Why the Increase of Chinese Investors is Good for American Real Estate

A new trend is hitting the real estate market, and it may not be the trend that American real estate experts were hoping for.

Due to regulations introduced in China earlier this year, Chinese investments in foreign countries have become more and more difficult. The reason for the new sanctions come with a two-fold answer: domestic economic growth is slowing as Chinese moguls look to invest in properties around the globe, making Chinese officials eager to cap foreign investment amounts in order to keep profits local.

If you’re wondering why this should come as a disappointment in American real estate, keep this statistic in mind: in 2016 alone, Chinese real estate investors made up 29% of total foreign investment in U.S. commercial real estate, with a record high of $19.2 billion (yes, billion with a b) in deal volumes. And if that number is surprising to you, also keep in mind that these numbers are a 10% jump from Chinese investments in 2015. With all trends pointing upwards, the new cap on foreign investments in China puts all of those hopeful projections for 2017 on hold in the U.S.

The Chinese Hold on the U.S. Market

According to a recent report by Business Insider, Asia produces a new billionaire every week, with 71% of those billionaires coming from China. Until now, these billionaires have been eager to grow their wealth, looking at the highly competitive real estate market in the U.S. as a potential goldmine for their newfound capital.

It’s also been reported that in 2016 alone, New York City received a whopping 46% of total Chinese investments, making these new regulations a solid hit on the New York market. San Francisco and the Bay Area enjoyed 15% of total Chinese investments as well, with L.A. and Chicago receiving 7% and 5% of total investments, respectively. In these growing markets, continued high-dollar investments are crucial to competition and value, with the potential loss of future business putting some fear in real estate experts looking to enjoy more growth in 2017.

New Rules, New Tools

With investments being capped at only $50,000, U.S. real estate experts can say goodbye to cash-only deals and the flooding of paid-in-full offers from Chinese investors. With the majority of Chinese money “stuck” in mainland China due to this cap and further regulations, U.S. lenders are seeing fast-rising trends in traditional financing. Over the past few years, only 20% of Chinese buyers used mortgages from a U.S. lender to fund their commercial real estate investments. With new rules in place, however, sources say that this is about to change- and quickly.

Looking ahead in 2017, U.S. real estate experts are hoping that these regulations don’t lead to major losses in revenue, but are preparing for creative solutions to keep business deals growing. With the Chinese having a huge hold on the U.S. economy, or a 29% hold to be exact, the U.S. continues to rely on foreign investments as a major source of economic support. Any changes to that support system could have implications that the U.S. has not seen for some time. And as Chinese investors continue working to find ways around investment caps, it appears that the U.S. real estate market and Chinese investors are still attempting to work together in order to keep those losses from devastating either side of future deals.

Scott Prephan originally published this piece on his website.

How to Avoid Getting Burned in a Real Estate Transaction

When it comes to growing your wealth, investing your money, especially in real estate, is one of the best and safest ways to increase your money. However, being one of the safest methods doesn’t mean that doing so is inherently risk free. There are many ways that you can be duped or scammed into losing money, but there are also risks you could bring upon yourself. With everything that goes into investing, protect yourself against loss by being aware of some of the easiest ways that you can get burned in a real estate investment deal and preparing yourself against them.

• Never, ever hand over unsecured money.
• One of the easiest ways to lose your money is to plain old hand it over to someone. Say you stumble upon a once-in-a-lifetime bargain on your dream house, and in your haste to secure the property you hand over money without any real assurance or security on your end. Suddenly, the seller has vanished, you find out the property was never even actually listed by the owners, and now you’re out thousands of dollars on top of everything. Before you ever let any money leave your hands (or your account) have some sort of security so you know you won’t get burned.

• Do your own research.
• Before you start looking to invest in a property, find an area whose real estate will be lucrative and have a good potential of yielding high returns without too expensive of an investment. You also want to make sure that you have third party appraisers and home inspectors on hand for every step of the process. Although it might be easier to have the seller handle all of these things, especially if they offer, you want to have an unbiased person who will make sure that you’re both being treated fairly and receiving the best deal.

• Be realistic about the repairs.
• When you see a property that’s a good bargain, it can be easy to see the potential profit at your fingertips and gloss right over the expected repair costs. Before you even consider purchasing a property, make sure you have an understanding of approximately how much it will cost to get the property “up and running,” so to speak. While unexpected expenses are a part of every property renovation, having an accurate estimation of what the repairs will cost helps you make sure you don’t run out of money halfway through your project.