Russian Investors Buying Chicago Cash Flow Properties
International sanctions combined with lower global demand for crude oil and natural gas have had an adverse effect on the Russian economy forcing the ruble to record lows.
Some have speculated that policies have been created to keep the ruble artificially weak, as a way to stimulate economic growth. As the weakened currency continues to decline, Russian investors have sought to invest in real estate as a way to create growth and stability for their hard-earned money.
London was originally considered a hot spot for foreign investment, but a new trend has emerged where Russian investors are looking to the United States and Chicago, Illinois, specifically, as a way to convert their rubles away from the euro, focusing -se in the US Dollar, instead.
Russian citizens have been looking for ways to preserve their wealth and invest in American real estate are being recommended by brokers from Moscow to Donetsk.
The Central Bank of the Russian Federation has made six different interest rate hikes, which have seen its currency devalued by almost 300%. Their goal is to slow the fall of the ruble, but what they are doing is causing people to rush to cities like Chicago for cash flow opportunities.
Russian investors have found a sense of comfort and success working with US investment firms that have a strong team of people on the ground that provide turnkey real estate investment for cash flow income.
Companies like Retire On Income have provided these investors with properties that are already professionally renovated, leased and managed. This removes much of the risk associated with remote investing.
The Russian ruble’s significant decline is something economics professors and finance analysts will be studying for decades. There are several factors that are causing this decline. Oil and natural gas are Russia’s two biggest exports, and after its aggression in Crimea and Ukraine, the United States and the European Union have imposed economic sanctions on Vladimir Putin’s government, preventing them from selling the its exports to most of the free world. They still have several international clients, but not being able to capitalize on the European markets has had big implications.
Another important factor to consider is that the EU currency is also going through a slump. Russian investors began buying real estate in London, Paris, Berlin and other major European cities. Now that both the ruble and the EU are falling, we see Russians selling their European portfolios and redistributing their wealth to key markets like Chicago, Illinois.
From a financial perspective, the US dollar is a much stronger currency than the euro, Russian ruble, Chinese yuan or Japanese yen. It makes smart strategic sense to invest in American opportunities.
Recently, the European Union has approved a resolution to initiate quantitative easing in its financial markets through the central banking mechanism established by all member countries.
The ECB (European Central Bank) has set aside $60 billion to buy short-term government bonds in its bid to lower interest rates. The United States has just completed a 4-year program of quantitative easing initiatives that have helped strengthen the economy, following the subprime mortgage crisis (2007 – 2009). The reason for the economic decline in Europe is centered on the governments of Portugal, Ireland, Italy, Greece and Spain.
In the short term, Greece is on the hot seat as they struggle to pay back the billions of dollars the ECB has lent them since joining the EU. What is not discussed much by media pundits is the fact that when Greece was considering EU inclusion, its accounting techniques and reporting mechanisms were flawed and the real figures were swept under the carpet. Once Greece became a member, EU leaders discovered how far the Greek economy was and how difficult it would be to make them sustainable.
Fast forward to 2015 and you have Alexis Tsipras leading the far-left party Syriza to major victory in the national elections. Campaigning on an anti-austerity platform, Greece is on a major collision course with Berlin and Brussels. If Greece were to leave the EU, it would have huge ramifications on the economy and cause the other “hot” countries to face potential financial collapse.
A recovery in the EU is not expected for many years, and nervous Russian investors are selling their properties and looking to the United States to stabilize their future.
As financial uncertainty continues to play out globally, more foreign investment is going toward growth in America. Alan Siebenaler is a well-respected real estate investment broker in Chicago, and when asked about factors Russian investors might consider when moving their retirement income, he told me several things that make a city to be “investor friendly”.
Some important factors that can be used to determine a market that has investment potential include:
* Real estate prices compared to rental income (high cash flow possibilities)
* Low unemployment
* Diversity in employment / Job growth (multiple industries)
* Is the population growing or staying stagnant?
* Is the cost of living low, compared to national standards?
* What is the relationship between rental rates and purchase prices? (High Rents vs. Lower Cost)
* There is access to services that improve quality of life (eg, arts, entertainment, parks)
* How is the crime rate?
* Are there natural resources or sources of cash being injected into the reference economy?
Keep in mind that analyzing these factors will provide you with a better education about the market and help you make a more informed decision about whether investing in real estate in Chicago (or any other city) is right for you.
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