Go Russia! (Yea, Really.)

Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.

As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...

From Dennis Fassett, Cash Flow Mercenary...

Touchy subject, I know. And, yep, I know that as crazy as it sounds, there’s a reason to root for Vlad the Impaler to win in the Ukraine conflict.

Because it’s boosting U.S. real estate prices!

No joke.

I read an article on this recently on CNBC, and I was pretty surprised by it. But it made a lot of sense as I was going through it.

It said that:

"Ukraine's ongoing war with pro-Russian separatists and their Moscow benefactors is pushing money out of the region — and into the United States.”

And that:

“Rich Russians and Ukrainians have varied reasons for moving their money overseas, and investing in the more-stable West is nothing new for them.

But anecdotal evidence indicates they're trying harder than usual to get their money out of Ukraine and Russia as quickly as possible and into the United States. And overwhelmingly, that money is flowing into American real estate.”

The article quoted a consultant who told CNBC that the number of deals he has closed this year with Russian billionaires and millionaires compared to last year has tripled. Compared to 2012, he said it has quadrupled.

All of the deals so far have been investments in safe and stable assets like commercial real estate, and that some of the deals included a building that housed a trade school near Seattle that an investor from Moscow bought it for $1.5 million. Another Moscow investor bought up a hospital in California for $3.5 million. And another deal for $8.5 million of a 24-hour fitness center in California is pending.

Kruzhkov Speaks

Marlen Kruzhkov, a Ukrainian-American attorney whose business is oriented toward foreigners, particularly those from the former Soviet Union who want to invest in the United States, says the reason is pretty simple:

"For Russians, it's purely economic-driven. The sanctions and existing economic pressures have really started to squeeze people."

putin He said Western sanctions — and Russia's retaliations against them — have also had a boomerang effect. For example, the closures of some McDonald's locations in Russia has put a lot of Russians out of work since those businesses are locally sourced and staffed.

"All the people in that supply chain are screwed," he said. "Who will they sell products to?"

Kruzhkov went on to say that there's also a major fear among the wealthy that the Russian government will seize assets and money if it is kept in or brought back to Russia.

"People aren't hiding assets because of taxes, they are hiding it because of the people in charge," he said.

That Mermelstein Guy

And finally, a guy named Edward Mermelstein, a New York attorney who works with affluent Russian clients, said the firm has been very active of late but expects business to wane if another round of sanctions is imposed, as the European Union and United States have threatened. It's becoming steadily more difficult to get money out of Russia.

He said that "Banks are cracking down on all foreign transfers, and Russians are especially being given a hard time” and that "they are being pressured in Russia about any outgoing transfers."

So no matter what you think of freedom, real estate, or even sovereign national borders, keep your eyes open for a bunch of rich Russian guys walking around with brief cases full of cash.

This opportunity may not last too long!