By Alex Zylberglait
Foreign investment in U.S. real estate has been increasing significantly over the last few decades, despite periodic fluctuations by region or product type. The source of the inbound capital has shifted over time and in different cycles depending on the global economic conditions or those affecting the specific countries. Yet there’s a clear positive trend and interest from foreign buyers in U.S. real estate that will continue to accelerate as long as we remain one of the most stable economic markets in the world — especially during these times of so much global volatility where global capital is seeking safe and consistent returns over time.
An area where we see this clear trend is in commercial real estate investments. Working with many foreign buyers for almost two decades has allowed us to identify how to strategically facilitate their entry into the U.S. commercial property markets, which could be overwhelming relative to the amount of information required to invest in and then manage these types of assets. There are five areas that I believe are critical to consider for advisors or principals to work successfully with foreign buyers.
1. Truly understand their motivation for investing.
Although it sounds like an obvious question, it is even more important to understand the conditions that are specifically attracting these particular investors to seek investments in the U.S. — and, in particular, real estate investments. Very often it is economic or political instability in their home country that drives them to want to protect their capital and to reduce volatility; other times it is simply to diversify their portfolios or for estate planning purposes. The better you understand their true motivation, the more likely you are to address their needs and provide with the right investment options.
2. Be patient, and be ready to provide a lot more information and education to the investors than would normally be expected.
Given the lack of familiarity with the U.S. systems and markets, foreign buyers tend to ask a disproportionate number of questions, so the educational curve is steep. As an advisor or principal, you need to be prepared to access significant amounts of market data and resources to satisfy the myriad of questions and concerns these investors are likely to have. The process can be at times daunting and long, but at the end of the road, those who spend the time and do so in the most professional and comprehensive manner will see the rewards and earn the trust of these investors for many years to come. While it is generally true that it takes longer to earn their trust, it is also true that foreign investors tend to be more loyal long-term clients.
3. Have a team of experts you work with to handle all aspects of the transaction.
Inevitably, given the complexities often involved in working with foreign buyers, this will require access to a myriad of competent advisors such as attorneys, accountants, property managers and possibly others. Having the right experienced team in place will not only facilitate the acquisition process for them, but will make them that much more comfortable in establishing a larger investment base in the U.S. going forward. Understanding that many requirements in the U.S. may be totally different than what they are used to in their countries may be difficult at first, but with the help of the right professional team, you will appear resourceful and dependable in their eyes.