Without a doubt, investing in real estate overseas can be the greatest way to diversify your property portfolio and also capitalise on the growth of real estate sectors in other developing countries. What’s more, doing so adds an element of protection to your investment, given that a portfolio with both foreign and domestic properties doesn’t rely wholly on the stability of just one market. Moreover, given how low the risk of investing in real estate actually is, not to mention the healthy returns you receive from your investment, no wonder many investors are continuing to show interest in the property sector, where they are even considering going global with their investments.
The thing is though, whether buying a property domestically or overseas, there are a number of challenges/issues that you need to address first in order to safeguard your investment. But when the property is abroad, these issues become more amplified, especially when expanding your portfolio into new and uncharted territories. With this in mind, let’s take a look at some of the most crucial aspects that you need to consider before finalising your overseas investment.
What’s your reason for your overseas investment?
This is the most important consideration in the entire investment process as it will directly influence everything that follows later, from your budget to the country of destination and the type of property and insurance you choose. If you are buying the property with the intention of renting or any other sort of investment, you will need to execute your financial decisions in line with your expected return. And if you are purchasing the property to make it your home, you will need to pay attention to the standard considerations such as the local amenities, surrounding area as well as school catchment regions.
Where do you want to buy the property?
Even with all the money in the world, you will need to make a wise decision on where you want to make your investment. You need to do more research to find the ideal location and country to buy the property. Remember, when making such a decision, don’t let your heart rule your head, which basically means that the principles that guided you when buying your current property, should also guide you when buying the overseas property. Look for a place that’s currently enjoying growth, and one where your investment will prosper.
How are you going to finance the property?
This is the other crucial consideration given that it guides you on the type of property to look for. Selecting a property that meets your current needs is pretty straightforward, and it’s one thing, but putting actual money or financing that investment is a completely different thing. Securing finance isn’t an easy process, especially considering the international laws it will be subject to, as well as the currency issues. Also, it’s not always guaranteed that you will secure a mortgage in your country of choice, so you will need to come up with a plan on what you are going to do in the event you don’t secure financing – will you be able to reclaim your initial deposit? It’s also important to understand the local currency as well as the exchange rates.
What will the tax liability look like?
Not everyone’s tax circumstances will be the same, especially considering the changeable and the diverse nature of the global real estate market. You will find that every country has its own tax laws and legislation, which means that you might find yourself paying costs such as stamp duty, title transfer tax, or inheritance tax during the point of purchase. You will also find countries where you are required to pay land tax, mostly paid annually, and as a condition of the mortgage. The reason why you need to put these costs into consideration is for you to be able to budget right. Also, you don’t want to face legal penalties for failure to meet these costs.
Is the developer credible?
In case that you are looking to invest in overseas properties that are still under development, you are exposed to certain risks, especially during the construction phase. Obviously, you won’t be able to travel every day to inspect the work being done, so, you ought to have a reliable developer working on your project. Choose a reputable property developer with a sizeable operation as well as strong balance sheets so as to minimise the risks of default or poor quality construction work.
What’s your plan for moving?
If you are buying property to move into, other than buying, the next stage is moving into the new home. In as much as it can be exciting knowing that you are about to start a new life in a new country, delivering your household items to your new property is something that gives many homeowners a real headache. Remember, you are not delivering items locally – that you can just call man and van services to take you to your new place, in this case, you are moving abroad and that involves a whole lot of other processes. You first need to find reliable long distance movers, to ship your stuff to the new location, and do so safely and in a timely manner. Also, figure out everything, from the shipping costs to getting your belongings through customs as well as the insurance policies. Basically, you need to have a clear plan!
Strategy is key
This is particularly critical when you are building rental properties abroad. If you are planning to invest in rental properties and then manage them from abroad, you should know that’s probably not a very good idea. It’s better to have a local property manager take care of your investment for you. What’s more, you need to consider who your ideal renters are, the best locations, the average rental prices, the seasonal flow of tourists as well as the turnover expectations before making any final decisions. All these factors will have a direct impact on your expected return, so you’d better choose wisely. Just ask yourself, if managing rental property in your own country is such a headache, imagine managing one abroad. But with thoughtful planning, a fun future with a global view will certainly be yours.
Investing overseas can’t be easy, but you can make it a success through proper planning and also asking for help whenever necessary. The key to investing overseas is having the right mindset, starting with doing your research. You need to know what you’re getting into and have a plan for how you will manage it. If that sounds like something outside of your expertise or comfort level, don’t be afraid to reach out for help from an expert who knows more about global investments than you do!