Saturday, April 21, 2007

Florida Mortgage | Foreign National Homebuyers: Europe has come calling!

Wow... the Sun Sentinel has finally caught wind of the Europeans that are buying en masse in South and Central Florida these days!

The article speaks of why Western and Northern Europeans are growing fonder of the area for both the lifestyle and climate.

They printed this map showing that most of the European Buyers are from the UK.

There are also many from Denmark and Holland.

Right now, Mortgages for Foreign Nationals are at an all time high. It is easier now than it has been in years to get financing at attractive rates.

That was actually a point missed by the journalists. Loan Programs are available from far more banks and lenders. Also there are new options in foreign exchange that are making the conversion of funds that much quicker and easier.

Some of the other factors that are influencing the current investment boom is the strong Euro. Based on the Dollar, the Euro is dominant... and the British Sterling is even stronger.

So what does this mean to Europeans? It means they're making much more on their investments than US citizens.

How? Foreign Exchange Rate Hedging...

The Dollar has long been an international standard in currency. Even people with stronger currency have a tendency to sock some away in US currency. It was actually causing a panic a few years ago when the US believed that so many bills were out of circulation and sitting in foreign floorboards and safes that we would eventually run out ourselves.

  • The Dollar has also been volatile - as volatile as our politics and financial markets.

  • As the dollar has dipped - much like a stock, foreign investors have bought the dollar.

  • As the dollar has recovered - the investors would sell the dollar back and take the profits.

  • So... while the dollar is LOW, investors are buying up Dollars with their Euros.

Then they buy a property here in the US.

Over time, the property itself increases in value. The dollar also becomes stronger over time as we recover economically.

Then when the foreign investor sells the property, they make a profit in appreciation. They then take the Dollars and exchange them for Euros and make a profit on the appreciated Dollar!

So if they buy the US Dollar and the House.

  • They put $100,000 down on a $500,000 house (20%).

  • The House appreciates 15% over 5 years to $575,000.

  • and the Dollar gains 5%, to $105,000 (equity CAN appreciate in this instance).

  • The combined profit is $80,000 on $100,000 invested or 80% in 5 years!

  • subtract out the debt service and depreciation to get a true IRR

How's that for some fancy European Math!

So... who wants to start marketing overseas with me??

More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

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