Recently, in a forum, someone posed this question:
Hi, I would like to hear from non-US Citizens investing in the US on how they are going with their investment strategy, what strategies they find are most successful for them with being a remote investor, and the hurdles they have had to overcome to achieve success.
Although I am a US citizen, when I made my first overseas investment in 2014, I invested in an area I knew nothing about - Jacksonville, Florida. I had never visited the area and knew no one from that area. I faced a lot of the same difficulties that foreigners faced. Anyway, I took a stab at answering this question and added 17 tips for foreign investors.
I don't qualify for this post because I am a US Citizen. But I did invest while living in Korea, in a state I had never visited before, with investors that I had met online. So, in that respect, I share a lot in common with foreign investors.
I didn't know about the area I was investing, I didn't have the ability to easily visit it, and I had to rely a lot on web resources to figure things out.
The degree of difficulty and risk go up as you try to do what I've done - and I suppose if you're a foreigner, there might be a few more hurdles to overcome in terms of figuring out taxes and withholding - but I did a lot of macro-level due diligence beforehand to pick an area that I thought had good potential to grow in the next few years. I wrote a post about the process I went through.
I also help organize a meetup out here in Korea. We help bring together investors who are looking to invest overseas and give them a chance to network with other investors. Our members are pretty evenly mixed between US Citizens and non-US Citizens. One of our lead organizers is from the UK.
The area my partners and I in has been doing well. Our investment on paper is probably worth about 50-80% more than what we paid for it at this point. Even though I was looking for cashflow, the property has appreciated a lot more quickly than we had anticipated, and right now we're actually looking to find another market because the deals are harder to come by.
The problems I've encountered
- At the purchase, we knew there would be some CapEx costs on the roof and pipes. We thought we'd have to time to make those repairs, and we'd pay for them through rent collected. It turns out we had to do those repairs sooner rather than later. So, while we were anticipating additional capital outlays and had enough to cover them, we had hoped to pay for them later.
- Pipes under the house leading to the street burst. This was an unexpected $1,700 repair. The city covered half of the cost, and after talking to a few general contractors, it's not a repair that you can necessarily check for ahead of time, but something you might want to just have on your CapEx expenses long term.
- We ended up replacing the windows which we hadn't anticipated.
- We did some interior work - tiles and cabinets - to make it more presentable.
- We switched property management (PM) companies. Normally, this wouldn't be that big of a deal. But the previous PM had already placed a tenant (we inherited the tenant). So, when it came time for her to move out, there was some damage that the previous PM had not documented well, so we weren't able to charge the tenant and this ended up costing us a few hundred dollars.
- Things will often take longer than you anticipate. For our windows, we were delayed because the ones we wanted (that matched the existing ones) were not readily available.
Right now, we're getting the place ready to rent out and looking at between $900 to $1,000 in rent. We know a place nearby that's not in as good of an area that rented out for $975, so we're optimistic.
The market we chose was voted as one of the top 25 hottest markets in Florida. So we think there's still room for the price to run even more.
My advice to any international investors
- Start macro. Really look at employment and population trends.
- Start to narrow down your search grid.
- Look micro and get as much info as you can about the place.
- Read the City Minutes to find out about the community.
- Read CAFR report (mentioned in the blog post).
- Read local area newspaper reports.
- Find out the names of all the subdivisions.
- Use Zillow not to tell you the absolute price for the areas but instead to give you a sense of the trends in the area. Where are the expensive houses? What neighborhoods are nearby? How much do they cost?
- Create a custom Google Map of the area and pin things to it so you have a sense of where everything is.
- After you have a few candidates areas in mind, contact PMs. Ask about the area, and tell them what you see. Ask for their opinion.
- Contact investors on BiggerPockets (BP) in the area - ask them their opinion. (You might try contacting investors first, but you never know if they are giving you the whole story. Better to have a sense of an area first and then ask specific questions. For example, I noticed that there was a lot variance in price along Smith Ave. What do you know about that street? Plus, as someone who helps other investors regularly, I'm always more eager to help those who have already done some legwork.)
- Contact realtors.
- Continue to network with the investors you meet on BP. Try to arrange a Skype call. Send them research on the area. This is part of the "feeling out" process to see if they're interested in partnering and if they might make a good candidate. Both parties can kind of test the water with each other.
- Always be aware of what value you bring to the table. Of course, money is one thing. But you can bring other value as well, such as the ability to research well, organize projects, and take notes and send them to everyone. The more value you can add to a deal, the better your terms with the other investor and the more likely you will find someone willing to partner.
- Look for ways to align incentives. If they're bringing money to the deal, that's one way. Other things to look for: Do they have online credibility? What types of accountability do they have? What recourse do you have if things go sour? What referrals or credibility do they have?
- Multiple exit strategies. The more ways you can monetize this investment the better. The ROI is one way. How about blogging about your experience? How about starting an investment club?
- Network with other international investors. If you don't know any successful international investors, I'd say that's the first thing to do - find a few. Everyone will give you advice - I know I got a lot. But unless they've actually done it, the value of the advice is often dubious. On the other hand, if you connect with successful overseas investors, spend time with them, and surround yourself with as many of them as you can, you'll find your odds of succeeding will go up greatly.
What do you think of my advice? Agree or disagree? Is my situation too different from international investors to give advice? Please comment below!
By the way, I recently posted a question in our closed Facebook group:
Since the property we've purchased in Jacksonville has already appreciated, how do I know when to sell?
The closed Facebook group is where members can more easily talk and ask questions. We also have a property analysis spreadsheet that we offer to our members (based on Ben Leybovich's spreadsheet he used at the October meetup) and a sample due diligence board.
If you haven't joined the conversation, we invite you to jump in and start asking or commenting!