CALIFORNIA

Californication, Red Hot Chili Peppers

In last week's "Buyer's Guide to California Pt 1 - Education Matters,," we discussed why Education is an important driver of where overseas borrowers choose to invest in real estate. 

In that report, we looked at the top 50 Public, and Private high schools, average ACT/SAT scores, Median Household Income, Average Home Prices, and Rental Yield.

We argued that when looking at where to make your US property investment, the quality of education in the nearby city/area is a factor in the decision since there is always a notion of "can I live there one day" and "maybe my children can go to school there". Popular cities in the US will undoubtedly have good schools in the city or in the vicinity. 

"Popularity as a living destination" in turn drives demand, home value appreciation, and strong growth in rental income.

This week we focus on Demographics.

An under-appreciated factor in determining where to own is what city has the most culturally similar population. It's much easier when you have neighbors that speak your language and share similar cultures and values. 

We will answer these questions (and much more)!

• Which high schools in California has the highest Asian population?
• Which cities have the most Korean-born residents?
• Which cities have the highest total Asian population and the respective top schools?
• Does the highest Asian population determine how home prices will behave?
• Which California cities have the highest: Hong Kong, China, Taiwan, India, South Korea, and Philippines-BORN residents?

Demographics matter!

In this study, we solely focus on the Asian population in schools. Asians have been the biggest group of immigrants over the last 60++ years, spurred mainly by the Immigration Act of 1965 but also the Taiwan Relations Act of 1979, the Luce-Celler Act of 1946 as well other obvious political issues of the time.

In addition to the above reasons, many immigrants just wanted a better life for their families, they studied hard, and slowly communities grew around the top education destinations.

Here is the Asian population (>40%) for the top 50 Public and Private Schools in California.

You can also see that these cities have the highest Home Price to Median Income ratios, highlighting the center of attraction for Asians moving to the US.

Note a common rule for affordability is for a home price to be UNDER 3x your income!

Public High Schools

Private High Schools

Takeaway - You can see cities where the top schools are located have very high Home Price to Income Ratios which highlights the property value growth driven by families moving to these cities, in particular Asians.

The next study is very interesting!

Our team looks at which California cities have the highest overseas-born residents, specifically from:  China, Hong Kong, Taiwan, South Korea, Philippines, Vietnam, and India.

You guessed it, many are in the cities where the top schools are

We only used cities with over 20,000 population.

*Refer to full chart below

Here is same chart in Alphabetical Order

Illustrating popular cities ranked by multiple demographics

As you may observe in this report, the cities with the highest Asian immigrant population tend to be where the most demand is, especially when compared to household income, and it's no surprise it's also where the top high schools are.

That is to say, the schools and cities mentioned in last week's report on Education being the main driver of price appreciation and rents are very similar to the cities mentioned in this report.

While this study is not meant to be a rigorous analysis by any means, it is close to my heart since I moved from Singapore to San Francisco when I was 16. My parents had the same thought process…strong Hong Kong population and good schools. I ended up finishing high school in San Francisco and attended UCLA.

Stay tuned for the final part of our Buyer's Guide to California, where we take a quick look at the general carrying costs for a rental property, including taxes, deductions and other administrative costs. 

Finally, we will be hosting a webinar with our California Partner for a real "on-the-ground" discussion along with a panel of real estate experts for the Bay Area, Palo Alto, Los Angeles, and Orange County. We are still finalising the exact details, but this will be in September. 

Have a good weekend!  If you want a copy of the spreadsheet with the data from our research, please contact us. We are happy to share our findings.

www.gmg.asia

CALIFORNIA

"California, Here we come" Phantom Planet

(click for an awesome Indie rock song from 2002)

We are super excited to kick off our "Buyer's Guide to U.S. Real Estate" series, where we go in-depth into the main U.S. states for property investment purchases, starting with California!

We also have a surprise guest at the end of the month (see bottom of article)!

What's not to love about the Bohemian vibes of San Francisco, the technology center-of-the-universe in Palo Alto, wineries in Napa, food in Yountville, golf in Steinbeck country, the quaint and exclusive Montecito, and year around perfect weather in San Diego.  

And finally, Los Angeles – Beverly Hills, Hollywood, Venice Beach, Santa Monica, Bel Air, Pasadena, Orange County – it's almost endless. 

It's no surprise that California is a favourite investment destination for our clients, both Overseas Expats and Foreign Nationals, primarily from: the U.K., Canada, Australia, Mexico, China, Hong Kong, Singapore, Philippines, Indonesia, Australia, France, UAE, Germany to name a few.

Want Home Value Appreciation and Rental Income Growth?

Education is key!

Job market growth is certainly a key driver for price appreciation and is normally driven by the new business formation in the area, but popularity as a living destination is driven by things like safety, cost of living, ease of transportation and quality of education, especially for families with young children.   

"Popularity as a living destination" in turn drives demand, home value appreciation, and strong growth in rental income. 

Why is Education important?

In this week's report, we will take a deep dive into Education – an important (if not the most important) factor for overseas property investors in determining where your next home purchase will be in the U.S.

With Foreign National buyers, in particular, the objective of owning real estate to earn income almost always comes down to "could I live there one day"?   

In Asia, where owning property is ingrained in their culture, it's common to purchase an investment property "in anticipation" of sending their child to college. They could even live there during or after they graduate, and the price appreciation could even pay for college if they sell the property. Or, if the child decides to get a job in the U.S., they can stay in the apartment as a post-graduation gift to build up their credit or even rent it out to earn income. 

Which are the top high schools in California?

We look at the top 50 high schools in California, both public and private, ranked by average SAT and ACT scores. As you can see, the SAT scores will range from 1300-1500. To get into a top 25 U.S. university, the SAT scores should be at least 1400 as a reference, so these schools are all great.

Why high schools?

Many new immigrants or returning expats will choose to live in areas where there are good schools and a higher population of similar background families (the latter we will investigate next week). High schools are a very important decision since it will determine their experience during these formative years between 14-18 years old but also potential college choices. 

"Popularity as a living destination" drives demand, home value appreciation, and strong growth in rental income. 

Schools with the highest SAT/ACT scores

- Public: Lynbrook High School, San Jose

- Avg SAT 1450 / ACT 33

- Private: The Nueva School in Hillsborough & Basis Independent in San Jose

- Avg SAT 1510 / ACT 34 for both

Household Income, Home Prices, and Rental Yield

We also look at the Median Household Income, Average Home Prices, and Rental yield in each city. When moving to a new city, aside from the quality of education, most will look at how expensive it will be to live there, own a home, and potential rental income potential. 

It's probably no surprise cities like Palo Alto, San Diego, San Jose, Los Angeles, and others will have higher home prices, but we also look at a rough gauge of affordability which is a "Home Price to Income Ratio," which tends to be where most immigrant buyers choose as their base.

Cities with the highest Median Income

- $250,000+ per annum income

- Cities: Piedmont, Hillsborough, Los Altos

- Neighbouring schools: Piedmont High School, Los Altos High

Cities with the highest Home Prices

- $2,000,000+ home price

- Cities: Piedmont, Palo Alto, Hillsborough, Ross, Atherton, Los Alto, Saratoga, San Marino

- Neighbouring schools: Piedmont High School, Los Altos High, Palo Alto High, Henry Gunn, Aragon High, Nueva School, Crystal Springs Uplands, The Branson School, Menlo High, Pinewood School, San Marino High

Highest Rental Yield

>5% gross yield: Riverside
>4% gross yield: Lo Jolla, San Diego, San Jose, Fresno, Irvine, San Clarita

- Neighbouring schools: Riverside STEM Academy, Canyon Crest Academy, Torrey Pines High, Westview High, Del Norte High, The Bishops School, La Jolla Country Day School, Francis Parker School, The Harder School, Basis Independent, Bellamine College Prep, Notre Dame High, University High Fresno, University High Irvine, Woodbridge High, Arnold Beckham High, TVT Community Day School, Academy of the Canyons

America Mortgage Concierge Program

We launched this free service last month to connect potential home buyers with our approved panel of realtors in each major U.S. city, which only focuses on overseas buyers. If you would like to learn more, please contact [email protected].

Our surprise guests!

At the end of August, we will be hosting a webinar with our California partner, who will present a "Guide to California Real Estate" along with a panel of the top realtors in Los Angeles, Orange County, and Bay Area to give you a real "on the ground"feel for all the points we discussed above and more.   

Stay tuned…this is going to be amazing! 

Sources: Niche, City-Data, US News, OECD data, US Census Bureau and respective school websites

"Bridge over Troubled Water" Simon & Garfunkel

Globally, but especially in the main overseas investor markets like the US, UK, Canada, and Australia, the housing market has seen intense competition, massive price surges, and dwindling inventory since 2020 - but if you're a real estate investor, all of that may be about to change, and for the better. 

Using the US as a reference, mortgage rates are rising. In mid-June of 2022, the 30-year fixed-rate mortgage averaged 5.81%. That may seem high; however, rates now are where they were right after the financial crisis of 2008 when many people were actively trying to obtain a mortgage. 

What makes this type of market great for real estate investors?

These higher rates make it more difficult for would-be home buyers to afford new homes. It's not that people are trying to buy extravagant houses, but that a modest home with an increase of $50 a month in mortgage payments could be the difference between buying or renting. 

These higher costs are putting pressure on the housing market. It has already led to a decrease in mortgage applications to purchase and refinance for owner-occupied property, but an increase in investor mortgage applications getting in on high rental prices, demand, and lack of available rentals.

What once was a seller's market is shifting slightly, causing properties to stay on the market longer. This has resulted in liquidity issues for investors looking to sell their properties quickly to buy additional properties.

Luckily, there is a relatively simple and easy financing solution - GMG bridge loans. 

What is a Bridging Loan?

Investors use real estate bridge loans as a short-term financing tool to bridge gaps in financing. For example, an investor might take out a bridge loan against a property they are selling in order to purchase or act on another investment property immediately. 

In this case, the homeowner may need the money before their property sells. They can now use a GMG Bridge loan to extract equity today while waiting for the right price to sell.

Bridge loans can be secured quickly, often closing within a week to 10 days, and with little paperwork, because lenders are more interested in the collateral (i.e., a house) than a credit score or cash flow.

We offer Bridging Loans in: USA, UK, Canada, Australia, Singapore, Hong Kong, and Thailand.

How to use Bridging Loans to free up liquidity 

Bridge loans allow investors to quickly free up liquidity using their real estate assets as collateral. This is a quick asset-backed mortgage where your financials or credit are not the primary underwriting criteria; the asset is. In order to better understand how this works, let's take a look at two examples;

1. Waiting for a property to sell at the right price:

You're selling a property but waiting for the right price. Another investment property becomes available that is too good to pass up, but you won't have the available funds until after you sell the existing property. No problem. Extract the equity from the property you're selling. Take advantage of the new investment. Wait for your property to sell and pay off the bridge. It's that easy and quick! 

2. Financial strain:

Often, unpredictable circumstances can impact our financial position. The equity in your property can be the perfect way to ride out the storm without worrying if you'll qualify for a "conventional" mortgage loan. It is easy, quick, and straightforward to release up to 70% equity from your property based on the asset value alone. We can also structure these loans to where you do not have to make any monthly debt servicing for up to 12 months. This allows you to get the liquidity you need and then relax, reset and focus on your situation at hand. 

When do Bridging Loans benefit investors? 

As explained above, bridge loans are a great way to free up liquidity. A bridge loan may also be a good fit for you if you:

• Need to free up liquidity in a fast-moving market

• Can't afford to take out a mortgage on a new property without selling your other property.
  
• Need to secure funds to acquire or renovate real estate quickly.
  
• Already purchased a property, but you can't sell your current property quickly enough.
  
• Financial strain where conventional financing won't work or is difficult to obtain. 

The housing market is evolving rapidly. Investors would be wise to understand their options so that they are able to adapt, take advantage of opportunities, and free up liquidity when they need it. 

As a company, we only focus on non-resident mortgages for major international real estate investor markets: USA, UK, Canada, Australia, Singapore, Hong Kong, and Thailand.

In the US, our wholly-owned subsidiary, America Mortgages, is the only US mortgage specialist outside the US.

Get in touch with us today to learn more about the structures and options of short-term bridge financing solutions at [email protected].

www.gmg.asia

Direct from our Loan Development Team – we have created a solution which allows our international high-net-worth clients to use their liquid asset portfolio to qualify for a U.S. mortgage loan without pledging or encumbrance, nor the requirement of any minimum deposit held at a bank (AUM).

Introducing “GMG U.S. Super-Jumbo+" & "LADMI"

• Are you a businessperson with low reported income?
• Are you retired with little to no fixed income? 
• Are you self-employed but with little to no “provable” income? 
• Are your assets held in a bank with a U.S. branch or presence?
• Do you have Trust assets with completely unrestricted use?

If you answered Yes to any of these questions, you will qualify for this program. 

Asset Rich, but Cash Poor?

It’s a common issue for high-net-worth investors who report low income but have sizeable asset portfolios including stocks, bonds and other liquid securities.  

Traditional banks require pay stubs, employment letters, and credit scores (we have fantastic programs for this as well), but many of our clients are not in the corporate world and require more flexible programs to suit their specific needs.

Separately, private banks will undoubtedly require Assets Under Management (AUM) and normally at least the amount of the mortgage.

We are seeing a trend that high-net-worth investors are now open to looking at financing options outside of their private bank, even if the rate is higher than the subsidised rate they would get from their private bank.  

“A small price for freedom,” as one of our European clients recently told us. 

Introducing: Liquid Asset Derived Monthly Income “LADMI”

Salient Points:

• Qualify for a loan using your liquid asset portfolio instead of income from employment.

• No AUM (Assets Under Management) or encumbrance of your portfolio at all, rather, it is ‘only’ to qualify for a loan. 

• Liquid Asset Derived Monthly Income (LADMI) is calculated by taking total liquid assets and dividing by the duration of most mortgage loans, 360 months (30 years). 

• LADMI allows you to prove your ability to service the debt without regular income from employment – great for entrepreneurs and high-net-worth investors! 

• No need to show any other sources of income or employment.

• If your LADMI is sufficient to service the mortgage – as well as regular living expenses – you can qualify based solely on this calculation.

• No need to cash-in your portfolio or encumber in any manner. 

• Your assets are used “only to demonstrate” an ability to make the mortgage payments. 

Commonly-used Liquid Assets:

• Checking or savings accounts 
• Money market accounts 
• Certificates of Deposit (CD) 
• Investment accounts such as stocks, bonds, crypto, and mutual funds
• Liquid retirement accounts

[Note] All accounts, banks and or brokerages will be required to have a U.S. presence. IE Fidelity, Capital, Coinbase, Charles Schwab, HSBC etc.

Here is an example:

59-year-old mortgage borrower has:

• Cash: $750,000
• Investment portfolio: $3,500,000
• Cryptocurrency: $300,000
• Liquid retirement fund: $500,000
  
  = Total Liquid Assets: $4,300,000 (2+3+4)

This is how we calculate LADMI:

• Cash: $750,000
• Total Liquid Assets: $4,300,000
• Discount Factor: 30%
• Discounted Liquid Asset Value: $4,300,000 x 70% = $3,010,000
  
  = Total Allowable Assets: $3,010,000 + $750,000 = $3,760,000
  
  = LADMI = $3,760,000/360 months = $10,444

In this case, we will calculate the borrower’s maximum mortgage payment based on a monthly ‘income’ of $10,444.

The next question you will ask is, what kind of property can this get me?

If we assume a minimum 43% debt to income ratio (DTI) for most lenders and use the current market mortgage rate, you can qualify for a US$1M home (approximately $4,000 P+I monthly payment).

[Note] This is just an example and there are many factors that go into qualifying for a mortgage. This illustration is show that you do not need a salary to qualify for mortgages anymore thanks to our program. 

If you have any questions about our GMG U.S. Super-Jumbo+, LADMI or any of our international mortgage or asset-backed financing solutions, please contact us at: [email protected] or send me a confidential Whatsapp at +65 8499-3229.