Operating Locally But Thinking Globally Is a New Commercial Real Estate Trend
December 11th, 2013 by Diane Moore
Real estate is a perpetually confined business. It has always been the tradition to “shop locally” when dealing with real estate. In order to buy, sell, lease, or build real estate, you need admission to specific information on resident customs, various regulations like zoning, ecological conditions, tax laws, market, and more.
However, within the last decade the ways and means of dealing with real estate has gone under “reconstruction” as a growing amount of investment mediums have endorsed capital operations for real estate into the global market.
In one part of the real estate industry, REIT, or Real Estate Investment Trust, type mediums currently function in over three-dozen countries worldwide with more jurisdictions on the way. For example, Mexico, who has recently modified previous legislation to make the arrangement of tax-privileged real estate businesses, or Fibras, to appear more appealing to real estate investors.
The broadening arena produced by REIT grants investors the chance to invest throughout global platforms, expand country liabilities, and make subdivision investments that may not be accessible at home. Additionally, REITs permits countries to draw investment into their real estate markets, frequently from overseas, amplifying market transparency and liquidity, and eventually triggering economic expansion.
Considering the worldwide nature of real estate, and the increasing links between capital markets, it is ever more vital to have admittance to global data, even if a company operates on a local level.
It Is about Time to Jump in
If you are considering global real estate opportunities, there are no better signs of “jumping on the bandwagon” than now. There are ways and means to find unique and value oriented real estate from around the world. In depth analysis of countless real estate projects gives those in the real estate investment business the inside comings and goings of profitable real estate investments.
Actually, global commercial real estate real estate may be the best means for investors to stockpile a fortune over the next decade! With the local markets unpredictable, the returns on international real estate investments can be astronomical.
Local real estate investors are starting to feel the pinch and feel the need to spread their wings. How much more beachfront property is there left to buy? In the instance of residential or office space, supply responds with a variable year interval. Consequently, what happens when an increasing cache of finances and investors in hot-emerging markets pursue a limited or responsively lagging supply? Prices and value increase at a quickened rate, far more than the economy or additional assets.
With commercial real estate, one can invest a comparatively minute sum of money to manage a huge asset. For example, in sections of north-east Brazil, the value of some condominiums increased by 60% in just two years. Even more, one could manage this condominium over a two-year period with only a 20% investment of the purchase price!
In addition, real estate is a fantastic way to shield hard-won capital. The advantage is authentic, productive, and functional. Traditionally, land has been the numero-uno protection against turmoil and inflation. There will always be a need for housing and commercial real estate, price bubbles will fluctuate, nevertheless, real estate will retain an inherent value.
As of yet, the best real estate opportunities are outside the borders of the US. The gigantic growth chapter of the US economy is finished, at least for the moment. Real estate investors are perplexed about where new growth will pop-up, the security of their investments, and the worth of their paper assets.
However, beyond the US borders things are a bit different. There are many growth opportunities. In fact, there is a whole gamut of opportunities to increase revenue. Anywhere from high-growth frontier-markets to markets abroad like Brazil, to real estate that is relatively cheap symbolizing genuine long-term value.
For example, Brazil is considered a middle-class country. At least half of the population currently slides into the middle-class category. During the last year, the country produced 2.5 million jobs, and credit and mortgage-finance is becoming more available.
Once the population arrives in the middle-class sector, they become consumers. This means placing themselves in the market for purchasing real estate. Those 2.5 million new middle-class citizens will need somewhere to work, a factory, an office etc.
Consider the impact on commercial real estate. Going by past results, this means prices should increase, along with the revenue received from these assets. A ton of money has flooded the stock markets of these fresh powerhouses, with a few markets seeming a bit costly. However, this may not touch real estate prices. These powerhouses can be effectively wagered at a lower-valuation.
Today, purchasing international real estate has several key advantages:
- An investor retains control. They can purchase, sell, rent, or develop depending on their timetable and requirements.
- Cash flow can be created in another currency. This is an ideal means of diversifying a portfolio towards appreciating-currencies.
- It is a fantastic inflation-hedge. Real estate is healthier than merely cash-flow in another currency. It is a hard asset, meaning that it keeps a value apart from any paper currency’s nominal-value.
- Real estate has numerous advantages. Land can be used for a number of things such as agriculture or forestry while the investor hangs on until the people, industry, or tourists to arrive. The new middle-class in China, India, and Brazil are consuming more meat, which indicates more land will be required to grow-feed. They will also need wood for furniture and construction in their new residences.
- Real estate investing is intriguing. A real estate investment can double as a personal home, vacation getaway, or part-time residence. Real estate can be enjoyed as it appreciates in value, safeguarding net worth and generating rental returns.
Being Local, Going International
How about putting the shoe in the other foot? The US has seen a rise in foreign real estate investment. It will probably be a good move not to ignore this real estate tsunami. Being local is not the issue, it is stretching the imagination to see beyond the borders of the US and the revenue that can be acquired by doing so.
There are approximately 4.5 million ready for investment listings on one well known online realtor site. Last year, 30% of purchases by buyers from abroad were in the $250,000 to $500,000 price-range, 28% more than 2011 figures. The average purchase price by a real estate buyer from abroad was $252,000, in contrast to the general US average of a little more than $160,000.
Here are a few tips on how a local can go global:
Speak the Language
Knowing the language allows a real estate company to gear their market in the direction of the country or region where the language is primarily spoken. Research shows that the most widespread concern of foreign investors is the language hurdles. Understanding the culture is imperative.
Understand How They Do Business
Different cultures have different ways of doing things. For example, not every culture is accustomed of doing business with a handshake, some prefer to bow. Additionally, showing the bottom of a shoe is considered offensive, and looking into the eyes means that a person is more trustworthy and so on.
Understand What They Want
This is where the Internet, though irreplaceable, may fall short with international buyers when transferring the “complete” picture of the real estate being offered. If the needs of the buyers are wholly understood, schools, transportation, shopping, business centers, and so on, there will be a better possibility of a perfect match resulting in a profitable sale.
Correctly Estimate Conversions
The US is one of the last countries to continue using traditional measurements, such as miles, pounds, feet, and inches. Other countries have adapted the metric-system. When adding information about the size of a property, it is crucial to display precise measurements in traditional measurements such as feet and inches and the metric system.
In addition, currency conversions will have to be dealt with as well. Exchange-rates are continuously fluctuating, so it is vital to use the current rates and data by using a currency-exchange company or bank. This way, potential clients will receive the proper currency exchange information and know exactly that they will be paying for a property.
The Certified-International Property Specialist title prepares realtors to deal with the increasingly growing international real estate market.
Reaching Across the Globe
Research carried out by a group of realtors last year revealed that sales to international clients accounted for roughly 5% of total US sales. The financial estimation of those sales, totaled $82.5 billion in capacity. Even if it’s only 5% of total sales, it is still a humungous amount of business, and a little more than 25% of real estate experts say there are working with international clients.
Realty experts agree there are two classifications of real estate buyers: investors who will remain overseas and buyers who will live in their homes. Locals can still have a big hand in these transactions if they remain hands-on with real estate opportunities. For example, foreigners who plan on living in the US prefer newer, high-end, low-maintenance homes.
This is mainly because they have no idea who to address, and have no time for, repairs and renovations. They are moving to an area where they have few connections, if any. Moreover, the same as any buyer, they are searching for qualities like good neighborhoods and schools, and people they have something in common with.
Thinking Globally And Operating Locally Has Its Advantages
“A tenuous economic revival aside, the US continues to supply the most stable and secure real estate investment opportunities around the world, ranked-higher than U.K., Australia, France, Canada, and Germany, according to studies carried out by the Association for Foreign-Investors in Real Estate. “
The political-system is well-ordered and dependable, and real estate methods in the US are one of the most transparent.
Encouraging exchange-rates against the dollar has allowed foreign bargain hunters to get more bang for their currency. In comparison with the European countries, the standard apartment is roughly 700-square feet, properties in the US are double that size, and usually half the price as well. For example, Miami had 23,000 empty condominiums at its highest-inventory in 2008. Now, many have sold, mostly due to the enthusiastic buyers of international investors from South and Central America.
Though Florida is a central place for South Americans and Europeans, Chinese real estate investors are an average age of around 39. “These people are young and rich, searching for options,” stated one international real estate expert.
So What Is the Lowdown?
“Europe is on the road to recovery,” says one international real estate analyst. Cautioning that inflation and increasing interest-rates may put a constraint on any real estate market recovery within Europe; nonetheless, strong real estate opportunities have been noted in the region as well. Markets like Germany will be a driving force in Europe’s real estate market growth.
Restricted construction in other prime-markets like Paris and London indicates that supply will probably out-meet demand. Therefore, real estate investment in offices and other principal commercial assets, in much sought after locations, symbolizes a healthy choice for local and global-investors.
Some international real estate experts predict more prospects for foreign investors to invest in China, as 8% economic-growth in the last few years is leading all global markets. In spite of financial restrictions by the government, there is still a huge liquidity in China’s capital-markets; however, that state of affairs could alter due to the strong need to keep real estate prices in control. Nonetheless, a comparative shortage of experience amongst China’s local property market grants experienced foreign-partners a wonderful opportunity to contribute to the market.
Generally speaking, the outlook is that even though no one is ready to admit that their local- markets have wholly turned the corner, growing well-heeled investors must watch global developments as appealing investment opportunities can materialize from anywhere around the world!
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