When investing in real estate, one normally looks to their own country and market first. 

Over the past few years, however, overseas real estate investment has attracted attention, and real estate in the United States has gained popularity as a highly transparent market.

In this article, we will introduce the basic knowledge that you want to know about when investing in U.S. real estate.

This section also explains the advantages and cautionary notes of investing.

What are the characteristics of US Real Estate Investing and how is it different from Japanese real estate?

To understand real estate investment in the United States one first needs to know and understand the difference between the US and domestic real estate investment.

Below, we introduce the basic concepts and differences about U.S. real estate investing.

Demand for housing is extremely high due to the increasing population

As Japan's birthrate is gradually declining and its population is declining year by year, there are some risks associated with investing in real estate domestically.

However, because the United States is one of those rare countries with a developed economy but with an increasing population, the risk is lower than in Japan.

Demand for used properties is higher than for newly built properties

According to a survey by the Ministry of Internal Affairs and Communications, "new construction" and "rebuilding" of owner-occupied homes account for more than 90% of the total of new construction in Japan.

On the other hand, in the U.S. about 80% of people who buy houses purchase used properties.

Even if the building is older, it is regarded as a high-value asset depending on the location and previous repairs.

There is no concept of rebuilding from scrap like  in Japan, so it is also characterized by a low supply of new buildings.

Areas with good schools and low crime are more popular than locales near the station

In Japan, with its excellent public transportation system, there is strong demand for properties near stations to be extremely high.

However, in the U.S., a car society that does not use trains very often, properties located in good school districts with low crime is more popular than properties near train stations.

Unlike Japan, one of the chief characteristics of the United States is that security changes greatly depending on the area in which you live, rather than in Japan.

As a result, there are many cautious views on the security of residential areas.

What are the 4 Benefits of investing in US Real Estate?

This section explains the merits of investing in US real estate.

Housing demand is expected to expand due to population growth and the impact of Covid-19.

In the U.S., despite the fact that population growth has been temporarily stagnant in recent years due to the decline in the birth rate and the increase in the number of deaths due to the impact of the pandemic, it is rare among developed countries that the population is on the rise, partly due to the acceptance of a large number of immigrants.

In addition, due to the impact of Covid 19, the number of people who work remotely has increased, so more people are purchasing houses in the suburbs.

As a result, the environment is ideal for real estate investment in the U.S. due to rising home values and expanding rental demand.

Real estate values do not decline because it is easy to sell properties with older buildings

The United States is a country with a developed property market for older, pre-owned homes. 

As a result, depending on the area and the condition of the property,  it is easy to sell even older homes because the value of the property doesn't decline. This is a major attraction and merit of the US real estate market. 

Americans typically relocate according to their lifestyles at the time, so the real estate market is more liquid than in Japan.

Demand for rental properties is also rising as the number of young people who are highly oriented toward rental properties is increasing.

Currency Diversification

Diversification is one of the advantages of U.S. real estate investment.

If one had invested solely in Japanese real estate and stocks, we would be directly exposed to the risk of fluctuations in the Japanese yen exchange rate.

This can be avoided by investing in U.S. real estate.

It is also advantageous as the US dollar is a highly reliable currency. 

Low risk for foreign investors

While some foreign countries have established regulations on foreign investors, there are no such regulations in the United States.

Therefore, even foreigners may purchase land and properties which is a major advantage.

In addition, U.S. real estate investment is considered low risk for the following reasons:

●The US dollar is the key currency of the world

●Due to the large number of used properties, the risk of non-completion is low

●Transaction transparency is high because of the third party "escrow" system

For this reason, it can be said that real estate investing in the United States is easy even for beginner investors who live outside the US.

What are the disadvantages and points to consider when investing in US Real Estate

This section introduces the points that you should be aware of when investing in U.S. real estate.

Need to research the surrounding area carefully

Compared to Japan, the United States has many areas with poor security. Therefore, when investing in real estate, it is necessary to properly research the area.

The first point to check is whether the number of crimes is small. Attention should be paid to properties in areas with a high crime rate, as they are susceptible to damage to vacant sites and rent delinquency, even if yields are good.

It is also a key point to check whether the living environment is favored by Americans.

●Two or more garages

●Easy access to major roads

●The lawn and garden are well maintained

●There is a bathroom with shower in the master bedroom

●There are more than two shower rooms at home

Having a shower room installed in the master bed room is a fairly important point in the US. 

It is important to have a proper understanding of American culture and lifestyles when buying US real estate. 

Tax returns need to be filed in both Japan and the United States

When investing in U.S. real estate, you must file tax returns not only in Japan but also in the U.S. 

If profits are generated by managing a U.S. property, tax payments must be made in the U.S. 

If you don't file a tax return in the U.S., you have to pay a large tax of 30% of rental income.

Therefore, it is important to remember that you need to ask a tax accountant to file a tax return in the United States for you. 

Need to understand rental management, exchange risk, etc.

If you purchase property in the U.S. and are considering leasing it as a rental property, you will need to hire the services of a management company.

But many don't know how to find one. 

If it is difficult in this way to contract directly with a company in the U.S., it is advisable to first consult with an agent who deals in U.S. real estate in Japan and is familiar with the local real estate situation.

In order to generate high profits, it is also important to select agents who are familiar with local real estate conditions and have a local network.

In Conclusion

This article introduced the basic knowledge that we want to keep in mind when investing in U.S. real estate, the difference between investing in domestic real estate vs US real estate, and important points to consider. 

The US real estate market is recommended for those who are considering real estate investment in the future, as it poses fewer risks than domestic Japan real estate. Is also has an additional advantage of diversification. 

Let's understand the advantages and cautionary points we have introduced, and start by looking for agents who are familiar with U.S. real estate.