Riding The Wave Of Chinese Wealth
How can you take advantage of Chinese opportunities reaching our shores? The first step is conducting research in your own backyard to determine what properties might appeal to high-net-worth Chinese investors and what ties might already exist to connect with them.
Locate opportunities in your market
No matter what your real estate focus, start by making local connections.
See if your local REALTOR® association has a Global Business Council. If so, ask if they are making efforts to develop business in China. If not, contact NAR Global to inquire about other initiatives in China or investigate NAR’s global alliances at realtor.org/global_alliances.
“Check with your Chamber of Commerce or local Economic Development Office to see if they have any Chinese visitors coming to your city,” suggests Adrian A. Arriaga, CCIM, CIPS, of AAA Real Estate & Investments of McAllen, Texas, and NAR President’s Liaison to China. “It’s standard for international investors to contact these groups for information about the area and demographics.” Also look into SelectUSA.gov, formerly the Invest in America program, a Department of Commerce effort to encourage foreign direct investment in the U.S.
Contact Chinese companies with facilities in your market to offer your services to their executives and management, and discuss their plans for the future. Ask if they are aware of other Chinese companies that are considering expanding to the U.S. or establishing manufacturing here, especially if your market has unoccupied industrial or commercial property and a skilled workforce.
Reach out to local colleges and universities to learn if they have programs to attract Chinese students. Contact international recruitment officers to see how you can become involved in their programs to attract students from China.
Find out if there is an EB-5 Regional Center in your area that is looking for overseas investors. The U.S. Citizenship and Immigration Services (USCIS) publishes an updated list of all current Regional Centers; to access it, go to uscis.gov and enter Immigrant Investor Regional Centers in the search box.
Look for properties in your market that would attract Chinese investors. These would include high-end, luxury residences; apartment complexes with a history of good occupancy rates and steady income, but under distressed ownership; and hotels, office buildings or restaurants in need of financial partners.
Establishing connections in China
After you have identified opportunities in your market, the next step is connecting with Chinese nationals with the funds to invest in them. To your prospects, traveling to China shows your interest in and commitment to doing business with its people.
Unlike many Westerners, the Chinese expect to get to know you in person before conducting business with you. When planning a trip to China, there are several routes for making business connections there:
Attend a Chinese real estate expo. Huge numbers of investors flock to expos looking for residential, industrial and commercial properties abroad. (See sidebar on the next page.) There you can mingle with real estate professionals from China and all over the world, along with investors and their representatives searching for global opportunities. Going to an expo is also a great educational experience. You may learn more at a four-day expo than through anything you can do at home.
Meet with sponsors of home-buying trips to the U.S. There are companies in China that put together groups of high-net-worth individuals for multi-city tours, usually of luxury and investment properties. Introduce yourself while in China and make them aware of the opportunities and attractions of your market.
Join a trade mission to China. Your initial research may uncover an upcoming REALTOR®-sponsored trade mission, or a trip organized through your state’s Economic Development Office or Chamber of Commerce. If so, consider getting involved early, during the planning stages.
Identify and meet with investment advisors with wealthy Chinese clients. These include Chinese firms and American lawyers, financial advisors and real estate advisors who have offices in China.
Meet with Chinese real estate agents to network and promote your listings and provide more information about your area.
“It’s a good idea to build your trip around a real estate expo and then plan as many additional meetings as you can, to maximize your results,” says Arriaga. “Make sure that for all your dealings with Chinese nationals, you have someone accompanying you who understands the language and can translate for you.” However, also be able to use common Chinese phrases and greetings; it indicates you are trying to meet them on their ground.
Chances are good that you will return from China with a long list of contacts. Because the Chinese conduct business based on social relationships and trust, turning your leads into sales may take far longer than you are used to in the States or Canada. Some things to keep in mind:
Don’t expect immediate results. Your Chinese contacts will want to get to know you personally. This may require more than one visit and lots of time socializing.
“They’ll want to see you again and again,” reports George Betz, Partner and CEO of Fortune Real Estate Group in London, which focuses exclusively on facilitating transactions in Far East markets. “You have to be in it for the long haul.”
Become acquainted with Chinese social practices. NAR’s Field Guide to Business Etiquette When Working with Other Cultures can help, and can be found at realtor.org/library/library/fg225. “It’s up to us to learn their ways, not tell them how things are done,” says Betz.
Be formally polite in your business dealings. “Chinese business etiquette is polite on steroids,” reports Arriaga. It’s best not to use colloquialisms, slang, or make jokes that may be misinterpreted.
You’ll become a “client/friend.” In China, business associates get to know one another well socially. They know each other’s families, visit one another’s homes, and know their associates’ circle of friends. “The Chinese have a saying, ‘know where you live,’ meaning knowing you well personally,” says Arriaga. “They have to find out if they can trust you, who you are connected with, and what kind of person you are.”
Expect awkward questions. Your contacts may ask questions that, in our culture, might be considered overly personal, like, “Are you a millionaire?,” “How many properties do you own?” or “What is your net worth?” These questions are meant to gauge your business status. Handle them comfortably and politely, indicating that your status is appropriately high enough to be dealing with them.
Offer respect. The Chinese are very proud of their culture and accomplishments. Be properly deferential and respectful when visiting and touring in China. Our history is very brief when compared to China’s 7,000 years.
Hosting expectations. When your clients come to the U.S., be prepared to commit all your time to them. They will expect to see your offices, as well as your home, and be well-entertained.
Real estate practices vary a great deal from country to country, and the Chinese, like most other foreign nationals, are not necessarily familiar with how business is done here. You may want to keep these things in mind when conducting business:
Many Chinese purchases are done in cash. Though there are limits on individual transfers of funds out of China, most funding will come from offshore sources, like companies set up in other countries.
Determine your client’s motivations. “If they’re interested in your market, they probably know someone with a connection to it,” says Arriaga. “There is no impulse buying.” Understanding and exploring that connection will strengthen your position in closing the deal and building a referral network.
Explain all aspects of the purchase process thoroughly. In China, property is acquired through a lease from the government, which can be bought and sold. Make your client aware of steps in the American purchase process, and the roles of every party in the transaction. Due to corruption in some parts of China, your buyer may ask if you have the right to sell the property. Your client also may not trust lawyers. You may want to explain that in the U.S., an attorney’s role is to protect clients’ interests.
Support financial projections with historical returns. In Chinese business deals, due diligence is expected. Your clients may want to review the data supporting your calculation of expected returns on the purchase, even on residential property for self-use. When estimating investment returns, remember that most Chinese clients will pay with cash, eliminating the mortgage interest deduction for any clients subject to U.S. income tax.
Learn a little about the concepts behind feng shui. Many Chinese take them into consideration in selecting properties. Consult NAR’s Field Guide to Feng Shui and Vatsu to get started, available at realtor.org/global.
Be open, honest and true to yourself. Because social contacts and context are so important in Chinese business dealings, work with people and groups who reflect your character and the ethics of your organization.
Adrian A. Arriaga expects nothing but growth in the near term for Chinese buyers. “Getting a foothold in Chinese investment in U.S. real estate will be challenging, but there is a tremendous upside. If I were 20 years younger, it’s where I would set up shop.”
NAR Member Resources
NAR Field Guides: Visit realtor.org/global for field guides on China and feng shui.
NAR Cooperating Association: The Chinese Association of Agents and Appraisers. Visit realtor.org/global, follow the Global Alliances link.
Attend China’s largest real estate expo
The Beijing Overseas Property and Investment (BOPI) Expo is the premier exposition of its kind in China. Held every Spring, Summer, Autumn and Winter, it is a showcase for overseas investment opportunities for wealthy Chinese. In September 2011, the Expo had 100,000 visitors over four days, including over 5,000 high-net-worth citizens. Visit chinapropertyexpo.com for more details and 2012 dates.