Foreign Investors: What Do They Need to Know Before Investing in the US

Foreign Investors: What Do They Need to Know Before Investing in the US

There are no citizenship requirements for buying real estate in the US. Foreigners who are non-citizens can even apply for a mortgage in the US. However, foreign property owners may face complex tax laws compared to US citizens.There are no citizenship requirements for buying real estate in the US. Foreigners who are non-citizens can even apply for a mortgage in the US. However, foreign property owners may face complex tax laws compared to US citizens. There are also certain factors to consider before buying real estate, such as a visa and other requirements. Here’s what foreign investors need to know before investing in property in the US:

Basic Requirements for Buying Property in the US

The following are basic requirements you’ll need to buy property in the US.

* Valid foreign passport

* US visa

* Social Security number or ITIN

* Bank statements

* Financial documents from your foreign bank

* Evidence of reserves

* Tax return

If you’re only visiting the US to buy property but have no intention of staying long-term, you must hold a B-1 or B-2 visa. The B-1 is for business visits, while a B-2 is for tourism. As a B visa holder, you can stay in the US for up to 6 months at a time, which is generally enough time for you to make any major real estate decisions. However, to secure this visa, you must be able to prove that you have reserves or sufficient funds to support yourself during your stay.

Mortgages for Non-Resident Foreign Buyers In 2021, 61% of foreign buyers made all-cash purchases for property. As a foreign national buyer, you certainly have the option to pay all cash. However, you can also obtain a US mortgage without a US credit history. There are US mortgage lenders that specialize in foreign national mortgage loans. To obtain pre-approval, you’ll need to provide additional requirements that demonstrate your ability to make payments on the property, including evidence of assets or savings that can help you make a down payment.

Because you don’t have a US credit history, the US lender will also likely use an International Credit Report. The credit report will provide data that mortgage lenders would typically need to assess creditworthiness. It will reveal your credit history in your home country, property ownership, and property tax. The lender will also investigate public records to identify if there are any liens, judgments, or foreclosures in your name for property inside and outside the US.

Taxes for Foreign Property Owners

The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) may apply to your property purchase. The tax law will impose a US income tax on you should you eventually decide to sell the property or receive income from it. In general, income from US property owned by a foreign national is taxed at a 30% rate. However, there are tax treaties that exist with several foreign countries. And if the treaty applies to you, you might enjoy a reduced tax rate. Additionally, some states may require an additional holdback from a foreign investor when they do sell a property in the United States.

Because of the complexities of investing in real estate in the US as a foreigner, it’s best to work with a reputable real estate company.

 

Source: Foreign Investors: What Do They Need to Know Before Investing in the US

https://www.creconsult.net/market-trends/foreign-investors-what-do-they-need-to-know-before-investing-in-the-us/

What Are the Top Two Real Estate Fundamentals to Keep in Mind When Investing?

What Are the Top Two Real Estate Fundamentals to Keep in Mind When Investing?

There are different ways to invest in real estate. If making money sooner rather than later is your goal, one of the key ways you can do that is by purchasing real estate that you can rent out. Another way to earn money is by buying undervalued real estate, fixing it up, and selling it for a profit. You may even be considering participating in real estate trust (REIT) exchanges. Whether you’re planning to become a landlord or a real estate flipper or diversify your portfolio, there are important factors to consider before investing in property. Let’s break down each of these:

Define your Investment purpose

Define your reasons for investing. What are your cash flow and profit expectations? Are your goals short-term or long-term?

As mentioned, there are different ways to invest in real estate. Are you buying property for self-use? This approach allows you to save on rent while also enjoying value appreciation. Or are you planning to be a landlord so that you can gain regular rental income and long-term value appreciation? There’s also the option to buy and sell or “flip a house” for a profit. There’s also the long-term buy and sell option, which means investing in real estate now in the hopes that it will appreciate over a long period and satisfy your long-term goals.

Understand the importance of location

“Location, location, location.” Location cannot be stressed enough because renters and home buyers will also be prioritizing the location of their houses. A potential tenant or buyer may love the home but will hesitate if its location is in a “bad” neighborhood or “off-grid.” Unless the renter or buyer’s goal is a secluded home in isolation, they’re likely looking for access to markets, healthcare facilities, schools, gas stations, and public transportation.

Generally, the closer your investment is to local amenities, the better. We live in a day when “30 minutes or less” and “same-day delivery” is still not fast enough for most consumers. The same goes for traveling to amenities such as grocery stores, hardware stores, restaurants, shops, and entertainment. Renters and homeowners also want easy access to public transportation to ease their commute to school and work. This includes a preference for properties closer to highways, bus stops, and train stations.

But what do you do when supply is low, and prices are high in the best neighborhoods? You do your research and look for the locations that have potential. Look for signs that a community is growing. Watch out for access to major roadways, new constructions, declining crime rates, and city development projects. It’s also a good sign if the area has popular chain businesses coming soon or if an established company has announced they’ll be opening a branch or office in the area. Any sign of new construction and businesses mean more jobs. And more jobs mean more people are moving to the area and looking for homes.

 

Source: What Are the Top Two Real Estate Fundamentals to Keep in Mind When Investing?

https://www.creconsult.net/market-trends/what-are-the-top-two-real-estate-fundamentals-to-keep-in-mind-when-investing/

Why I Want to Know More About ESG in Multifamily

Why I Want to Know More About ESG in Multifamily

Interviews for this year's 20 for 20 White Paper, ESG (Environment, Social and Governance) was an unsurprisingly common theme. Based on the 20 conversations with senior executives, it seemed that ESG was becoming a driver in many decisions, including technology implementations.

At the time, I noted that while the influence was big, it was unspecific. The parameters executives used to define potential ESG benefits of technology projects seemed extremely broad. The most sophisticated companies in the domain appeared to be at the stage of defining how they could measure ESG rather than using it as a decision-making criterion for individual projects. 

The broader media coverage of ESG in the nine months or so since those interviews has presented a mixed bag of views on ESG. It makes me want to know more about how it's affecting multifamily operations and technology. 

A Shifting Tide?

I was interested to read a recent special in The Economist (ESG Investing: A Broken Idea) that provided a detailed review of current ESG investment practices. The collection of articles referenced (and were perhaps inspired by) an essay series by Tariq Fancy, the former chief investment officer for sustainable investing at BlackRock, the world's largest asset management company. 

Fancy called into question the ultimate benefits of ESG initiatives, claiming that the profession is little more than "marketing hype, or spin and disingenuous promises from the investment community." He pointed out that investments were rendered acceptable according to the ESG narrative that could be established rather than hard facts about their benefit. 

The Economist took a similar perspective, generally calling into question the legitimacy of current ESG measures for several reasons. One, there are far too many of them. A study of six ESG rating agencies found that they used 709 metrics across 64 categories, only ten of which were common to all six agencies. 

As well as the sheer number of metrics, the Economist questioned the variety of interchangeable metrics that can contribute to ESG scores. If firms can balance poor "environmental" scores with higher "social" ones—which are heavily dependent on the prevailing political climate—it is hard to see how the scores encourage real accountability. 

The Economist strongly suggests that the ESG industry is, at least in part, driven by the need for asset management firms to identify new revenue streams. The recent apparent cancellation of "Dilbert" cartoons for ridiculing ESG culture at work also suggests a sadly familiar politicization of what ought to be a force for good.

A Multifamily Perspective

My sense from the executive interviews is that multifamily perspectives of ESG are firmly downstream of the broader investment community. Of the interviewees, public companies or anyone who has to raise capital paid the most attention to ESG. If investors look increasingly to the ESG performance of companies in deciding where they place investments, then ESG is de facto important. But details are scant.

The Economist's strong recommendation is to scrap most of what investors currently think of as ESG and replace it with just "E," which should stand not for "emissions" rather than "environmental." 

If companies were to hold themselves to the standard of trying to reduce emissions, stakeholders would at least have a chance to establish whether or not the companies were achieving their goals. There would also be a clear and broad benefit: reducing the contributions to climate change. 

The appeal of this approach is to make targets specific and measurable. The article parallels the other things we use to measure investments, most notably accounting measures. For example, the metrics included in companies' profit and loss statements and balance sheets are concrete in a way that ESG metrics currently are not. 

Towards Concrete Measurements?

If the tide were to turn in the investment community way the Economist and Mr. Fancy recommend, it is interesting to consider what it would mean for multifamily. It might tighten the scope so that only things with a direct environmental impact matter. Utility usage and the selection of development materials could become the primary or even the sole focus of the thing we currently call ESG. 

Of course, at this point, nobody knows how priorities will change. But what particularly interests me is what multifamily firms are actually doing concerning ESG. 

When I prepare to interview 20 more leaders at the end of the year for next year's paper, you can be sure I will ask them for their views on ESG initiatives. I want to know more about what went on this year, how we can expect them to change in 2023, and to get a read on where ESG sits in the priorities of executive leadership.  

 

 

Source: Why I Want to Know More About ESG in Multifamily

https://www.creconsult.net/market-trends/why-i-want-to-know-more-about-esg-in-multifamily/

Selling an Apartment Building FAQ's

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Top Frequently Asked Questions on Selling a Multi-family in Chicago

Are you thinking of selling your multi-family property?

Here are some of the most frequently asked questions we get from clients looking to sell multifamily properties in Chicago.

Before You Sell:

How is selling a multi-family different than selling a single-family home?

If you’ve sold an investment property before, you’ll be familiar with the ins and outs of selling a multi-family. However, if it’s your first time, you’ll learn that the process works differently than it would with a single-family or condo.

A large part of a multi-family’s sale appeal will lie in its cash flow. Buyers looking for a multi-family are looking for more than just a home: they will want to see a property that generates good rental income, rents easily, and provides a financial incentive for them to buy. This could be in the form of easy upgrades they can make to boost rental income or as an empty unit for them to occupy and offset their own living expenses.

Do I need a broker to sell a multi-family?

Of course, we’re biased...but we do recommend working with a broker who is experienced in the multi-family market in your neighborhood. Not only will they be able to pull good comps and provide a market analysis of how you should price the property, but an experienced agent will know how to show the proeprty to different types of buyers, whether they are experienced investors or first-time multi-family buyers who want some supplemental income. Brokers who work in multi-family markets are also in the know about rent prices and trends, which will help them sell your home at the right price.

Do I need to make repairs before selling?

Some buyers look for multi-families with units that could benefit from some updating because they see it as an opportunity to raise the rent using some sweat equity. Your agent should be knowledgeable of the renter’s and buyer’s market for your area and property type and will have good recommendations of what types of updates to make before selling.

Making simple upgrades around the property and in common areas like hallways and entryways can be an easy way to boost the property’s curb appeal that won’t break the bank, whether it’s through new fixtures or a fresh coat of paint.

How do I list a multi-family?

One of the most important parts of getting ready to list your property is confirming the number of legal units in the building. In a city full of old homes like Chicago, many apartment units have been created in old basement spaces or have been de-converted into larger single unit. If you sell your property with an incorrect number of legally recognized units, you could face legal issues down the road. To get the most accurate picture of how your property should be valued and listed, get in touch with the local village to confirm the number of legal units listed in their records.

How should I price my multi-family?

Buyers and their lenders will typically appraise a multi-family home using the income approach method instead of simply using comps in the area to compare values. This means that the appraiser will look at the cost of property maintenance and rental income to evaluate a property’s cash flow. To price your multi-family, you should do appraise a building’s income and use comps in the area to accurately represent what someone might want to pay for it.

How should I market my multi-family?

• You’ll want professional photos of each unit to get ready to list your property, which means asking your tenants to clean their spaces and set up a time for the photographer. Having an empty unit comes in handy because it gives you the opportunity to deep clean the space and potentially even stage it with furniture to show off its potential.
• Put together a financial breakdown and lease abstract to show possible buyers. This might include details like current rents, cost of utilities, and other maintenance fees to give them a better idea of potential rental income.

Selling a building with tenants.

How do I sell my multi-family with occupied units?

One of the trickiest parts of selling a multi-family is to make sure that you are aware of your tenants’ legal rights and that you make the selling process as effortless for them as possible.

• Breaking the news to tenants: Announcing that you’re listing your property for sale isn’t the easiest conversation to have with tenants. For them, it means the hassle of cleaning their apartments for multiple showings, a change in landlords, and a potential increase in their rent after the sale. However, you are legally obligated to inform your tenants when you sell the property, so it’s important to have that conversation before getting too far into the selling process.
• Tenant’s rights when a property is listed for sale: To protect yourself from liability and provide a smooth transition for your tenants during the sale process, it’s important to be aware of their rights determined both by the state and by their lease agreement. Your tenants most likely have a right to be notified a set amount of time before showings and have a lease that can’t be terminated just because you want a vacant unit to sell the property. Reread your lease agreements and the tenant’s rights for your city before listing your home or schedule showings.

How do I show a property with occupied units?

An experienced Broker will know the ins and outs of how to show a property with occupied units (which is one of the biggest reasons why you should take your time to find a good agent). The most important concern when it comes to showing units is to make sure that the tenant is aware of the appointment sufficiently ahead of time. Check your lease agreement to see if there are already guidelines in place, or contact your tenant prior to listing the process to come to an agreed-upon amount of days or hours before the showing when they should be contacted.

Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

 

Source: Selling an Apartment Building FAQ’s

[/ux_text] https://www.creconsult.net/market-trends/selling-an-apartment-building-faqs/

Maintaining Your MultiFamily Real Estate Investments Property Checklist

Maintaining Your Multi-Family Real Estate Investments Property Checklist

Penny wise and pound foolish. Everyone has heard that old saying, but do you really know what it means. At its most basic it means to not choose to save pennys on items that if not addressed will cost you much more (back when this saying first came about, a British pound comprised 240 pennys). How this applies towards real estate investments are many fold, and specifically really seen in the area of maintenance.

In fact, most savvy real estate investors realize that the best way to maximize their returns is to make sure that their investments are well maintained. Not only will a well maintained property maximize their returns, but it will also protect their investment by at the very least maintaining their ROI.

Maintenance is as critical to your investment as any other component as staying ahead of issues can save you money, time and potential headaches. We reached out to our friends at Perma Pier to help us put together a checklist of sorts for routine property maintenance and advice on what to look for to prevent any issues getting out of hand. Here's a few of the tips you'll find:

• Walk Thru each unit at least annually to check for small water leaks, that may easily be fixed for a few dollars, vs. replacing damaged wood due to a continual leak.

• Have your electrical system inspected or tested annually: electrical issues account for 24.5% of all reported fires in non-residential buildings.

• Inspect the caulking and weather-stripping around windows and doors: finding and fixing air leaks could save you thousands in energy bills.

• keep an open line of communication with your residents and encourage them to report maintenance items they see and/or feel need attention.

 

 

Source: Maintaining Your Multi-Family Real Estate Investments Property Checklist

https://www.creconsult.net/market-trends/maintaining-your-multi-family-real-estate-investments-property-checklist/

January 2023 Commercial Market Insights

January 2023 Commercial Market Insights Report | National Association of Realtors Research Group.
Despite the market's uncertainty, commercial real estate performed well overall in 2022. However, this year will be challenging for most commercial real estate market sectors, with higher vacancy rates in the office and multifamily sectors.
https://cdn.nar.realtor/sites/default/files/documents/cmr_jan_2023.pdf

The Future of Multifamily is Now

The Future of Multifamily is Now

Here are three fascinating current trends in multifamily housing that are dramatically changing the rental market as we know it:

1. Build-To-Rent (BTR) Single-Family Homes Are Bringing Privacy and Backyards to Renters 

The development of new, single-family homes specifically built for the purpose of renting is a trend that Forbes says is “hot and getting hotter by the minute.” According to RentCafe, Build-To-Rent homes are desirable because “the trend combines the financial and leasing flexibility of a rental with the amenities and convenience of a professionally managed property, all while living a single-family home lifestyle.”  

Built-To-Rent single-family homes have wide appeal. Renters of all demographics are tempted by more space and privacy than can be found in a typical multifamily community. Many would-be-homeowners may not be in a position to purchase a home, thanks to skyrocketing home prices which are outpacing wage growth. Inflation and rising interest rates compound the affordability challenge. Build-To-Rent has found its sweet spot, according to Forbes: at “the intersection of desire for a home and economic reality.” 

That explains why single-family rental home construction is going gangbusters all across the country. 2021 was a record year with 6,740 new Build-To-Rent homes completed. 2022 promises to be even stronger with nearly 14,000 Build-To-Rent homes under construction as of January, according to RentCafe’s analysis of Yardi Matrix data.  

GlobeSt reports that Build-To-Rent is becoming more important to institutional investors and has in fact outperformed traditional multifamily for the past five years. Says Paul Fiorilla of Yardi Matrix, “With so much capital looking to invest in the sector, and the demand for rentals rising, build-to-rents are likely to increase rapidly for the next several years, if not longer.” It appears this housing trend will play an outsize role in the future of the rental housing industry for years to come.  

2. Co-Living Arrangements Are Making Space-Sharing Glamorous 

The term co-living might conjure up housing arrangements that are less than desirable for most adults, such as cramped college dorms, youth hostels, and co-ops. But the concept of co-living is experiencing what some refer to as a glow-up: it’s gotten better over time.  

What is co-living, exactly? According to SALTO, “co-living is when a group of three or more unrelated people live together in one place.” The concept has evolved dramatically in recent years and come to include a wide variety of living arrangements which are much more attractive than shared spaces of old. Says CBRE, modern co-living properties are much like student housing for young professionals. The purpose-built or renovated multifamily assets are designed around several unrelated individuals sharing an apartment unit, sometimes referred to as a ‘pod.’” 

The concept of co-living is gaining in popularity for several reasons, including:  

• Appealing amenities: Co-living spaces differ widely, and their amenities do, too. But most make life easier and more enjoyable with creative perks such as furnishings, bundled utilities, coworking areas, and community events. 
• Flexible lease terms: Many co-living spaces allow residents the freedom to move when the spirit moves them, whether to experience a different floorplan across town or a different lifestyle across the globe 
• Camaraderie and connection: Many co-living communities feature gathering spots such as cafes and offer social events like happy hours, comedy open mic nights, and exercise classes 

• Shared Economy: Co-living appeals to residents who prefer to rent vs. own—not just their home, but their experiences and things. Consider the popularity of other sharing solutions such as Uber, Airbnb, JUMP bikes or Rent the Runway.  
• Affordable luxury: Sharing a living space can allow renters to save money while maintaining a higher standard of living than they might enjoy on their own. 

Co-living is another rental housing trend that appears to be both heating up—and here to stay. CBRE reports that “co-living companies plan to open more than 55,000 beds in the next few years and have raised hundreds of millions of dollars of equity to meet their expansion targets.” According to Vox, major co-living companies include Common, Ollie, Quarters, Startcity, X Social Communities, and WeLive, which is run by the co-working company WeWork.

 

3. Flexible, Short-Term Vacation Rentals Are Easier to Manage 

Speaking of the shared economy, another trend we are watching in the multifamily space is how renters, owner/operators, and technology companies are innovating to get in on the unsatiable demand for short-term vacation rentals. This has been a volatile space for rental housing, with many owners’ policies and leases as well as local zoning laws regulating or even forbidding short-term vacation rentals. Despite that, PropModo reported at the beginning of 2021 that 65% of recent Airbnb bookings were in multifamily buildings—and home rentals have outperformed hotels in 27 global markets since the start of the pandemic. Clearly the appetite for short term rentals is healthy.   

The vacation rental’s most well-known player, Airbnb, has deployed various solutions in an effort to capture a slice of the multifamily rental market as vacation rentals—some more successful than others. For example, the company’s “Airbnb-friendly building program” was put on the back burner in March 2020 according to Rental Scaleup.   

In June of 2021, multifamily software and data analytics provider RealPage announced an exclusive partnership with Airbnb to launch an apartment home sharing solution called Migo. According to a RealPage press release on the launch, “residents can recoup a portion of their monthly rent depending upon how frequently they home share exclusively on Airbnb. Owner can differentiate their apartment offering and share the financial benefits of home sharing with residents.”  

Benefits of offering home sharing as an amenity for rental housing communities include: 

• Financially advantageous for both renters and building owner/managers 
• Added incentive for real estate investors 

• Higher stabilized occupancies, faster lease ups, and enhanced property NOI 
• Improved resident satisfaction 

Home sharing may not be suitable for all communities. It is most desirable and practical in urban core areas with high walkability. Newer communities equipped with smart access technologies are particularly well-suited to home sharing.  

The pandemic caused a shift in the way people live, work, and travel. Many who formerly reported to an office setting daily have transitioned to hybrid work or permanent work-from-home arrangements, allowing more time and freedom to travel. According to Forbes, “with more people working remotely now, renters can travel more and not risk losing as much money on rent. It could increase listings (on Airbnb) quite substantially, with close to 50 million rental units in the U.S. alone.”  

We’ll be closely watching to see how successful rental housing owner/managers are at participating in the vacation rental economy. It seems evident that home sharing is here to stay; what’s less clear is how adept multifamily operators will be at managing the demand and accompanying challenges of short-term rentals.  

 

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It’s true that the future of multifamily may not look quite like the setting of The Jetsons. For example, we have yet to see a rental housing community with conveyer belts that take residents from point A to point B. We’re also still awaiting the flying car that folds itself into a suitcase, no garage required. Developers have not mastered the 1,000-unit community on stilts concept just yet, and while multi-use real estate is all the rage, we’re still watching for the first rental property to feature a floating shopping mall.

Nonetheless, today’s reality for owners and managers of rental housing is evolving rapidly, and we’re excited about the rapid pace of innovation and the potential that comes with it.  

 

Source: The Future of Multifamily is Now

https://www.creconsult.net/market-trends/the-future-of-multifamily-is-now/