Federico Cerdas
Global Businesses Inc.
Expert Contributor

Real Estate Investment in US a Winning Alternative

By Federico Cerdas | Mon, 02/01/2021 - 13:00

The COVID-19 pandemic, which began last year, undermined economies around the world. The lockdown and closing of non-essential businesses and activities left a scenario of uncertainty in several markets, including real estate, which is comprised of the office, commercial, hotel and residential sectors.

Except for residential, income in the other segments was affected by the prevention measures that required the closing of malls and hotels, and the implementation of systems such as remote working or home office.

The housing segment showed more stability during the worst months of the pandemic, mainly in countries such as Turkey, the Philippines and Germany, while in the Americas, Mexico and the US enjoyed an incredible boom in spite of the economic effects.

And with good reason, because, in spite of the current international financial conditions, to invest in a home has become more attractive than investing money in other sectors; therefore, some specialists consider that the market has overcome the recovery phase and is currently at its peak.

Although it is important to clarify that the health emergency is and shall continue to be a turning point in world history, after a year in which most of the news has been negative, it is worth looking at the bright side. That side of the coin, if used properly, may bring many good benefits.

It is precisely that situation that has encouraged several national and foreign businesspeople to play it safe and protect their money in real estate investments in the US, even as the sociopolitical environment has left a feeling of uncertainty that has come and gone since Donald Trump arrived in the White House.

However, the numbers do not lie and the commercial transactions between the two countries continue.

According to the National Association of Realtors (NAR), Mexico ranks third in terms of the highest foreign investment in residential real estate in the Stars and Stripes nation, with US$5.8 billion.

Florida, California, New York, New Jersey and Texas are the most sought-after destinations by international buyers and investors, with Texas being the main investment center for Mexicans. Twenty-eight percent of Mexicans who decided to purchase or invest in the US did so in the state of Texas, followed by Florida at 14 percent; California 12 percent; Arizona 7 percent; and Illinois 5 percent.

It is not just about the good quality of life in the different states or the revenue these investments may provide. We’re also talking about a pretty favorable exchange rate. Even though the peso has gained value, carrying out dollar transactions will always be synonymous with higher profits.

Evidence of that is that Mexican investment in real estate increased 20 percent in recent months, and that is without taking into account all relevant political, economic, social and sanitary events happening in our northern neighbor.

Preferences, of course, are inclined toward residential housing with 60 percent of investments coming from Mexico, while 40 percent choose to purchase commercial premises, whether to sell or to rent the space to some fast food or coffee shop franchise.

Houston, Texas

Houston is the fourth-biggest city in the US and the city has seen important economic and linguistic development. Additionally, Houston has the biggest medical center in the world, two international airports, NASA Space Center’s headquarters, Rice University, and it is the second-biggest cultural district for museums in the country.

It goes without saying that it’s one of the regions that has most certainly come out on top in terms of foreign investment because, besides those attractions, it also has a high real estate offer and it’s located at the Mexican border, which eases transportation and negotiations, that, in some cases, can be performed on a tourist visa.

This part of the state has demonstrated economic growth in the last 10 years with a broad offer of luxury developments and an attractive investment return. An example of this is that during the 2008 crisis, the city continued to increase by 5 percent, and in 2016, Forbes placed it within the Top 10 best real estate markets for investors.

Today, one of its main charms is its verticality and a luxury offer at good prices, since it’s between 5 percent and 20 percent below the present fair market value, with high trade volumes and a housing stock that moves quickly, and that’s without taking into consideration that it continuously offers job opportunities.

Which is why, during the current times, investing in one of the most economically safe cities in the US is a win/win situation. There’s no way to lose.

Experts believe that crises signify an opportunity to invest in a home that can be used in retirement or for holidays, and even as an extra income if rented; and, because of that, it’s essential to know where you can find good prices and revenues. Most importantly, with the passage of time, it provides above-average capital gains.

The main use of homes in this part of the world is as a second home. Around 50 percent of those who want to buy a house, do so to use it for vacations, while the other almost 50 percent see it as a rental investment. A smaller number counts those who want it as a main home.

The pandemic has left, not only in Houston but across the US territory, a real estate market with little stock. This situation has created a price war that coupled with low interest rates provides an opportunity to profit.

NAR states that the average purchase cost for foreigners is US$280,600, an amount which, compared to other cities such as Los Angeles, Florida or New York, is way below the average ticket.

Real estate acquisition can also be pretty complex, especially for a foreign investor. The reason? The existing tax and legal implications. However, countless real estate advisers, who can help you throughout the process, may be found on both sides of the border.

EB-5 Visa

In 2011, the US government, by means of a license provided by the U.S. Citizenship and Immigration Services, approved a special status for some companies to grant legal residency to foreign citizens who invested in real estate, with the support of a financial investment and job creation program.

As a Mexican citizen, the EB-5 Visa is one of the best options for you to take your capital to the US because, besides allowing you to invest, it also gives you the opportunity to live there legally while generating jobs at the same time.

Despite the pandemic, this visa has not been canceled by the US government, since it constitutes one of the alternatives to work and obtain citizenship in the country by investing in areas where jobs and new residential project developments are encouraged.

Remember that the EB-5 Visa only allows you to invest in some of the approved projects, which, as any investment, will bring you revenues, but it’s not the option for you if your goal is to buy.

In the end, the main goal is to demonstrate the strength and solidity of Mexican capital, which, both inside and outside the country, represents an expanding economy.

Photo by:   Federico Cerdas