I was interviewing Boston-area broker Tom Truong for an article spotlighting the Boston market for the August issue of RealtyTrac’s Housing News Report when he made this comment that took me a bit by surprise.
“We’re putting (agents) on a plane, sending them over to Asia … to go to trade seminars promoting real estate investments here in Massachusetts,” said Truong of real estate agents who are part of the four RealtyDirect franchises where he is broker/owner in and around the Boston metro area. “We’re also meeting with them here with their delegations when they come to visit.”
I knew foreign investors, particularly those from Asia, were heavy buyers in certain U.S. real estate markets, but I hadn’t realized that their business was such a significant part of some local brokers’ business that those brokers would invest in sending agents overseas to court those investors.
“About 25 to 30 percent of my dollar volume of transactions is cash buyers from Asia,” Truong told me, adding the percentage is up from about 10 to 15 percent of his transaction dollar volume in 2013. “They are buying million dollar condominiums that would be lucky to get a 2 percent cap rate … but it’s a much safer place for them to move their money.”
And it became clear to me that Truong’s experience is not completely unique when I talked to another Boston-area broker, Leland DiMeco, broker owner of Boston Green Realty, who also estimated about 40 percent of his business this year is coming from foreign investors.
“And they’re cash buyers too,” he added, noting that many foreign investors are buying multiple properties. “I sold one guy three buildings in one year through RealtyTrac (leads).”
DiMeco said most of his foreign buyers are from China, and many are looking to buy three- to four-unit properties in the Boston area. The strong demand from those foreign buyers for all types of properties is pushing out some of the other buyers DiMeco works with.
“We are definitely seeing a lot of first-time homebuyers trying to get in,” he said. “But they are getting frustrated because of these bidding wars. … I had one guy who lost four places already.”
DiMeco said he’s even advised some buyers not to go any higher on their offers, recalling some situations where his clients bid tens of thousands of dollars over the asking price and were still not among the top five bidders.
“I want to make sure my client is making a solid investment,” he said.
Most of the buyers DiMeco works with are investors, or become investors after seeing the opportunity in the Boston market, he said, recalling a recent buyer who came to him through RealtyTrac wanting to buy a bank-owned property as his first home.
“He wound up buying a three-bedroom condo in Brookline that needed rehab,” he said, noting the property was purchased for $650,000 but will likely sell at $750,000 to $800,000 after rehab. “So he’s going to make some good money on it.”