Posted: 01 Oct 2014 01:55 PM PDT

Chinese investment in New York City real estate

As Chinese property developers and investors look to generate bigger profits by looking beyond their local markets, questions have arisen about what's actually driving the influx of cash – and what could slow the flow.

By any yardstick, China's overseas real estate investment has skyrocketed in the past few years. The numbers tell the tale. According to global real estate services company Colliers International, outbound property investment from the People's Republic in 2008 was close to $70 million. In 2013, that number was closer to $16 billion. Chinese investment this year, through Aug. 31, has already passed $8.5 billion.

Will the deals keep coming or will Chinese investors pull back? Here are five things that could well determine the answer to that question.

Further easing of capital controls

While many large Chinese investors are still learning the U.S. real estate market, the government's policy around foreign investment is paving the way for increased capital outflows.

"All of the indications for the past year or year and a half have been that the government wants to continue to increase flows of capital from the country to investment outside of the country," said Dan Cashdan, senior managing director at HFF Securities.

This year, Chinese agencies have streamlined and deregulated rules around outbound investment. In April, the National Development and Reform Commission upped the monetary threshold on outbound investments that are subject to government oversight. The old minimum: $30M. The new threshold: $1 billion

Beijing will further simplify regulations by no longer requiring cross-border investments of $100 million or more to be approved by the Ministry of Commerce. That change is slated to kick in on Oct. 6.

Much of China's growth is driven by real estate, and property companies are big employers, noted Brendon Frye, senior manager at Colliers International in Hong Kong. Thus, there's an incentive to let those companies go abroad, invest capital and diversify in order to keep China's economic engine chugging along.

China is also trying to boost international recognition of its brands, including its colossal developers.

"The Chinese are very happy to see groups become international and be recognized in multiple countries," said Frye "I'd be very surprised if you saw any sudden shift in that."

A change in U.S. visa rules

Under the Immigrant Investor Program – more commonly known as EB-5 – the U.S. grants visas to foreigners who invest $1 million or more into companies and developments. The pathway has proven especially popular among the Chinese, who accounted for about 85 percent of the EB-5 visas issued this past fiscal year.

This summer, the State Department announced that it was on track to meet its limit of 10,000 EB-5 visas and promptly stopped issuing the visas to Chinese investors until Oct. 1.

But the pause is unlikely to dissuade Chinese visa seekers, experts said.

"The increased popularity of the EB-5 program is not going to diminish the interest of investors from China for a number of reasons," said Stephen Yale-Loehr, a professor of immigration law at Cornell Law School.

At the top of the list: the backlog is not so bad compared with other visa categories. What's more, EB-5 visas are not only issued to investors, but also their spouses and children. Historically, for every EB-5 visa issued to an investor, 1.5 family members also participate in the program, according to Chris Bentley, press secretary at the U.S. Citizenship and Immigration Services. That means only 4,000 and 4,500 of the visa holders produce investment money.

Some groups have lobbied President Obama to use executive authority to reinterpret the language of the EB-5 program so that all 10,000 slots would go to investors. If left to lawmakers, Congress will likely take up the matter when it grapples with the larger issue of immigration reform, said Yale-Loehr.

Amped up competition from other countries

The United States is not the only country offering residency-for-investment programs, and with demand surging for EB-5 visas, some worry that Chinese investors could opt to put their money elsewhere.

But since many investors seek EB-5 visas not for return on investment, but as a means of securing a foothold and planting their family in the United States, the popularity of the program is unlikely to wane.

"If the investor primarily wants a green card for their children, because they want their children to get an education, then the U.S. is still the top destination," said Yale-Loehr.

Still, Australia has an excellent school system, Frye said, and has consequently attracted many Chinese with its Significant Investor Visa. That plan provides permanent visas to foreigners who put 5 million AUD ($4.4 million) in certain types of investments for four years.

Portugal is also attracting Chinese investors and developers with its Golden Visa. By making a relatively small investment – 500,000 euros on property or 1 million euros in cash – foreigners can obtain residency in Portugal, allowing them to travel throughout the European Union and opening the door to European universities.

The arrival of institutional investors

One big question hanging over the market: Will Chinese insurance companies and large institutional investors take advantage of deregulation and buy into New York?

So far, big deals by such investors have been few and far between. They include the sale of the Lloyd's Building in London to life insurance giant Ping An and the 70-percent stake China Life Insurance took in a 1 million-square-foot Canary Wharf office tower.

According to Frye, however, these firms are getting on planes and scouting potential assets in the United States. Still, Chinese insurers remain highly bureaucratic and significant investments are likely years away, said Frye.

"These insurance companies have so much regulation and so many risk-averse people," he said. "It will take them a while to get there."

Lack of progress on simplifying the US tax code

One reason London's property market is more attractive to foreign investors than New York's is the United States' arcane tax structure.

"The biggest concern in investing in the U.S. is not that it's not a mature market or there's not enough growth," Frye said. "It's the complexity of the tax structure."

Many Chinese companies that consider investing in commercial property in the U.S. – but ultimately opt to go elsewhere – are swayed by concerns over tax structure. According to Frye, it would be difficult to simplify the U.S. tax system sufficiently to mitigate investors' fears.

At present, much of the buying has been done by ultra high-net worth individuals and large, sophisticated developers like China Vanke and Greenland Holding Group. Those businesses have committed to learning the market, partnered with U.S. advisors and tax experts and established a permanent presence in New York.

Tags: chinese buyers, Chinese Developers, EB-5, foreign investment

Investing In Luxury Real Estate - Investopedia

Posted: 01 Oct 2014 04:57 AM PDT

The average luxury home in New York sold for $1,565 per square foot in 2013, according to Christie's International Real Estate, a luxury residential real estate network. That's upwards of $1.5 million for a 1,000 square foot apartment.

"Many high net worth individuals are buying homes as a hard asset," says Jay Belson, the CEO of SRE Investing, a full service luxury real estate investing firm based in Beverly Hills, Calif. And with the wealth of the world's richest people at an all-time high this year, according to Forbes, the potential market for luxury properties is larger than ever. Major cities worldwide, including San Francisco, New York and London, saw double-digit increases in luxury residential property sales in 2013. If you want to get in on the action and can afford the steep price tag, here are several options for doing so.

Defining "Luxury Property"

It's important to understand what features characterize a luxury property before you invest, because a high price tag alone won't put a property in this category. "It has to be unique and exclusive, in a good way in a desirable way. People who are wealthy will pay a premium for something that's perceived to be superior," says Randy Char, senior vice president of operations at One Queensridge Place, a luxury high-rise located just minutes from the Las Vegas strip.

High-end buyers want access to luxury activities like high-end shopping, dining and the arts, as well as proximity to other luxury homes. A trophy address, like Park Avenue in New York City, adds value. Having a storied history - Robert Redford used to live here! - doesn't hurt, either. Many luxury buyers seek the natural beauty of a waterfront location, or at least views of a river, ocean or lake. Others want countryside or mountainside views.

High-end buyers want many of the same features that all buyers want, but on a grander scale. They want privacy and security, sometimes to the point of seclusion. They want beauty inside and out, and can afford custom architecture, custom design, over-the-top attention to detail and opulent finishes. They also want amenities on top of amenities: a chef's kitchen, luxury pool, expansive master suite and outdoor living space, not to mention home automation, motion detectors, car lifts and temperature-controlled wine cellars. They also want space. In Malibu, Calif., for example, the average luxury home has more than 4,000 square feet (and a $6 million-plus price tag).

When choosing a luxury home, it's extremely important to think about the aspects of the property that can't be changed, says Mark Fitzpatrick, CEO of RUHM Destination Marketing, a destination marketing service for luxury properties worldwide. "You can't change the path of the sun, the location of the ocean or the fact that there is a flight path for large airplanes over your head. Ugly wallpaper in the bathroom is far less important than the weather," he says.

How Much Do You Need?

In markets where prices are generally lower, you could need as little as half a million to own a piece of luxury real estate. But you'll need at least $1 million to buy a luxury property in most major cities, and the entry price point goes up where the cost of living is high. It's $3 million in San Francisco, $5 million in Los Angeles and New York, and $7 million in London, according to Christie's.

Luxury buyers often pay cash, but a jumbo mortgage is another option. If you're financing the purchase, you'll need a large down payment, excellent credit, proof of income and assets and large cash reserves.

How to Do It: Your Options for Investing in Luxury Real Estate

If you want to invest in luxury real estate, there are several paths you can take.

Flip a Mansion

Remodeling existing luxury properties and reselling them for a profit is an excellent investment, says SRE Investing's Belson. "It's faster than building from ground up, but is limited to properties that have just the right combination of architecture, condition and layout," he says, adding that fixers are better. The downside is that "because most of these homes can be lived in at purchase, you will be competing with local buyer-users who can outbid you," he says. However, the competition among investors and flippers is much lower in the luxury market because there are fewer people who can afford to fund high-end projects and who understand how to execute them at a high level, Belson says.

Invest Internationally

Investing in luxury real estate abroad can have benefits you won't find domestically. In the Turks and Caicos islands, a small British overseas territory located east of Cuba and north of Haiti and the Dominican Republic, there are no annual property taxes and no capital gains taxes on transferred property. Property ownership is protected by a land registry, and the U.S. dollar is the official currency, so exchange rates aren't a factor in completing the purchase or in your property's future value.

These islands are a good place to invest because land prices have increased steadily over the last 10 years and are expected to continue to do so thanks to rapidly increasing tourism and development, says Blair MacPherson, co-owner and broker of RE/MAX Real Estate Groups Turks and Caicos. And you can earn additional income from your investment by renting it out while you're away and letting a management company handle the details, he says.

Investing abroad can also have unique hassles. "We have to remember that the rest of the world does not operate like we do in the States," RUHM's Fitzpatrick says. "You do not want to purchase a property in another country only to find out the government can take it back from you down the road." Use an international real estate attorney and other professionals to help with your due diligence, he says.

Buy a Luxury Condo

Whether you're buying a luxury condo for yourself or to rent out, "spending money on a home

located in a great luxury building with amenity and transportation options nearby is the way to go," says Lydia Sussek of Corcoran, a full-service real estate firm in Manhattan. "Buying in a luxury-looking building with poor transportation options is a poor investment," she says.

The services and features the building offers can also make or break your investment. "Don't have a full-time doorman? Fine, but what else does your home offer? Views, high ceilings, terraces, all of these features help distinguish your home from other cookie-cutter apartments and can lead to a higher selling rate when it's time to move out," Sussek says.

Keep in mind that when you're buying luxury real estate, you're buying a lifestyle. Private roof decks, swimming pools, common spaces with fitness centers, and maid service or hotel-style services distinguish luxury real estate, she says. "Even if there are other new condos built around the home you buy, these types of properties hold value," Sussek says.

Choose a High-End Vacation Rental Property

"A luxury vacation rental can provide a wealth of benefits including asset appreciation, tax deductions, business networking opportunities, and most importantly, personal enjoyment," RUHM's Fitzpatrick says. Choosing a location with a typically strong market is key, such as a ski resort town, Hawaii or a tropical island. "They are great for seasonal income and perform well during good financial markets. However, they may suffer more during a recession than the homes near major cities," he says.

Indeed, the luxury housing market experienced the strongest rebound from the housing crash in major cities, but resort areas are starting to follow suit, states a recent report from Christie's International Real Estate.

In addition to choosing the right city, investors should consider buying a property that will be attractive to vacationing families, Fitzpatrick says. "It will increase your occupancy rate and your ROI," he says.

Bruce Tobias, a 20-time top producing real estate agent with RE/MAX Sedona in Arizona, adds that high-profile tourist resort destinations are a sound choice, and investors should look for properties with the potential for long-term gains.

Complete a Custom Build

Building a new home from the ground up offers the highest profit margins but has a longer time frame, says SRE Investing's Belson, but a home where everything is new and has today's most desired styles and amenities is crucial in getting top dollar. He says his company is currently constructing a 25,000 square foot home in Bel Air, Calif. "We purchased the property for $8.7 million. The construction budget is $18 million. The projected sale price is $50 million. It's hard to top that as an investment," he says.

If you aren't building the home for yourself, be careful about how you customize it. You'll want to select a layout, amenities and finishes that will appeal to a broad segment of the luxury market to maximize your chances of selling quickly and for top dollar. Make sure the home is functional and welcoming and has the security and privacy features that high-end buyers want. But there's a fine line between creating that broad appeal and creating the uniqueness that luxury buyers crave.

"When something is not commoditized and it is desirable and there is demand, that's when you see prices really jump," One Queensridge Place's Char says. "If you look at a bottle of '82 Lafitte Rothschild, the price appreciation grows exponentially over a vintage that is less superior because of supply and demand. It's the same thing with luxury real estate. The more exclusive and harder to find, the more worthy of investment the home becomes."

The Bottom Line

Investing in luxury real estate can be more exciting than investing in securities thanks to its tangible aspect, and there are many ways to do it, from building a custom home to flipping a mansion to buying a vacation property . You can enjoy your luxury home as a resident, as a traveler or as a landlord or build luxury homes for others to enjoy. Before you buy, make sure you understand the features that create lasting value in this asset class to get the best return on your investment.

Alternative Investments Include Gold, Real Estate and Settlements

Posted: 03 Oct 2014 08:59 AM PDT

Added by Bryan Levy on October 3, 2014.
Saved under Bryan Levy, Business, Opinion

alternative investment

After a September that saw record lows for the cost of gold, the precious metal seems to be rebounding and gaining strength as an alternative investment. As global equities drop, gold futures have been rising slowly, which is good news for those who count on gold as an alternative investment. Along with gold, alternative investments like real estate and selling a settlement have also seen growth.

There are many reasons to own gold. Generally, the metal holds its value. While the specific price may fluctuate, gold has proven itself throughout time as a valued commodity, something that people will always be willing to buy and spend money on. In case of emergency, financial or otherwise, gold can be good to have around. During the Great Depression, gold prices soared while other investments took a dive. For those with an apocalyptic bent, gold can be a good item to have around in times of conflict between nations. If the world ends and money fails, someone will probably still want gold. At least, that is what is portrayed in the movies.

There are different ways to own gold. The simplest way is to purchase the physical metal. However, the more gold that is purchased, the higher the taxes and fees will be on the purchase. Having a small amount may be beneficial for a family trying to hedge against rising inflation, but large amounts may be better handled by buyers with more capital. Other ways include trading on gold futures or on stockpiles of gold traded on different exchanges. Another gold investment is the option to invest in mining companies that dig for gold. The drawback to this is that a mining company is not gold, and the mining company can fail, and the investment is worth nothing.

Gold is not the only popular alternative investment. Investors have been looking to things such as real estate, investment grade diamonds, and even baseball cards as a way to ensure savings in the future. Recently, the practice of selling a structured settlement as an investment has come into vogue. Using the proceeds from selling the settlement on a more traditional investment, or even an alternative investment like real estate can be a good way for an investor to pad and diversify their portfolios. Structured settlements can be less functional than they were initially set up to be, and selling one and using the proceeds for other investments can do much for a family's investments.

Investors should realize that alternative investments are alternative because they may not necessarily be as proven or stable as more traditional methods of investing. Gold prices do fluctuate. Housing markets can fail. The baseball card market can be flooded and nothing but the oldest and rarest cards are worth anything. The impetus behind these alternative investments is diversification. Focusing on one form of investment can lead to disaster. By spreading around investments, an investor can protect themselves against the failure of the stock market, or housing market, or anything.

When investing, it is integral that the investor takes time to carefully research what they will be investing in. By staying knowledgeable and involved in their holdings, they can be successful in the long run.

Opinion by Bryan Levy

Sources:
Forbes
Cash For Settlement Payments
Buy Gold Coins
Investopedia
Money News