There are a number of reasons an investment abroad is so attractive at the moment, here are just three of them for you to consider.
Diversification
Markets can and do change and so any smart investor will ensure that they haven’t got all of their money tied up in any one market or asset just in case the worse really does happen.
Real estate is still one of the safest investment options available on the market but just as you would vary your investment portfolio for stocks and shares, to protect your wealth and provide options for generating a lot more you are better of varying the markets in which you invest in property too. Otherwise your real estate investment is at the mercy of a fluctuating market and interest rates, with no protection if that market collapses. If you want to diversify with some degree of certainty you need to look outside of the US for real estate investment opportunities.
When buying abroad it’s important to take the long-term view. Often to get the best deals you will want to look at countries that are still developing their infrastructure so that you can buy real estate at a low price and enjoy the benefits as the value of the area grows through regeneration. Although this significantly increases your chances of a return it also increases the time in which that return might be made.
If you can’t wait for your investment to mature and want to start seeing a return immediately then you could consider buying property to rent out. Buying a condo for rent in an already popular and cosmopolitan city such as Singapore is a very different prospect than buying to make money on the resale in a country like Grenada. If you choose the right area for a buy to let you could make a significant annual income on the rent alone. If both of these idea appeal why not mix your portfolio up - you will see the dividends in the long-run as you can insulate yourself to some degree from local and global economic fluctuations.
If you are going to diversify in order to protect and grow your assets then you will need to have your finger on the pulse of changing foreign markets, political stability and economic environments and be ready to snap up a bargain as soon as the time is right. Buying overseas doesn’t come without its challenges. You have different legal and economic structures to navigate on top of any language barriers and currency exchange.
Employing a really good real estate attorney that has considerable international investment experience is a must if you want to get this right first time.
Investing for your retirement
Saving for your retirement can be scary as you are unsure where to place your money for the best return. Everyone should be making some provision for their retirement and there is no substitute for a high interest savings account. However if you can afford a little more investment in your future, adding international real estate to your retirement portfolio can be a very positive step to financial freedom when you are older.
This is because if you invest right you can add thousands of dollars in a matter of months to your retirement pot without doing a thing. If you buy a property in a country like Colombia, where real estate is still relatively cheap but that has vast regeneration plans in the pipeline you might see that property increase in value by 50% without you spending another dime of your own cash. No matter how high the interest rate is on your savings account it can’t match this opportunity. However this is just an opportunity and nothing is guaranteed in investment. By its very nature it is a gamble, a risk. However with the right homework and expert advice it can be a calculated risk that will not only protect your retirement nest egg but help it to substantially grow.
Retirement income
Increasing property value is only one way international investment can help you build your retirement portfolio. As previously discussed you can choose to buy real estate not for the resale value but for the income it could provide from tourists and businesses looking to relocate.
Rental income in popular tourist destinations such as Belize, Portugal and Italy can be substantial if you find a property that matches the needs of its tourists. If you are going to take this punt then you need to know why people vacation in those areas and then look for property that offer those facilities. You might want to do some research into popular vacation destinations and match this to those that have real estate markets that still haven’t caught up with this popularity. Or better still buy somewhere off the beaten track and help make it popular again with tourists - overseas investment can do wonders for a city’s infrastructure development plans! Buying to let also gives you the option to spend part of your time there in retirement so whilst you are looking for a destination that you think could make you a decent monthly income you should also consider if it is somewhere you would like to spend time in - after all why not retire in style!
Tax protection
Investing in real estate overseas can also provide some tax benefits depending on how you are going to use the property. Most property investments are not intended to be lived in by the investor but if you do plan to live in the home then you can deduct mortgage interest and property taxes. The most tax efficient however is if you plan to use the property as a rental income. Then you can deduct as above but you can also deduct property and liability insurance, repair and maintenance costs and anything else related to maintaining the property.
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