Multifamily Attracting Foreign Investors

June 14, 2012

Though it’s a good time to buy a house considering the rock-bottom prices and interest rates, strict lending guidelines are driving more would-be home owners to go the rental route. Enter overseas investors, who are well aware of the rising need for rental units and the low number of vacancies nationwide. These properties are drawing attention from investors across the globe, industry insiders say.

“Ninety percent of the buyers at our auctions are investor-based, with a tremendous amount of foreign money — they’re placing money into anything that provides a return,” says Lamar Fisher, president and CEO of Fisher Auction Company. “South American, Russian, and the Israeli buyers are the top three cash foreign buyers, and price is not a factor to them. They are closing transactions in two weeks. Foreign investors see this as protection for their money in light of their own country’s economic fluctuations. They feel the U.S. market will continue to improve and their investment is safe.”

This international interest shows that despite its recent economic issues, the U.S. is still seen by foreigners as the top option for investments. "There is a certain allure and prestige to being a U.S. investor. When people do well, they put their money in American real estate or a Swiss bank account," says Faith Xenos of Singer Xenos, a wealth management firm in Florida that works with Brazilian clients.

One of the factors driving the costs of renting up is the low supply of units. The Wall Street Journal recently reported that the rental market is “the tightest it’s been in more than a decade, with only 5.2 percent of apartments nationwide vacant at the end of 2011, down from a high of 8 percent in 2009, according to real-estate data firm Reis.” 

“It’s going to be a hot market for the next 18 months to two years” Fisher says. “If you can secure a multifamily property, it will bring off-the-charts money because that’s what buyers want in today’s marketplace. Also, land development parcels that are fully entitled to build apartments have become another hot commodity - the developers that are purchasing these sites are going right to build based on market rate rental. Waterfront properties are also in high demand right now — I literally receive one or two calls a day from investor pools looking for waterfront multifamily properties.”