Property Grunt

Tuesday, November 20, 2007

A Better Tomorrow

This is how cool you have to be.

Recently there has been a lot of talk about the foreign buyers invading New York City and they have been touted as the next big thing since the Wall Street Bonuses. With the weak dollar the international community have been flocking to New York City for bargains. Already the streets of Manhattan are flooded with tourists with wads of cash buying luxury items. Travel agents are even advertising weekend trips to Woodbury Commons in London.

Real Estate is no different.

This enthusiasm for Manhattan real estate isn’t felt by just a few enterprising foreign buyers. Real estate brokers say that they are seeing more sales to foreign buyers than ever before and that these buyers are helping to fuel the Manhattan market.
The increase in demand comes as a new tide of high-rise condominiums is hitting Manhattan. Buyers from other countries who don’t have credit histories in the United States or who do not intend to use their apartments as primary residences have historically had trouble passing muster with co-op boards. But condos pose no problem for foreign buyers, and they often find that buying in Manhattan is less expensive than buying a comparable house or apartment in cities like London.
Jonathan Miller, an executive vice president and the director of research at Radar Logic, estimates that foreign buyers have bought about 1,000 newly constructed or converted condos in Manhattan in the last 18 months, which is about a third of the condo sales in Manhattan in that period.

They are even hitting Florida.

To the degree that the market has held up, it has been helped by eager foreigners, checkbooks in hand, who are still showing up and often paying cash. A survey last year by the National Association of Realtors found that the number of foreign buyers in Florida had dropped significantly from 2005. But of those who bought, 29 percent paid cash. Only 8 percent of domestic purchasers did. More than 10 percent of the foreigners bought homes for over $1 million.

So the broker community is good to go right? Nothing to worry about here, since those buyers will just line up at your offices. I disagree. If brokers will really want to haul in the big profits from the foreign invasion they need to take the initiative and stage a pre-emptive strike.

That means traveling to the buyer’s country and acquiring buyers on foreign soil. Why? Once those foreign arrive in New York City, they will have already procured a broker at that point and have no need for your services. Brokers that cater to foreign buyers already have a network that consists of friends, family and colleagues that funnel them leads. They can afford to sit back and wait.

If you are a broker who is Chinese and speaks fluent in Mandarin, you are wasting your time if you are not ass deep in Shanghai.

The United States has more billionaires than any other country: 415 by the last count of Forbes magazine.

No. 2, and closing fast? China.

A year ago, there were 15 billionaires in China. Now, there are more than 100, according to the widely watched Hurun Report. Forbes has documented 66.
Unlike America's rich, China's are hardly famous, even here. Bill Gates and Warren E. Buffett are known around the world. But Yang Huiyan and Robin Li?
Yet, who they are, and what they decide to do -- or are allowed to do -- with their money and newfound influence will have political and economic consequences in China and probably far beyond, analysts say.
''They could start buying companies in the U.S.,'' Chang Chun, an economist at the China Europe International Business School in Shanghai, said. ''They have so much influence.''
Thanks to the capitalist stock mania sweeping the Communist mainland, Chinese private and state-owned companies issuing stock for the first time are becoming the most valuable companies in the world -- at least on paper -- often overnight.
On Tuesday,, one of China's biggest Internet companies, had a blockbuster stock offering, raising nearly as much as Google and soaring 193 percent on its first day of trading.
That came after the debut on Monday of the state-owned energy company PetroChina on the Shanghai Stock Exchange. Its market valuation ran up to more than $1 trillion, topping that of any company in history.

When you get to Shanghai with that 100 grand book yourself the best suite in the best hotel you can find and begin to stage a hearts and minds campaign for wealthy Chinese buyers.

You need to target the areas where the rich congregate, whether they are bars, restaurants, and golf clubs. If you have a family member or friend that can make introductions, even better, if not, you might have to hire a power broker who can give you access to these circles of wealth.

So now what do you do? This is where the 100 grand comes into play because you are going to be generous with that money to the point of night sweats. That means buying expensive dinners, drinks, trips, gifts and perhaps other pleasures that the Pope might frown on.

You are going to focus on businessmen with families and are going to ingratiate yourselves to their wives because in Chinese culture they are ones always running the show. Get the women on your side and the men will follow.

One thing that you are not going to do is sell real estate. You heard me.
You are not going to try to push an exclusive or ask them to be their broker. What you are going to sell is opportunity. What you will talk about is how amazing China has become and you will tell them they are so lucky to be rich in a time when the dollar is so weak and the Yuan can go so far in America. And even though America has fallen from the economic hierarchy, it just a lull for now, for one day it will come back on top twice as strong.

Inform the wives that the opportunity to prepare for their children’s future is at hand. Buying an apartment for the children will prove quite useful if their children decide to move to Manhattan for school or work. And if they don’t, then they can always sell or rent it out.

They will ask you questions and pick your brain. Be generous with your answers and show your knowledge but restrain yourself from helping them too much.

The most important thing is to make the impression that you are the mack, the go to guy, the Chow Yun Fat of brokers. You can blow 100 grand in shanghai because it is chump change that you can make in a day as a broker.

After leaving, make sure to exchange contact information and maintain relationships online and send expensive gifts during the holidays. Make sure they remember you. If you pull this off you are going to get an army well qualified who have gobs and gobs of cash.

I predict in the next couple of years there will be an exodus of wealth from China and this is one reason why.

But many analysts argue that there is nothing underlying the skyrocketing values, or that the obscure finances of the companies make it impossible to know their true value. And if China's stock market is a bubble, the new billionaires will disappear as quickly as they rose.
''A lot of people are surprised at how fast this has happened,'' said Jing Ulrich, an analyst at JPMorgan. ''But this is the power of the capital markets. A lot of people's wealth is based on newly listed companies.''
After a nearly decade-long bear market for Chinese stocks, investors here are in party mode. The Shanghai Stock Market is up nearly 400 percent in two years. The Hong Kong Stock Exchange is shattering records.

There will be those who will be smart enough to sell before everything goes pop and decide to get the hell out of dodge. And considering the stability of the government, it would not be all that surprising if we see another brain drain. Those people are going to need a place to live or at least a place to store their cash. That is where you come in.

Doing this is not for the faint of heart. Your looking at a major investment that you may not see a return on for quite awhile, if at all. But if it is done right you will be swimming in huge commissions for at least next 5 years.