Friday, June 10, 2016

Thrifty Thinking: Real Estate

Ross Milroy is in the heart of real estate booming at Ross Miami Real estate. I had a chance to get a few soundbites from him on real estate and investment property.

I address financing in two separate areas - one under Investment Property and then the section Financing for Foreign Nationals

Remember - MOST U.S. buyers NEED to finance, some Europeans WANT to finance and often it is cheaper for them to loan against their assets at ridiculous low rates in Europe and then pay cash here, and MOST Latin Americans like to pay cash and avoid leveraging. 

In the past, all cash used to be more powerful with negotiations until everyone started paying cash. The reality is that most sellers & agents discourage deals that involve financing due to (i) issues with appraisal valuations (ii) stricter bank underwriting guidelines (iii) longer time to close the deal and often more costly to the seller => price renegotiations, seller credits etc. 

It is often significantly cheaper and easier for a European to borrow against their assets with a line of credit or home equity line than pursue a foreign national mortgage in the U.S. I always encourage clients to look to their existing banking relationships first before even going to a local bank and paying 5 percent or more on a 5 or 7 year adjustable rate mortgage. In some cases, I have had an international client open up an investment banking relationship in the U.S., fund the account with the minimum in cash, bonds or equities, and then use it as collateral to open a line of credit and fund the RE purchase. In general, if you open an investment bank account with $1.0M value, you can easily draw down up to $500k (50%) at LIBOR plus 50 to 100 bps. So much easier and cheaper than going the traditional route.


Condos are a safe bet. Condomimium ownership is often a preferred option for many international buyers, as they often offer heightened amenities, and they're common in many of the particularly dense markets overseas investors are most interested in.
“They really like the idea of buying essentially a piece of space between four walls in a building that’s secure, safe, where all the maintenance is taken care of and where if they’re not present, they can call on management to take care of it,” Milroy says.

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