Foreign Real Estate Investing: How Much Do You Know?

I hear so much about foreign investors in the real estate industry; some agents run scared, some agents embrace foreign investors and most just don't have a clue and don't understand that part of the business. I am one of those who had no clue about foreign investors, visas, the IRS and many other questions. Where I live in Central Florida is apparently a hot bed for foreign investors, so I decided to look around for help so all of us understand more about foreign investors and what opportunities a Realtor might have.

My research started with finding an expert in the business and seeing if we could have a teleconference to help me understand and, in turn, share what I learned in this article. Turns out one of my LinkedIn connections was the perfect choice—Lauren Cohen is an international lawyer and a cross-border expert. She's also a global Realtor, best-selling author and sought-after speaker, and is the only globally-acclaimed legal and business advisor who goes "above and beyond borders" to help clients invest, live, work and play globally.

We started exchanging messages and when she shared some estimated numbers, she got my attention:

• $78 billion invested in U.S. real estate by foreign investors in 2019 from Canada, Mexico and globally
• $402,010 average residential property price paid by foreign investors in 2019
• In the wake of COVID-19, foreign investor interest has increased an average of 250%.

I think you see why she got my attention.

Before we get into an argument about the amount of investing done by foreign investors, $78 billion, let's remember if you add residential and commercial together here in the United States in 2019, we are talking approximately $2.2 trillion in sales. So as you can see, a very small fraction is bought by foreign investors—plus, they do buy and sell, so nothing is leaving the country!

The biggest part of my conversation with Lauren was setting the stage for future articles and doing my best to understand it so I can write about. One thing I did understand somewhat was currency fluctuations. When computing international return on investments, there are two parts: equity return and currency return. For example, a foreign investor owns a property for a few years and sells the property at a 20% equity return on the investment, but at the time they sell, the currency rate between the two countries is down by 20%, meaning net zero return on the investment. When you start thinking about selling an investment property as a foreign investor, even a loss or 0% equity return could still mean an overall profit based on currency return.

Many of us have looked at investment properties through one lens, equity return on the investment based on buying, improvements, cash flow and maintaining and eventually selling. When you add currency speculation between different countries into the formula, you have successfully gone above most of our comfort zones!

This is why this is article is number one on foreign investors. I just hope Lauren Cohen, who is an expert in this field, has patience as I try to share some of her knowledge in the articles. Want more information on Lauren? Connect with her on LinkedIn or visit ecouncilinc.com/goglobal.

Dick Betts is a REALTOR® in The Villages, Fla. for Touchstone Real Estate in Mount Dora. He's also a national speaker, trainer and consultant. Learn more at www.DickBetts.com