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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Besides, investing in real estate is low risk and doesn't require professional knowledge.
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.