Erika Morphy at GlobeSt.com writes, “As Q3’s numbers come in for the District and surrounding suburbs one trend is standing out — foreign investors are back. That is one of the main findings by CBRE as it analyzes activity in the region.”
Manhattan was the largest recipient of foreign investment, followed by the DC area. Los Angeles was third, Boston was fourth and Dallas was fifth. Last year DC was in the fifth spot
Why? The reason for it, Revathi Greenwood, CBRE Director of Research and Analysis for the Washington/Baltimore attributes the jump from #5 to #2 to investors deciding that the DC area has successfully undergone the “restructuring” it needed and has come out stronger.
But not strong enough for foreign investors to stray too far from their preference for trophy assets. It is understandable, Greenwood said, as these properties tend to have far lower vacancy rates than the District as a whole.
So if Foreigners are going after the trophy assets, doesn’t that make competition stiffer for the less than trophy assets? It would seem to us that almost all investment properties get a ratcheting up in demand.
As we wrote here in the past, quoting Mark Ferguson, “Investing in real estate is a fantastic way to retire early or increase your income. There are many ways to invest in real estate, but personally, I think long-term rental properties are the best real estate investment. Long-term rental properties take little management, give great returns and produce cash flow for years and years into the future. Flipping, wholesaling and most types of real estate investing are more like a job than investing; take more time, more money and once you stop working, you stop making money. Rental properties have provided me with over 20 percent cash on cash returns and that does not even factor into account equity pay down and appreciation.” I would say those are decent returns.
“Decent return” is a subjective term. It should be a positive return after taxes and inflation and most important, it should compensate you for the risk you take. Since real estate is illiquid, your return on investment (ROI) should be higher than stocks, bonds, CDs. ROI for some includes appreciation. For a good rental property in the Washington DC area, we prefer cash-on-cash return as the most important calculation for real estate investors. This approach looks at every dollar invested and determines the percentage yield return on an equity cash investment. This leads us to “cash flow” where the cash inflows during a period are higher than the cash outflows during the same period.
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