investment property Archives - America Mortgages

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

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

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!

How do I invest in U.S property without traveling there?

The house-buying experience is often synonymous with physically travelling to the location and exploring every aspect of the house in person. The very idea of investing in property that you’ve never seen physically is unusual – for some people. The “old” way of investing in Real Estate is becoming synonymous with the “old” way of buying socks in a store and not online. With the right partners in place – Mortgage Broker, Realtor, Property Manager, buying a property outside of the city, state, or country where you live is not only possible, it is almost as common as buying “socks” online these days.

Let’s first dispel the notion that the best property to invest in are those that are in the same country code as you. Location absolutely matters, but not in the traditional sense. Global real estate investors in the ‘know’ will tell you the most important factors are asset location and yield – their own proximity to their investment shouldn’t be a factor. Another thing they’ll probably tell you would be that the U.S is by far the best place to invest right now.

Why the U.S?

For one, it’s extremely easy – anyone can buy and own property in the U.S, regardless of citizenship. There are no restrictions (or stamp duties/extra costs) that prevent an individual of foreign citizenship from owning or buying a home in the U.S.

For another, the International Investor Survey done by AFIRE (Association of Foreign Investors in Real Estate) found that the U.S. continues to lead the world in terms of offering the best opportunity for capital appreciation. The same survey also found that 58% of respondents felt that the U.S is the most stable for real estate investment. Moreover, mortgage rates are expected to stay low for some time, resulting in the ability to secure cheap loans and fuelling demand for property within the U.S.

Can I do it?

The answer to this question would be quite different if it was 20 years ago when the ability to build a portfolio in markets beyond where you live was something you could do only if you were extremely wealthy. However, what seemed impossible is easily achieved these days, thanks to the Internet making the world a much, much smaller place. The key to success here is trust in the right partners.

It is essential that you find people you can trust throughout the process – look for licensed realtors and property managers with local expertise in the markets you find the most appealing. Whenever possible, ask associates for referrals, do website searches, find locals in real estate directories and check references. If you do decide to opt for financing, it’s all the more important you find experts who understand the situation and have experience with these transactions.

American Mortgages has proven results-driven solutions for U.S Expats and Foreign Nationals. We understand the requirements of our international borrowers and provide tailor-made mortgage solutions to purchase, refinance or release equity regardless if you have U.S. credit or prior investment experience. Speak to us today to understand how you can obtain a mortgage for U.S property without leaving the comfort of your home. Visit us at www.americamortgages.com to find out more.