What's up with Chinese investors?

Mar 26, 2016 20 Comments

I was hoping Chinese investors would slow down in buying up US real estate because of recent downturn in China. But that hasn't happened. The RE agent tells me they are out bidding houses by like 20% in my area like no tomorrow.

Lot of these houses then goes on rent but the rent are so low it simply does not make any financial sense. I mean they are taking on huge losses here with the difference in rent and the money they COULD have been making with other types investments.

As a person who is not much familiar with China as country or culture, I am absolutely baffled by what these investors are doing. Can someone who is more familiar with Chinese cultural/social background explain what is going on?

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TOP 20 Comments
  • Yelp / Eng
    bitter

    Go to company page Yelp Eng

    bitter
    Rich Chinese want to park their money outside China.
    Mar 26, 2016 2
  • Google
    turkeystan

    Go to company page Google

    turkeystan
    simple fix is increase property tax on foreign non resident owners. takes their money and invests it into the local community. it's the price they pay for safeguarding their dollars here...
    Mar 28, 2016 2
  • I think I am finally getting the math. Assume you have $700K cash lying around and you want to invest it. Now let's not be too greedy, so you decide to have just 4% annual return. This translates to about $2300 of rent. Let's add another 10% for rental management company plus critical maintainence. This brings us to $2600 rent which is quite reasonable for Seattle East Side area 3 bed room house with yard and den.

    Now add on the fact that real estate has on average 4% appreciation per year over long term. That brings up your total return 8%. Notice that unlike majority of stocks, real estate not only pays huge "dividends" each month but also has great appreciation over long term.

    Now the most important thing: Government has your back! During inflation, real estate tracks extremely well in both rents and appreciation. During deflation, you can count on government to do tons of QEs for you AND lower the interest rates, making sure real estate stays attractive and doesn't lose significant value.

    So real estate is essentially government insured 8% return investment over long term. Now I think about it, you would be foolish to invest that $700K in anything BUT real estate.

    Note that above calculation doesn't work that well if you have to borrow for investment. You must have all cash to pay for entire cost.
    Mar 29, 2016 0
  • Dropbox
    VISC67

    Dropbox

    VISC67
    In SF RE prices are finally dropping and you can buy a house for less than 10% over asking. Seems the Chinese investors here finally got spooked. Good riddens.
    Mar 27, 2016 2
  • Google
    balanha

    Go to company page Google

    balanha
    money landry
    Mar 27, 2016 0