Collapsing house prices allow foreigners to build investments
It’s before dusk on a sunny afternoon in Phoenix, and Kris Anderson, a real estate agent for RE/MAX Excalibur, is packed in a bus with Canadian investors, touring local properties for potential investment deals.
Anderson, a veteran real estate agent, is all too familiar with the hectic scene surrounding her. Bus guests are eagerly peeking out the windows to see the next home on the tour as she takes hold of the microphone sharing details about each listed property.
In the wake of the housing bust, plummeting home prices across the U.S. turned American cities into magnets for Canadian, European, Asian and Middle Eastern investors. Some are looking for second homes they can live in. Others are searching for vacation properties or full-time residences. Others believe the U.S. dollar and the American economy is in better shape, making the region a solid investment choice, said Linda Rheinberger, owner of One Source Realty and Management, a real estate property management firm in Las Vegas.
Like Anderson, Rheinberger is noticing a surge of Canadian investors flooding the Vegas market looking to pay cash for cheaply priced properties.
Rheinberger also is noticing an uptick in second-home buyers and investors from around the country and across the globe, including international investors with roots in the Philippines, Japan, Southeast Asia and Europe.
Americans also are grabbing investment and second-home property deals, acquiring vacation properties and second-homes in hard-hit areas like Florida and Arizona. In some cases, the homes are acquired simply as vacation properties or winter escapes for snowbirds.
The states highlighted by real estate agents as the tops for second-home purchases in the first nine months of 2011 include Florida, with 10,684 homes acquired, California (6,354), Arizona (4,682), North Carolina (2,535) and Texas (2,463), according to CoreLogic data.
For Anderson, the shift in the American property landscape is leading agents further into a global real estate marketplace, where buyers are coming from the world over.
International investors used to be 10% of Anderson’s business, and now make up 60% of her existing deals as they hunt for second homes around Arizona. Anderson is so entrenched in the scene of helping Canadian second-home buyers in the United States that she partners with Canadian brokers to connect foreign investors with the local market.
One of those agents touring homes with Anderson in late January was Rod Damian of the Steve Martel Group out of Canada.
The Canadian investors Damian advises are looking for U.S. properties in the $70,000 to $250,000 price range. “We hold these events throughout North America,” Damian told HousingWire. “The neighborhoods in the U.S. are different than in Canada, giving them a birds-eye view and a first-hand experience in seeing how the neighborhoods are different from back home.”
Damian says Canadians are looking in key U.S. markets like California, Las Vegas, Florida and North Carolina.
The Midwest also is an attractive real estate market for second-home buyers who are looking to buy low with the intent of turning properties into rentals for monthly yield
WHAT SECOND HOMEBUYERS WANT
After 22 years in the business, Linda Rheinberger is abreast of what second-home buyers want. “They know that at least in Southern Nevada the properties are undervalued. They are in many cases selling below replacement costs,” the agent/property manager said. Many of the second-home buyers shopping in the state want homes at the median price point of $120,000 or less. At the moment, single-family detached homes are the craze with the condominium market oversaturated, Rheinberger says. She points out that recent research from the National Association of Realtors shows 52% of buyers in her area are paying cash for properties.
“It may start out as an investor home, but perhaps, down the line they are thinking about using it as a vacation home,” Rheinberger said of the properties purchased by second-home buyers. Right now, she says, “they are placing a tenant in the property right away, and they are gaining cash flow.”
Second-home buyers from European countries like Portugal, Italy, Greece and Spain are afraid their currency is under attack, making them turn to the U.S. for investment security, Rheinberger explained. Kris Anderson said Arizona’s second-home buyers are investment-driven in most cases.
“They are looking for single-family homes under $110,000,” she said. In addition, they generally want three bedroom homes and a price-point where the rent will create cash flows of roughly $1,100 a month.
“They are looking for an investment, and their holding strategy is about 10 years,” Anderson said.
The markets highlighted, with statewide opportunities, as strong spots for second-home buyers are California, Arizona, Florida, North Carolina and Texas. These regions continue to attract buyers looking for warm weather, relatively stable home prices and new levels of affordability.
See the March 2012 magazine flip book to read about the top five and bottom five markets for second-home buyers.
Nonprofits — the Cuyahoga Land Bank, NeighborWorks America, Rebuilding Together, the National Association of Hispanic Real Estate Professionals, PCV|VRM Seeds of Hope and many more local organizations — are investing significant resources to improve America’s most vulnerable housing markets.