Real estate investors looking to expand their investments would do well to look to overseas markets. Don’t just jump blindly into the deep end, though. Read on to find out what investors need to know before buying property abroad.
Best Places to Invest
Real estate investors looking to diversify their portfolios should start by investigating overseas markets. Recently, many investors have begun to express increased interest in Singapore. This island city-state has recently begun to experience extraordinary economic growth thanks to its strategic location, pro-business government, and openness to foreign investment.
Combined with these factors, Singapore’s limited space makes it almost certain that property values will continue to grow. Those who want to move closer to the action can take out a home loan in Singapore to get a foot in the door.
The property taxes levied against foreign investors vary substantially by country. Some countries levy taxes only if investors leave their properties vacant, while others impose property taxes on all foreign real estate investors. Investors should factor ongoing property tax rates into their decisions when evaluating whether they can afford to expand to foreign markets.
It’s also important for American investors to note that not all countries have double taxation treaties in place. Investors should investigate taxation treaties prior to purchasing property abroad to avoid having to pay taxes to two countries for the same property. International taxes are complicated, so most investors hire specialized accountants to help them navigate the maze of property taxes, capital gains taxes, and other complications.
Finding the right financing options can be tricky. Investors who have plenty of working capital may have less to worry about, but most property owners can’t afford to purchase high-value real estate without taking out a mortgage.
Some people pull funds out of their retirement accounts or use the equity from their primary residences to fund overseas real estate transactions, but that’s a mistake. The best option is to work with a specialized lender who offers financial services to foreign investors.
It’s harder to evaluate the risks associated with buying property overseas. Choosing a low-risk market is the best way to go, but investors may still want to plan a trip abroad to view potential properties in person. Those who don’t have the time for trips overseas to evaluate options should work with local professionals who can offer expert, trustworthy advice.
Whether buyers are looking for a vacation home abroad or a profitable rental property, they should have an exit strategy in place before finalizing any purchases. In some countries, properties may remain on the market for months or years before selling. Investors should factor in local market conditions when developing an exit strategy to avoid trouble if they decide to sell.
Enlist Some Help
When buying property overseas, investors need to be aware of more than just local markets. They also need to know about their legal rights and obligations as foreign property owners. Put together a dedicated team of professionals who can help, including a real estate agent, a specialized attorney, and a qualified lender to ensure that the process goes smoothly.
The Bottom Line
Overseas real estate investment is a great way for investors to diversify their portfolios and protect themselves against potential market fluctuations. Plan to devote some time to investigating options first to avoid problems during or after the sale and everything should be fine.