International investors looking to purchase real estate in the U.S. aren’t that different than American buyers and sellers. They go to parties and gab about their new ventures. They chitchat with friends and coworkers about their investment experience. And they’re willing to give their agent a referral if they like their service.
Greg Kurzner, CEO of ERA Atlantic Realty in Atlanta, has been attracting foreign clients since his company acquired a few property management portfolios in December 2013 consisting of assets primarily owned by overseas investors. From that point on, he’s seen the floodgates of demand open up in this niche.
“There is little expertise in the U.S. to get these investors what they want,” Kurzner says. “It’s like the Wild West. It’s wide open.”
Before 2014, his 35 employees (he also has 20 agents) mainly handled foreclosure sales for Fannie Mae, Freddie Mac, and HUD, as well as investment properties for U.S. hedge funds and individual investors. But as they’ve gotten to know their foreign clients, they’ve come to understand their preferences in properties and communication methods, which has helped build trusting relationships. Now this segment of Kurzner’s business is booming.
Over the last six months, his company has gained enough foreign investor clients to make up 15 percent of their total business. In the last quarter of 2015, about 20 percent of the team’s closings consisted of foreign investment purchases at a median price of about $120,000.
“It is still a minority of our overall business but it’s the fastest expanding segment,” he says.
Kurzner and his team provide their clients with detailed feedback about their investment portfolios. Having previously assisted a U.S.-based real estate investment trust (REIT) acquire 2,000 homes in the Atlanta area has helped his team understand what works and what doesn’t. "Having that history managing their other homes, and giving feedback on what in their portfolios is working as good investments, gives us credibility with our investors,” he says.
Today, they have investors from Belgium, Germany, Australia, China, Canada, Nigeria, and Israel. These clients generally invest in single-family detached homes and buy one to three houses at a time in cash. Some are groups of 20 to 30 investors who use a financial advisor, while other clients are individuals with varying levels of investment experience, Kurzner says.
About half of their clients want to see a property before purchasing it, so they will either travel to Atlanta or send a representative they trust to attend a showing. One of Kurzner’s Nigerian investors comes into town for every closing, he says. Another investor from Germany has purchased four properties, but Kurzner has never met her. His team is trying to make the process more virtual for clients, so they purchased a Matterport 3D camera last year to conduct virtual tours.
They’re now working on a build-to-rent program, which is attractive to international customers because new construction generally means fewer maintenance issues. New-home construction in Atlanta has recently bounced back after developers were able to buy cheap bank-owned lots during the downturn.
“Some international buyers are taken to the cleaners by managers who do poor repairs or promise a higher return,” he says. “International investors are not going to drive by their investment every day, and they’re not able to make sure repairs are done properly in person. They put a lot of trust into who’s managing these investments.”
Building trust leads to more referrals from international clients, he says. It’s a niche where word-of-mouth still reigns.
The U.S. real estate market offers bargains for international buyers whose home country’s price points are usually significantly higher. In Belgium, an average investment property may cost the equivalent of $500,000, but that same investor could buy five properties for the same amount in the United States and get a higher cash flow rate in return, Kurzner says.
The biggest barrier for foreign investors right now is capital. International hedge funds can buy a lot in cash, but individual investors are more limited without a reasonable financing mechanism, Kurzner says. One of his individual investors has six houses that were purchased with cash, and now that person is looking to pull money out of those properties to buy more homes. “They lament that they can’t do more,” he says.
Demand is high, Kurzner says, and the international investor market is a lucrative niche for brokers who position themselves properly. His REO team already had experience working with reputable renovation contractors who are capable of getting a property into good rentable condition. He also has established a property management arm of his brokerage — Atlantic Property Management — which operates in-house. Those resources coupled with the company’s longevity helped put them in the position to serve international investors.
“We’re a 26-year-old company, and we have other people who we manage investments for,” he says. “We’ve tried to build on our track record and our honesty throughout the years.”
For newly established companies breaking into the international market segment, Kurzner advises to start by developing relationships with trusted contractors who know how to tackle a broad range of renovations. And if your company doesn’t have a property management team in-house, then build relationships and partner with a reputable local firm, he says.
“Position your company to be able to do or refer everything for your clients,” he says.