Free resource - A guide to buying overseas property

[totallyproperty]

Buying overseas property

The vast majority of real estate markets are now open to overseas investors, research is readily available on the Internet and international property management companies can give you further comfort that your assets are being looked after. However, there are number of factors to consider when looking at buying overseas property which will help to minimise the risk and hopefully maximise the rewards.

Investment vehicle

The level of allowable overseas investment may vary from country to country and it is vital that you are fully aware of the regulations in any country you are targeting. There are a number of investment vehicles available including personal investments, company investments, collective investments and joint ventures. You will need to do your homework to see which vehicle is the best for you and your chosen marketplace and then take advice to put this in place. Many property investors looking overseas have been attracted by the array of real estate investment trusts and other tradable vehicles now available.

Management of your properties

While the Internet, email and other communication systems effectively mean that we can contact anybody anywhere around the world at any time there is a need to manage your property assets as efficiently as possible. Many people who look at overseas property investment will outsource management to a local property specialist or somebody with whom they have had personal dealings with in the past. The ability to have your “eyes and ears on the ground” should not be underestimated although this is not always possible.

Currency considerations

If you had a pound for every investor who had made money on a property investment in local currency but lost on conversion to their home currency, you would have a few pounds in your pocket. Currency considerations can be mitigated with long-term use of currency hedge transactions although this will depend upon the size of your investment and the cost of such dealings. In a perfect world all of your transactions would be carried out in the same currency which would take away any currency risk. However, if you are looking towards overseas real estate investment you do need to keep an eye on the exchange rates and take action where required.

Local regulations

As we touched on above, the vast majority of real estate markets around the world offer some degree of exposure for overseas investors. Indeed many property markets have relied upon overseas investors in times of trouble although the situation can reverse as we have seen to a certain extent in Australia and the UK for example. In these two countries in particular, the mass media blamed international investors for pushing some internal property markets to levels which were unaffordable for local investors. However, research has shown that while overseas investors are increasing their exposure in countries such as Australia and the UK their impact on the overall marketplace tends to be minimal. Scare stories by the media?

Diversifying your portfolio

The introduction of overseas real estate can help to diversify your portfolio and give you exposure to markets that you may not have considered in times gone by. There is nothing wrong in maintaining your portfolio in and around your national/local property market but there are now many opportunities to diversify overseas. This helps to diversify specific risk to individual countries and economies not to mention currencies and local property market fluctuations. Overseas exposure may not be for everybody but for those looking to extend their investment reach there are property management companies, investment vehicles and many opportunities out there.

 

[John Scott]

Very informative post and guidelines on buying overseas property. Buying overseas property can be a very profitable. But, there are plenty of important decisions you have to make. Make sure you do a good research on the location and the country you wish to buy property from.

 

[Longterminvestor]

I find that many people tend to ignore currency considerations - sometimes to their detriment.

 

[Paolo Agostinelli]

As a US real estate investor, I continue to see an inflow of investment from foreign investors and there is nothing on the horizon to indicate that trend will not continue for the foreseeable future. From that perspective, the one thing that I would add to this article is to make sure that you are partnering/investing/etc with very experienced individuals that know local markets well. Understanding high level macro trends such as currency markets, interest rate environment, and regions from a high level is certainly valuable. But partnering with experienced individuals in any capacity that are knowledgeable about local markets that your investment will reside will mitigate most of the risk that the above article highlights.

 

[John62]

Useful article, thank you! How can I find a local specialist who can manage my properties if I've never been there and don't have personal connections. Any ideas?

 

[Veronica]

Why would you even consider buying a property somewhere that you have never been to? In my eyes that is a recipe for disaster.

 

[mach]

Why would you even consider buying a property somewhere that you have never been to? In my eyes that is a recipe for disaster.

I can understand why you would think that, but in my experience, if done properly, the results are outstanding.

After all a good investment is a good investment. You need to know what you are doing and what to look for I'll give you that, but if you do know what you are doing would you really give up an attractive investment just because you have not been to a particular place?

I do this for a living, these days I mostly deal with High network clients looking for assets such as commercial buildings, residential buildings, Warehouses and Trophy hotels (Ultra High Ticket Assets) 90% of whom have never even been to the country that they are investing in, countries such as the UK, Germany, Portugal, Switzerland and Spain just to name a few. Yes I understand that these are a different class of investor but the idea still holds true, and believe me I make them a lot of money!!

But this concept can still be applied to single units... when someone buys shares in Apple lets say, do they go and visit the headquarters.. no... point is if you study the numbers related to an asset in a SAFE Market, I really don't understand why would need to go there. Anyway, you can even request photos and videos of the asset if needs be but at the end of the day NEVER turn a good deal away just because you have not been there. Instead I would suggest you do your due diligence or employ the help of an expert who can talk you through it.

There are many countries where investing in property may not be the safest investment or even bring you great returns, lets say you lived in one of those countries, why should you settle for a dodgy deal when you know there are better options out there, do not limit yourself, you may just find a gold mine in a country you have never visited!!

If you really do not know the market, or the local regulations, or tax laws etc then yes I agree do not invest and yet there are now people who can do it all for you!!