Takeaways:
- The world of global buyers has only grown over the past 10 years in spite of U.S. and global economic issues.
- Physically going to the international market you target is the most important step in global networking.
- You must learn how your foreign clients conduct business and what they need to know to do so in the U.S.
SAN FRANCISCO — With real estate moving on a global level and the increase of foreign investors, it isn’t difficult too see why this panel was a valuable one at Inman Connect.
Moderated by Joseph Rand, managing partner of Better Homes and Gardens Rand Realty, several experts joined to discuss the hot topic.
They included Mark McLaughlin, CEO of Pacific Union – Christie’s International Real Estate; Stephen Kotler, COO of Douglas Elliman Real Estate; and Olivia Decker, luxury real estate specialist of Bullock Sotheby’s International.
Here is recap of a few of the thought-provoking questions and answers from the panel’s conversation:
What impact are foreign buyers having on your local markets?
Mark McLaughlin: The San Francisco Bay Area is one of the key geographic focuses of non-U.S. buyers. For example, in Palo Alto, 34 percent of the properties purchased are by Chinese.
They are buying to hold the property as an investment, for their kids while in university and as additional homes they have around the world.
Because of that, we launched a new division of our company last year — a Chinese concierge site with a Mandarin-speaking staff.
Stephen Kotler: The world of global buyers has only grown over the past 10 years in spite of U.S. and global economic issues. New York City has benefited from this market in dramatic ways compared the rest of the country.
Much of the new real estate development opportunities we are connected to are now Chinese investment groups. They are creating these new projects for the benefit of their families, long-term investments, and for their kids who will be going to our local schools and universities.
Olivia Decker: In recent years, the Chinese have been the largest part of my international business. However, we are in a global world, and it is not just about Chinese money coming into our local markets.
My biggest client has purchased 26 properties from me, and he is from Mexico City.
How I have developed the international division of my real estate practiced is by networking with key Realtors in target international cities, identifying key architects who are designing luxury properties, networking with professionals who serve global clients and actually being present where the wealthy are: Monaco Yacht Show, Cannes Film Festival, art auctions and more.
You must put yourself in opportunity’s way.
What is your company doing to identify international real estate channels?
Stephen Kotler: Our company began four years ago by searching for an international real estate firm who shared our corporate values and culture.
We are now partners with Knight Frank, based out of London with 412 offices worldwide. Our partnership with them has far exceeded our expectations. This was required because over 50 percent of the investors in NYC real estate are based outside the U.S.
Mark McLaughlin: The most important first step is to physically go to the global markets you are targeting. Our largest targeted country is China. So, in the fall of 2014 our leadership team went to China.
Because of that trip and subsequent others, we built a real estate portal in Beijing for all of our company’s listings. It also required us to set up a new division of our company, a Chinese concierge service center with only a Mandarin-speaking team.
What have been some of your biggest challenges while developing an international division of your firms?
Mark McLaughlin: Learning the attributes of how your target foreign market conducts business — in our case, the Chinese. For example, their understanding of the timelines connected to a real estate escrow calendar are generally nonexistent.
So, there is a very large learning curve and educational opportunity required when entering into a real estate transaction with them.
Stephen Kotler: Trust is the first place to start when dealing with foreign buyers and investors. You have to have the ability to know and understand all aspects of the people you are serving in the international real estate markets.
And it starts with the basics that we take for granted: understanding the purchase process, the need for a bank, the mechanics of transferring funds, title and escrow companies, the role of attorneys in the transaction.
Olivia Decker: I am Chinese, so it is actually very easy for me to bridge the gap into this market. I already have the trust built because of my heritage and reputation.
And, like Mark and Stephen had said, you need to be with them in their local community: Hong Kong, Paris, Geneva, Mexico City, etc. You will not be able to succeed by just sitting in your local real estate office.
And, once they trust you, the remainder of the process is just explaining the details of the transaction.
What have been some of your biggest mistakes as you have moved into global markets?
Mark McLaughlin: Hiring a consultant who promised he was able to turn on the faucet of wealthy Chinese buyers. The reality is you must be where they are in China.
Stephen Kotler: We had assumed that the foreign buyers were always buying the mega properties. The average price point for our foreign buyers is $2 million.
So, they are rarely the “whales.” So, we are now focusing on foreign developers who are building the product that average foreign buyer is looking for.
Olivia Decker: Focusing only on the high-end foreign buyer. The vast majority are buying second homes, vacation homes, and homes for their kids while they attend schools and universities in the U.S.
What are the design features that international buyers are looking for?
Olivia Decker: They want new. They do not want to fix something up. Plus, often they want to buy the entire furniture and furnishings of the home as part of the purchase. They do not want to fix a property up. It must be turnkey.
Stephen Kotler: We even had one foreign buyer who wanted to purchase the housekeeper as part of the real estate purchase. We had to explain that it was not allowed in the U.S. to purchase anyone.
We are also seeing more purchases of land for development. You must do your homework on who you are serving.
Mark McLaughlin: In the San Francisco Bay Area we are noticing a wide range of real estate purchases from new condo (and) home projects all the way to the mega mansions in Pacific Heights.
If you have extended your reach beyond the U.S. borders, please share in the comments section below about your trials and successes.
Jim Walberg is a real estate agent with Pacific Union — Christie’s International.