Intero Real Estate Blog

Intero Folsom Lake and Intero El Dorado Hills are featured in the October 12, 2011 Sacramento Bee newspaper article.

WEDNESDAY, October 12, 2011

By: Rick Daysog
Sacramento Bee

Despite the sluggish local housing market, a major Silicon Valley real estate firm said it is expanding in the Sacramento area.

Intero Real Estate Services opened its first local office in Folsom in June and its second in El Dorado Hills in August. Under an area development agreement with locally based Kaizen Real Estate, Intero said it plans to expand to as many as 16 offices in the Sacramento region over the next four years.

Intero’s two local offices employ 21 people.

“As a significant number of Sacramento residents transition to and from Silicon Valley, the Sacramento area is a perfect market for Intero,” said David Bicknell, Kaizen’s president.

Founded in 2002, Intero lays claim as the largest and fastest-growing real estate firm in Silicon Valley. The company, which has over 2,000 employees, pioneered the use of small offices that rely on high-tech innovations to market properties.

David Bicknell, broker and owner of Intero Folsom Lake, is featured in the October 16, 2011 Sacramento Bee newspaper article.

SUNDAY, October 16, 2011

By: Phillip Reese and Rick Daysog
Sacramento Bee

Twenty-nine cents on the dollar.

That’s what homebuyers now pay for a typical house in the Sacramento region compared to buyers in San Francisco. And if history is any guide, that mounting price gap could have a big impact on Sacramento’s housing market and economy in the not-too-distant future.

The last time the spread between Bay Area median prices and Sacramento median prices grew so big was a decade ago, just before tens of thousands of Bay Area transplants arrived in Sacramento, turning a healthy housing market into a bona fide boom.

Since then, that wave of transplants has slowed to a drip, with barely more residents relocating from the Bay Area to Sacramento than heading in the other direction.

Several local real estate experts and economists said they don’t expect to see another approaching fleet of U-Haul trucks quite yet, with the possible exception of a few being driven by carefree retirees.

“It’s a different market now,” said Suzanne O’Keefe, a Sacramento State economics professor. “Everyone is more cautious. The housing market isn’t going to rebound quickly because people move from the Bay Area.”

O’Keefe and others note that the local job market is stalled; cheap housing is available elsewhere; and many Bay Area residents already cashed out home equity during the boom. Just as key: Bay Area home prices are less expensive than they have been in years. A San Francisco condo worth $1 million in 2005 would sell today for about $840,000.

But even if Bay Area transplants aren’t about to swoop into Sacramento tomorrow on white horses, many expect their numbers to increase, helping to put a floor on falling home prices. To bolster their case, these optimists point to past trends.

The San Francisco and Sacramento housing markets are closely entwined. Growing price differences between the two areas preceded and fed the last two housing booms.

The calculus is simple: Bay Area residents see their modest homes sell for immodest prices, and decide to cash out and buy quasi-mansions in Sacramento.

Right now, the median home price in the Sacramento region is about $185,000, according to data from Wells Fargo and the National Association of Home Builders. In San Francisco-Marin-San Mateo, it’s $630,000. In the San Jose area, it’s $454,000.

David Bicknell, the local franchisee for Intero Real Estate Services, is putting money behind his premonitions of a coming influx. His company recently opened offices in Folsom and El Dorado County and plans more expansion.

“More and more people are able to move to the Sacramento area,” Bicknell said.

Influx of equity-rich retirees seen

Bicknell is encouraged by the local tech sector, which he believes is rebounding.

Intel Corp., one of the local region’s largest private employers, recently hired 368 new workers at its Folsom campus, reversing more than a decade of downsizing.

The new hires increased Intel’s local workforce by about 6 percent to 6,515 workers. Many are recent college graduates who have relocated to the region, the company said.

Tech company Bloo Solar of El Dorado Hills plans to hire another 40 or so workers over the next several years as it expands its solar manufacturing plant.

“We see this as a continuing trend,” Bicknell said. “The homes are nice, the schools are good, and the cost of living is so much lower.”

Retiring Bay Area baby boomers are just as important to Bicknell’s strategy.

The last generation of retirees largely drove the big influx from the Bay Area to Sacramento 10 years ago. The town of Lincoln quadrupled in size during that boom, partly because of senior citizens arriving from places like Santa Clara County.

Assuming they have a pocket full of cashed-out equity, retirees might not worry as much as others about Sacramento’s difficult economy.

“There’s a lot of potential out there for the active adult market,” said Dean Wehrli, a senior manager at John Burns Real Estate Consulting. “That part of the market is increasing, and it’s going to be like that for 20 years.”

Granite Bay Realtor Eve Fenstermaker said she has noticed more interest from prospective Bay Area buyers since last spring. She gave the example of a client who lives in the exclusive Blackhawk area of Contra Costa County. Two years ago, the woman balked at moving because of declining prices in her neighborhood – and corresponding lost equity. With prices recovering, she is considering Sacramento.

“If you can sell your house in the Bay Area for $900,000 and can buy a comparable house here for $725,000, why wouldn’t you do it?” Fenstermaker said.

Douglas Booher, a 34-year-old Southwest Airlines pilot based in Oakland, recently looked at several homes in Folsom and El Dorado Hills. He likes the schools and the proximity to Lake Tahoe.

“If we can live in Sacramento in a nice home – maybe not our dream home, but a nice home – then we will have more money left to play with,” said Booher, who rents in Clayton and spends much of his time on the road. “It’s worth the two-hour drive once a week.”

Despite its free and open image, the United States can be a very bureaucratic place to move into as an overseas property investor. If you want to live there, the green card process is notoriously long and problematic. However, as OPP’s American correspondent Cindy Fauth explains, there is another option … if your client is prepared to invest beyond the property itself … in creating jobs and wealth. This is how it works.

The United States is known as the land of opportunity … a nation forged with an entrepreneurial can-do spirit. It has long attracted global business investors from around the world. In a recent survey of investors by the Association of Foreign Investors in Real Estate (AFIRE), its real estate market was overwhelmingly ranked as the number one choice for investment and viewed as the best opportunity for price appreciation.

But, at the same time, overseas property investors can also be faced with a range of complexities in purchasing and using the U.S. residence they have decided to buy.

Immigration, tax, currency and financing issues all play an increasingly important role for global investors looking to move into the US residential property sector. The home of the free can be surprisingly bureaucratic.

The EB-5 visa has emerged as one important tool for those willing to invest in the U.S. as a means of obtaining U.S. residency status. Your clients need to know about it and how it works … but it is not a simple programme. Any real estate agent with clients interested in investing in the U.S. will benefit from a solid understanding of what the EB-5 is all about.

The Path to U.S. Residency

Known informally as the investment or entrepreneurial visa, the EB-5 encourages foreign nationals to invest specified amounts of money, typically $500,000 or $1,000,000, in commercial enterprises or development projects that create jobs for U.S. workers.

In return, they receive conditional permanent residency. While other types of visas may have waiting periods or long delays in processing, the EB-5 has no waiting period after approval.

The US government is authorized to grant 10,000 EB-5s per year, but has never met its quota.

There are many scenarios under which the EB-5 might be the right answer to an international investor’s visa-related residency issues. For example:

• Individuals, couples and families that prefer to live and raise their children in the U.S.A;
• Foreign nationals on long waiting lists for other visas;
• Entrepreneurs who want to start a U.S. business;
• Affluent buyers looking for a second home in the U.S. and more flexibility to use it.

Two Paths to Residency

Today there are two ways to apply for the EB-5 visa:

1. Under the original program as an individual investor/entrepreneur; or
2. Under the Regional Centre Pilot Program, contributing to an investment pool.

Individual EB-5 requirements:

• Invest at least $1,000,000 in a new commercial enterprise, an existing business reorganised as a new enterprise, the expansion of an existing business, or a troubled business; lowered to $500,000 if the investment is in a Targeted Employment Area.
• Set up a new business, create 10 jobs for U.S. workers, not including the immigrant and his or her family;
• Help a troubled business, maintain the pre-investment level of jobs for at least two years;
• Directly manage the business or formulate business policy.

Regional Centre EB-5 requirements:

• Invest at least $1,000,000 or $500,000 into an investment pool funding a new commercial enterprise or troubled business within or affiliated with a Regional Centre, depending on the TEA status of the region;
• Create at least 10 new full-time jobs either directly or indirectly through capital investment;
• The investor becomes a limited partner in the venture, freeing him or her to live anywhere in the U.S.

Qualified advisors are important

Under either path, the U.S. Citizenship and Immigration Services (USCIS) requires extensive documentation to be submitted with the visa application on the commitment of required funding, lawful source of funds, and viability of the business plan and job projections.

An immigration attorney specializing in EB-5 law and a financial advisor can help an investor navigate the complex process.

An EB-5 attorney can provide a list of well- established Regional Centres into which to inquire about investments, and provide guidance on legal matters. A financial advisor can examine the fit of the investments to the applicant’s needs.

“There are two kinds of risks in the EB-5,” says Ron Klasko, immigration attorney and founding partner with Klasko, Rulon, Stock and Seltzer LLP in Philadelphia, and Chairman of the EB-5 Committee of the American Immigration Lawyers Association (AILA).

“As immigration attorneys, we deal with issues of immigration risk. We insist that investors have their own financial advisors conduct due diligence on the Regional Centre and the project to address the financial risk.”

Once the EB-5 visa is granted, the individual and his family become conditional permanent residents. After two years the visa holder must petition for removal of conditional status by submitting proof that the original requirements for the visa were met.

The role of Regional Centres

EB-5 investors who are not interested in starting and managing their own business can invest in projects associated with a government-approved Regional Centre. Regional Centres exist in almost every state. (See Regional Centre map.) And, as defined by the USCIS, a Regional Centre is any USCIS-approved public or private economic unit involved with the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment in a specific geographic area.

Most Regional Centres are in Targeted Employment Areas with $500,000 investment requirements. Their activities include:

• Looking for local projects that can benefit from foreign investment and will meet USCIS requirements for job creation;
• Marketing projects in their geographic region to foreign investors;

The benefits of Regional Centres to EB-5 applicants include:

• Projects associated with Regional Centres have less restrictive job creation requirements, and jobs created indirectly count toward the quota;
• Much of the business documentation required for the application is provided by the Regional Centre;
• Most projects are structured as limited partnerships, meaning investors can live anywhere in the U.S. and meet USCIS requirements for management.

Partly because Regional Centre EB-5 requirements are less restrictive and somewhat easier to meet, Regional Centre investors now account for more than 90% of EB-5 applications.

There are currently over 100 Regional Centres in the U.S.A, with many more applications in the pipeline.

Regional Centres must meet ongoing reporting requirements to maintain their designation. If they fail to do so, they are dropped by USCIS. For an updated list, go to uscis.gov and enter Immigrant Investor Regional Centres in the search box.

For most immigrants, the road to permanent residency via the green card can be long and complicated. However, there is a shortcut for those with significant financial resources—the EB-5 visa.

Make sure you are well educated on this topic so you can help your clients pursue their goal of investing in the United States.