The Benefits of Owning Land as an International Investor

Opportunities for real estate investment for foreigners is wide and varied in the United States.  It doesn’t matter where you’re from and what currency you’d be using to purchase a property, there is land waiting for you!

You’ve probably heard of the increasing number of foreign real estate investments in the United States.  This is not surprising.  With the troubles that the real estate investment market is facing in the United States, greater opportunities in real estate investment have opened for foreign investors.

With the dollar’s value at all-time lows, foreign investors are finding real estate bargains all over the United States.  There are no shortages of deals in this market.  The United States real estate has become a fairly attractive long-term investment for foreign investors.

There are many reasons for foreigners to invest in land in the US.  Aside from the fact that the floating exchange rate has given foreign buyers a lot of leverage over the bargaining table, the financial market is a pretty good reason why you should invest in the US real estate.

Despite the devaluation of the US dollar and the high amount of foreclosures, the real estate market remains stable due to foreign investors’ capital appreciation.  Domestic real estate buyers may not necessarily share the same opinion, but the market has remained strong for foreign real estate buyers.  This may be largely credited to the fact that there is minimal risk for them.

There are many investments for foreign investors, but the safest is investing your money in real properties including land.  This is another good reason aside from the fact that you can create a large ROI particularly with widespread property foreclosures and seemingly continuous US dollar devaluation.

The US government supports foreign investments and has formulated various tax breaks to encourage foreign investment of real estate.   Foreign real estate investment in the United States is open to everyone.  As long as you can afford to buy the property or at least comply with the mortgage requirements and payments, you can secure for yourself a wonderful piece of land in the United States.  Again, with the current economic situation of the United States, this is the perfect chance for you to make an investment.

Another great benefit that you can take advantage of is the availability of mortgage financing.  Lenders have opened their doors to foreign investors who are looking into purchasing a property.  This means, you don’t have to actually deplete your bank account and you can secure a mortgage and gradually pay it off.

Looking to Invest in Real Estate? Think land!

Many investors, especially first time investors, choose to invest in real estate over stocks, bonds, mutual funds or other types of investments.  Real estate is so popular for investment purposes due to tax breaks, its being a tangible asset, it experiences less depreciation, and the real estate market is less volatile than the stock market, among many reasons.

Within real estate there can be many investment choices.  You can purchase a home to rehab and sell, a home to produce rental income, commercial property or land.  Land is the wisest of investment choices within the real estate world for a variety of reasons.  In many instances vacant land for sale is less expensive to purchase than land with an existing home.  The land can be used for many future uses including building, development, resale, or personal recreation.  Also, the depreciation on land value is much smaller than the deprecation an investor would experience purchasing a home.

Within the Cape Coral and Southwest Florida market we are seeing a much higher ROI on land over land with existing homes.  Parcels within Cape Coral with Gulf of Mexico access purchased in 2010 for $20,000 are now being valued by the Lee County Property Appraiser and sold for nearly $50,000.  Quite a return in three short years!

Determining your ROI on Investment Land Purchases

When you look for ways to put your money to work, real estate may catch your eye as a source of potentially big profits.  Whether you buy a home to live in or purchase undeveloped land, calculate your return on investment.  ROI can include rents paid by tenants on houses, duplexes, apartment buildings and office buildings.  ROI also encompasses appreciation in the value of property, including a home, commercial buildings and unimproved land.

ROI with Leverage

If you put $20,000 down on a property worth $140,000, your investment is $20,000.  Don’t make the mistake of counting the full amount as the value as your investment.  Real estate investment allows you to leverage your money.  That is, you control a much larger value by putting down a smaller percentage on the purchase.  When you pay a down payment on a home, land or commercial real estate, you receive all of the ROI from that property.  A comparable investment in stocks, for example, might produce a return of 15 percent.  For a $20,000 investment, 15 percent is $3,000.  If your property worth $140,000 appreciates 15 percent, the increase in value is $21,000.   Calculate your ROI by dividing your gain by your investment and multiply by 100.  In this case, 21,000 divided by 20,000 times 100 shows that your leveraged investment produced a 105 percent ROI.

ROI Using Capital Gains

Capital gains come from an increase in the property value.  Even if you don’t sell a property, you can estimate its current value vs. the original value.  Use comparable properties in the local area for your estimate.  If you prefer, you can hire a professional appraiser.  Capital gains apply to any type of real estate, including a home, unimproved land or buildings you rent to tenants.  To calculate ROI using capital gains, determine how much the property has appreciated in value.  For example, if you invested $20,000 in a property and it went up $10,000 in value, divide 10,000 by 20,000 and multiply by 100 and you find you made a 50 percent ROI.

Total ROI

If you invest in a property that is leveraged (you make a down payment but get all the capital gains from the full value), produces income and incurs expenses, you need to combine all of your factors into one formula: ROI equals capital gains plus income, minus expenses, divided by your investment.  For example, if you had $10,000 in capital gains plus $5,000 in income, that totals $15,000. Subtract expenses of $2,500 and your net figure is 12,500.  Divide that by an original investment figure of $20,000 and multiply by 100, and you find that you made 62.5 percent ROI in this example!