Foreign Investment in U.S. Housing
Landmines versus gold mines
I have been the subject of many articles in foreign real estate industry trade magazines that have emphasized our refined financing program and implemented in 2013. And why not? After a while, most foreign investors give up on financing because US creditor will not touch them unless the garbage loan is NOT worth the peanut hill. However, we have set new standards and want to update foreign investment trust in U.S. real estate.
In almost all of these articles, I certify that “Atlas is the only company that lends internationally-borrowed 30-year loans to foreign investment in U.S. real estate”; So let’s check what I mean by making this claim. I believe this is an important dialogue to have because I have seen some predatory loan products out there and have heard more than a few horror stories from foreign investors who either do not understand what they are up against, or do understand and choose to roll over. dice. Let’s take a look and get a good idea of the loan products available to overseas investors and where these products might be detrimental to the investment benchmarks expected by investors. Foreign Investment in U.S. Housing
LANDMINE – ARM 3/1 and 5/1
I talked to a small group of individual investors from Australia for months who have all found themselves in a very bad state. They all get financing through U.S. lenders. 3 years ago. They were given a rate of 8.25% on a 30-year note and they were satisfied with the rate of return based on the rate and record requirements. However, every year debt services increase and yields fall. Actually, some properties are actually in a negative cash flow situation. That’s because they do not understand the loan products they are entering because the earliest details are buried deep inside the 40-page closing document package. They all sign a contract with ARM 3/1, or Adjustable Rate Mortgage and do not know what they are dealing with.
ARM and interest rate adjustments are equivalent to a drive-by colonoscopy. Where rates are re-adjusted, EVERY year for THREE years (or FIVE years if you are in position 5/1) always go to UP and never go down. After all, does anyone think that banks go into speculative long-term loans without decks stacked as they see fit? There is little known tool that banks use LIBOR, or the London Inter Bank Offer Rate. These are the interest rates that some of the world’s leading banks collect for short-term loans. This serves as a first step to calculate the interest rates of various loans around the world and always go up. “Existing Power” can take advantage of any industry change, anywhere on the planet, to adjust LIBOR whether it is a downward change in the Venezuelan Sheet Sheet industry or Guano industry in the Galapagos. Either way, if you are in ARM you are in trouble unless you have LOT of results and are able to lose most of it. Why take a risk with your foreign investment in the U.S. real estate? Foreign Investment in U.S. Housing
LANDMINE- Baloon Payments
I want to paint a picture. Let’s pretend that you went to the store to pick up a gallon of milk at the end of the day. You go to the counter and talk to the owner, and he says that the milk costs $ 4.00. Now you have $ 4.00 in your pocket or purse but the owner offers an interesting proposal. He said “Let’s do this – give me $ 1.00 today.Then give me a nickel every month for the next three years.And then at the end of three years gave me $ 3.00” Foreign Investment in U.S. Housing
I can not think of a single person who would buy a gallon of milk in such circumstances, but believe it or not there is a real estate investor who does this every day with real estate which, last time I checked, is much more expensive than a gallon of milk. It’s crazy (or at least in my opinion) but for some reason investors use this tool for long-term investment properties and are happy to get the “loan”.
Balloon loans usually require a decent down payment and even consider this, amortized at 20-30 years which means that for the loan term you will pay interest on the loan amount and very little if any principal. At the end of the period when the balloon goes up you will pay off the entire loan or damned nearby. Better to pay an entire gallon of milk than to use this worthless loan product! Keep an eye on these balloon payments if you think of foreign investment in U.S. real estate