Author: Donald Klip

Buy property where CHIPS Act will add 500K jobs

Post author By Donald Klip
Post date January 14, 2025

The CHIPS and Science Act is a U.S. federal law enacted in August 2022 to bolster the domestic semiconductor industry, enhance technological innovation, and strengthen national security by bringing manufacturing onshore.

Total funding, investment and spending is expected to be $500 billion.

More importantly, creating over 500,000 jobs over the next 5-10 years.

As a property investor, you want to own in areas where employment will be robust with high-wage renters. Learn which specific U.S. states will benefit the most.

THE HOUSING MARKET

The CHIPS and Science Act could have a significant positive impact on the U.S. housing market due to its focus on stimulating domestic semiconductor manufacturing and fostering economic growth.

Here’s how:

1. Increased Demand for Housing in Manufacturing Hubs

Job Creation: The CHIPS Act is expected to create 500,000 high-paying jobs in semiconductor manufacturing, research, and related sectors. This influx of employment will drive housing demand in areas surrounding major chip production facilities, such as:
– Arizona (Phoenix)
– Texas (Austin, Taylor)
– New York (Clay, Albany)
– Ohio (New Albany)
– Oregon (Hillsboro)
Population Growth: Migration to these regions for employment opportunities will increase the need for housing, potentially driving up home prices and rents.

2. Boosted Construction Activity

Residential Development: Increased demand for housing near semiconductor facilities could spur residential construction projects to accommodate the growing workforce.
Infrastructure Expansion: Investments in roads, utilities, and public amenities to support these facilities may also enhance local real estate markets.

3. Rising Property Values

Economic Growth: The influx of jobs and investments is likely to enhance local economies, increasing property values and attracting real estate investors to these regions.
Regional Hot Spots: Cities and states benefiting from the CHIPS Act could experience accelerated growth in property values, creating new real estate hot spots.

4. Rental Market Growth

Short-Term Demand: Many workers relocating for semiconductor jobs may initially rent before purchasing homes, boosting rental market activity.
Corporate Housing: Companies building semiconductor facilities may also increase demand for temporary housing for contractors and employees.

5. Housing Affordability Challenges

Pressure on Supply: A surge in demand without corresponding increases in housing supply could exacerbate affordability issues in regions with already tight housing markets.
Gentrification Risks: Rapid economic growth could lead to higher housing costs, displacing lower-income residents in affected areas.
This is a perfect scenario for investors and rents are bid-up in these areas.

6. Long-Term National Impacts

Economic Stability: By strengthening the U.S. economy and ensuring supply chain resilience, the CHIPS Act may contribute to long-term stability in the national housing market.

STATES TO SEE THE BIGGEST IMPACT

1. Arizona

Major Projects: Intel’s expansion in Chandler and Taiwan Semiconductor Manufacturing Co. (TSMC) in Phoenix.
Investment: TSMC’s facility represents over $6.6 billion in funding, while Intel’s expansion accounts for $7.87 billion.

=> Jobs: Intel’s projects in Arizona are expected to create up to 30,000 jobs across multiple states, including Arizona, New Mexico, Ohio, and Oregon.

2. New York

Major Projects: Micron Technology’s $100 billion commitment to a new chip factory in Clay, New York.
Incentives: $5.5 billion in state tax credits and $825 million in federal funding for Albany NanoTech.

=> Jobs: Micron’s investment in Clay, New York, is projected to create approximately 20,000 jobs.

3. Ohio

Major Projects: Intel’s semiconductor manufacturing expansion in New Albany.
Investment: Billions are allocated to develop a state-of-the-art chip production facility.

=> Jobs: Intel’s expansion in Ohio is part of a broader initiative expected to generate up to 30,000 jobs across multiple states.

4. Texas

Major Projects: Samsung Electronics in Taylor and Texas Instruments across multiple locations.
Investment: Samsung has committed $17 billion, Texas Instruments $30 billion.

=> Jobs: Approximately 10,000-15,000 direct jobs in semiconductor manufacturing and an estimated 6,500 construction jobs during the build-out phase.

5. Oregon

Major Projects: Intel’s ongoing investment in Hillsboro as part of its U.S. manufacturing network.

=> Jobs: Intel’s activities in Oregon are included in the company’s expansion plans, which are expected to create up to 30,000 jobs.

6. Utah

Major Projects: Texas Instruments’ semiconductor wafer plant.
Investment: Part of Texas Instruments’ $1.6 billion allocation shared with Texas.

=> Jobs: Expected to create 500 to 800 direct jobs in manufacturing and engineering roles at the Lehi plant.

THE UPSHOT

The CHIPS Act aims to:

Reduce U.S. reliance on foreign semiconductor manufacturing.
Create high-paying jobs across the country.
Boost local economies in states with large manufacturing investments.

The CHIPS Act will likely stimulate regional housing markets near semiconductor manufacturing hubs through job creation and population growth.

We are happy to introduce you to realtors and property managers in these areas. If there’s further interest, we’re happy to explore expanding these services.

These states, due to existing infrastructure, workforce capabilities, and favorable policies, are emerging as leaders in the domestic semiconductor resurgence.

America Mortgages is ready to help you navigate these exciting opportunities. Whether you’re an investor targeting high-demand markets or a homeowner exploring financing options, we provide tailored solutions to meet your needs.

For more information, there are several easy ways to contact us:

Visit www.AmericaMortgages.com

Speak with a U.S. loan specialist 24 hours a day, 7 days a week: +1 845-583-0830

Schedule a convenient time to speak to one of our U.S. loan specialists.

Compra propiedades donde la Ley CHIPS generará 500,000 empleos

La Ley CHIPS y Ciencia es una ley federal de los Estados Unidos promulgada en agosto de 2022 para fortalecer la industria nacional de semiconductores, fomentar la innovación tecnológica y reforzar la seguridad nacional mediante la fabricación en el país.

El financiamiento, la inversión y el gasto total se estiman en $500 mil millones.

Más importante aún, se espera la creación de más de 500,000 empleos durante los próximos 5 a 10 años.

Como inversor inmobiliario, querrás poseer propiedades en áreas donde el empleo sea sólido y los inquilinos tengan salarios altos. Descubre cuáles son los estados específicos de EE.UU. que más se beneficiarán.

EL MERCADO INMOBILIARIO

La Ley CHIPS y Ciencia podría tener un impacto positivo significativo en el mercado inmobiliario de EE.UU. gracias a su enfoque en estimular la fabricación nacional de semiconductores y fomentar el crecimiento económico.

Esto es lo que puedes esperar:

Mayor demanda de vivienda en centros de manufactura

Creación de empleos: Se espera que la Ley CHIPS cree 500,000 empleos bien remunerados en la fabricación de semiconductores, investigación y sectores relacionados. Este aumento en el empleo impulsará la demanda de vivienda en áreas cercanas a las principales instalaciones de producción de chips, como:
– Arizona (Phoenix)
– Texas (Austin, Taylor)
– Nueva York (Clay, Albany)
– Ohio (New Albany)
– Oregón (Hillsboro)
Crecimiento poblacional: La migración a estas regiones para aprovechar oportunidades laborales aumentará la necesidad de vivienda, lo que podría elevar los precios de las propiedades y las rentas.

Aumento de la actividad de construcción

Desarrollo residencial: El incremento en la demanda de vivienda cerca de las instalaciones de semiconductores podría estimular proyectos de construcción residencial para acomodar a la creciente fuerza laboral.
Expansión de infraestructura: Las inversiones en carreteras, servicios públicos y comodidades públicas para apoyar estas instalaciones también pueden mejorar los mercados inmobiliarios locales.

Incremento en el valor de las propiedades

Crecimiento económico: La llegada de empleos e inversiones probablemente mejorará las economías locales, aumentando el valor de las propiedades y atrayendo a inversores inmobiliarios a estas regiones.
Zonas calientes: Las ciudades y estados beneficiados por la Ley CHIPS podrían experimentar un crecimiento acelerado en el valor de las propiedades, creando nuevos puntos de interés inmobiliario.

Crecimiento del mercado de alquileres

Demanda a corto plazo: Muchos trabajadores que se trasladen para empleos en semiconductores podrían inicialmente alquilar antes de comprar viviendas, impulsando la actividad del mercado de alquileres.
Alojamientos corporativos: Las empresas que construyen instalaciones de semiconductores también pueden aumentar la demanda de alojamientos temporales para contratistas y empleados.

Desafíos de asequibilidad de vivienda

Presión en la oferta: Un aumento en la demanda sin incrementos correspondientes en la oferta de vivienda podría agravar los problemas de asequibilidad en regiones con mercados inmobiliarios ya ajustados.
Riesgos de gentrificación: El rápido crecimiento económico podría llevar a costos de vivienda más altos, desplazando a residentes de ingresos bajos en las áreas afectadas.

Este es un escenario perfecto para los inversores, ya que las rentas tienden a aumentar en estas áreas.

Impactos nacionales a largo plazo

Estabilidad económica: Al fortalecer la economía de EE.UU. y garantizar la resiliencia de la cadena de suministro, la Ley CHIPS podría contribuir a la estabilidad a largo plazo del mercado inmobiliario nacional.

ESTADOS CON MAYOR IMPACTO

Arizona

Proyectos principales: Expansión de Intel en Chandler y Taiwan Semiconductor Manufacturing Co. (TSMC) en Phoenix.
Inversión: La instalación de TSMC representa más de $6.6 mil millones en financiamiento, mientras que la expansión de Intel equivale a $7.87 mil millones.
=> Empleos: Los proyectos de Intel en Arizona se espera que generen hasta 30,000 empleos en varios estados, incluidos Arizona, Nuevo México, Ohio y Oregón.

Nueva York

Proyectos principales: Compromiso de $100 mil millones de Micron Technology para una nueva fábrica de chips en Clay, Nueva York.
Incentivos: $5.5 mil millones en créditos fiscales estatales y $825 millones en financiamiento federal para Albany NanoTech.
=> Empleos: La inversión de Micron en Clay, Nueva York, se proyecta que cree aproximadamente 20,000 empleos.

Ohio

Proyectos principales: Expansión de la fabricación de semiconductores de Intel en New Albany.
Inversión: Miles de millones se destinarán al desarrollo de una instalación de producción de chips de última generación.
=> Empleos: La expansión de Intel en Ohio es parte de una iniciativa más amplia que se espera genere hasta 30,000 empleos en varios estados.

Texas

Proyectos principales: Samsung Electronics en Taylor y Texas Instruments en múltiples ubicaciones.
Inversión: Samsung se ha comprometido con $17 mil millones, mientras que Texas Instruments con $30 mil millones.
=> Empleos: Aproximadamente 10,000-15,000 empleos directos en la fabricación de semiconductores y unos 6,500 empleos de construcción durante la fase de desarrollo.

Oregón

Proyectos principales: Inversiones continuas de Intel en Hillsboro como parte de su red de fabricación en EE.UU.
=> Empleos: Las actividades de Intel en Oregón están incluidas en los planes de expansión de la compañía, que se espera que creen hasta 30,000 empleos.

Utah

Proyectos principales: Planta de obleas semiconductoras de Texas Instruments.
Inversión: Parte de los $1.6 mil millones destinados por Texas Instruments, compartidos con Texas.
=> Empleos: Se espera la creación de entre 500 y 800 empleos directos en manufactura y roles de ingeniería en la planta de Lehi.

CONCLUSIÓN

La Ley CHIPS tiene como objetivos:

Reducir la dependencia de los Estados Unidos en la fabricación de semiconductores extranjeros.
Crear empleos bien remunerados en todo el país.
Impulsar las economías locales en los estados con grandes inversiones en manufactura.

Es probable que la Ley CHIPS estimule los mercados de vivienda regionales cercanos a los centros de fabricación de semiconductores gracias a la creación de empleos y el crecimiento poblacional.

Estamos encantados de presentarte a agentes inmobiliarios y administradores de propiedades en estas áreas. Si hay mayor interés, estamos dispuestos a explorar la ampliación de estos servicios.

Estos estados, gracias a su infraestructura existente, capacidades de fuerza laboral y políticas favorables, están emergiendo como líderes en el resurgimiento del sector de semiconductores domésticos.

America Mortgages está listo para ayudarte a navegar estas emocionantes oportunidades. Ya sea que seas un inversor enfocado en mercados de alta demanda o un propietario explorando opciones de financiamiento, ofrecemos soluciones personalizadas para satisfacer tus necesidades.

Para más información, hay varias formas fáciles de contactarnos:

Visita www.AmericaMortgages.com
Habla con un especialista en préstamos de EE.UU. las 24 horas, los 7 días de la semana: +1 845-583-0830
Programa una hora conveniente para hablar con uno de nuestros especialistas en préstamos de EE.UU

在《CHIPS法案》将新增50万个工作岗位的地区购买房产

CHIPS与科学法案》是美国于2022年8月颁布的一项联邦法律，旨在通过将制造业带回国内来加强国内半导体行业、促进技术创新以及增强国家安全。

总资金、投资和支出预计将达到5000亿美元。

更重要的是，这项法案预计将在未来5到10年内创造超过50万个就业机会。

作为房地产投资者，您需要关注就业强劲且租户收入较高的地区。了解哪些美国州将从中受益最大。

房地产市场

《CHIPS与科学法案》通过其专注于刺激国内半导体制造和促进经济增长的举措，可能对美国房地产市场产生显著的积极影响。

以下是具体影响：

制造业中心的住房需求增加

就业创造：《CHIPS法案》预计将在半导体制造、研究及相关行业创造50万个高薪职位。这种就业增长将推动主要芯片生产设施周边地区的住房需求，例如：
– 亚利桑那州（凤凰城）
– 德克萨斯州（奥斯汀、泰勒）
– 纽约州（克莱、奥尔巴尼）
– 俄亥俄州（新奥尔巴尼）
– 俄勒冈州（希尔斯伯勒）
**人口增长：**就业机会将吸引人们迁往这些地区，从而增加住房需求，并可能推高房价和租金。

建筑活动增加

**住宅开发：**半导体设施附近对住房的需求增加可能会推动住宅建设项目，以满足不断增长的劳动力需求。
**基础设施扩展：**为支持这些设施而进行的道路、公用事业和公共设施投资也可能改善当地房地产市场。

房产价值上升

**经济增长：**就业和投资的增加可能会提升当地经济，推高房产价值，并吸引房地产投资者到这些地区。
**热点地区：**受益于《CHIPS法案》的城市和州可能在房产价值方面实现快速增长，成为新的房地产热点。

租赁市场增长

**短期需求：**许多为半导体工作搬迁的员工可能在购房前选择租房，从而推动租赁市场活动。
**企业住房：**建设半导体设施的公司可能会增加对承包商和员工临时住房的需求。

住房负担能力的挑战

**供应压力：**需求激增但住房供应未相应增加，可能加剧住房市场紧张地区的负担能力问题。
**绅士化风险：**经济快速增长可能导致住房成本上升，将低收入居民排挤出受影响地区。

这是一个理想的投资者机会，这些地区的租金正在上涨。

长期的全国影响

**经济稳定：**通过加强美国经济并确保供应链韧性，《CHIPS法案》可能为国家房地产市场的长期稳定做出贡献。

受影响最大的州

亚利桑那州

**主要项目：**Intel在钱德勒的扩展和台积电（TSMC）在凤凰城的设施。
**投资：**台积电的设施投资超过66亿美元，而Intel的扩展投资为78.7亿美元。
**=> 就业：**Intel在亚利桑那州的项目预计将在多个州（包括亚利桑那州、新墨西哥州、俄亥俄州和俄勒冈州）创造多达3万个就业机会。

纽约州

**主要项目：**美光科技承诺在纽约州克莱新建一座价值1000亿美元的芯片工厂。
**激励措施：**州政府提供55亿美元税收优惠，联邦政府为奥尔巴尼NanoTech提供8.25亿美元资金支持。
**=> 就业：**美光在纽约州克莱的投资预计将创造约2万个就业机会。

俄亥俄州

**主要项目：**Intel在新奥尔巴尼扩展半导体制造设施。
**投资：**投资数十亿美元开发最先进的芯片生产设施。
**=> 就业：**Intel在俄亥俄州的扩展是更广泛计划的一部分，预计将在多个州创造多达3万个就业机会。

德克萨斯州

**主要项目：**三星电子在泰勒的设施以及德州仪器在多个地点的项目。
**投资：**三星承诺投资170亿美元，德州仪器承诺投资300亿美元。
**=> 就业：**预计半导体制造领域直接创造1万到1.5万个就业机会，建设阶段预计创造6500个建筑岗位。

俄勒冈州

**主要项目：**Intel在希尔斯伯勒的持续投资，作为其美国制造网络的一部分。
**=> 就业：**Intel在俄勒冈州的活动包含在公司的扩展计划中，预计将创造多达3万个就业岗位。

犹他州

**主要项目：**德州仪器的半导体晶圆厂。
**投资：**德州仪器16亿美元投资的一部分，与德克萨斯州共享。
**=> 就业：**预计在Lehi工厂直接创造500至800个制造和工程岗位。

总结

《CHIPS法案》的目标是：

减少美国对外国半导体制造的依赖。
在全国范围内创造高薪工作岗位。
提升在拥有大规模制造投资的州的地方经济。

《CHIPS法案》可能通过创造就业机会和人口增长，刺激半导体制造中心附近的地区住房市场。

我们很高兴为您介绍这些地区的房地产经纪人和物业管理人员。如果您有更大的兴趣，我们也乐意探索扩大这些服务的可能性。

这些州因现有基础设施、劳动力能力和有利政策，正在成为国内半导体复兴的领导者。

America Mortgages已准备好帮助您驾驭这些令人兴奋的机会。无论您是针对高需求市场的投资者，还是在探索融资选项的房主，我们都提供量身定制的解决方案以满足您的需求。

如需更多信息，您可以通过以下方式轻松联系我们：

安排方便的时间与我们的美国贷款专家交谈。

访问 www.AmericaMortgages.com

每周7天、每天24小时与美国贷款专家交流：+1 845-583-0830

安排方便的时间与我们的美国贷款专家交谈。

Average U.S. rental yields are 8% and rising!

Post author By Donald Klip
Post date April 19, 2024

Rental Yields | Mortgage Lenders Of America

8% and Rising!

That’s right! Not a typo. The average rental yield in the U.S. is 8%.

It is unheard of in any major country, and it is quite a shock to nearly everyone who hears this, but it’s true.

More importantly, we have a loan program specifically-created for international investors looking for an easy way to qualify for a mortgage by using the rental income and not personal financials (see below).

This article is a summary of a presentation we made to our clients.

On a LinkedIn survey last week, we also asked the following:

What is the average rental yield in America?

Range	Responses
4% – 5%	57%
5% – 6%	20%
6% – 7%	9%
7% – 8%	14%

You can see the mean expectation is 4-5%, but in fact, if I could put 3-4%, most would probably choose that, but we couldn’t put that many choices and still accommodate for 7-8%.

This illustrates the fact that most investors don’t realize the cash flow opportunities from investing in U.S. real estate. We want to change that perception.

Global Rental Yield Comparisons

UAE 12.3% (Ranked #1)
USA 8.1% (Ranked #12)

G7UK 4.3%
Canada 3.9%
France 2.6%
Italy 4.2%
Germany 3.4%
Japan 2.4%

As you can see, most developed countries have a rental yield lower than 4%, and half of the major Asian countries have a rental yield under 3%. Greater China countries are below 2%!

When investing in these markets, investors “hope” prices will rise for capital appreciation but there is little to no cash flow opportunities.

Why is the U.S. so high?

Severe Housing Shortage

From 2012 to 2022, 6.5 million ‘more’ households were formed compared to homes built. “Household Formation” refers to the change in the number of households (persons living under one roof or occupying a separate housing unit) from one year to the next. Let that sink in for a bit….

There is currently a 5.5M home shortage to meet existing demand.

Higher labor and raw material costs with stringent zoning laws make it difficult to build homes fast enough to meet demand.

Existing Home Sales

Existing home sales normally account for 90% of total home sales.

Of the existing homeowners with a mortgage,

99% are UNDER 6%
80% are UNDER 5%, and
40% are UNDER 3%

What this means is the supply is not moving unless sellers are willing to pay capital gains or move to a higher priced home using a 1031 Exchange – regardless, they will have to face a higher mortgage rate.

It’s no surprise that in 2023, existing home sales fell to the lowest level in nearly 30 years, while the median price hit a record high, according to a recent report by the National Association of Realtors.

Scylla and Charybdis

Similar to boats crossing the Straits of Messina in Homer’s Odyssey, homebuilders face a similar dilemma of whether to construct houses that buyers may not be able to afford with 7%+ mortgage rates or to hold back and therefore make long-term housing supply issues worse.

Institutional Buying

The current lack of supply plays right into the hands of Blackstone and its peers.

The Blackstone Playbook is well-known :

Identify supply-demand imbalances
Invest billions to build giant landlords
Dictate rental pricing

January 2024, Blackstone announced the acquisition of Tricon Residential for $3.5B, making it the 3rd largest landlord (62K homes) in the U.S. behind Progress Residential (84K homes) and Invitation Homes (82K homes).

Meanwhile, just last week, Blackstone purchased private rental housing apartment firm Air Communities for $10B in cash!

Demand

COVID accelerated WFM which was growing 2.5% per year before the pandemic. It suddenly went to 100% and reversing this trend is difficult and technology has become so good that execution-based roles can be done remotely.

Meanwhile, when companies get to a certain size in expensive states such as California and New York, it becomes too expensive to live and operate a company, and many move their headquarters to a state with a lower cost of living and state taxes, like Texas. For example, Dallas has the most Fortune 500 companies in the world as their headquarters, and this is increasing every year.

U.S. Rental Yields

Here is where it gets interesting….look at some of these rental yields!

Detroit	32.9%	Tulsa	13.5%	Las Vegas	10.8%
Milwaukee	20.7%	Colorado Springs	13.2%	Anchorage	10.4%
Omaha	18.3%	Nashville	12.7%	Atlanta	10.3%
Baltimore	17.2%	Spokane	12.3%	Miami	10.1%
Indianapolis	17%	Madison	11.5%	Denver	9.5%
Memphis	15.9%	Tucson	11.4%
New Orleans	13.6%	Ann Arbor	11.1%

This is an illustration of what is happening due to the reasons stated above:

Unfixable housing shortage
Gentrification to lower cost-of-living states
Supply is further being squeezed by institutional buying
Marginal homebuyer has to rent, given high mortgage rates

It’s never been a better time to be a landlord!

I always tell clients, if you can make the numbers work now, they will only get better because rental yields WILL RISE, and when mortgage rates decline, you can refinance to a lower rate. Over time, your net cash flow will only rise.

More importantly, when the value of the home rises, you can refinance 70% of the increased home value to lower the investment cost!

Mortgages for International Investors

AM Rental Coverage+

Our loan program was designed specifically for international investors looking for an easy way to qualify for a mortgage by using the rental income and not personal financials.

Up to 75% loan-to-value
30-45 days closing
If rental income > mortgage and other costs = you qualify!!
No age restrictions
Closing documents signed at your local U.S. embassy

If you’re interested in learning more, reach out to us at [email protected] or visit our website at www.americamortgages.com. Additionally, if you’d like to schedule a commitment-free meeting with one of our U.S. loan officers to explore your U.S. mortgage options further, you can do so using our 24/7 calendar link.

The BRRRR Method of U.S. Property Investing for Overseas Investors

Post author By Donald Klip
Post date February 8, 2024

The BRRRR (Buy, Rehab, Rent, Refinance, Repeat) real estate investment strategy is a popular approach that involves finding a mispriced/distressed property, fixing it up, renting it out, and then using a Cash-Out Refi to pull cash out towards another property purchase.

The mindset shift focuses on 2 things: finding a mispriced property, “forcing” appreciation, and then pulling cash out of the increased valuation in the form of a Cash-out refinance.

Yes…this is achievable as a Foreign National, Non-U.S. Citizen or U.S. Expat living overseas, AND it can all be done remotely!

America Mortgages and its parent company, Global Mortgage Group, are the world’s ONLY place you can obtain a U.S. mortgage outside the U.S.

Speak to our Loan Officers to learn how an overseas investor can use leverage to lower your cash investment and increase your returns for your U.S. real estate investments!

Don’t believe us?

Watch a recent interview with one of our clients, a young Singapore-based couple who used our loans for the BRRRR Method and built a 11-unit cash-flowing rental portfolio in only 3 years – all remotely from Singapore. They have recently quit their jobs and are now full-time U.S. real estate investors!

Here is how it works.

BUY

The key to the BRRRR method is purchasing a mispriced property. There is a fine line between distressed and mispriced. The more distressed, the cheaper it will be, so there is a higher potential for “forced appreciation,” but you will have to spend more on refurbishment.

Financing the initial purchase can be tricky since all lenders will require an appraisal on the property, which needs to meet certain criteria. A distressed property will unlikely meet this criteria, but a mispriced property may.

One option is to use a Short-term Bridging Loan to purchase the property and then use a traditional loan to refinance. Bridging loans are based on the asset value of the property and are more flexible in terms and conditions. This is a common approach to the BRRRR method.

Another option is, of course, to pay for the home with cash and then refinance.

REHAB

This takes a little expertise, but costs of renovations and materials are very inexpensive in the U.S., and it is fairly easy to get everything at Home Depot, IKEA, etc. You will need to find a good contractor in the neighborhood, but generally speaking, most of the REHAB should be cosmetic and nothing foundational. That includes painting, flooring, changing bathrooms, kitchens, etc.

The key to the BRRRR strategy is calculating the After-repair Value since that will be the value that you refinance once the rehab is complete.

A common rule of thumb is the 70/30 rule. If the ARV value is $300,000, you should not pay more than 70% or $210,000.

RENT

Finding rental comps is fairly easy – even if it’s for short-term rentals (Airbnb, VRBO, etc.). This does require some work, but Zillow and AirDNA are good places to start your research.

Choosing tenants requires a little common sense, but a simple checklist would be:

Good credit score (if they don’t pay their banks, they won’t pay you on time)
A stable job with a steady income (name of company, position, how long they have been there, etc.)
No criminal record
Positive references
Young family (families don’t normally have time to host parties)

I personally use the 1% rule in real estate investing, and only in the U.S. can you find these deals. Here is how it works – multiply the purchase price of the property (ARV) by 1% to determine the base level of rent. In this case, financing will need to be less than 1%. More later.

REFINANCE

Here is the big mindset shift – to use a Cash-out refinance towards the next purchase, which often means your net initial outlay is ZERO!

You can qualify for our AM Rental Coverage Plus loan program by using the rental income of the property to cover the mortgage costs.

REPEAT

The final step in the BRRRR method is to repeat the steps again. There is no rush here, and it’s important to learn from the entire process.

Pros and Cons of the BRRRR Method

Pros – With a limited cash outlay, you can start to build a portfolio of cash-generating assets, “force” equity appreciation, and use debt to your advantage! Remember, debt is not taxed in the U.S.!

Cons – This takes work, but we think the satisfaction of seeing your assets “Pay You” is worth the effort. Work includes research, building a team on the ground, finding the properties, and maximizing cash flow, to name a few.

Example (for illustration purposes)

Home price: $200,000

Nearby comparables: $250,000 – $300,000

Renovation costs: $30,000

After-repair value: $310,000

After-repair monthly rent: $2,500

Scenario 1 – All cash payment

Purchase price = $200,000 + Rehab $30,000 = $230,000 cash outlay
After-repair value = $310,000
Cash-out refinance using AM Rental Coverage Plus = 70% x $310,000 = $217,000
Monthly mortgage = $1,700
Gross monthly rental income = $2,500
Net rental income = $800
Now, you have $217,000 towards your next investment.

In this scenario, you spent $230,000, and then borrowed $217,000, which means your total cash outlay was $13,000.

With $13,000 spent, you are now earning $800 monthly!
After 12 months, you will have earned $9,600 in passive income (Yes, 74% return!)
After 16 months, the property would have paid back your entire investment!

Scenario 2 – Bridging loan to purchase

Purchase price = $200,000
Bridging loan = 70% loan to value x $200,000 = $140,000 loan = $60,000 down payment
Bridging loan term = 12 months @ 12% per annum, interest-only
Total Bridging loan interest = $16,800
Down Payment = $60,000
Rehab = $30,000
Total initial outlay = $90,000
After-repair value = $310,000
Cash-out refinance using AM Rental Coverage Plus = 70% x $310,000 = $217,000
Monthly mortgage = $1,700
Gross monthly rental income = $2,500
Net rental income = $800
Pay back Bridging Loan = $217,000 – $140,000 = $77,000
Subtract Bridging loan interest = $77,000 – $16,800 = $60,200
Now you have $60,200 towards your next investment

In this scenario, you spent $90,000, then borrowed $60,200, which means your total cash outlay was $29,800

With $29,800 spent, you are now earning $800 monthly!
After 12 months, you will have earned $9,600 in passive income (Yes, 30% return!)

It gets better!

In both scenarios – after 12 months, you can renegotiate a higher rent once the lease term ends and refinance the loan to a lower 30-year fixed-rate mortgage at a higher property value!

Money in GOES UP + Money out GOES DOWN = MORE MONEY!

There are strategies for finding the best states and cities to invest in. If you want to learn how to identify which city to start your BRRRR Method journey, please feel free to contact us!

In conclusion, the BRRRR method offers a great opportunity for investors from overseas to invest in U.S. real estate. America Mortgages, along with Global Mortgage Group, is your go-to for getting U.S. mortgages abroad. With success stories like the couple who built a rental portfolio from afar, it’s clear this strategy works. For those keen on making the most of their investments, our team is here to help. Reach out today at [email protected] to learn more about how the BRRRR method can boost your real estate journey.

www.americamortgages.com

What just happened? + How to bet alongside Blackstone!

Post author By Donald Klip
Post date December 29, 2023

What a year it’s been and the resiliency of asset markets in the face of everything that was thrown at it was truly amazing!

We are living through unprecedented times with technology and crypto experiencing another bull market, U.S. elections in 2024, and potential rate cuts around the world. Could we be “back to the races” again this year?

One exercise that we all do at the beginning of the year is to adjust our personal investment portfolio to reflect what we expect to unfold in the world over the short, medium, and long term.

For many, including myself, that means increasing the allocation to crypto and U.S. real estate investments.

The simple key to making long-term money is to create a portfolio of non-correlated investments, and there is no better time to increase your U.S. real estate investment exposure.

Our goal in 2024 is to bring more education, experience, and strategies to our client’s real estate investing.

We are living through unprecedented times, and we want to be there for you on your journey as an international real estate investor.

Message me if you want to know what I recommend as your real estate exposure vs. your overall portfolio.

U.S. Real Estate Market – What Just Happened?!

In a year that saw:

10-year Treasury yields at 5%
30-year mortgage rates at 7-8%
Inflation as high as 6.5%

How did:

Home prices rise across the country; in some metro areas 10-15%
S&P +25%; Nasdaq +55%

How did everyone get it wrong?

In hindsight, it is clear to me that the extent of the positive impact of various layers of government stimulus going back to COVID (including the Fed’s BTFP) was severely misunderstood and underappreciated.

Now, with inflation and employment (Fed’s dual mandate) seemingly under control, most of the world now expects around a 75 bps cut in Fed Funds rates (echoed by the Fed’s new dot plot).

Hat’s off to our GMG Research team, which mid-2022 called for a supportive U.S. property market in 2023, but never did we expect a rising market to this extent.

Our thesis was simple – it was based on the fact that:

24% of homeowners have their mortgages < 3%
63% are locked-in < 4% and
83% of homeowners have mortgages < 5%
Severe lack of supply

Existing Homes

In any marketplace, you need supply and demand. For U.S. real estate, the supply is Existing Homes and New Homes. Existing Home Sales are about 90% of Total Home Sales in the U.S.

Given that 83% of existing homeowners have a mortgage < 5%, they would have to be under financial stress to sell, given their new mortgage would cost 7-8%. As you can imagine, Existing Home Sales is at a 13-year low!

New Homes

It’s widely known that there is a major shortage of homes in the U.S.; between 3-6M units, depending on what you read.

Lack of Homebuilder Motivation

With higher borrowing costs, higher commodity prices, and higher wages – there is no financial motivation for homebuilders to increase their development, given the lower margin potential from higher costs.

More importantly, demand and affordability will be dampened by higher-for-longer mortgage rates.

Remember, the large homebuilders are all publicly traded companies with CEOs compensated on share price performance.

Higher profit => Higher EPS => Lower PE => Institutional Buying => Higher share prices => Higher CEO bonuses!

Sun Belt is Rising!

Elsewhere, the national reshoring of manufacturing is happening; it’s happening now, and it’s happening fast!

States like Georgia, Texas, and Florida are experiencing an unprecedented influx of employment seekers to match the growing opportunities.

Between January 2020 and January 2023, rents for a two-bed detached home increased about 44% in Tampa, Florida, 43% in Phoenix, and 35% near Atlanta.

Why is this important for you (international property investor)?

Many Americans will not be able to afford a mortgage even if rates fall to 5-6%, so they will have to rent.

In the states mentioned above, we are seeing gross rental yields of 12% already!

I have no doubt that rental yields in these states will be 15% sooner than we think.

You know who else knows this?

Wall Street, aka Private Equity (aka Blackstone and its pals)

Single-family homes are the next big institutional investment opportunity given its sheer scale and for the reasons I mentioned above.

There have been many articles published this year about how institutions may own up to 40-60% of single-family home supply by 2030!

Hear Bobby Kennedy Jr’s speech on this

As an investment banker for over 20 years with Blackstone as its client, I can assure you if there is money to be made, they are going to make it!

The Perfect Storm to Invest in U.S. Real Estate

Extremely supportive supply demand
Low-entry price point
Ease of transaction
High leverage (even for foreign nationals living overseas)
Tailwind of institutional buying and
Plenty of ways to maximize cash flow (lower tax)

Home prices will certainly go higher, given the expectation of lower rates in 2024!

If you are interested in taking your first step in owning a U.S. real estate investment property, send me a private message, and I can walk you through the entire process:

How to find the right city to invest in
Which cities have the highest rental yield
Setting up an LLC and bank account
U.S. tax specialist specializing in international investors
Property manager
Realtor….and, of course,
Financing for foreign nationals or expats living overseas

2023 In Review

Bank stuff…

Silicon Valley Bank was put into receivership after it failed to raise needed capital. SVB’s closure was the largest bank failure in U.S. history since the 2008 financial crisis. This led to the collapse of cryptocurrency-focused Silvergate Bank and Signature Bank as well.

The implosion of these three small-to-mid-sized U.S. banks ignited contagion fears across the globe in the months that followed, prompting the Federal Reserve to set up a US$12B emergency lending program – known as the Bank Term Funding Program (BTFP). More on this later.

The programme couldn’t save First Republic Bank from closing down and was ultimately sold to JPMorgan Chase.

This was just an amuse-bouche for what happened next as Credit Suisse collapsed with UBS paying only CHF 3B to save the company, a deal brokered by the Swiss government. Google “AT1 bonds,” and the story gets even crazier.

Crypto stuff…

January – BTC $16,000; ETH $1606; SOL $9.9
February – Kraken shuts down
March – SVB collapses; Arbitum launches ARB token
April – ARK refiles Bitcoin ETF
May – DOJ investigation on Binance for Russia sanctions
June – SEC sues Binance CEO; Blackrock files for spot Bitcoin ETF; Fidelity, Wisdom Tree, VanEck refiles Bitcoin ETV
July – Blackrock CEO says BTC “could revolutionize finance”; Ripple won ruling
August – Paypal launches stablecoin, Grayscale wins lawsuit with SEC,
September – Nomura launches Bitcoin fund
October – 1st ETH futures ETF launched
November – SBF found guilty; Blackrock files for spot Ethereum ETF; Binance settles lawsuit and CEO steps down
December – BTC $40,000; ETH $2,396; SOL $105

Bad actors were removed, Binance settled, Ripple won, Bitcoin spot ETF (only a matter of time), and MicroStrategy bought $600M of BTC at $42K last night!

AI stuff…

It’s mind-boggling that ChatGPT reached 100 million users in just 2 months after launch. Just guessing here, but it must be the fastest adoption of any form of technology, language, or service in the history of humankind. The scary thing is that it’s only getting started. It’s now a necessary tool for nearly all organizations (ChatGPT is writing this now…just kidding).

An event prescient of things to come was the Hollywood strike, which, at the core, was about protecting Hollywood jobs from AI. The delay of Dune 2 till March 2024 was the biggest disappointment to me personally.

Nvidia, the only company that is able to make chips capable of crunching AI’s large language models, saw its stock +200%. The rest of the tech incumbents went along for the ride: Meta +250%, Tesla +100%, Google, and Microsoft, both +50%+.

Fun stuff….

Taylor Swift’s x ERAs tour is generating more GDP than many small countries. I’m a massive Swiftie, so bummed I couldn’t get tickets.
Taylor Swift x Travis Kelce
Barbie x Oppenheimer
Coronation of King Charles III and Camilla

Sad stuff…

Hamas and Israel
Hawaii forest fires
Titan x Titanic
Matthew Perry, Tina Turner, Sinead O’Conner

Crazy stuff…

Twitter rebrands to X
George Santos gets expelled from the House of Representatives
Kevin McCarthy gets ousted as Speaker of the House
Torrential rain flooded Burning Man (I was supposed to go)
The Cricket World Cup breaches 1 trillion viewing minutes globally
Watching Harvard and UPenn botch their response to the ME events
Ozempic, a diabetes drug popular with Hollywood actors to lose weight, became mainstream to the point its manufacturer, Novo Nordisc, was the largest market cap stock in Europe, larger than LVMH!
Even crazier, General Mills had to research the impact Ozempic had on their business, given the potential lack of calorie consumption.

Sports stuff…

Messi-mania goes nuclear in Miami
Inter Miami is the most searched sports team on Google
Lebron surpassing Kareem in most points scored
South Africa wins the Rugby World Cup
Australia wins the Cricket World Cup

Update of our Global Financing Capabilities

International Residential Mortgages
U.S., Canada, Mexico, U.K., France, Spain, Portugal, Italy, Dubai, Singapore, Japan, Thailand, Australia
International Asset-backed (Bridging) Loans
U.S., Canada, U.K., Singapore, Thailand, Philippines, Australia
Asian Real Estate Structured Debt Financing
Most of Asia
Listed Share Financing
Most of Asia and the U.K.

I want to thank all our stakeholders for joining us on our journey to disrupt how international investors secure financing for global real estate investments.

We wish you abundant health, wealth, and happiness in 2024!

Happy Hunting!

[email protected]

[Report] 2023 Foreign Buyers of U.S. Real Estate

Post author By Donald Klip
Post date August 25, 2023

Considered the “bible” for foreign investor trends in U.S. residential real estate, the 2023 National Association of Realtor’s report on Foreign Investments has just been released, and the results are eye-opening!

This is why we got into this business in 2017!

Problem: Foreign Investors found it difficult to securing financing for their U.S. real estate investments.

That is when we started on our journey to fix this!

Watch our DemoDay Presentation!

Before we start…

If I told you that in a year that saw:

Interest rates rising globally (in the U.S., rates tripled!)
Russian-Ukraine conflict
Other Geo-political concerns
Inflation concerns
Supply chain issues stemming from Covid-19

And I said U.S. real estate purchased by foreigners was ONLY 10% LESS THAN the previous year.

Would you believe me?

Of course not!

Frankly, this report surprised me but states the resilience of the U.S. real estate market, especially with foreign investors and overseas investors.

If you have any questions about this report or anything real estate financing-related, please feel free to reach out to me directly at [email protected] or my personal mobile +65 9773-0273.

Sincerely,

Donald Klip, Co-Founder

America Mortgages

Before we begin, I want to thank our summer intern, Angelina Hong, who is currently reading the Classics at the University of Oxford in the UK and the author of this report and many of our previous articles. We wish her the best in her future endeavours!

International Buyers of U.S. Real Estate: 2023 Highlights

In the ever-evolving landscape of global real estate investment, the United States remains a sought-after destination for international buyers. The year 2023 has brought about significant changes and trends in the international real estate market, with foreign buyers continuing to play a vital role. This article explores the statistics and key factors driving the international buyers of U.S. real estate in 2023.

Key Statistics (April 2022-March 2023):

$53.3 billion of foreign buyer purchases

84,600 foreign buyer existing-home purchases

Average foreign buyer purchase price rose to $639,900

Top foreign buyer: China

Top destination: Florida

Part I: Strong U.S. Housing Demand, Tight Supply, Soaring Home Prices

The United States housing market has experienced its own set of dynamics. In 2021, it witnessed the highest levels of home sales since 2006. However, 2022 saw a slowdown and normalisation of the market due to various factors. In response to inflationary pressures, mortgage rates were raised, which impacted housing demand.

As of the end of March 2023, the housing market faced challenges related to supply. Unsold homes were 4% above levels seen one year prior. The median price of existing homes also hit a notable milestone, reaching $375,700 in April 2023.

Part II: International Buyers

Purchases of Existing Homes

The 2023 statistics reveal a shift in the international buyer landscape. The number of existing homes purchased by foreign buyers decreased to 84,600, marking the lowest figure since 2009. This decline represents a 14% drop from the previous year, with 14,000 fewer foreign buyers participating in the market.

The dollar volume of foreign buyer purchases also decreased by 9.6% to $53.3 billion, reflecting the impact of market dynamics.

READ – still $53 billion of demand, despite the issues mentioned above!

Origin and Destination

The origin of international buyers continues to diversify. Asian buyers maintain their dominance, representing the largest group with a market share of 38%. Latin American buyers follow closely behind, accounting for 31% of the market. European and Canadian buyers hold 14% and 10% of the market share, respectively.

China remains the top country of origin for international buyers, representing 13% of the market. Chinese buyers stand out with the highest average purchase price at $1.2 million, often investing in expensive states such as California and New York. In contrast, Mexican buyers tend to purchase less expensive properties, with Texas being a preferred destination.

The top 10 countries of origin of international buyers:

China
Mexico
Canada
India
Colombia
United Kingdom
Australia
Germany
Venezuela
Israel

In terms of destinations within the United States, Florida remains the top choice for international buyers, with a significant 23% share of the market. California and Texas closely follow, each with a 12% share.

The top 10 states for international buyers:

Florida
California
Texas
North Carolina
Arizona
Illinois
New York
Ohio
Pennsylvania
New Jersey

Financing

Foreign buyers continue to exhibit a propensity for all-cash purchases, with 42% choosing this payment method, compared to 26% among all buyers of existing homes. Those foreign buyers residing abroad are more likely to make all-cash purchases.

Property as a Real Estate Investment

Foreign purchases of U.S. real estate saw 6% increase from the previous year, indicating a growing interest in real estate investment for various purposes.

READ: Year-on-year INCREASE in property purchased for investment purposes!!!

The majority of foreign buyers prefer detached single-family homes, with 76% making such purchases. Additionally, foreign buyers tend to gravitate towards suburban areas, with 45% choosing this type of location. Interestingly, more than three-quarters of Asian Indian buyers opt for suburban properties. Conversely, Canadian buyers are more likely to purchase properties in resort areas for use as vacation homes.

Part III: Reasons for Not Purchasing U.S. Property

Despite the allure of U.S. real estate, some international clients cite their perception of hurdles for investing in this sector.

Here are the common misconceptions, the actual facts and our solutions:

Cost of properties	Not at all. See the following chart on price comparisons to global cities
Difficulties in finding suitable properties	This can be an issue with time zones, which sites to look at etc. We have fixed this – AM Property Finder.
Immigration Laws	As a foreign real estate investor, there are NO restrictions!
Challenges in obtaining financing	This is all we do. Check out our Foreign National loan programs.
Property taxes	You earn income, you need to pay taxes; however, there are many ways to deduct expenses to maximise your rental income.
Exposure to U.S. tax laws	The reality of U.S. taxes is MUCH EASIER than perception. Some states, like Texas, don’t have state taxes, which is why it’s one of the most popular investment destinations. Also, there are many ways to deduct expenses to maximise your rental income.
Maintenance fees	Any real estate investment will have maintenance required, but that is why you pay a small fee to the property manager. AM Concierge service can introduce you to our preferred managers to make your investment seamless and hassle-free.
Currency transfer difficulties	No issues here. AM Concierge service has partner remittance firms that help our clients. Even in China we have viable solutions from our partners.
Insurance	Insurance is a small percentage of the rental income you receive, and we have partners to help you with this.
Exchange rate concerns	If you are funding the mortgage payments in your home currency, you may experience a currency loss, BUT you can easily hedge this, PLUS you will be earning USD rental income.

America Mortgages Concierge Services:

Property Finder
Property Management
International Remittance Solutions (including China)
Property Taxes
Tax Advice and Filing
LLC company set up
Immigration Consultants

In conclusion, the 2023 statistics on international buyers of U.S. real estate demonstrate a changing landscape influenced by global economic conditions, supply and demand dynamics, and evolving buyer preferences. While challenges persist, the U.S. remains an attractive destination for international real estate investment, drawing buyers from diverse backgrounds and motivations.

Contact us at [email protected] and seize opportunities in the thriving U.S. property market. Visit www.americamortgages.com for more information.

Our Parent Company Offers International Property Loans in 15 Countries!

Post author By Donald Klip
Post date May 12, 2023

Here are our 3 types of real estate financing solutions.

1. International Residential

In these countries, we offer onshore financing options. Our value-added is our relationships with local in-country banks, which we have developed over many years and would be hard for an international borrower to access.

Our partners are traditional banks, regional banks, wholesale lenders, and private banks, to name a few. Depending on the country, the minimum loan amount is $500,000 ($150,000 in the U.S. and Thailand).

In the U.S., our service is through our wholly-owned subsidiary, America Mortgages.

Available in these countries:

The Americas	Europe	MENA	Asia
USA	UK	Dubai	Singapore
Canada	France		Hong Kong
Mexico	Spain		Japan
	Portugal		Thailand
	Italy		Australia

2. Global Bridge Lending

This has been by far our most popular financing request this year, especially since traditional bank lending has been curtailed globally and the need for liquidity is required. These loans are normally first-lien, 1-3 years in tenure, and use the value of the underlying asset to qualify. Loan amounts range between $1-100M.

Here the value proposition is fast funding times, high loan-to-value, and flexibility. Typical use of proceeds are: to purchase more property, make personal investments, improve cash flow, make debt repayment, refurbishment, and cash out before sale, to name a few.

Available in these countries:

The Americas	Europe	MENA	Asia
USA	UK	N/A	Singapore
Canada	France		Hong Kong
	Spain		Thailand
	Portugal		Philippines
	Italy		Australia

3. Structured Real Estate Credit

These are larger, more complicated structures, often involving multiple levels of the credit stack. The minimum loan amount is $50M (lower on a case-by-case basis). Typical use of proceeds are: acquisition financing, last-mile development financing, construction loan, special situations, and distressed opportunities, to name a few.

Available in these countries:

The Americas	Europe	MENA	Asia
USA	UK	Dubai	Singapore
Canada	France		Hong Kong
	Spain		Thailand
	Portugal		Australia
	Italy

Our corporate material:

Global Mortgage Group	America Mortgages
GMG Corporate Profile	AM Corporate Profile
International Loan Programs	Foreign National Loan Programs
Global Specialty Lending	U.S. Expat Loan Programs
Global Bridging Loans	High Net Worth Loan Programs

Please feel free to contact me directly if you have any questions relating to real estate financing anywhere in the world.

Donald Klip
Co-Founder
Global Mortgage Group & America Mortgages

[email protected]

5 Reasons Why U.S. Housing Prices will not Crash but Surprise us!

Post author By Donald Klip
Post date March 8, 2023

1. Lack of investment by homebuilders

According to data from the U.S. Census Bureau, fewer homes were built in the U.S. in the 10 years following the 2008 financial crisis than in any decade since the 1960s.

From 2010 to 2019, a total of 6.8 million new privately-owned housing units were completed in the U.S., significantly lower than the 9.7 million units completed in the 2000s and the 8.6 million units completed in the 1990s.

A major reason for the drop in new housing construction following the 2008 financial crisis was partly due to the housing market crash, which led to a decline in demand for new homes and tighter lending standards (Dodd-Frank).

2. Higher input costs

Additionally, builders faced various challenges during this period, including higher land and labor costs, regulatory hurdles, and a shortage of skilled workers for construction.

These issues are only more pronounced now with higher wages, higher input prices such as lumber, concrete, etc., and of course, financing costs as of last year!

3. Massive lack of housing supply to meet demand

Last year, Freddie Mac published an article, “Housing Supply: A Growing Deficit,” noting as of the fourth quarter of 2020, the U.S. had a housing supply deficit of 3.8 million units.”

Meanwhile, the National Association of Realtors projects that the housing deficit is closer to 6.8 million homes.

Lastly, a report published by the Fed last year, “Volatility in Home Sales and Prices: Supply or Demand?” find that a 30% increase in the monthly number of homes coming onto the market would have been necessary to keep up with the pandemic-era surge in demand.

4. TikTokers need more space at home

However, there is a new dynamic that has arisen over the past 3 years, which is how labor is defined and its impact on housing. Many workers are now choosing to work from home, and also, the younger entrants into the labor force are now earning income from alternative methods, all requiring some “extra space” at home and not an office to go to (TikTok, Amazon sales, Crypto trading, etc.) – this is all very supportive of housing demand.

5. Stability

The stability of the U.S. housing market cannot be underestimated. Post-COVID, when mortgage rates were lowered to historically low levels, most homeowners took the opportunity to refinance their homes to take advantage of the interest rate savings. Fast forward to today, 50% of all mortgages outstanding are under 4%, fixed for 30 years; 40% of all homes are owned free and clear, and nearly 100% of all borrowers have mortgages lower than the current rate!

Will we see a crash? NO!

We feel given the structure of the supply-demand landscape, there is no impending crash, but we feel the market will be supported faster than expected.

In summary, whether you say we are 4M units short, 6M units short, or 30% short – we are short, making this a great opportunity to start building your U.S. rental portfolio, given rental income and yields will continue to rise.

Why Rents Increase in the “Bizarro World”

Post author By Donald Klip
Post date November 1, 2022

The “Bizarro World” references Bizarro Superman, a supervillain who lives in a world where everything is opposite. Here’s a great explanation from the TV show Seinfeld.

This reminds me of the world we live in now; mortgage rates double in 10 months, and yet, rental yields continue to increase double digits, year-on-year.

I have been telling our clients over the past few months that it is a great time to be owning a home in the U.S. for investment income. Most of us have lived through a few economic cycles, and for most of my career, 30-year fixed rates were between 6-7%, which is when I got my first mortgage in 2006, similar to where rates are now.

However, back then, you owned homes almost as leveraged equity, not like what it’s meant to be, more similar to a bond.

When academics say real estate is an inflation hedge, that is a peculiar concept since we have not really seen any inflation since the 70s, so not many of us know what that means in real life.

Till now….

This world is very different. Good or Bad, the fact is that there are significantly more people who need housing, millennials are unable to afford homes, and the rising rates have squeezed out the marginal buyer, and all of the above need to live somewhere.

My colleagues hear me say this ad nauseam,

“We will be in a world where 30-year fixed-rate mortgages are 7%, but rental yields are 10-15% very soon”.

I will try to explain why in this report.

A few days ago, on October 13th, Redfin reported that the Median U.S. Asking Rent rose 9% year-over-year in September to $2,002, the slowest growth since August 2021 and the first single-digit increase in a year. Sure the article makes it sound bearish.

Wait a minute? (sound of car screeching on the pavement).

Mortgage rates have doubled since the beginning of the year, and yet rents are still rising 9% a year. (As recent as May, rents rose +18% year on year!)

While visually, it does look like rents are falling, but that was from an outlier peak of 18% in May….my personal view is anything that has growth in this world is POSITIVE!

In some cities like Oklahoma City and Pittsburgh, rents rose by more than 20% year-on-year (not a typo). More below.

THE PROBLEM – HOUSING SHORTAGE

A housing shortage is not something you can really see. We hear it on the news or read it in the papers, and we think…how can that possibly be an issue.

Can’t homebuilders just build more homes?

The NABM/Wells Fargo Housing Market Index dropped three points to 46 in September, the lowest reading since May 2014!

Meanwhile, “Application to Build” declined to 1.52M units, the lowest since 2020.

Number of Building Permits (SAAR)

One could also conclude with higher borrowing costs, homebuilders are discouraged from starting new projects, which is not helping the undersupply situation.

Another aspect of this is the financial incentive.

Like many other issues in the U.S. economy, there has been a focus on shareholder returns, dividends, share buybacks, etc., and hence the underinvestment in housing development since the Financial Crisis in 2008.

In fact, fewer homes were built in the U.S. in the 10 years following the 2008 financial crisis than in any decade since the 1960s! Think about that for a moment!

In the normal world, high mortgage rates tend to bring down values, and of course, there are some parts of the U.S. that are seeing a relatively faster decline in home prices, like San Francisco. I would argue that is city-specific, as the local economy hollows out and the homeless situation and cost of living is untenable for most.

Across the nation, there are indeed fewer sales and more price cuts on listed homes.

However, in this “Everything-is-weird” economy, the doubling in mortgage rates hasn’t caused home prices to fall as much as you would think, all things equal.

In fact, I really don’t think we are going to see any substantial collapse in home prices in the coming years because many owners bought when mortgage rates were low and can simply stay put through this phase of the economic cycle.

Also, there was less speculation, and investors put more equity in the properties during a time of tight supply. This will keep many families locked out of homeownership and forced to rent.

Here are some mind-blowing data points: Around half of all mortgages outstanding are under 4% fixed for 30 years, and about 40% of all homes are owned free and clear. Think about that for a moment!

Last month, Philly Fed President Patrick Harker discussed his recent research report with most major news outlets, “Unpacking Shelter Inflation”, September 2022, that the housing shortage is a key inflation driver. Read: “…housing shortage…”

In another research report by the Fed, “Volatility in Home Sales and Prices: Supply or Demand?”, Anenberg and Ringo, June 2022, write:

“We find that a 30% increase in the monthly number of homes coming onto the market would have been necessary to keep up with the pandemic-era surge in demand. Since new construction typically accounts for about 15% of supply, our estimates imply that new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand. This is a very large, unrealistic impulse to housing supply in the short-run, suggesting that policies aimed at reducing bottlenecks to new construction would have done little to cool the housing market during Covid-19.”

Read again: “…new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand.”

Here is yet another report, this time by Freddie Mac. “Housing Supply: A Growing Deficit”, Kater, May 2022. I give a little more weight to Freddie Mac since they are actually buying the loans. Their thesis is that:

“As of the fourth quarter of 2020, the U.S. had a housing supply deficit of 3.8 million units. These 3.8 million units are needed not only to meet the demand from the growing number of households but also to maintain a target vacancy rate of 13%. Between 2018 and 2020, the housing stock deficit increased by approximately 52%.”

Read yet again! “…U.S. housing supply deficit of 3.8 million units.”

I always take stuff like this with a grain of salt because academics look at things from a 10,000 ft altitude and through the lens of an Excel spreadsheet, but the gist is that every Think Tank in the world seems to claim there is a shortage of housing supply and since they have a few more tools (and PhDs) at their disposal for this that I do, I will take their conclusions at face value.

Here is a neat graphic from The New York Times, The Housing Shortage Isn’t’ Just a Coastal Thing Anymore” Badger and Washington, July 2022.

The Housing Shortage has Spread to More Parts of the Country.

Housing Shortage Map — Source: Up for Growth analysis of U.S. Census Bureau and U.S. Department of Housing and Urban Development data. Shortage percentages reflect estimated housing units needed to meet demand as a share of existing housing units. Metros with a surplus have enough housing for existing residents.

Let’s look at recent city-specific rental prices:

Top 10 HIGHEST Year-on-year Change in Median Asking Rent (%) *

Top 10 LOWEST Year-on-year Change in Median Asking Rent (%) *

Top 10 HIGHEST Median Asking Rent *

Top 10 LOWEST Median Asking Rent *

* From Redfin News: “Rental Market Tracker: Rents are Growing Half as Fast as They Were 6 Months Ago,” by Lily Katz, October 13, 2022 Methodology – Redfin analyzed rent prices from Rent.com across the 50 largest U.S. metro areas. This analysis uses data from more than 20,000 apartment buildings across the country.It is important to note that the prices in this report reflect the current costs of new leases during each time period. In other words, the amount shown as the median rent is not the median of what all renters are paying but the median cost of apartments that were available for new renters during the report month. Currently, Redfin’s data from Rent.com includes only median rent at the metro level. Future reports will compare median rent prices at a more granular geographic level.

DEMAND IS DIFFERENT NOW

Single-person households accounted for 80% of the new household units that have formed since 2020. Think your one-man Crypto trader or Tik Tok marketer. Meanwhile, the number of Gen Z adults living alone almost doubled from January 2020 to early 2022 (sounds like a lot of COVID breakups), likely using the stimulus income to get started. The point here is that the way labour formation is defined now makes this current real estate cycle and how it interacts with the overall economy very different from past cycles.

Another quirk of the world we live in is Video Conferencing. While we can imagine a world where we go back 5 days a week but in reality, my view is that how we work has changed forever and there are clear benefits for being able to Zoom. What this has done is artificially increased the living space needed (globally). That is to say, adding a corner or a room just for Zoom calls etc, driving up demand for overall living space.

SUMMARY

In summary, the makeup of the labour market, as well as the supply demand imbalances in real estate, are very supportive of higher rental prices and rental yields over the long term.

As a non-resident buyer of U.S. real estate hoping to earn income, this is the perfect storm and has only happened BECAUSE rates are rising.

We may see rates come down in the future where borrowers can easily refinance into a lower rate, but what if prices do not come down or there is a sudden price surge next year? These are all crystal ball-type guesses but what I want to leave with you in this report is that the lack of supply is a major long-term driver of higher rental yields, which is positive for any U.S. real estate investor.

U.S. real estate is considered a safe haven for many – low entry price point, no stamp duties, ease of gentrification, available tax deductions, USD income, ease of travel, quality of schooling, and the list goes on.

If you have any questions about this report or about anything U.S. real estate or mortgage related, please feel free to reach out to me directly at: +65 9773 0273 or email me at [email protected].

www.americamortgages.com

Tags buy a rental property, High rental demand, high rental income, Investing in rental property, Investor Rental Mortgage, long-term rental yields are some of the best in the U.S, rents

“Ex-post, Ex-ante” + Family Office uses bridge loan to buy Retail/Office building

Post author By Donald Klip
Post date September 8, 2022

Ex-post

The worsening energy crisis in Europe has taken the front page of most media channels this week as the Nord Stream 2 pipeline, a 1,200 km natural gas pipeline from Russia to Germany, remains close, which is driving the Euro to a 20-year low vs. USD. The BBC reports that the annual energy bill for a typical UK household is £1,971. From 1 October, however, that’s due to rise 80% – to £3,549!!! Can you imagine paying USD4,000 a month for electricity?! The new incoming PM, Ms. Truss, will certainly be making this a top priority. We really hope for a mild winter in Europe for everyone’s interest.

Meanwhile, the Yen is now close to a mind-boggling ¥145 vs. USD, a 24-year low! Oil at $82 is a very critical level and, technically speaking, could break lower, which could give some breathing room to the economy. Seeing Oil go from $120 a barrel in May 2022 to $85 now shows how volatile the world is and also how quickly demand can fall for the most popular commodities.

Oil Edges Higher After Deep Selloff Graph

In the US, Nonfarm payrolls were +315,000 in August (seasonally slow) vs. +526,000 in September, slightly lower than expected but a big month-on-month decline. Meanwhile, unemployment is at +3.7%, slightly higher than expected. The tight labour market while companies are announcing hiring freezes is peculiar. Could this be a recession where employment is less affected? ISM Manufacturing for August was 52.8, unchanged from July – not the decline I was hoping for to give us a little breathing room.

US Rates	30-year fixed 6.12%	15-year fixed 5.32%
	30-year jumbo 5.10%	5/1 ARM 5.95%

* Reference only. These rates are Conforming rates, not applicable to Foreign Nationals.

Ex-ante

I’m really keeping an eye on oil prices…I have a sinking feeling that Oil is such a consensus overweight for most hedge funds (and institutions) that technical breakthrough support (say $80) will see a further decline in oil prices which is good news for everyone! European energy prices are now generally 15-20% of GDP, and someone has to pay for it – the public or private sector. If the public pays for it, it will have to run a fiscal deficit of 15-20% of GDP, so more debt on top of the already growing debt problem. The private sector gets tricky, especially for countries that have piled on loads of debt in a short period of time. One country that sticks out is Sweden, with over 150% of private debt to GDP. Nationally, Sweden’s debt service ratio is 27% (highest on record). It appears Sweden, France, and South Korea are the most interest-rate sensitive countries, relatively speaking, according to BIS data. Watch this space. The negative soundbites on the European banking sector are going to get louder and more frequent.

Buy now! Why now?

We are in a perverse cycle where rising rates are actually squeezing up rental yields. The marginal buyer cannot afford to own given rate rises, and the Millennials also cannot afford and must rent – AND, to add to that, there is a 3.8M housing shortage according to the Fed. If you read last week’s “Ex-post, Ex-ante,” places like New York are seeing double-digit percentage increases in rents, BUT 39% of residents are looking to move given the high cost of living. It won’t be long where we are in a world where rates are 7-8%, BUT rental yields could be 15-20% (some parts of Texas can net you low teens yield already).

Look at this chart below from a Bloomberg article (7 September) US household debt service ratio has fallen from around 13% at the time of the last housing crisis to 10% now, according to the Fed. The amount households are spending to service their mortgage debt has been cut almost in half, from 7.18% in 2007 to a recent 3.89%!

LOANS OF THE WEEK!

1. Indonesia family uses bridge loan to purchase $5.4M Retail/Office to maximize cash flow

Location: San Diego	Price: $5,400,000
Property: Storefront Retail + Office	Loan Amount: $3,500,000
Cap rate: 4.05% / 100% leased	Loan to value: 65%
Use: Investment	Rate: 8.5%
Loan: AM USA Bridge+	Term: 3-year interest only

– Client was offered a bank loan at 5.75% but given that it is cash-flow based he would not be able to cover the 1.25x cash flow coverage typically required and would be able to get around 40% LTV. Our knowledge was valuable. We knew that California is a tough market as it is with very low CAP rates but the added increase in interest rates is making it even harder to achieve higher loan amounts.

– Our solution: Use a bridge loan with higher leverage, interest-only payment to get into the property. Then position the tenants for renewal of their lease agreements and refinance when rates come back, allowing for more leverage to be supported by the cash flow. Good news is the client is using this strategy to purchase more yielding assets in the US. Loan managed by our Head of Sales, [email protected]

2. Canada tech entrepreneur buys $1.25M condo in Miami

Location: Miami	Price: $1,250,000
Property: Condo	Loan Amount: $875,000
Use: Investment	Loan to value: 70%
Loan: AM Foreign National+	Rate: 6.875%
	Term: 30-year fixed

– Client wanted to start building rental portfolio in the US to earn income and to begin developing a credit footprint for future family and business opportunities. Given the nature of his business, he was not able to find bank financing in Canada and we were able to find a mortgage which used his Canada credit and income to qualify. Funded in 43 days with the help of our Canada-based loan officer, [email protected]

3. UK family buys $850K Boston condo in son’s name to develop credit

Location: Boston	Price: $850,000
Property: Condo	Loan Amount: $595,000
Use: Investment	Loan to value: 70%
Loan: AM Foreign National+	Rate: 6.875%
	Term: 30-year fixed

– Client bought condo in son’s name to rent out while his son attends boarding school on the East Coast. The intention is for him to stay in the condo upon graduation from university in 4-5 years or continue to rent out to bolster his income while starting out on his career, meanwhile developing US credit for himself. Our UK-based loan officer provided a hassle-free experience throughout their mortgage journey, [email protected]

Schedule a call with us at [email protected] to find out more!

www.americamortgages.com

Tags bridge lending to purchase office building, bridge loan to buy retail building, bridge loan to purchase real estate in the us, ex-ante, Ex-ante" + Family Office uses bridge loan to buy Retail/Office building, Ex-post