Real estate investment firms are often faced with a few challenges when it comes to dealing with foreign investors. Before we delve into this subject however, it is important that we first differentiate between real estate syndication and single investor/buyer deals. Syndication deals occur when several real estate investors partner up to invest in an expensive property that they cannot afford or manage alone. These types of deals may generally be more complicated but they enable investors to focus on expensive or multi-family properties.
In this blog, we’re about to address the top 6 problems this industry is often confronted with when handling foreign investors…
1. Cultural and Language Barriers
Foreign investors derive from all cultural backgrounds. It’s important that you take the time to familiarize yourself with the norms and etiquette of the investor’s culture. This will ensure that everything runs smoothly and that there are no misunderstandings or miscommunication. Culture isn’t always the issue. Sometimes, language barriers also play a part. When problems like this arise, it’s recommended that you turn to an online translation tool to truly understand what is being said.
2. Location, Location and…Location
It’s essential that you find the right market to attract your investors in. According to the National Association of Realtors, Florida, Texas and California are the top states (U.S) where foreigners tend to purchase property. Within these U.S cities, foreign buyers are mainly investing in residential properties and apartment complexes. Have you thought about locations outside the United States?
3. Investment Transaction Management
How often do you find yourself stuck in limbo waiting for an investor to send funds from overseas to the title agency/solicitor? This usually depends on where the property is located but during this time, you need to rely on other services to bring your deal to a close. Banks tend to take their time with bureaucracy and also charge your client with too many hidden fees.
Many foreign investors use regular cross-border bank transfers to send their investments but they are usually oblivious to the additional hidden fees. Covercy’s services have proven to benefit both the investment group and investors themselves. Real estate investors can potentially save thousands compared to using regular bank transfers.
What about investment groups? Covercy has a free platform called “Terra” which manages all investment payments. This tool comes in handy with syndicate projects in particular, but not only. The system collects all relevant documentations, sends out payment requests, shows you the status of each payment and speeds up the entire process. By using Covercy, you also give your clients more opportunity to save money. To sum up, Covercy have made sure to make Terra relevant for investment funds as well as investment groups. For more information about Terra, click here.
4. Finding Reliable Property Management Companies
In this business, it’s crucial that you work with trustworthy people. This can be difficult to find, so it’s highly recommended that you get referrals for any property management companies. The property manager will not only collect rent and other fees on your behalf, they will also handle day-to-day maintenance and respond to your renters’ needs. Most problems arise when property management companies are located in other countries and speak a different language from you. Be sure to negotiate the terms of the contract and also review the manager’s tenant lease agreement. Ultimately, you want everything to run smoothly and after all, it is your responsibility to ensure that everything in the process is working as planned.
5. Getting That First Deal
The real estate industry has a “hot” market with plenty of advanced competitors and prestigious companies with great experience. It can be a tough challenge managing and adjusting to that first deal. Failing is not an option in this field therefore, arranging your first deal will probably be the most difficult challenge for you. When that initial deal goes wrong, good luck with the second. No pressure at all!
When investing in the U.S, foreign buyers must obtain an ITIN from the IRS or hire an IRS-approved certified personal accountant to get one for them. This process can take a minimum of three months. Before investing your time in a particular client, make sure that they have at least started the process. This can save you time and you can avoid wasting precious hours pointlessly. Taxation laws differ from one country to another. It would be wise to consult with an international taxation specialist.