For those considering their financial future, investing in real estate has long been considered a sensible choice. However, when contemplating a real estate investment, most people tend to focus on the domestic property scene – which could be a mistake. Investing in overseas property can provide several benefits; your investment is protected from a domestic economic downturn, and if you choose to invest in a country with strong commercial prospects, the opportunity for higher profits can be very attractive indeed.
If you are tempted by the idea of overseas property investment, then it is – as with any form of investment – incredibly important to research the entire endeavor at great length. Below, we’ve provided six different considerations you’ll need to factor into your decision-making process to ensure any overseas investments you make are as beneficial as they can be…
#1 – Economic strength
Any investment should always be approached with an eye on the bigger economic picture, and such thoughts are all the more crucial when it comes to investing in overseas property. Unless you are investing in a country you are already familiar with, you’ll need to undertake something of a learning curve to understand the economy and housing market of that country. The best way to do this is to read local newspapers, as localized news can provide a real insight into day-to-day developments rather than the generalized idea that you’re more likely to see if you read international reporting. In addition, it’s also helpful to obtain more historical insights by purchasing a few books specifically written about your chosen country’s political and economic history.
#2 – Domestic intricacies
Regardless of where you are planning to purchase property, you will need to become accustomed to the intricacies of the domestic market in order to ensure you get the most from your endeavor. The reason for this is the sheer amount of diversity and variance across the global property markets. In Scotland, a bidding system is used rather than a conventional advertised price; In Singapore, build-to-order (BTO) flats are common and can be accessed with a BTO application; in Thailand, you cannot own land if you are not a Thai citizen – and these small regional quirks really are just the tip of the iceberg. You will, therefore, need to spend a huge amount of time researching the various laws, regulations, and processes for buying in the country you choose to buy property in.
#3 – Income generation
While some people do leave the property alone in the hopes of selling it during a future housing price rise, this is relatively unusual. For the most part, those who invest in property expect that property to essentially “earn its keep” – i.e. generate an income, a goal which is most commonly achieved by renting the property out to long-term tenants. The same approach can work with overseas properties, but it’s essential to remember renting a property out is all the more complicated if you don’t actually live in the same country; you’ll almost certainly need to hire a local firm to manage the process, so it’s best to investigate potential fees and returns you can expect if you do decide to invest.
#4 – Language barriers
The language surrounding property can be difficult at the best of times, but is all the more complicated if you also need documents and conversations to be translated or interpreted. As a result, most overseas investors choose only to buy in countries where they speak the language fluently – as in near-native level – or more commonly, where English is listed as one of the national languages of that specific country. On initial inspection, these restrictions sound far from ideal, but a surprisingly large number of countries have English as an official language, so don’t worry – you don’t need to be a polyglot to invest in overseas property.
#5 – Convenience of traveling to your chosen country
It may well be technically possible to purchase a property, rent it out, and then sell it without ever actually setting foot in the property itself, but such a scenario is rare. For the most part, investors would prefer to visit the property, as it can be reassuring to see exactly what they are buying for themselves. Furthermore, some investors also want to use their overseas investment as a holiday home, which means that the ease of visiting their chosen country needs to be considered at length. Ideally, look for a country that you can fly to from a local airport with a minimum number of stops; the more convenient the country is to travel to, the more likely it is that you will be able to visit as and when you wish.
#6 – Your get-out strategy
It may sound odd to investigate the options for selling your investment property before you have even bought it, but it’s far better to do this research before you invest than to be unpleasantly surprised at a point in the future. It can be beneficial to essentially “war game” your strategies for how you would sell the property in a variety of circumstances; for example, what would you do if the economy of your chosen country crashes – would you sell as soon as possible, or hang on and wait for things to improve? What if you suddenly needed to raise funds for your domestic living expenses; would you sell your investment property, or do you have other savings or investments you would liquidate first? Of course, you don’t need direct, absolute answers to these questions – any future event would have its own nuances that might influence your decision – but you do need to have at least contemplated such occurrences before you invest your savings in overseas property.
Investing in property is always a good idea, and investing in overseas real estate has the potential to be even better still – providing you keep the above considerations in mind, tread carefully, and only commit to a purchase when you are 100% certain it is the right choice for your financial future.