“Ex-post, Ex-ante” + Family Office uses bridge loan to buy Retail/Office building

Ex-post, Ex-ante" + Family Office uses bridge loan to buy Retail/Office building
Ex-post, Ex-ante" + Family Office uses bridge loan to buy Retail/Office building


The worsening energy crisis in Europe has taken the front page of most media channels this week as the Nord Stream 2 pipeline, a 1,200 km natural gas pipeline from Russia to Germany, remains close, which is driving the Euro to a 20-year low vs. USD. The BBC reports that the annual energy bill for a typical UK household is £1,971. From 1 October, however, that’s due to rise 80% – to £3,549!!! Can you imagine paying USD4,000 a month for electricity?! The new incoming PM, Ms. Truss, will certainly be making this a top priority. We really hope for a mild winter in Europe for everyone’s interest. 

Meanwhile, the Yen is now close to a mind-boggling ¥145 vs. USD, a 24-year low! Oil at $82 is a very critical level and, technically speaking, could break lower, which could give some breathing room to the economy. Seeing Oil go from $120 a barrel in May 2022 to $85 now shows how volatile the world is and also how quickly demand can fall for the most popular commodities. 

In the US, Nonfarm payrolls were +315,000 in August (seasonally slow) vs. +526,000 in September, slightly lower than expected but a big month-on-month decline. Meanwhile, unemployment is at +3.7%, slightly higher than expected. The tight labour market while companies are announcing hiring freezes is peculiar. Could this be a recession where employment is less affected? ISM Manufacturing for August was 52.8, unchanged from July – not the decline I was hoping for to give us a little breathing room. 

US Rates30-year fixed 6.12%15-year fixed 5.32%
30-year jumbo 5.10%5/1 ARM 5.95%
* Reference only. These rates are Conforming rates, not applicable to Foreign Nationals. 


I’m really keeping an eye on oil prices…I have a sinking feeling that Oil is such a consensus overweight for most hedge funds (and institutions) that technical breakthrough support (say $80) will see a further decline in oil prices which is good news for everyone! European energy prices are now generally 15-20% of GDP, and someone has to pay for it – the public or private sector. If the public pays for it, it will have to run a fiscal deficit of 15-20% of GDP, so more debt on top of the already growing debt problem. The private sector gets tricky, especially for countries that have piled on loads of debt in a short period of time. One country that sticks out is Sweden, with over 150% of private debt to GDP. Nationally, Sweden’s debt service ratio is 27% (highest on record). It appears Sweden, France, and South Korea are the most interest-rate sensitive countries, relatively speaking, according to BIS data. Watch this space. The negative soundbites on the European banking sector are going to get louder and more frequent.  

Buy now! Why now? 

We are in a perverse cycle where rising rates are actually squeezing up rental yields. The marginal buyer cannot afford to own given rate rises, and the Millennials also cannot afford and must rent – AND, to add to that, there is a 3.8M housing shortage according to the Fed. If you read last week’s “Ex-post, Ex-ante,” places like New York are seeing double-digit percentage increases in rents, BUT 39% of residents are looking to move given the high cost of living. It won’t be long where we are in a world where rates are 7-8%, BUT rental yields could be 15-20% (some parts of Texas can net you low teens yield already).

Look at this chart below from a Bloomberg article (7 September) US household debt service ratio has fallen from around 13% at the time of the last housing crisis to 10% now, according to the Fed. The amount households are spending to service their mortgage debt has been cut almost in half, from 7.18% in 2007 to a recent 3.89%! 


1. Indonesia family uses bridge loan to purchase $5.4M Retail/Office to maximize cash flow

Location: San DiegoPrice: $5,400,000
Property: Storefront Retail + OfficeLoan Amount: $3,500,000
Cap rate: 4.05% / 100% leasedLoan to value: 65%
Use: InvestmentRate: 8.5%
Loan: AM USA Bridge+Term: 3-year interest only

– Client was offered a bank loan at 5.75% but given that it is cash-flow based he would not be able to cover the 1.25x cash flow coverage typically required and would be able to get around 40% LTV. Our knowledge was valuable. We knew that California is a tough market as it is with very low CAP rates but the added increase in interest rates is making it even harder to achieve higher loan amounts.

– Our solution: Use a bridge loan with higher leverage, interest-only payment to get into the property. Then position the tenants for renewal of their lease agreements and refinance when rates come back, allowing for more leverage to be supported by the cash flow. Good news is the client is using this strategy to purchase more yielding assets in the US. Loan managed by our Head of Sales, nick.worthing@americamortgages.com

2. Canada tech entrepreneur buys $1.25M condo in Miami

Location: MiamiPrice: $1,250,000
Property: CondoLoan Amount: $875,000
Use: InvestmentLoan to value: 70%
Loan: AM Foreign National+Rate: 6.875%
Term: 30-year fixed

– Client wanted to start building rental portfolio in the US to earn income and to begin developing a credit footprint for future family and business opportunities. Given the nature of his business, he was not able to find bank financing in Canada and we were able to find a mortgage which used his Canada credit and income to qualify.  Funded in 43 days with the help of our Canada-based loan officer, kristen.young@americamortgages.com

3. UK family buys $850K Boston condo in son’s name to develop credit

Location: BostonPrice: $850,000
Property: CondoLoan Amount: $595,000
Use: InvestmentLoan to value: 70%
Loan: AM Foreign National+Rate: 6.875%
Term: 30-year fixed

– Client bought condo in son’s name to rent out while his son attends boarding school on the East Coast.  The intention is for him to stay in the condo upon graduation from university in 4-5 years or continue to rent out to bolster his income while starting out on his career, meanwhile developing US credit for himself.  Our UK-based loan officer provided a hassle-free experience throughout their mortgage journey, diana.gomez-mcgurk@americamortgages.com

Schedule a call with us at hello@americamortgages.com to find out more! 


“Ex-post, Ex-ante” + When rates will fall

Welcome to our newly revamped weekly product, where we do a quick summary of salient news over the past week and what to expect the following week and beyond. It took a while to think of a catchy name for our weekly and we hope you like it. We also plan to include our house view of the major macro events and, of course, how it all relates to the global real estate markets, in particular the US.


  • Ex-post; Ex-ante
  • Will rates decline? Yes, starting in March!
  • Why US home prices will not collapse
  • Buyer’s Guide to California
  • Loans of the week! 


Last week saw major headlines with UK printing a 10% inflation number and Europe continuing to see hefty price increases in energy costs, with Germany at €700 ($696) a megawatt-hour, up from under €50 in January. 

In the US, mortgage applications dipped slightly for the week ending August 12, 2022, down 2.3% week on week. Things are generally slower in all areas of the economy in August, and this is no different. 

30-year fixed rate 5.45% mortgages are down 50 bps from June 2020 highs of 5.98%

* This reference rate is for conforming Fannie Mae loans, not applicable for overseas borrowers.


This week, all eyes will be on Jackson Hole, where Fed chair Jerome Powell will speak on the economic outlook at 10 am Washington time. We cannot see Powell becoming incrementally dovish at this stage, while there could be an outside chance of being less hawkish. As a firm, our house view is that given the fact that the “reputation and credibility as an institution” is under pressure, the Fed will risk over-tightening in this economic cycle – right or wrong. To us, tightening into a recession is extremely heavy-handed, but Powell certainly does not want to be remembered as Arthur Burns 2.0. 

The Trillion-dollar question is IF rates will be cut, and if so, how much?

If you look at the Eurodollar implied futures curve, you will see that the market is expecting rates to peak in March 2023 at 3.93% and then start to decline to 3.51% by December 2023, and drop to 3.03% a year later. That is to say; the market is expecting 90 bps of decline in Fed Funds by December 2024! The charts also imply that rates are expected to stay under 3% thereafter.  

3-month Eurodollar Futures Yield Curve

Credits: Barchart.com, GMG Macro Research

ISM Manufacturing Index – US 30-Year Mortgage, YoY%, 18-Month Lead Inverse”

One area of potential concern is US industrial production, which is at risk of significant contraction (below 50 on ISM Manufacturing Index is a contraction). If so, this could trigger deeper recession concerns. The next the Institute of Supply Management (ISM) report will be out September 1st. 

If you look at this chart, it appears that the ISM Manufacturing Index (black line) lags the inverse of the US average 30-year mortgage rates (red line) by about 18 months. If the US manufacturing economy pans out in this manner, the Fed may be forced to make deeper cuts and we could see a bigger decline in rates than the market is pricing in, giving another opportunity for US home buyers who are waiting for lower rates! 

Credits: TradingView, GMG Macro Research

Home Prices

There is no impending collapse. We see strength in housing prices.

As we read in the media that home prices are softening, housing starts declining, home prices are falling, and it paints a doom and gloom picture, but we cannot see a collapse in housing prices and a repeat of 2008.  

Did you know that 40% of all homes in the US are held free and clear without a mortgage?

The average outstanding mortgage is 33% of home values. There is simply too much equity in the market for a collapse. Since 2008 underwriting standards have been significantly more stringent with more regulatory oversight. More importantly, most of the outstanding mortgages were printed when rates were below 4%!

Sure, in some cities, there will be softening as residents gentrify out to lower cost of living areas. It’s no surprise that San Francisco, Los Angeles, and New York City are at the tops of those cities where there are significant outflows of residents.  

According to a Redfin article on July 18, 2022, here are the:

Top outflow cities in 2Q2022:

San Francisco48,718Top destination: Sacramento
Los Angeles  40,632Top destination: San Diego
New York City 48,731 Top destination: Philadelphia

Top inflow cities in 2Q2022:

Miami12,614Top origin city: New York City
Tampa7,939Top origin city: Orlando
Phoenix11,464Top origin city: Los Angeles

Buyer’s Guide to California

Over the past 2 weeks, we have published a Deep Dive into what drives overseas buyers to California. In Part 1 – Education. We look at the top 50 public and private high schools in the state, average SAT/ACT scores, Median Income and Average Home prices and conclude the cities with the top schools tend to have the strongest property price appreciation and rental reversions.

In last week’s Part 2 – Demographics. We look at the Asian population in each of these schools and conclude the schools with the highest Asian population is another driver of home prices where the top schools are located.

This week, in Part 3 – Taxes and Benefits. We will conclude the report with a tax guide for overseas investors, how rental income is taxed and various deductions that are allowed.  

Finally, to wrap-up our Buyer’s Guide to California, we will be hosting a webinar with Susan Kim, our Private Client US Concierge Partner and top real estate experts in San Francisco, Palo Alto, Los Angeles, and Orange County to give you an on-the-ground discussion on the respective cities, where the value is now and in the future. Stay tuned!

Loans of the week!

1. Switzerland Family Office purchases luxury condo in New York

Client wanted options outside of their private bank which did not require pledging assets.

Type: Luxury Condo

Price: $20M

Loan Amount: $11M (55% LTV)

Use: Second home

Loan type: America Mortgage HNW+

Qualification: Using borrower’s liquid investment portfolio as a reference without encumbrances. (Example Fidelity account)

Term: 5-year fixed / 30-year amortized

Interest-only: Fixed for 5 years

Rate: 7.875%

2. UK technology entrepreneur purchases home in Atherton (near Palo Alto)

UK-national client attended Stanford and plans to move their children there in 3 years to attend high school. His goal was to rent out the home to tech executives or AirBNB in the interim.

Type: Single-family home

Price: $10.9M

Loan Amount: $6M (55% LTV)

Use: Investment

Loan type: America Mortgage HNW+

Qualification: Using borrower’s liquid investment portfolio as a reference without encumbrances. (Example Fidelity account)

Term: 5-year fixed / 30-year amortized

Interest-only: Fixed for 5 years

Rate: 7.25%

3. Singaporean family purchases home in San Antonio for rental income

Father attended the University of Texas and, after reading our Deep Dive report, decided to own a home where he could take advantage of the strong USD and rental income currently in San Antonio and potentially will move there for retirement.

Type: Single-family home

Price: $350,000

Loan Amount: $245,000 (70% LTV)

Use: Investment

Loan type: America Mortgage Foreign National+

Qualification: Based on overseas income and credit

Term: 30-year fixed

Rate: 6.875%

Thank you and feel free to contact us if you have any questions.


Buyers Guide to California Pt 2 – Demographics

Buyers Guide to California Pt 2 - Demographics Matter
Buyers Guide to California Pt 2 - Demographics Matter


Californication, Red Hot Chili Peppers

In last week’s “Buyer’s Guide to California Pt 1 – Education Matters,,” we discussed why Education is an important driver of where overseas borrowers choose to invest in real estate. 

In that report, we looked at the top 50 Public, and Private high schools, average ACT/SAT scores, Median Household Income, Average Home Prices, and Rental Yield.

We argued that when looking at where to make your US property investment, the quality of education in the nearby city/area is a factor in the decision since there is always a notion of “can I live there one day” and “maybe my children can go to school there”. Popular cities in the US will undoubtedly have good schools in the city or in the vicinity. 

“Popularity as a living destination” in turn drives demand, home value appreciation, and strong growth in rental income.

This week we focus on Demographics.

An under-appreciated factor in determining where to own is what city has the most culturally similar population. It’s much easier when you have neighbors that speak your language and share similar cultures and values. 

We will answer these questions (and much more)!

  • Which high schools in California has the highest Asian population?
  • Which cities have the most Korean-born residents?
  • Which cities have the highest total Asian population and the respective top schools?
  • Does the highest Asian population determine how home prices will behave?
  • Which California cities have the highest: Hong Kong, China, Taiwan, India, South Korea, and Philippines-BORN residents?

Demographics matter!

In this study, we solely focus on the Asian population in schools. Asians have been the biggest group of immigrants over the last 60++ years, spurred mainly by the Immigration Act of 1965 but also the Taiwan Relations Act of 1979, the Luce-Celler Act of 1946 as well other obvious political issues of the time.

In addition to the above reasons, many immigrants just wanted a better life for their families, they studied hard, and slowly communities grew around the top education destinations.

Here is the Asian population (>40%) for the top 50 Public and Private Schools in California.

You can also see that these cities have the highest Home Price to Median Income ratios, highlighting the center of attraction for Asians moving to the US.

Note a common rule for affordability is for a home price to be UNDER 3x your income!

Public High Schools

Private High Schools

Takeaway – You can see cities where the top schools are located have very high Home Price to Income Ratios which highlights the property value growth driven by families moving to these cities, in particular Asians.

The next study is very interesting!

Our team looks at which California cities have the highest overseas-born residents, specifically from:  China, Hong Kong, Taiwan, South Korea, Philippines, Vietnam, and India.

You guessed it, many are in the cities where the top schools are

We only used cities with over 20,000 population.

*Refer to full chart below

Here is same chart in Alphabetical Order

Illustrating popular cities ranked by multiple demographics

As you may observe in this report, the cities with the highest Asian immigrant population tend to be where the most demand is, especially when compared to household income, and it’s no surprise it’s also where the top high schools are.

That is to say, the schools and cities mentioned in last week’s report on Education being the main driver of price appreciation and rents are very similar to the cities mentioned in this report.

While this study is not meant to be a rigorous analysis by any means, it is close to my heart since I moved from Singapore to San Francisco when I was 16. My parents had the same thought process…strong Hong Kong population and good schools. I ended up finishing high school in San Francisco and attended UCLA.

Stay tuned for the final part of our Buyer’s Guide to California, where we take a quick look at the general carrying costs for a rental property, including taxes, deductions and other administrative costs. 

Finally, we will be hosting a webinar with our California Partner for a real “on-the-ground” discussion along with a panel of real estate experts for the Bay Area, Palo Alto, Los Angeles, and Orange County. We are still finalising the exact details, but this will be in September. 

Have a good weekend!  If you want a copy of the spreadsheet with the data from our research, please contact us. We are happy to share our findings.


Buyers Guide to California – Education drives prices and rents


“California, Here we come” Phantom Planet

(click for an awesome Indie rock song from 2002)

We are super excited to kick off our “Buyer’s Guide to U.S. Real Estate” series, where we go in-depth into the main U.S. states for property investment purchases, starting with California!

We also have a surprise guest at the end of the month (see bottom of article)!

What’s not to love about the Bohemian vibes of San Francisco, the technology center-of-the-universe in Palo Alto, wineries in Napa, food in Yountville, golf in Steinbeck country, the quaint and exclusive Montecito, and year around perfect weather in San Diego.  

And finally, Los Angeles – Beverly Hills, Hollywood, Venice Beach, Santa Monica, Bel Air, Pasadena, Orange County – it’s almost endless. 

It’s no surprise that California is a favourite investment destination for our clients, both Overseas Expats and Foreign Nationals, primarily from: the U.K., Canada, Australia, Mexico, China, Hong Kong, Singapore, Philippines, Indonesia, Australia, France, UAE, Germany to name a few.

Want Home Value Appreciation and Rental Income Growth?

Education is key!

Job market growth is certainly a key driver for price appreciation and is normally driven by the new business formation in the area, but popularity as a living destination is driven by things like safety, cost of living, ease of transportation and quality of education, especially for families with young children.   

“Popularity as a living destination” in turn drives demand, home value appreciation, and strong growth in rental income. 

Why is Education important?

In this week’s report, we will take a deep dive into Education – an important (if not the most important) factor for overseas property investors in determining where your next home purchase will be in the U.S.

With Foreign National buyers, in particular, the objective of owning real estate to earn income almost always comes down to “could I live there one day”?   

In Asia, where owning property is ingrained in their culture, it’s common to purchase an investment property “in anticipation” of sending their child to college. They could even live there during or after they graduate, and the price appreciation could even pay for college if they sell the property. Or, if the child decides to get a job in the U.S., they can stay in the apartment as a post-graduation gift to build up their credit or even rent it out to earn income. 

Which are the top high schools in California?

We look at the top 50 high schools in California, both public and private, ranked by average SAT and ACT scores. As you can see, the SAT scores will range from 1300-1500. To get into a top 25 U.S. university, the SAT scores should be at least 1400 as a reference, so these schools are all great.

Why high schools?

Many new immigrants or returning expats will choose to live in areas where there are good schools and a higher population of similar background families (the latter we will investigate next week). High schools are a very important decision since it will determine their experience during these formative years between 14-18 years old but also potential college choices. 

“Popularity as a living destination” drives demand, home value appreciation, and strong growth in rental income. 

Schools with the highest SAT/ACT scores

– Public: Lynbrook High School, San Jose

– Avg SAT 1450 / ACT 33

– Private: The Nueva School in Hillsborough & Basis Independent in San Jose

– Avg SAT 1510 / ACT 34 for both

Household Income, Home Prices, and Rental Yield

We also look at the Median Household Income, Average Home Prices, and Rental yield in each city. When moving to a new city, aside from the quality of education, most will look at how expensive it will be to live there, own a home, and potential rental income potential. 

It’s probably no surprise cities like Palo Alto, San Diego, San Jose, Los Angeles, and others will have higher home prices, but we also look at a rough gauge of affordability which is a “Home Price to Income Ratio,” which tends to be where most immigrant buyers choose as their base.

Cities with the highest Median Income

– $250,000+ per annum income

– Cities: Piedmont, Hillsborough, Los Altos

– Neighbouring schools: Piedmont High School, Los Altos High

Cities with the highest Home Prices

– $2,000,000+ home price

– Cities: Piedmont, Palo Alto, Hillsborough, Ross, Atherton, Los Alto, Saratoga, San Marino

– Neighbouring schools: Piedmont High School, Los Altos High, Palo Alto High, Henry Gunn, Aragon High, Nueva School, Crystal Springs Uplands, The Branson School, Menlo High, Pinewood School, San Marino High

Highest Rental Yield

>5% gross yield: Riverside
>4% gross yield: Lo Jolla, San Diego, San Jose, Fresno, Irvine, San Clarita

– Neighbouring schools: Riverside STEM Academy, Canyon Crest Academy, Torrey Pines High, Westview High, Del Norte High, The Bishops School, La Jolla Country Day School, Francis Parker School, The Harder School, Basis Independent, Bellamine College Prep, Notre Dame High, University High Fresno, University High Irvine, Woodbridge High, Arnold Beckham High, TVT Community Day School, Academy of the Canyons

America Mortgage Concierge Program

We launched this free service last month to connect potential home buyers with our approved panel of realtors in each major U.S. city, which only focuses on overseas buyers. If you would like to learn more, please contact james.morales@americamortgages.com.

Our surprise guests!

At the end of August, we will be hosting a webinar with our California partner, who will present a “Guide to California Real Estate” along with a panel of the top realtors in Los Angeles, Orange County, and Bay Area to give you a real “on the ground”feel for all the points we discussed above and more.   

Stay tuned…this is going to be amazing! 

Sources: Niche, City-Data, US News, OECD data, US Census Bureau and respective school websites

Making a case for U.S. Residential Property Investment: “Let’s Look Under the Hood”

Making a case for U.S. Residential Property Investment

“Let’s Look Under the Hood”

In the previous 2 weeks, we have discussed U.S. real estate investment’s relative affordability and income potential.

In this week’s Deep Dive, we will look at what the Key Drivers of Property Prices are and make an argument on which U.S. cities represent the best projects for future price appreciation.

The utility of owning a home is greater than any other possession – a roof over your head, it provides a sense of security for present and future generations, the sense of incredible accomplishment that “I have MADE IT in life,” and the list goes on.

However, as an investment, we need to think about its ability to produce income (dividends/rental income, etc.) and future price appreciation.

We start this discussion by digging into what factors drove property prices in the past, what ‘new’ factors exist today, and (drumroll….) we will try to take a stab at where they will be in the future.

We will also introduce a new proprietary index: AM Job Prospect Index

First, what drives property values up?

This is a vast topic that can get very granular – see below for a snapshot of a 2019 article written by the New York Fed about Forecasting Home Prices.

But we will try to keep it simple.

Liquidity is plain and simple. The world has seen an unprecedented fiscal stimulus and monetary easing over the past 20 years.

A commonly accepted money base is M2 (Money in circulation, checking deposits, and savings deposits less than $100K).

Let’s look at M2 money supply over the past 10 years. You can see the amount the U.S. has grown its money base dwarfs any other country, and in fact, it is 4x the growth rate of the U.K. In absolute terms, the current M2 supply in the U.S. is almost twice that in Japan.

Now that we have identified the global macro drivers, we can look into where the money is flowing into – specifically real estate and, more importantly, why.

It’s not surprising that the top 5 states in terms are GDP are:

California Texas New York Florida Illinois
California Texas New York
Florida Illinois

This is consistent with our most popular destinations for real estate investments (see below).

Within this context, we take another cut at the data and look at which cities in those states represent the highest contributors to the overall national economy:

Here are the cities with over 2% contribution to U.S. GDP:

New York City (8%!) Miami Fort Lauderdale Fort Worth Dallas Houston
Seattle Chicago Los Angeles San Francisco Atlanta
New York City (8%!) Miami Fort Lauderdale Fort Worth Dallas Houston
Seattle Chicago Los Angeles San Francisco Atlanta

Now we look at cities with the highest GDP growth rates (over 1% y-o-y growth 2018-2019):

Seattle Los Angeles San Francisco San Jose
Austin San Antonio Portland
Seattle Los Angeles San Francisco San Jose
Austin San Antonio Portland

You can see that these cities naturally are attractive given the size of the economy; hence the probability of finding meaningful employment is higher. Now, the list likely looks much different 2020-2021, which I’m guessing will magnify the growth potential in the Texas cities even more!

Next, we will look at why these cities.

We have identified 3 main factors that raise the demand for properties in an area – 1) Economic prospects, 2) Gentrification 3) The China Effect

1) Economic prospects

AM Job Prospect Index

Our multifactor algorithm includes factors like the number of big companies moving to these cities, market capitalization of the new companies, new headquarter size, etc.

Using our “AM Job Prospect Index, in general, job prospects of U.S. cities appear to be better than other global cities. The average job prospect index for the U.S. is 70, but only 30 for other cities (the higher, the better). In the U.S., cities with the best job prospects are Austin, Dallas, Miami, Los Angeles. Austin, TX specifically, has the highest value as numerous big companies are setting up headquarters there– Tesla, Google, Amazon, SpaceX are just a few. Tesla’s new manufacturing plant in Austin alone will hire more than 10,000 through 2022. We can expect plenty of people to move to these cities, meaning increased demand and elevated home prices in these areas.

2) Gentrification

Gentrification is the process of changing the character of a neighbourhood through the influx of more affluent residents and businesses. When wealthier residents move into a neighbourhood, they often renovate homes, making them more aesthetically appealing and equipped with better facilities, which increases the value of the property. The addition of new and more “hip” businesses in the city also aids in job creation and can attract more people, increasing the demand and prices of homes.

According to the NCRC Research report, taking into account the number of neighborhoods gentrified and the intensity of gentrification, New York, Los Angeles, San Francisco, Houston, Austin, Miami are the most gentrified cities in the U.S. (arranged in order). Therefore, we can expect home prices to appreciate in these cities.

3) The China Effect

Instead of the usual demographic factors like immigration, we’ll look at the percentage of the population who are Chinese. Why do we do so? China has experienced rapid growth in recent years, and its people have gained a significant amount of wealth. It’s no surprise that according to the National Association of Realtors annual report of International Buyers of U.S. residential real estate, China was ranked #1 for the past 5 years.

Excluding predominantly Chinese cities, we see that the average percentage of Chinese the U.S. cities (9.85%) is higher than those in other major cities (8.25%). Thus, we can expect Chinese investors to be more inclined towards U.S. cities, demanding more houses and driving up prices in U.S. cities more than other cities. They will typically choose areas with a significant Chinese population as it offers a sense of familiarity. U.S. cities with the highest percentage of Chinese population are Los Angeles, San Francisco, New York, Seattle.

Based on the abovementioned factors and looking at the “top performers” in each category, prices will likely appreciate the most in Texas, Los Angeles, Miami. This is also in line with the price appreciation data provided by Case-Shiller Home Price Index and Zillow. Prices appreciated by 35.07% in Austin last year!

In summary, the conclusions in this report are consistent with our previous 2 reports. There is a tremendous amount of value in the Texas cities, with its abundant jobs, high wage growth, low taxes, easy of travel, strong ethnic mix, and the list goes on.

New York will always have a premium, and Los Angeles and San Francisco will always have specific attributes which make them unique.

HOWEVER, the high cost of living, home prices, and state taxes are quickly driving residents to other states. Almost every metric we see supports this argument. Gentrification in the U.S. is real and is happening much faster than we can imagine. Just look at new home sales from the largest home building company Lennar. They cannot sell enough homes, and it’s the Gentrification Effect we discuss above.

One area that the U.S. has lagged behind its low-cost international peers over the past 10 years is the vocational workforce – smartphone manufacturing, assembly, etc. This was a growth engine in the 80s before the Japanese began their auto manufacturing dominance. But slowly, the U.S. economy retooled and prospered again. Then in the early 2000s, the steel industry lost millions of jobs to low-cost manufacturers overseas, and those jobs have not returned.

The current trend of technology companies moving major offices inwards (See Texas) not only helps the local economies but it reflects a bigger theme – vocational employment. It may not be assembling smartphones, but it will be something else – smart cars, smart cities, smart grids, distribution centers, cloud kitchens, drone deliveries, and so on. Technology is clearly the growth driver going forward, and if you are thinking of real estate as an investment, you should look at states that offer this type of value. Right now, it is clearly Texas, and I suspect there is still more room to go here.

In next week’s Deep Dive, we will be bringing in a U.S. Tax Accountant who focuses specifically on U.S. Expats to explain how the tax regime on owning U.S. property is not as bad as you think and, in fact, could be the easiest and most flexible in the world!

Keep your eyes peeled and subscribe to our newsletter, so you don’t miss out! www.americamortgages.com

Making a case for U.S. Residential Property Investment: “It’s not Apples to Apples”

Making a case for U.S. Residential Property Investment

“It’s not Apples to Apples”

As you may recall, last week, we looked at the affordability between popular U.S. investment destinations compared to major cities in the world. We argued that the U.S. offered the best “entry price” for real estate investments on absolute terms and when adjusted for affordability.

This week in Part 2 of our Deep Dive Series, we look at the Relative Income Potential of the popular U.S. investment destinations compared to major cities in the world.

Investing in residential properties or buying-to-let is a form of a business, and as a business owner, making a profit is of priority. A common metric that we use to measure the profitability of a real estate investment is rental yield. Net rental yield measures the profit you generate each year from your investment as a percentage of its value.

Same as what we did last week, we shall compare data sets from 2 sample groups:

1. Major global cities:

Toronto Vancouver London Sydney Melbourne
Shanghai Beijing Hong Kong Singapore
Toronto Vancouver
London Sydney
Shanghai Melbourne
Beijing Hong Kong

2. Top U.S. residential real estate investment destinations:

New York, NY Miami, FL Orlando, FL Ft Lauderdale, FL Ft Worth, TX
San Antonio, TX Austin, TX Dallas, TX Houston, TX Seattle, WA
Chicago, IL Los Angeles, CA San Fran, CA San Jose, CA Atlanta, GA
Portland, OR Las Vegas, NV
New York, NY Miami, FL
Orlando, FL Ft Lauderdale, FL
San Antonio, TX Ft Worth, TX
Austin, TX Dallas, TX
Houston, TX Seattle, WA
Chicago, IL Los Angeles, CA
San Fran, CA San Jose, CA
Atlanta, GA Portland, OR
Las Vegas, NV

On average, the net rental yield of popular U.S. real estate investment destinations is 3.49%, much higher than that of other global cities – 1.39%. This means that on average, for a property that costs USD 500 000, you can earn approximately USD 17,450 if this property is in the U.S. and only USD 6,950 if this property is in other global cities. This is after accounting for property taxes. We see that investing in the U.S. can earn you 2.5 times the income you will earn in other cities!

In the following chart, you will see the disparity in the profit flow more clearly.

Now, if we look at the net rental yield that takes into account both local property and rental income tax as part of the costs, we can see that the results are similar. U.S. destinations, on average, have a much higher yield than other global cities (3.40% vs. 1.36%).

Note: Even after considering income tax, investing in the U.S. can still earn you 2.5 times the income you will earn in other cities.

Myth Buster – The common misconception that the U.S. tax regime makes investing difficult and not feasible is unfounded. Even adjusting for taxes, U.S. residential real estate is superior investment.

To further strengthen our point that the income potential of U.S. cities is much higher than other global cities, including your home cities, take a look at the table below. If you live in the cities stated in the row, you should definitely not buy-to-let in the cities highlighted in red as the income potential in those cities is worse than your home. Instead, it would be best to invest in the cities highlighted in yellow, where yield is much higher.

Net Rental Yield differences between Major Global Cities and U.S. Residential Real Estate Investment Destinations

Let someone else pay for your mortgage.

To make things better, in some U.S. cities, you can even pay off a sizeable portion of your mortgage loan with your post-tax rental income. Using the AM debt coverage ratio, we see that in cities such as Orlando and Fort Worth, without considering other maintenance costs of your home, your annual post-tax rental income can cover all of your annual mortgage payment (with some to spare). This is rare in other global cities. In Hong Kong, annual post-tax rental income can only cover 17% of the yearly mortgage payment.

The following diagram shows the debt coverage ratio comparison (the higher, the better).

Solely based on net rental yield, you should always consider Orlando, Fort Worth, San Antonio, and almost never San Francisco. It is interesting to see some overlap with last week’s affordability rankings, where Fort Worth and San Antonio were at the top and San Francisco at the bottom.

Just like affordability, rental yield is also just another aspect of property investment. It is important to consider other factors too – growth potential of the city, capital gains, future price appreciations – which we will discuss in our next report.

To summarize, we see that U.S. real estate properties are outperforming other major global cities in terms of affordability and income potential.

Next week, we will get an even bigger picture by understanding the factors that drive property value growth and why these factors will affect U.S. real estate investments more than other major global cities. You won’t want to miss out!

Stay tuned for next week’s continuation of our Deep Dive series. Email Us

Making a case for U.S. Residential Property Investment – “Cheap as Chips”

America Mortgages introduces….

In our never-ending crusade to acquaint and educate the world of the investment opportunities in U.S. residential real estate and the ease of securing financing, we launch “The Deep Dive Series.” We investigate major themes, dispel major misconceptions in the U.S. real estate market, and use data to confirm our thesis.

Over the next 5 weeks, we will publish a series of reports on the following theme:

Making a case for U.S. Residential Property Investment.

  • Week 1 – “Cheap as Chips”
  • We compare at the relative affordability of the major U.S. real estate investment cities vs. major global cities.

  • Week 2 – “It’s not Apples to Apples.”
  • We look at the relative income potential of U.S. real estate investment cities vs. major global cities.

  • Week 3 – “Let’s Look Under the Hood”
  • We investigate what drives property prices and why these factors are more constructive in the major U.S. real estate investment cities vs. major global cities.

  • Week 4 – “Its Bark is Worse Than Its Bite”
  • We dispel the misconception that owning U.S. property is burdened with taxes and complications when it’s probably the easiest and most flexible in the world.

  • Week 5 – “Bringing Everyone to the Table”
  • In the final report, we expand on the above topics and combine them into a comprehensive mosaic to be published and distributed. 

“Cheap as Chips”

This week is Part 1 of our Deep Dive Series where we look at the Relative Affordability of the major U.S. investment destinations compared to major cities in the world.

When investors look at where they should buy real estate, most will typically choose where they live. This is rational because you know the market, the financing landscape and can physically see the property at any time.

However, if the assumption is to earn the highest risk-adjusted return for an investment property, then it would be irrational to not explore all real estate investment opportunities that could offer you the highest return.

Of course, as a primary home, there are other considerations to motivate a homeowner, such as not worrying about a “roof over your head.”

This is particularly true in Asia and ingrained in the culture, but in many countries like Germany and France, homeownership hovers around 50-60% vs. say Singapore, where homeownership is over 90% (admittedly the highest in the world).

When buying anything, you look at the absolute price of the asset and the associated costs (which include mortgage rates, stamp duties, taxes, etc.), what you can afford, adjusted for the risk (to include research time), its income potential and lastly what you think the asset will be priced in the future.

Let’s start with the price and cost of U.S. real estate vs. major global cities. 

We compare datasets from 2 sample groups.

1. Major global cities:

Toronto Vancouver London Sydney Melbourne
Shanghai Beijing Hong Kong Singapore
Toronto Vancouver
London Sydney
Shanghai Melbourne
Beijing Hong Kong

2. Top U.S. residential real estate investment destinations:

New York NY Miami FL Orlando FL Ft Lauderdale FL Ft Worth TX
San Antonio TX Austin TX Dallas TX Houston TX Seattle WA
Chicago IL Los Angeles CA San Fran CA San Jose CA Atlanta GA
Portland OR Las Vegas NV
New York NY Miami FL
Orlando FL Ft Lauderdale FL
Ft Worth TX San Antonio TX
Austin TX Dallas TX
Houston TX Seattle WA
Chicago IL Los Angeles CA
San Fran CA San Jose CA
Atlanta GA Portland OR
Las Vegas NV

If we look at the major global cities where majority of our clients live, we will find that the affordability of a 1500 sq. ft house is really low.

AM Affordability Index*

*Our proprietary index includes factors such as, taxes, pension contributions, debt repayment, inflation, currency and others.

Using our proprietary AM Index, 0 represents a house that is very unaffordable and 100 represents a house that is very affordable.  Affordability only ranges from 0 – 24 in our client’s home cities.

Now, looking at the data for popular investment destinations in the U.S. for real estate investors. We see that the average affordability is drastically higher. This is particularly so for San Antonio, Chicago, and Fort Worth.

For example, if you live and work in Vancouver and earn the median income, the affordability index of 1500 sq. ft house in your city is at a meagre 12. However, the affordability index of a same-sized house in Fort Worth is at a whopping 94!

Read – if you live in Vancouver, buying a Fort Worth Texas investment property is 8x “more affordable” than back home!

You will see this graphically in the following charts, and the results are very clear and obvious.

Solely based on affordability, when purchasing property for investment income, you should always consider Chicago, San Antonio, Fort Worth, and almost never San Francisco.

Now, we know there are many other considerations when buying property besides just being cheap and affordable – like historical price appreciation vs. future price expectations, net rental yield, ease of securing financing, friction costs of doing the research – all of which we will discuss in our upcoming reports.

In summary, when deciding where to invest next, it’s best to get out of your comfort zone and be open-minded to the opportunities.

There are other cities in the world that you can consider aside from your home country, but we argue the best cities for real estate investments are in the U.S.

Hopefully, Part 1 of our Deep Dive Series has showed you that U.S. properties are more affordable that you think. In fact, they could be up to twelve times more affordable than your own city, e.g. Hong Kong residents buying in Chicago!

Next week, we will illustrate the net income potential of U.S. real estate investment cities vs. major global cities, i.e. how much you can earn from renting after financing costs… the results will shock you!

Still not convinced?

Supporting Charts

Price Differences between Major Global Cites and U.S. Residential Real Estate Investment Destinations:

Stay tuned for next week!

The Roaring 2020s?

mortgage specialist

The “Roaring 20’s” is often considered as one of the most prosperous times in the West. WWI had just ended, and the housing market’s growth, the development of infrastructure, telephone networks, automobiles, etc., was the centerpiece of growth. America’s wealth more than doubled in the years between 1920 and ’29 with most of the wealth invested into finance and industry but there was enough trickle-down to lower-income earners to help buoy a new consumer culture.

Doesn’t this sound familiar?

In 2020, FAANG stocks (our version of industrial stocks in 1920s) doubled as well!

Meanwhile, as the world heads towards being incrementally more vaccinated, we are seeing inflation expectations rise, the first wage growth in over a decade, and a potential $3T infrastructure plan in the U.S. which draws some comparisons to FDR’s The New Deal.

Personally, I find it remarkable how the global macro narrative has shifted 180-degree only one year out from the start of a global pandemic, and also not far from when the discussions among leading economists were ‘when’ deflation would happen, not if. Now consensus, in under 12 months, has gone from deflation to inflation.

If you are looking for evidence that inflation is back, look no further than housing prices. Knight Frank reports that worldwide home prices rose 5.6% in 2020, and CoreLogic says U.S. home prices increased 10.4% year-on-year in February 2021, the highest in 15 years!

Taking some data points from Knight Frank’s survey, look at the annual % change in home prices in the major cities that Global Mortgage Group offers mortgages in.

Can you guess which city had the highest growth in the U.S., U.K., France, Canada, Australia, and Singapore? Read here to find the answer!

Phoenix, California+14%
Seattle, Washington+13%
Los Angeles, California +10%
New York City, New York+10%
Atlanta, Georgia+8.9%
Dallas, Texas+8.4%
Miami, Florida+9.2%
Geneva, Switzerland+7%
Lyon, France+8.9%
Paris, France+7.7%
Sydney, Australia+4.5%
Brisbane, Australia+4.2%
Melbourne, Australia +3.6%
Manchester, UK+8.7%
London, UK+4.3%
Montreal, Canada+15%
Toronto, Canada+10%
Vancouver, Canada+7%

For more information, please contact hello@americamortgages.com.

Sources: World Property Journal, High Finance, History.com