The US real estate market is fierce. Just last year, foreign investment in US real estate amounted to $153 billion. Many foreigners continue to choose the US as their investment destination given the stability of the market and the country overall. Particularly, given the political and economic instability in Europe and many countries around the world, the number of foreign investors in US real estate has increased significantly in the past couple of years. Additionally, with technology advancing, buying property overseas has been made easy as now the process can take place mostly online.
Related: How to Buy an Investment Property in the US from Abroad
Foreign investors in US real estate have been accumulating great wealth as they expand their investment portfolios. You might have landed on this page because you are an international investor keen on investing in the US real estate market. Well, you are on the right page. Today, we will explore the best cities for foreign investors in US real estate to help you find where you should plan your next investment.
Why US Real Estate?
Before we delve further and discuss the top cities for foreign investors in US real estate, let’s shed some light on the attractiveness of the US real estate market. Why is the US housing market so appealing to international real estate investors?
First, the new and changing rules in some countries have driven away many investors and urged them to look into other markets like that of the United States; for example, France has levied new taxes on investors. London, which was a top destination for many foreign investors, has put new taxes on wealthy investors driving them away. Even Canada has levied new taxes on foreign investors and has been penalizing investors and charging them fines for leaving property vacant.
Second, the US market has been labeled as one of the safest for real estate investments. As a matter of fact, according to the Association of Foreign Investors in Real Estate (AFIRE), real estate investors have ranked the US housing market the safest and one that has always enjoyed property appreciation.
Lastly, while home values have significantly increased in the US in the past few years, property prices are still cheaper than in other countries. Compared to the UK and big Canadian cities, for example, the US housing market is a lot cheaper.
3 Best Cities for Foreign Investors in US Real Estate
What are the best cities for foreign real estate investors in the US then? Of the best US cities to buy real estate, you should consider the following:
- San Francisco, CA
- Miami, FL
- Los Angeles, CA
San Francisco, CA
According to one study, the California real estate market‘s share of foreign purchases of all US residents amounted to 14%. So it makes sense that San Francisco is a top destination for foreign investors in US real estate.
Many resort to investing in San Francisco real estate for the enormous property appreciation, tax benefits, and tax shelter. Moreover, the job growth that San Francisco enjoys has been advantageous to the real estate market. The expansion of large employers such as Dropbox, Facebook Inc., and Google has increased the demand for housing, with more people (international or domestic) being recruited and/or relocated to San Francisco. If you are looking for diversity and higher rental income, then consider this city.
- Median Property Price: $1,565,006
- Traditional Rental Income: $4,587
- Traditional Cash on Cash Return (CoC): 1%
- Traditional Capitalization Rate (Cap Rate): 1%
- Airbnb Rental Income: $6,124
- Airbnb Cash on Cash Return: 1.3%
- Airbnb Capitalization Rate: 1.3%
- Airbnb Occupancy Rate: 72%
Note: The real estate data for each city is provided by Mashvisor’s investment property calculator which also works as an Airbnb calculator.
Related: The 10 Best Places to Buy Rental Property in California in 2019
Miami, FL
From August 2017 to July 2018, according to Florida Realtors, foreign investors in US real estate purchased $22.9 billion worth of real estate in the state. In fact, foreign real estate transactions amounted to 19% of Florida’s existing home sales. Of the residential real estate, condominiums, single-family homes, and luxurious residences made up most of the sales in Florida. While there was a slight overall drop, Florida still leads the US in foreign investments in real estate, with Miami as one of the top cities.
Miami is a top tourist city in the United States. Many foreign investors in US real estate resort to Miami for their real estate investments. The city is vibrant which contributes to the booming industry of tourism. Many foreigners, whether property investors or tourists, choose Miami for its beautiful weather, economic stability, and lower cost of living. Such factors make Miami the best city to buy real estate in the US.
- Median Property Price: $554,489
- Traditional Rental Income: $2,415
- Traditional Cash on Cash Return: 1.2%
- Traditional Capitalization Rate: 1.2%
- Airbnb Rental Income: $3,287
- Airbnb Cash on Cash Return: 2%
- Airbnb Capitalization Rate: 2%
- Airbnb Occupancy Rate: 56%
Los Angeles, CA
Los Angeles is another city where foreign investors continue to buy real estate investments. Los Angeles, as a matter of fact, is the top destination for foreign investors in US real estate. The city ranked the second top city behind London for foreign investors in 2017. According to data extracted from a JLL Report, international real estate investors bought over $23 billion of value in LA real estate in 2017.
Related: What You Need to Know About Investing in the US Housing Market as a Foreign Investor
Foreign investors flock to Los Angeles and invest in LA’s real estate market given its favorable demographics, rigid housing market, and of course, a booming downtown business district. Los Angeles enjoys population density, growth, and a rising household income and demand for space, which in return make the city desirable for investments.
- Median Price: $831,560
- Traditional Rental Income: $2,678
- Traditional Cash on Cash Return: 1.2%
- Traditional Capitalization Rate: 1.2%
Bottom Line
Foreign investors in US real estate find investment properties here to be generally cheaper than in their home countries. They are comfortable investing here given the stability of the market and the environment surrounding it.
As an international real estate investor, you should thoroughly assess the market where you want to invest and ensure your goals align with the location. Foreign investors in US real estate tend to have more trouble finding the right property. Therefore, we invite you to subscribe to Mashvisor and utilize the resources and tools available to help you make sound decisions about your investment property today.
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