Russian Investors Buying Chicago Cash Flow Properties
4 min readInternational sanctions combined with a lower global demand for crude oil and natural gas have had an adverse effect on the Russian economy that has forced 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 looked to invest in real estate, as a way to create growth and stability to their hard-earned money.
London was originally considered to be 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 on the US Dollar, instead.
Russian citizens have been looking for ways to preserve their wealth and investing in American real estate are being recommended by brokerage houses from Moscow to Donetsk.
The Central Bank Of The Russian Federation have made six different interest rate hikes, which has seen their currency devalue by almost 300%. Their goal is to slow down the decline of the ruble, but what it’s doing is causing people to rush towards cities like Chicago for cash flow opportunities.
Russian investors have found a sense of comfort and success by working with American investment firms that have a strong team of people on the ground that provide a “turn key” real estate investment for cash flow income.
Companies like Retire On Income, have provided these investors with properties that are already renovated, rented out, and professionally managed. This removes a lot of the risk associated with investing from a distance.
The major decline of the Russian ruble is something that economics professors and financing analysts will be studying for decades. There are several factors that are causing this decline. Oil and natural gas are the two major exports for Russia and after their aggression towards the Crimean Peninsula and Ukraine, the United States and European Union have put economic sanctions on Vladimir Putin’s government, that prevents them from being able to sell their exports to most of the free world. They still have several international customers, but not being able to capitalize on the European markets has had major implications.
Another important factor to note is that the EU currency is going through a decline, as well. Russian investors began purchasing real estate in London, Paris, Berlin and other major European cities. Now that both the ruble and the EU are tanking, we’re seeing Russians sell their European portfolios and re-distribute their wealth into 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.
The European Union has recently passed a resolution to initiate Quantitative Easing into their financial markets.through the central banking mechanism established by all of the member nations.
The ECB (European Central Bank) has set aside $60 Billion to purchase short-term government bonds in its attempt to reduce interest rates. The United States has just finished a 4 year program with their quantitative easing initiatives that have helped strengthen the economy, after the sub-prime mortgage crisis (2007 – 2009). The reason for the economic decline in Europe is centered around the governments of Portugal, Ireland, Italy, Greece and Spain.
In the short-term, Greece is in the hot seat because they are fighting paying back the billions of dollars that the ECB have loaned them, since joining the EU. The thing that isn’t discussed much by media pundits, is the fact that when Greece was being considered for inclusion to the EU, their accounting techniques and reporting mechanisms were flawed and the true numbers were swept under the rug. Once Greece became a member, the leaders of the EU discovered just how far off the Greek economy was and how hard it would be to get them sustainable.
Fast forward to 2015 and you have Alexis Tsipras leading the ultra-left Syriza party to major victory in the national elections. Campaigning on an anti-austerity platform, Greece is set on a major collision course with Berlin and Brussels. If Greece were to leave the EU it would have major ramifications on the economy and will cause the other “hot seat” countries into a tailspin with potential financial collapse.
Recovery in the EU isn’t forecasted for many years down the road and nervous Russian investors are selling their properties and looking to America to stabilize their futures.
As financial uncertainty continues to manifest globally, more foreign investment is destined for growth in America. Alan Siebenaler is a well-respected Chicago real estate investment broker and when asked about factors that Russian investors might consider, when moving their retirement income, he told me several things that make a city “investor friendly”.
Some important factors that can be used to determine a market that has investment potential, would include:
* Real Estate Prices vs. Rental Income (High Cash Flow Possibilities)
* Low Unemployment
* Diversity In Employment / Job Growth (multiple industries)
* Is the population growing or remaining stagnant?
* Is the cost of living low, compared to national standards?
* What is the ratio between rent rates and purchase prices? (High rents vs. Lower Cost)
* Is there access to amenities that improve quality of life (ie. arts, entertainment, parks)
* What does the crime rate look like?
* Are there natural resources or sources of cash that are injected into the baseline economy?
Keep in mind that analyzing these factors will give you a better education about the market and help you make a more informed decision about whether investing in real estate for Chicago (or any other city) is right for you.
