Financing tips for investors interested in the US real estate market

This post is sponsored by one of our Trusted Partners, Lendai. To become a contributing editor, please contact our Real Estate Investor Solutions Specialist, David Maxwell at david@reincanada.com.

Investing in foreign markets is a big step in a real estate investor’s career. It is a landmark decision that means you’re already seeing success and are ready to manifest it in other opportune markets. However, you may not even be aware of some unique benefits to leveraging US investments with US financing until you make your first purchase. 

Below are the top four reasons foreign investors should finance their US real estate investments.

1. Triple your buying power & lower your risk by diversifying!

When taking out a loan, you use other people’s money to finance the investment property you are buying. Let’s say you have $100,000USD available to invest. If you accept all cash, you can only afford a property worth that amount. However, if you finance, you can buy a $300,000 home or diversify your investment by investing three $100,000 homes. All this can be done with the same equity that you started with!

The famous saying “don’t put all your eggs in one basket” applies perfectly here. By dividing your equity into different properties, you create multiple sources of income, thus diversifying and lowering your risk. If something happens, you still have other properties keeping the cash flow going and gaining appreciation.

2. Increase your cash-on-cash returns!

Financing your investment properties in the US can create a higher cash-on-cash return. What is a cash-on-cash return? It’s the rate of return used in real estate transactions that measure the cash income the investment property yields. 

Using the correct financing tools can lead to a higher cash-on-cash return. When leveraging your US property, if the debt service is less than the income generated from the property, then you will earn a higher cash-on-cash return. This is important as you are not using less money. Instead, you are making more money on every dollar that you spend.

For example, let’s compare a two-bedroom townhouse in Guelph, Ontario, to a two-bedroom townhouse in a suburban area out of Cleveland, Ohio. You will find a massive price difference. A lower market price means a lower amount of investment (or down payment), all without sacrificing rental income. And you guessed it right! A far superior ROI (return-on-investment) on that lower down payment. It is essential to run the numbers and analyze your potential deal, which leads us to number 3 below.  

3. Professional due diligence on your US investments!

What happens when you want to purchase a US real estate property for investment but cannot fly to the United States to see the property physically. Once you own it, are you able to visit it regularly to ensure all is in order and that any issues that arise are addressed promptly? Foreign investors depend heavily on professionals with boots on the ground to help them run their investments. 

Suppose you are working with the proper US lender. In that case, the loan process will include a review and assessment of all deal documents and thorough due diligence on the property and the supporting services required to secure the investment by experts. It is in the best interest of both the lender and the investor that the property performs well and is a good investment.

4. Protect yourself against inflation

Inflation is rising in the US and globally, which means home prices will probably continue to grow in upcoming years. However, the US offers 30-year fixed mortgages for almost any residential property. With mortgage rates at an all-time low, you can take advantage and lock in a favourable rate now for the next 30 years. 

By protecting yourself against inflation, you can get the best deal for your residential investment and earn more as rental rates continue to rise. 

Conclusion

The benefits of leveraging US investments with US financing are endless. When the lender is trustable and professional, you benefit from capital and professional advice. At Lendai, we work with the borrower to address any outstanding items raised and close the loan successfully!

Lendai enables foreign investors to grow and diversify your investment portfolio and lower your risk in a simple, fast, and efficient online process. It is not only about investing wisely; financing your properties can grow your portfolio and earn more money on every dollar you invest.