Are you interested in owning property abroad? Have you ever dreamed of having an ocean view villa with a veranda, pool and staff quarters? You may be asking yourself how to make this dream a reality. The world is your oyster when buying property abroad, but some key things need to be considered before leaping international real estate investing.
How do I find the right property? Where should I buy it? What’s my budget? Who can help me with all of this foreign jargon? Luxury estate agents Madison Fox of course.
Those are the most common questions people ask about investing in property overseas. This article will offer ten helpful tips about what you need to do when making your purchase so you can make sound decisions in your investments.
10 Great Tips For Investing In Property Abroad
1. Research the local economy
Investing overseas requires a thoughtful study into that country’s economic future to determine which areas are growing and prospering. Zoom out on maps of the region you are thinking about buying in and consider what sectors are growing fastest; how is unemployment in different cities – do they need more housing? Which countries are experiencing political unrest or social turmoil – see if this could affect the economy of the area you have targeted for your purchase. Are there any significant upcoming events or celebrations planned? These questions will help inform your decision-making when choosing the best place to buy foreign property.
2. Consult with experts
The finance industry has many professionals to help you with your foreign property investment. Before you buy, consult an international financial adviser who can offer advice on structuring any payments due upon completion of the purchase. If you’re buying in a different currency than your own, find out if any hidden costs or commissions are added along the way. An expert will also offer advice on taxation and capital gains tax implications for any overseas property purchases.
3. Get Professional Legal Advice
When purchasing property abroad, it’s essential to get professional legal advice about what obligations come with living in that country and environmental issues such as earthquakes or hurricanes before making your purchase. It may surprise you that many countries have strict rules about owning land, and some won’t allow foreigners to buy the property outright. You may be required to establish a company or business, so ensure you take the necessary legal advice before signing any contracts.
4. Don’t Invest Without Reserving
Sometimes it’s OK to invest without reserving – but only if you’re sure about the area and that comparable sales will support your purchase price. This can be carried out using an online tool such as Google Maps, which shows the prices of recently sold homes in specific areas.
However, you should always make a down payment on a signing for more complex investments such as large apartment complexes and hotel developments. If there is no return on this investment, it could affect your judgment when making future decisions – putting your entire investment at risk.
5. Choose the Right Country
When purchasing property abroad, choose a country that will allow you to enjoy an income-producing investment in relative safety. Countries that are friendly towards foreign investors are usually signatories of tax treaties with other countries, so you pay less to no taxation on your rental income. These countries have also invested in their real estate sectors, creating solid legal frameworks around property transactions that offer buyers greater transparency and protect their investments.
Make sure you know about the economy before buying – again, using research tools such as Google Maps to track prices of recently sold homes will help you understand if the money invested will retain its value well into the future.
6. Residency Permits
Choosing a country open to foreign real estate investors is a sensible first step. In many countries, if you purchase a property, you can apply for residency and even citizenship after some time. If this is your goal, check the immigration requirements before making an offer on any foreign property to find out how long it will take before obtaining a residency permit or citizenship. While visas are non-transferrable, once obtained, they stay valid for as long as the person stays in that country – so be sure to investigate where possible opportunities lie.
7. Merchant Investment
Some countries require proof of money deposited in local banks. These proofs must be presented within three months after signing the purchasing contract. This amount is relatively high just to put in a deposit without any consideration, so be sure to ask professional advice before making any decisions. It’s also important to know that these funds will not be released until you have received approval for your visa and prove your intent to live in the country.
8. Invest in Land
When purchasing property abroad, consider whether it should be land or a building. Buildings should offer rental yield, but land can provide capital growth over time, even if you choose only to build when the prices are favourable. Always research the current market conditions around construction costs before deciding on your purchase price, which will affect future earnings from renting it out. That said, buying land can often mean there are no ongoing costs, making it a more attractive investment.
9. Invest in Your Own Country
If you aren’t ready to make an overseas purchase, why not invest in your own country? Inflation may be low, but rents are expected to rise over the next few years as the supply of rental property remains low, and demand for places to rent continues to grow. If you’re looking for a haven with a reliable income, consider investing locally before considering international opportunities.
While purchasing property abroad can yield significant long-term rewards, it is not without its costs, and the tax implications should be considered. Capital Gains Tax can apply when you sell your property, so check the prevailing rates before offering. Foreign income taxes may apply when renting out a property, which can be substantial if your rental returns are high. If you decide to buy, don’t forget about yearly maintenance and repair costs and insurance premiums and agents fees: they all add up!
Whether you choose to rent or sell your overseas home in the future, make sure you keep good records of what money was spent on, where it went and for how much, otherwise finding yourself taxed twice could put a significant dent in any profits.
If you follow these tips, then your overseas investments should give you anything from a nice little nest egg to an extra monthly payment on the mortgage.