Wednesday, January 27, 2021

Things to consider before investing in a foreign property

Real estate is one of the most common investments, for the very simple reason that it is incredibly lucrative. Perhaps you've already got a home, or you are considering investing in another property to rent out. But you may be also looking at venturing further overseas. Many people invest in property overseas, and it can be incredibly lucrative, especially when it's in the desired location. But some people hear horror stories about a property not being finished in time, or the builders causing problems, ultimately resulting in investors losing thousands of dollars. So before you sell your home or expand your portfolio, what does it take to invest wisely in a property overseas?


Really Think About the Right Location

The temptation from an investor’s perspective would be to find a market that is up-and-coming, and cheap. But this could very well fall flat on its face. Because, after all, you are relying on the rumor more than anything. It is far better to go for an established market, especially when you are a first-time investor. When you see a house for sale in another country, take the time to see if it is an established location. Mortgage providers will look more favorably on properties in areas with a proven rental market. As nice as it is to be investing in a property, based in a beautiful location, it's got to be a sure thing, investment-wise.


Remember the Taxes and Exchange Rates

As romantic a notion as investing abroad is, you must consider the different tax rules to each country. It's vital to get to grips with each country's tax rules before you purchase anything. Countries have their own additional taxes, sometimes known as Stamp Duty. If you are using this property as a rental, and are charging money to tenants, it's important to speak to a tax advisor to get a clear picture of how your overseas investments could impact your tax obligations. It's a great idea in theory, but if you are paying more money in taxes than you are making in rent, you will either have to increase the rent and run the risk of losing out on good tenants, or think about getting rid of the property altogether. In addition to this, you have to factor in the exchange rates. You might be savvy when it comes to the exchange rates, but it's a good idea to use a specialist that can figure out the best way to transfer payments, minimizing the chances of your money being lost in poor exchange rates.


Understanding the Local Area

Investing in a property in another country is not just about getting a feel for the place. You need to use a legal specialist who has knowledge of the local property market. There are law firms that specialize in properties overseas, and it's important to find these individuals because they will have an understanding of the destination, as well as the financial assistance. You can always choose a legal firm based in your chosen destination, but make sure you keep the lines of communication open. It's a little thing, but you need to be aware of things getting lost in translation. This is especially true when it comes to legal documents. If you are investing in a country where you have no knowledge of the lingo, it might be best to have somebody that is able to liaise so you can get the best deals, as well as make sure you know exactly what you are getting into.


Investing in a New Development

If you decide to invest in a development where the properties are yet to be built, you need to communicate with the developer. You need them to show you some of the recent projects. If there's no information online, or they are not able to show you anything they've done recently, you need to hold back on transferring any cash to the developer. You need to make sure that there is a clause in the contract that states you will get any money back if the development is not completed. It sounds like a fantastic idea to invest in a property, especially if it is a new one with modern materials. But this can be dangerous and can result in you not getting any money back if you don't cover yourself.


Do it right, and investing in a property can be very lucrative. Do it wrong, and it can land you in heaps of trouble, financially, professionally, and in terms of your reputation.

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