U.S. Real Estate Is Becoming Increasingly Attractive To Foreign Investors

While inflation and rising mortgage interest rates have contributed to a substantial drop in real estate investment in the U.S., countries with their own inflation and economic issues are still looking here to invest.

Despite what you may have heard about China’s specific influence in purchasing property and agricultural land in the U.S., Canada is still the largest investor, accounting for 8% of foreign investments in U.S. real estate, according to the National Association of Realtors. In 2022, five countries (Canada, China, Mexico, India and the U.K.) accounted for 29% of purchases.

Though interest rates and prices remain high in the U.S., residential and commercial real estate remains a good buy for many countries battling their own inflation issues. South Florida has always been a hot market for foreign investors. That’s not being viewed as a good trend by Florida Gov. Ron DeSantis — especially as it relates to Chinese investment in the state. According to the U.S. Department of Agriculture, foreign investors also own 5.7% of Florida's privately held farmland.

"We don't want to have holdings by hostile nations," DeSantis said during a press conference on Everglades restoration in Bonita Springs, Florida. "And so if you look at the Chinese Communist Party, they've been very active throughout the Western Hemisphere in gobbling up land and investing in different things."

But there’s a new wave of investors coming into the U.S., according to Chad Gallagher, the co-founder of Home 365, a national property management company that manages 7,000 properties nationwide. Gallagher told Benzinga that his company has seen a significant uptick in foreign investors from economically volatile countries looking for property management services for their purchases of multifamily properties.

“U.S. real estate actually has a better cap rate than most countries. For instance, the average single-family home in Israel costs five times what a similar home here would cost,” he said. “So investing in a rental property in countries like that and making them cash-flow positive doesn’t work for them.”

According to Gallagher, up-and-coming foreign investors in U.S. properties include those from countries suffering from high inflation, like Argentina and Brazil. Those two countries are currently working on a common currency plan. Last year, Argentina’s inflation rate hit a three-decade high of 95%.

“I’ve seen two big drivers to foreign investment here. The first is they can’t financially invest in their own countries, and the second is that countries like Argentina and Colombia are terrified by rapid inflation,” he said.

Because of that type of investment opportunity, Home 365 has seen a significant uptick in being hired by foreign investors to manage properties they geographically can’t manage.

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“It’s a huge market getting bigger every year,” Gallagher said. “A lot of our clients are not in town, and 75% don’t live within an hour's drive of the property they own. It’s a logistics issue for them, and they have an issue collecting rent, maintaining engagement with the tenant and the city as well as dealing with property maintenance.”

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