “The banks and financial institutions watch dutifully and do not lend money to investors who cannot provide collateral or a higher down payment,” said Kliot. “We do have a sense of balance right now in terms of real estate.” That’s because presently there is an opportunity to negotiate more than in the past due to buyers and sellers thinking more realistically and being aligned in their outlook.
“The crisis was caused by global bank and insurance companies failing to pay on their liabilities,” Kliot said. “They were bailed out, but those who held their ground until now made a profit on their properties regardless because the prices regained the pre-2008 crisis level long ago.”