Why is Investing in U.S. Real Estate still Favored Among Foreign Investors?

Overlooking the ongoing conundrum created by COVID-19 unfolding in front of us doesn’t shed much positive light on the future. We can say with certainty that the foreign investors’ appetite for U.S. soil and real estate hasn’t subtracted one bit. Quite the contrary, the demand for U.S. real estate has spiked more than ever before. 

There are plenty of reasons why this ongoing trend is gaining momentum despite the fact that the evident issues are numerous, some of them deeply rooted in the “American dream” ethos. This article unravels some of the reasoning behind the investors’ focus on U.S. real estate.

Reasons Foreign Investors Favor U.S. Real Estate

US dollar

Convenient Debt Terms

American real estate debt market really treats its investors right, which they tend to forget. The unheard-of terms for mortgage loans are only a part of these perks. Long-term, fixed mortgages aren’t anywhere near the global standard. However, U.S. lenders have an opportunity to obtain low interest rates ranging from 10 to 30 years, with additional amortization schemes from 15 to 40 years. 

Relatively stable asset loans of a staggering $1 million or more, with the offering of interest-only periods and guarantorship, make it even more appealing to investors. United States interest rates are currently at a historic low, which only adds to the instant attraction to foreign investors.

Low Property Valuation

In the world of real estate, there’s this phenomenon called “sticker shock”. This is precisely what keeps shocking Americans when looking at property prices. However, the shock wave is much more prominent on the foreign counterpart’s side. Property is plentiful in the United States, with new construction sites on almost every corner. The most stable markets are found in the middle of the country, with the lowest barrier to entry and lower prices. Contrary to that, Asian and European investors have to pay a small fortune for that kind of stability. With the exception of New York, Los Angeles, and San Fransisco, foreign investors turn to the States when looking for a comparative bargain on premium properties.

Cash Flow

The two named advantages are enough on their own, but favorable debt and low prices combined create a possibility for positive cash flow. This out-of-the-ordinary potential is frequently overlooked by American investors. On the contrary to foreigners who, for instance, settle for low cash flow in the London real estate market. Another example is Australia, where negative cash flow is not only accepted but anticipated. The positive cash flow opportunity the U.S. holds contributes greatly to foreign demand for United States real estate. 

u.s. real estate

Relative Stability

Government bodies reserve the right to seize property for any named reason in many countries judicially, this also applies to the US. The idea is that the land belongs to the state, and landlords exploit the land in its favor. Nonetheless, the States usually reserve the seized land for the public good when exercising eminent domain rights. That suggests saving the land for utility development or highways, with historically known fair compensations for the seized property. 

However, private ownership is one of the core aspects of the aforementioned “American dream,” a fact which only the government and politicians refuse to accept. In contrast with despotic regimes that could seize property for no solid reason and with no second thought, this doesn’t make it easy for U.S. landlords. Despite that, foreign investors still rush to the States to get a piece of “the promised land” and its bright, real estate prospects.