Update: Cash buyers are involved in many of the real estate sales happening in 2020, the year of COVID-19. High-cash buys are a result of uber rich having more cash to make purchases with, and therefore impact those cities of most interest to them. New York, Florida, Georgia and Arizona are some of the areas seeing high sales of cash buys.
COVID-19 has changed the face of the world, including how foreign investors and U.S. real estate markets interact.
- Coronavirus is affecting all markets
- Foreign investments are down
- Real estate could be a good choice for domestic investors
Real Estate Markets
Real estate remains a strong market for investors, as alternative asset investing continues to gain in popularity. As recently as 2017, foreign investment was pouring billions of dollars into the U.S. real estate market. Now, however, the onset of coronavirus has changed how investors are spending, along with the US/China trade conflict.
Coastal cities such as New York and Miami had seen large amounts of foreign investments made, which have tapered off due to COVID-19 and the recent changes to H1-B and other skilled worker visas. As much of the foreign investments came from China, the recent drop has opened great opportunities for domestic investors.
While foreign exchange students wait to see if there will be in-person classes beginning in the fall, they, their parents, and many foreign investors are taking a “wait and see” approach to purchasing real estate. This means there may be more opportunity for domestic investors.
Instead of price wars initiated with money flowing from outside the United States, domestic money may have a better chance to bid on real estate in prime locations. In fact, this may loosen the market to a degree so that cost is much less prohibitive than in previous years.
Benefits of Real Estate Assets
Owning real estate has a tremendous upside for investors. Besides being a tangible asset, investors can physically use the space, rent it out, and borrow against it. Real estate proves a valuable commodity year after year for the benefits it can bring. How do foreign investors and U.S. real estate morph in the coming years, depending on how the world plays out? No one knows right now, but real estate continues to show strong results.
Investing with Self-Directed Retirement Plans
Those investors who want to make real estate a part of their overall plan may prefer to establish a self-directed retirement plan. Both a Solo 401(k) and a Self-Directed IRA offer options for investing in the real estate market.
With a checkbook control Solo 401(k) you can use funds to make purchases of real estate, including rental homes, raw land, apartments, condos, and more. Investing in alternative assets is something that can not only help diversify a portfolio, it can also help hedge against market volatility.
A Self-Directed IRA is another type of self-directed retirement account that can be used to invest in real estate as well as in other alternative assets. Using a self-directed retirement account to invest in real estate is a great way to earn passive income, such as rental income, to build up a nest egg. The use of a Real Estate IRA has become one of the most popular ways to invest.
Real Estate and the Future
With COVID-19 continuing to ravage the globe, investors in real estate are looking closer to home. This is due to both travel prohibitions and government regulations limiting visas and other access to countries previously open. Foreign investors who had previously spent large amounts of funds in college towns or coastal cities are no longer doing so, and they may not begin doing so again for some time.