Russian Investors Buying Cash Flow Properties in Chicago

International sanctions combined with lower global demand for crude oil and natural gas have had an adverse effect on the Russian economy that has driven 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 slide, Russian investors have sought to invest in real estate, as a way to create growth and stability for their hard-earned money.

London was originally considered to be a hot spot for foreign investment, but a new trend has emerged in which Russian investors are looking to the United States and Chicago, Illinois, specifically, as a way to convert their rubles out of the euro, focusing instead on the US dollar.

Russian citizens have been looking for ways to preserve their wealth, and brokerage firms recommend investing in American real estate from Moscow to Donetsk.

The Central Bank of the Russian Federation has made six different interest rate hikes, causing its currency to devalue by almost 300%. His goal is to stem the fall of the ruble, but what he is doing is making people rush to cities like Chicago for cash flow opportunities.

Russian investors have found a sense of comfort and success in working with American investment firms that have a strong team of people on the ground who provide a “turnkey” real estate investment to generate cash flow income.

Companies like Retire On Income have provided these investors with properties that are already renovated, rented, and professionally managed. This eliminates much of the risk associated with investing remotely.

The great fall of the Russian ruble is something that economics professors and financial analysts will study for decades. There are several factors that are causing this decline. Oil and natural gas are Russia’s two main exports, and following its assault on the Crimean peninsula and Ukraine, the United States and the European Union have imposed economic sanctions on the government of Vladimir Putin, preventing them from selling their exports to most of the free world. They still have a number of international clients, but not being able to capitalize on the European markets has had major implications.

Another important factor to keep in mind is that the EU currency is also experiencing a decline. Russian investors began to buy real estate in London, Paris, Berlin and other major European cities. Now that both the ruble and the EU are plunging, we see the Russians selling off their European portfolios and redistributing their wealth to key markets like Chicago, Illinois.

From a financial perspective, the US dollar is a much stronger currency than the euro, the Russian ruble, the Chinese yuan, or the Japanese yen. It makes smart strategic sense to invest in American opportunities.

The European Union recently passed a resolution to initiate quantitative easing in its financial markets through the central banking mechanism established by all member nations.

The ECB (European Central Bank) has set aside $60 billion to buy short-term government bonds in its attempt to lower interest rates. The United States has just finished a 4-year program with its quantitative easing initiatives that have helped strengthen the economy, after the subprime mortgage crisis (2007 – 2009). The reason for the economic decline in Europe centers on the governments of Portugal, Ireland, Italy, Greece and Spain.

In the short term, Greece is in the hot seat because it is struggling to pay back the billions of dollars the ECB has lent it since joining the EU. What is not much discussed by media pundits is the fact that when Greece was being considered for EU membership, its accounting techniques and reporting mechanisms were flawed and the actual figures were swept under the rug. Once Greece became a member, EU leaders found out how far along the Greek economy was and how difficult it would be to make them sustainable.

Fast forward to 2015 and you have Alexis Tsipras leading the ultra-left Syriza party to a huge victory in the national elections. Campaigning on an anti-austerity platform, Greece finds itself 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 send the other “hot seats” countries into a tailspin with a possible financial collapse.

Recovery in the EU is not forecast for many years and nervous Russian investors are selling their properties and looking to the United States to stabilize their future.

As financial uncertainty continues to manifest itself globally, more foreign investment is earmarked for growth in the United States. Alan Siebenaler is a well-respected Chicago real estate investment broker, and when asked about factors Russian investors might consider when changing 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 include:

* Real estate prices vs. Rental income (high cash flow possibilities)

* Low Unemployment

* Job Diversity / Job Growth (multiple industries)

* Is the population growing or remaining stagnant?

* Is the cost of living low, compared to national standards?

* What is the relationship between rental rates and purchase prices? (High rents vs. lower cost)

* Is there access to services 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 reference 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 in Chicago (or any other city) is right for you.

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