How To Invest In The US Real Estate Market Without Buying Properties

How To Invest In US Real Estate Market Without Buying Property But US REITs - Learn How Foreigns Make Money Investing in Property Stocks 2017 2018 2019 2020

How To Invest In US Real Estate Market

This guide is focused on helping retail investors, who would love to earn a steady income from real estate market but do not have the capital to buy properties or want the hassle of managing tenants, invest in US real estate market without buying a physical home or property abroad.

Housing is one the biggest driver of wealth in the US. A lot of investors who took advantage of the real estate crash in America are currently reaping a significant return on their purchases, over 300% in more than 6 years, as home prices have rebounded and risen above its pre-market crisis level. As prices get higher monthly, it is even more difficult for first-time investors with less cash to enter the market. In this article, I outlined an alternative window you can explore:

Let's quickly do a brief on the state of housing marketing in the US with opportunities for investors that don't have millions to buy homes or invest in property but reap from the booming housing market.

The US Home Market Report:

In 2016, CoreLogic® (NYSE: CLGX) (a leading global property information, analytics and data-enabled solutions provider) released its CoreLogic Home Price Index for the year which shows that home prices across major US cities are up.
As culled from GlobalPropertyGuide report:  "All 20 major U.S. cities experienced relatively strong house price hikes, with Portland posting the highest increase of 12.32% during the year to April 2016, according to Standard and Poors. It was followed by Seattle (10.67%), Denver (9.45%), Dallas (8.65%), San Francisco (7.77%), Tampa (7.77%), Atlanta (6.51%), Miami (6.44%), and San Diego (6.34%)".
The average sales price of a new home in the US was also up by 1% last year, to $359, 400, according to US Census Bureau.  Demand is rising, new and existing home sales are up while inventories and vacancies are down, because no home occupier wants to move or pay higher mortgage rate on new homes finance.
Besides, all indices that measure the strength of US real estate market (the U.S Homebuilders Sentiment Index, Wells Fargo Housing Market Index,  and Construction activity) show that housing markets are attracting a lot of buyers' interest, while new home turnover is booming alongside.

Why is US Housing Market Booming?

The reason is not far-fetched, the mortgage rate (cost of financing home purchases) is down all year low despite fed rate hike, a factor that has continued to fuel demand for new and existing home. Average interest rate for mortgages was lower in 2016 at 3-4% per annum despite Fed Funds target rate increase in December 2016 to 0.75% after being held at 0%-0.25% for seven years.
On Bankrate website, here are average mortgage finance rates in the US as at 6th, January 2017.


ProductRateChangeLast week
30 year fixed refinance4.12% 0.084.20%
15 year fixed refinance3.23% 0.123.35%
10 year fixed refinance3.13% 0.143.27%

Low-Cost Opportunities In US Housing Market For Retail Investors:

Having shared information on the current state of US housing market and why home demand and prices are surging, you and I know, based on the average home price of $290,400, that buying property in the market is an investment exclusive to multi-billion dollar real estate investment firms. Do you know how much $290,400 is in Naira, using the current CBN exchange rate of N314.75/$1? that's like N100,000,000 as at 6/1/2017.
You may be wondering how a retail investor can tap into the opportunities in US real estate or housing market right now without buying physical homes or properties.

Here's how to invest in US  real estate market without buying physical homes or properties but through Real Estate Investment Trust (REIT):

In 2008 global market crisis, the real estate market recorded massive home sell off which dragged prices down by more than 15% in the same year. As sellers found it difficult to raise cash, smart real estate investors began to mop up foreclosures or homes at a bottom prices.  The average price of a home in the US as at then was $232,000 (according to a report). Now, the price has spiked by 54.74% to $359,000 in 2016 (source) which has not only made these investors enjoy capital appreciation but reap attractive rental income year on year.
You know what? these investors are REITs who now own both residential and commercial real estate that generate consistent profit from lease contracts and rental income paid by tenants. By law, real estate investment trust are mandated to pay out 90% of taxable income in form of dividend to shareholders which make your cash flow predictable.

The big concern now for you as a retail investor is how to be a shareholder in a growing small cap REITs.

You can spot top performing companies by scanning through REIT stocks that have been paying dividend consistently (without borrowing from an external source) during and after the recession.
This article on Forbes and Fool will help you understand how to find the best diversified real estate investment trust stocks to buy now and enjoy a consistent and predictable profit.

In 2016, here the top 10 performing REITs you can check out:

  1. Essex Property Trust (ESS)
  2. Simon Property Group (SPG)
  3. Store Capital Corp (STOR)
  4. General Growth Properties (GGP)
  5. Public Storage (PSA)
  6. Extra Space Storage (EXR)
  7. Hannon Armstrong Infrastructure Capital (HASI)
  8. Pebble Brook Hotel Trust (PEB)
  9. Cyrus One Inc. (CONE)
  10. CubeSmart (CUBE)
While these REITs stocks delivered impressive gain and rewarded investors in 2016, you can also tell us how to invest in US real estate market via REITs.