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Purchasing a home has the possibility of major rewards.  Of course, high risks usually accompany high rewards.  This discussion will primarily focus on the monetary risks and rewards of a home purchase, however, other risks and rewards should also be considered beyond the financial topics.  For example, consider the “hassle factor” of showing a home while listing it for sale, or the “hassle factor” of trying to sell a home in the Upstate after returning to your home country.  There are also the intangible rewards of home ownership, like pride in ownership or the desire to improve a property.

Monetary Risks and Rewards of Purchasing
 
Market Risks and Rewards

Much has been written in the news lately about the real estate “bubble” in the U.S.    Real Estate has been at a record pace over the past years.  But In 2006, some parts of the country have shown a sharp decline in prices and an increase in days on market during the listing period.  Is the cooling coming to Greenville?  It’s difficult to predict.  Most recent articles and reports show Greenville’s market will continue to appreciate and that the Upstate is not overbuilt.  I have seen most international executives who have bought a home within the past seven years do quite well concerning the monetary appreciation of their investment.  The reward of the home appreciation prices for most has been quite high considering that they have leveraged a large portion of the price of the home. However, the quick appreciation days may be over; it is not easy to predict what will happen over the next years.  All this is to say, there is a definite risk that there might be a buyer’s market in the upcoming years - right at the time when you want or need to sell your home quickly.  

Tax Implications

Ann Williams, a Certified Public Accountant with Rödl Langford de Kock LLP, a CPA firm located in the Upstate specializes in international tax and accounting.  She addresses the issue of tax implications with respect to home purchasing as follows:

There are many current tax advantages that are available to homeowners in the U.S.  Exclusion of gains on the sale of a taxpayer's personal residence (subject to certain restrictions) and deduction of mortgage interest and property taxes can be sizable incentives for a U.S. resident taxpayer to own a home.  However, some advantages are phased out for taxpayers with higher levels of Adjusted Gross Income (AGI). Also, without proper tax planning the gain from the ultimate sale of the residence may have tax consequences in the U.S. as well as the taxpayer's home country. All these tax issues should be considered when weighing the pros and cons of an investment in U.S. real estate.

To follow up with any international tax and accounting questions, please feel free to contact Ann directly at Ann.Williams@roedlusa.com. RÖDL & PARTNER (USA)

 Exchange Rate Risks and Rewards

Brandon Cabaniss, a Certified Financial Planner® with Raymond James focuses on providing financial services to the international community in Greenville.  She explains the risks and reward possibilities in regards to exchange rate risks as follows: 

For both U.S. and foreign investors, drastic changes in the value of the dollar and your home currency can raise or lower the total return on your international real estate investment.  Exchange rate or currency risk arises because of these fluctuating foreign exchange rates. These fluctuations may affect the value of foreign investments or profits when converting them back into your home currency.  While investing in international assets can reduce portfolio risk because of the low positive correlation among economies of different nations, a highly unstable U.S. currency increases the risk for foreign investors in U.S. Real Estate, ultimately reducing the portfolio efficiency. There are ways to hedge the currency by purchasing currency options, but that it beyond the scope of this article.  If you purchase real estate while living in the U.S, t is important to think of the value of your investment in terms of your home currency. That way, if you decide to sell the real estate before you return to your home country, you know how much the U. S. dollar based proceeds can buy back home. As you are aware, the U.S. dollar is currently weak in relation to the Euro. This relationship fluctuates and you have to be aware that what your “dollar” may be able to buy today in your home country, it may not be able to buy tomorrow.

To follow up with any international financial investment questions, please feel free to contact Brandon directly at Brandon.Cabaniss@RaymondJames.com