For many property investors, foreign real estate has been looking like a more and more attractive option. In part, this is down to rising house prices here on home soil, a situation which only looks set to get worse. Thanks to home prices moving at their fastest rate in three years, U.S. investment isn’t viable anymore. Unless you have hefty savings to play with, you don’t stand a chance of getting anywhere.
But, overseas investment is another matter. By choosing the right area to put your money, you stand to see a major profit for a smaller upfront cost. It seems like a no brainer, right? And, if you manage to invest before a major property boom, your overseas efforts could become more than just a sideline. You stand to make it big. Areas like Indonesia, which have yet to see any significant investment, are your best bet. Take a look listings from companies like RumahDijual to get an idea of how this area compares price wise. The chances are, this will be enough to convince you this investment is worth making.
But, if a foreign investment is such a solid idea, why don’t all the great property gurus operate abroad? In truth, there are a lot of things you need to consider before overseas investment can work for you. Many investors fail to take the first step because they can’t get past these barriers. But, to help ensure you don’t make the same mistake, we’re going to consider ways around the problems.
When buying overseas, you have to get your head around the laws of the country you’re operating within. In many areas, selling to foreign investors isn’t plain sailing. Some countries have blanket bans on such operations, while others have laws that make things difficult.
Keeping with Indonesia as an example, up until 2016 it was near enough impossible for overseas investors to get a look in. Recent law changes have made it possible to break ground there, but there’s still a long way to go. Only Indonesian citizens, for example, are allowed freeholds on properties. As an investor, you’ll be looking at a leasehold. While this lasts for 25 years and can now be extended, it may not be what you had in mind.
You’ll find similar rules within a variety of areas. Make sure to do your research on the legal side of things before you take action. You may be best off opting for areas which have lifted all sanctions like these. Turkey, for example, lifted their ‘reciprocity’ law in 2012. Acting so soon after a law change may be your best bet at getting property before everyone else spots the opportunity.
The Exchange Rate
When operating overseas, you’ll be purchasing a house in a different currency to your own. Believe it or not, this is enough to keep many potential investors at bay. In some ways, it’s easy to understand why. If you fail to get a decent grip on exchange rates, you could spend over the odds. But, there’s no need to let this issue hold you back. With a little careful research, there’s no reason to get bogged down in details here. Once you know where you’re buying, take some time to get your head around current exchange rates. Within a few weeks of your search, you should have a decent idea of the prices you’re working with. To help judge whether you’re getting a good deal, compare prices abroad with those closer to home. If you’re buying in the right countries, the difference will be extreme. If there’s a small gap between the two, you may want to search elsewhere.
Foreign Buyer Tax
Foreign buyer tax has been in U.S. news a lot of late, with sanctions and rising rates pushing away foreign investors. And, you’ll face similar sanctions in your efforts to invest. All countries have differing rates of tax for those buying with investment in mind. Often, you’ll be paying higher than you would for, say, residential property. Countries are often reluctant to let foreign investment in. As such, high tax rates are often used as a deterrent.
Whether this should stop you acting is another matter. Find out about the tax in your chosen country as soon as you can. If you factor the added cost into your search, you should still be able to pay less than you would have otherwise.
On a more practical level, you’ll have to find a way to overcome language barriers throughout negotiations. It’s hard enough getting your head around all the above, but even worse when everyone you deal with speaks a different language. If you aren’t careful, you could agree to something you aren’t comfortable with.
Learning the basics of the language in your chosen country is worthwhile. That’s not to say you need to be fluent, but being able to understand key words will make your life much easier. It’s also worth contacting an English speaker in the country you’ve chosen. A professional who can operate on the ground there will do a lot of the negotiating for you. As such, you’ll find it much easier to reach a bargain.
And, once you do start renting your property, you’ll need to consider how best to interact with your tenants. As a landlord, you need to be available for queries and maintenance issues. Obviously, there’s more to this issue than simply a language barrier. Even if you and your tenants could communicate, there’s not much you can do from another country.
As such, it’s worth either putting someone on the ground or finding an existing company which can take care of matters. Often, letting agents will be able to deal with any major issues. Though, bear in mind that this service does come with a fee. Again, make sure to consider that when looking for properties. If you fail to take extra costs into account, you may find yourself no better off for your overseas exploits.