Real Estate Investment Tax Saving Schemes And Housing Trends
The purchase of US real estate by foreign investors is increasing year by year. The amount of investment from Canada is the first, and the amount of investment from is also the seventh (source: National real estate investor).
Different ways of thinking about real estate
The biggest merit is that it has adopted global income taxation, so “accelerated depreciation” can be applied to overseas real estate.
If the useful life of a used asset is the useful life of an asset that has passed the entire legal useful life, the useful life at accelerated depreciation can be the number of years equivalent to 20% of the helpful legal life.
Similar tax savings are possible for wooden, real estate that is 22 years old or older, but there is a difference in thinking about used assets in the United States. This is the so-called difference in values.
It is said that wooden real estate properties over 22 years old are of little value.
The way of thinking about housing tends to be “the value of the building will eventually disappear”, “no maintenance”, and “the value will decrease over the years.”
In Europe and the United States, the idea is that the value of a building should be maintained, and there is a tendency for maintenance to be solid and for the value to increase over the years.
The difference is thought to be a factor in the increase in real estate investment in US used assets.
Current US real estate market conditions
Workers’ incomes are rising across the United States. Employment expansion is evoking the rental jda housing scheme. Rents are expected to rise 3.7%, boosting continued demand for housing and job extraction or rent increases. Housing supply growth is expected to remain stable but continues to rise.
In addition, there is a tendency for the demand for apartments to increase due to the rise in the number of younger generations in their 20s and 30s, as well as apartments that benefit from the “aging of many children” It is also a factor that it is difficult to borrow money and there is a tendency for the consciousness to change from owner-occupied to rented.
What about the leverage on US loans? It is certain that using a loan can reduce investment and increase investment efficiency, but in order to procure a loan for foreigners from a local financial institution in the United States, you need to pay sufficient attention to various procedures and costs.
What is the risk of US real estate investment?
It is said that the loan ratio of US local financial institutions is 60% of the maximum property price, and the interest rate is about 4.5 to 5% as of December 2015. In addition, it may be necessary for the borrower to travel to the United States to open an account, so it is necessary to confirm with the financial institution.
It is also important to be aware that there is a risk of exchange rate fluctuations when investing in the United States.
There are certainly other operational risks, liquidity risks, disaster risks, and country risks.
Operating risks are the same for real estate investment, but are related to vacancy risk, risk due to rent delinquency, risk due to rent decline, risk related to real estate owner liability, repair/maintenance costs, etc., and tenant building usage. Risks, risks related to increased real estate operating costs, and risks associated with real estate management companies.
In this regard, risk countermeasures can be taken by selecting excellent PMs (property managers), managing PM companies by asset managers, increasing value through appropriate maintenance of properties, and selecting areas with high rental demand. Therefore, choosing a real estate investment company is probably the first idea as an investor.
For US real estate, risk control and diversification are the greatest investors’ needs and benefits.
