Government efforts to shore up the U.S economy after the global recession of 2008 have brought about a unique economic climate that’s extremely favorable to well-capitalized foreign investors. The substantial fall of the U.S dollar along with an ample supply of great investment properties at bargain basement prices have been turning investors’ heads towards the US for a couple of years now. But a strong local economy that produces good paying jobs and healthy tenant demand, the ever falling U.S Dollar and superior affordability make Houston the place foreign real estate investors should look into first.
Strong Houston Economy
The ultimate foundation for long term real estate investing is a healthy supply of great tenants. But one can’t be a great tenant without well-paid stable employment. Texas leads the country in jobs creation with over 251,000 private sector jobs created just in the last year. About 1000 people move to Texas every day due to plentiful job opportunities, low cost of living and low taxes. Smart foreign investors can strategically invest their capital in properties that will satisfy the demand from this inward migration thus insuring great returns on capital and minimal vacancies.
Take as an example an Australian investor with 500K of Australian dollars in capital to invest. On January 1st 2006, that capital could have purchased $368K worth of real estate in the U.S. Today that same amount of capital can purchase $530K of real estate, or 30% more. Or put differently, this Australian investor could purchase the same asset for 30% less than a U.S investor using American dollars. Although, not as drastic, the same is true with Canadian (20%) or European investors (14%) The mighty fall of the U.S currency due to steroidal levels of stimulus is a beautiful thing to a foreign investor.
Unique Property Characteristics
Houston offers a unique blend of property characteristics to foreign investors that is hard to find in other parts of the country. Here, you can purchase a great investment property located in a superb community with excellent schools, shopping and access, recently built (after 2000) for anywhere between $90-$140K depending on location and condition. What’s amazing is that these properties are being sold at prices that are below their replacement cost. That means, it would cost you more to rebuild that same exact home today. That offers strong growth opportunities long term. By being able to purchase great properties for less, foreign investors can make their capital go further and increase the yield on their investment.
In the next post, I will cover a realistic scenario of what cashflow and returns a foreign real estate investor should expect when buying an investment property in Houston.
Photo credit: Christian Haugen