Why consider investing in the USA? Reason #1: Diversity of risk.
The greenback is the worlds default currency. In good economic times investment monies pour into the US. It is generally considered a global safe haven.
So now with the unrest we see politically around the world and the continuing financial pressure you could argue it makes even more sense to consider this market. The strength of the US dollar is generally a disincentive to invest there as you lose too much fire power in the conversion. But in the last 4 years, and continuing right now we see the US dollar at historic lows whilst the NZ and OZ currencies enjoy significant gains.
Now this cannot last. It is simply bad economics to assume these smaller currencies will stay sky high. It would cripple our economy if things don’t return to historic norms. In fact we know that our governments will intervene to force the currencies down to avoid too much damage to our export sectors.
So by investing in such a large, robust economy now you have a very high likelihood of significant currency gains over time. Not just in the assets purchased but in the actual power of every dollar earned for the life of the asset.
At the time we published this article the NZ dollar was 83 US cents. I remember not that long ago visiting Los Angeles and the NZ dollar was 43 US cents.
6 cents is probably about right but right now things are not right, we are strong beyond strong and therefore should be taking advantage of what that strength is offering us.
Perhaps even more importantly by investing in a city like Memphis you will also enjoy significant cash flow in US dollars for life.
And let’s not even get into the discounts we are buying at creating equity without any growth!
The US government is far from perfect, but look around at the other choices globally.
Of course you can invest domestically and we would recommend you do, but to diversify and minimize risk it is smart to have a second geographic location to invest in real estate.
The US has a huge domestic economy and a relatively sophisticated and stable government.
To get reasonable returns with a realistic opportunity of growth and very muted negatives there really is no better alternative.
And diversity is important. By picking a market like Memphis you are entering another economy with different rules and pressures but enjoying the same underlying fundamentals. Everybody needs somewhere to live. The market for tenants and resale is enormous and it is likely that the US economy will be moving to a different rhythm than your domestic economy.
If you are a typical investor, rather than speculator then your basic strategy should be to hold assets until you die so the economic cycles are less important but we believe you should make sure you maximize the dollars in your jeans for the life of the asset. And that is where the yields in Memphis become so attractive.
You can take a single $500,000 NZ home which would pay you maybe $2000 a month in rent and turn that into TEN $50,000 homes that will pay you $7000 a month in rent.
To us that is not rocket science it is just great news for any investor, not to mention their children who can inherit these assets and be well on their way to financial freedom thanks to you and I getting the ball rolling.