Premium News Analysis: American Real estate purchases by Chinese are increasing at a high rate. Cities such as Los Angeles, Las Vegas, New York City, and Orlando are feeling the Positive Effects. The on-going process should continue into the future many predict.
How does one maximize Return on Investment in such a Market?
The sophistication of many Chinese Real Estate Buyers is quite advanced. One has to understand their ‘Reference Points’ used in judging Suitability of a Building, Home, or Project. Beyond that, their view of the property’s financial Return on Investment (ROI) is extremely important.
Several considerations they use are:
What is the nature of the property: Residence, Commercial, or Industrial?
What State is the property located?: Coastal States are generally preferred.
What City?: Las Vegas or Searchlight, Nevada?
What Is the Age and Condition of the property?: Deferred maintenance issues are generally not pleasing to the Chinese since they cannot readily verify the quality of repairs nor the timetable in which they might occur beforehand. Since they will be returning to China, visibility in this regard in curtailed. Even if they have a family member oversee the repairs by others, some uncertainty may be present in the Purchaser.
What is the “Feng Shui” of the property?: Are ‘Correct’ Energy Forces present in the structure which will enhance ‘Xi’ Flow or are there impediments to it? Part of this determination is the Direction the land and the structure face. Are there hills or mountains nearby that may obstruct ‘Xi’ flow? Is there an underground river present (such as one along portions of Las Vegas Boulevard (The Strip)? Energy flows with water; leaving a property can be very negative for ‘Xi’.
What earthquakes are probable of occurring in the immediate future in the State?
Are there ‘Seismic Faults’ close to the property?
What about a “Flood Plain” for the property? In coastal cities, both strong storms such as the Weather Debacle which occurred in New York City recently or Tsunami generated floods can devastate a property. In New York City many of the high-rise residences lacked electrical power (Basement Back-Up Units flooded) to operate elevators and to their units. Residents had to ‘hike’ up to their abodes. Also, the flooding caused numerous “Rat Encroachments” into tenants’ units. The animals were trying to escape the flooding. The Chinese are well aware of these possibilities.
Investors should anticipate what some one’s concerns are regarding a property. If a good Property Management Team is available for a Building(s), so much the better. For a Single Family Residence being bought on “Spec”, a Reliable Maintenance Person(s) should be accessible if there are Plumbing or other problems for tenants. This assistance may help facilitate a Chinese Buyer’s decision to “Do The Deal”.
“Spread Sheets” depicting Cash Flow and “ROI” will be suspect by many Chinese. They will perform their own Financial Analysis of a property or project (and probably be more accurate also).
If an Investor engages in Due Diligence in securing a property to “Flip” to a buyer or has a property already, its lack of any maintenance will be a “Plus” in helping its sale.
Pricing using “Comparables” while of some value, might not be of significance to a Chinese Buyer since the elements contained therein typically do not have any “Feng Shui” Analysis in them. Since it is of vast importance to the Chinese, a Wise Investor, considers the adage: “An Ounce of Prevention is Worth a Pound Of Cure”. He or she anticipates a Buyer’s thoughts and performs “Due Diligence” ahead of the game to “Bag The Buyer”.
Chinese Buyers are VERY SMART and VERY WISE when it comes to Investments.