When we think about the buying side of the residential real estate market, the vision that most often pops into our heads is a young couple, eager to get the keys to their first-ever home.
Of course, that’s not always the case. There are all different kinds of transactions, but the Dallas residential real estate market is becoming more and more appealing to foreign investors. It’s a trend recently discovered by NetWorth Realty principal Mark Bloom and investor Derek Abel.
“The Chinese are investing in the U.S. and specifically Dallas for three reasons: Diversifying investments, new real estate restrictions in China, and the low cost and volatility of property prices,” said Abel. “The Chinese investor is accustomed to flipping properties in China, as this is an extremely popular type of investment.”
It sounds like an interesting concept, especially with a pool of investors that can buy a greater number of homes, therefore ensuring a greater return on investment and less risk. And while “flipping” seems synonymous with buying a property, renovating, and then selling that property on MLS, that’s not the kind of transaction NetWorth handles. As Bloom tells it, the properties are presented to investors, who purchase them through a holding company a la carte. From there, Bloom and Abel handle the legwork.
“Mark and I have worked together to create a company that has created a pipeline for Chinese to directly invest in real estate in the Dallas area,” Abel said. “We provide them with market information for purchasing the property, contractor management, and marketing the property for sale. This provides a full-service company for foreign investors to use to invest money in real estate in Dallas with minimal time and effort.”
The company works specifically with Dallas properties, which make very attractive potential investments, Bloom said. After purchasing and selling several properties, Mark has seen that when the purchase price of a potential property plus the amount of repairs adds up to around 70 to 80 percent of the home’s value, that property will show a 15 to 40 percent return on investment in 3 to 6 months. It’s not a hard-and-fast formula, but it works for NetWorth’s purposes.
To me, that seems like a pretty sound investment, which is one of the reasons that the Chinese are looking to buy in Texas.
“At first it was difficult to get some foreign investors to look past New York, Los Angeles, San Francisco, Miami, etc. as Dallas, Houston, Austin, and San Antonio are often overlooked by foreign real estate investors,” Bloom said. “Once we got into numbers and statistics, it was easy for the Chinese investors to see that they were the early adopters in this situation, and if they made the proper inroads now, they would be able to take advantage of years, if not decades, of sustained growth in several major metropolitan areas in the great state of Texas.”
It’s heartening to see that Dallas, and even the whole state, is seen as an attractive investment all over the globe. We’ve been saying for a long time that because of our stable market, Dallas has been able to recover from the housing crisis much faster than markets such as Miami, Atlanta, and much of the East Coast.
Still, foreign investment in single-family homes is still a relatively new concept, Bloom said.
I’m curious: Most of our readers are Realtors who work with single-family homebuyers that will occupy the home they purchase. What do you think about foreign real estate investment in the single-family market?