Miami is known for its colorful vibrancy, but 23,000 vacant condos put a dark cloud over the south Florida market at its peak inventory in 2008. Do you know what happened? They’ve all sold — largely due to the purchasing power of international investors.
As foreign buyers’ interest in U.S. real estate continues to surge, REALTORS® are seizing this opportunity and arming themselves with education.
A window into this trend could be seen in Chicago this week as about 20 REALTOR® students, some who traveled from several states away, attended the Certified International Property Specialist (CIPS) course at the Chicago Association of REALTORS®. I had the pleasure of sitting in on the first day as instructor David Wyant of Wyant Realty and Across Borders School of Real Estate in Ormond Beach, Fla., covered local markets. CIPS is a real estate designation that has seen exponential growth, with more than 2,000 recipients and courses taught in 50 countries.
Why are foreign buyers eyeing the U.S. real estate market?
Is it because the value of the dollar has fallen? Yes, the lower dollar value equals deals for foreign buyers. But according to Wyant, that’s one reason among many.
“Investing in real estate is great for individuals and for sovereign nations,” Wyant explained. “Real estate has its ups and downs, but it’s never worth nothing. It’s tangible, it holds its value and it’s around for a long time.”
Of all the countries in the world, the U.S. is still leading the way in providing the most stable and secure real estate investment environment, above Germany, Canada, France, Australia and the UK. Why? The stability of the economy and laws the U.S. has protecting private property rights. “That means a lot if you’ve ever had anything taken away from you,” Wyant said.
The internet has helped quicken globalization. It’s led to the migration of jobs across borders, and as countries evolve and economies diversify or move from farming to industry, creative centers have emerged and trade has expanded. Sunsetting tariffs, 24-hour markets, ease of air travel, and countries specializing in specific industries and trades have all contributed to globalization.
Who’s buying in the U.S.?
According to 2012 Profile of International Home Buying Activity, total residential international sales in the U.S. for the past year ending March 2012 equaled $82.4 billion, up from $66.4 billion in 2011. Canada, China (including Hong Kong), Mexico, India, and the United Kingdom accounted for 55 percent of all international transactions. Canada accounted for 24 percent of international sales while China accounted for 11 percent, up from 9 percent in 2011. Mexico was third with 8 percent of sales and India and the U.K. both accounted for 6 percent.
These countries dominate the market for a reason. For the first time in 2008, Canada’s dollar hit par with the U.S. dollar. China has seen a proliferation of new trade agreements, and its slower growth rate is still a robust 9.5 percent, remaining quite high compared to the U.S.’ 1.5 percent. Mexico has $26 billion going into its economy, much of which comes from the remittances of migrant workers abroad, many of whom are in the U.S.
How can you take advantage of this lucrative segment of the real estate market?
Here are a few lessons from Wyant and the CIPS course:
Create partnerships: Wyant has agreements with native French- and German-speaking REALTORS® whom he brings in on deals for a referral fee. They help translate for Wyant’s clients if there is a communication barrier, and ensure the clients feel comfortable.
Identify opportunity: Find out how your market is suited to foreign buyers. In Montana, for example, there’s an influx of Brazilian and Argentinian farmers looking for land to continue farming as they did in their home countries. Florida is leading the country in attracting international buyers with 31 percent of all purchases. There are 23,000 REALTORS® in the Miami area, and 62 percent are working with international clients. Sure, these buyers and investors are attracted to the sun and sand Florida offers, but Florida also has a high number of well-trained immigration attorneys, and the Miami MLS provides additional global real estate tools and benefits for its members.
Know what international buyers want: International buyers generally want a long term investment, most will pay with cash, they expect predictable returns, and they want detailed research from specialized advisors. Keep in mind that buyers from outside the U.S. have a lot more variables in their lives and a lot less knowledge about the U.S. real estate market. This will likely mean more homework for you in terms of financial and market reassurance. “Eighty percent of your international clients are going to ask you for a financial analysis,” said Wyant.
Don’t try to be a real estate agent for the world: Pick a niche that suites you. It could be that your family has ties back to that country, or you might have a lot of people coming from that region to your market, or maybe you have a deep passion for that country, culture, food, language, etc. “Go where it makes your heart beat a little faster because you’re fond of that place,” Wyant said.
Once you have identified your niche, it’s time to network: For many foreign buyers, relationships must be developed before business can be done. “Have you ever shot a gun in the dark?” Wyant asked. “That’s kind of what networking is like without a plan. Know what you’re trying to accomplish and stick to your plan.”