Foreign investors consistently invest in multifamily apartment buildings throughout the United States of America (US). This is true even when investors stop investing or lose interest in other real estate sectors. Generally speaking, purchasing multifamily properties in the US is an easy decision for those foreign investors that have extra capital to invest in.
Foreign investors don’t have to be rich to invest in the US multifamily market. Specifically, with the availability of multifamily real estate syndications and Real Estate Investment Trusts (REITs), investors can use their capital and have access to large investment properties and diversify their portfolios.
Despite all of these benefits, foreign investment in multifamily real estate is lower than you might think. According to CBRE, only 4% of multifamily properties are owned by foreign investors or non-US companies. In some instances, this relates to the hurdles associated with obtaining financing; in other instances, it’s a lack of knowledge on how to do so.
BELOW ARE A FEW MORE REASONS FOREIGN INVESTORS SHOULD CONSIDER INVESTING IN MULTIFAMILY PROPERTIES.
DIVERSITY.
The US real estate market is truly diverse. With so many cities and markets, foreign investors have various investments to choose from; not to mention the tax advantages associated with owning multifamily properties.
LIQUIDITY.
Most US investors understand that, in general, real estate is not a particularly liquid asset. However, compared to other countries, the US real estate is far less illiquid. In the US, most investors use leverage to invest in commercial real estate. Major financing sources for existing assets in the US don’t have equivalents in other countries worldwide.
SHORT-TERM LEASES.
In the US, most renters are used to having one-year leases. However, this is not the global standard. Most people living in the US aspire for what in the US is called the American dream. Therefore, there is a perception that everyone who is renting is doing so temporarily.
PASSIVE INCOME.
In the US, owning multifamily property is a passive investment if set up properly. The larger management firms in the US offer foreign investors management of tenant interface along with local experience and knowledge. Additionally, the professional firms are able to offer professional services such as coordinating vendor appointments or utilizing pricing software to boost revenue. As a foreign investor, it’s typically best to leave the management of your multifamily property to the pros because of their expertise.
MULTIFAMILY REAL ESTATE SYNDICATIONS.
Multifamily syndications are a popular way for foreign investors to passively invest in the US multifamily market. A real estate syndication is when a group of people join together to buy a property or several properties. In general, multifamily real estate syndications give investors the opportunity to be a part of large investment deals that they may not be able to purchase individually. The investors earn a percentage of the profits from the project in exchange for their financial contribution to the syndication.
Overall, multifamily syndications are superior to other passive real estate vehicles in that they are 100% passive and allow investors to take advantage of lucrative tax benefits without directly owning property. Also, foreign investors can leverage the expertise and experience of qualified sponsors, who typically have specialized knowledge about the market where the multifamily property is located.
STEPS TO ACQUIRE A MULTIFAMILY INVESTMENT PROPERTY IN THE US
PICK YOUR ASSET CLASS AND TYPE
Commercial property is any real estate that the owner uses for business purposes. Commercial properties can include shopping centers, warehouses, hotels, and apartment complexes. In comparison, residential properties can be single-family homes, condos, or multifamily homes. Specifically, any rental property that has five or more units is considered commercial, even if it’s used for residential purposes.
SELECT A MARKET
The US housing market has made numerous cities that foreign investors can pick. With such variety, this increases your chances of finding a profitable investment property. In general, you should look at the population growth and job growth of any market that you are considering.
FIND PROFITABLE INVESTMENT OPPORTUNITIES.
Once you’ve chosen a real estate market, your next step will be to begin looking for properties for sale. As a foreign investor, you should consider investing in multifamily real estate syndications.
You can get in contact with Multifamily Investment Firms like MI Real Estate. Once you connect with us and provide the criteria of where you would like to invest, we will add you to our investment offerings distribution list. Once you’ve decided to partner with us, all you need to do is create an LLC/ITIN. We can even refer you to attorneys who specialize in creating LLCs for foreign investors if you need assistance.
FINAL THOUGHTS
If you know and understand the process, as well as the hurdles, and hire a competent support team, passively investing in multifamily real estate in the US can be lucrative. There are, of course, other ways of owning a piece of real estate without being principally involved in the acquisition, such as investing in multifamily real estate syndications, which is our investment vehicle of choice. Overall, be sure to explore all of your options before committing to any investment.
ABOUT THE AUTHOR
Ismael “Rey” Reyes has been actively investing in residential real estate since 2005 and has focused exclusively on multifamily since 2016. He has led MI Real Estate in investing in 13 multifamily properties in Alabama, Florida, Georgia, and Tennessee, totaling 599 units and valued at over $38 million. Rey also provides independent consulting to multifamily investors and is the international bestselling author of