Don’t you think property investment in only one city or country is putting all your eggs in one basket? Many real estate investors restrict their business to only one country while others discover the best countries for real estate investment and expand their portfolio by off-shore property investment to earn more money. Purchasing an overseas property can be a daunting task; however, the returns can be promising. When thinking about the best countries for real estate investment, bear in mind that not every country will yield the results you want, and you should narrow down your list of options based on your needs.
How much money do you have? What are your personal investment goals? Do you buy real estate as a vacation home or as a buy-to-let property? Do you seek backup residency or a tax-cutting solution?
Whatever your intentions are, as a smart property investor, don’t concentrate all of your efforts in one area and think of purchasing properties off-shore. The decision to do overseas real estate investment should begin with considering the following criteria.
Factors in Choosing the Best Countries for Real Estate Investment
Geography and Climate
Make sure that your property is located in a popular area with tourists, students or other short-term or long-term rental seekers and offers many seasons of use so that you can keep it in demand all year long. The area must have a high annual rental occupancy rate with little difference between high season and low season. Nevertheless, it is critical that the area won’t get too populated and overwhelming during busy seasons of the year. In addition, don’t invest in a property in an area with the risk of geographical difficulties such as hurricanes and tornadoes.
Your property must seem perfect in all seasons and have an easily accessible location, convenient transportation and local facilities and activities. Find out about the distance from your property to the nearest public transportation system and special events or activities during off-seasons.
Calculate the rental return on investment (ROI) and the profit margin of the area you are going to invest in by taking into account all the costs and expenses such as cleaning and maintenance costs, real estate commissions, void periods’ costs, transfer fees, transaction costs and insurance fees.
Economy and Market Fundamentals
Be aware that the procedures vary in different countries, and they might be totally different from those in your homeland. Study the economy and financial systems of the countries carefully. Take into consideration economic factors like long-term GDP (Gross Domestic Product) growth, over-supplies, interest and inflation rates, price bubbles, and stock markets’ volatility. Moreover, investigate the status of the local real estate market, and see whether or not the value of the property you are going to buy will rise and build wealth for you in the long run or it only generates considerable rental cash flow. Consider currency imbalances and fluctuations as one of the biggest challenges of real estate investment because even a small change in exchange rates can affect the value of your property or your mortgage repayments overnight.
Legislation, Regulation, Bureaucracy
When deciding to invest in a country, check the finances and investment opportunities, as well as the local laws to figure out whether foreigners are allowed to buy real estate, and if there are any restrictions on the types of property they can buy. Make sure if the government of the country provides foreigners with full property ownership, and review the requirements for non-residents purchasing or rules regarding the selling of a property. You must be able to travel to the country and get visas or special residence or buying and renting out property permits with no hassle.
Study tax rates and financial systems, and regulations of your target country. Find out about annual property tax, income/rental tax or income tax for non-residents. You must also discover if you have to pay income tax on the rent you receive from your cross-border property to the government in your homeland. Search about the business-friendliness of the country and the restrictive tax policies that make purchasing and handling a property highly expensive and difficult for non-citizens.
Changes in the government, war, terrorism, sanctions, political decisions, and foreign policies within a country might result in unexpected capital losses. If a country’s political climate is not hospitable to foreign investment, the country will not make a good candidate for purchasing a property. Political instability and lack of transparency in international relations might give investors legal headaches and uncertainty.
To get a realistic idea of how much rent you can make from a property, find out about the rent rate of the real estate and rental market, and check similar properties in the area to discover how much the previous owner has charged, and how many weeks per year the property has been occupied.
Once you have found the best country for real estate investment, remember that you cannot buy real estate for investment in a country without doing proper research. Not only ask a lot of questions about the property and the area in which the property is located, but also seek advice from qualified professionals. Do not forget to get legal advice from a local real estate agent or a lawyer in the country you’re buying who can speak both your language and the local language of your target country to make sure you understand everything about the process and the associated paperwork.
Investigating global markets for off-shore investment and dealing with different regulations and taxes related to property ownership in a foreign country may be more intimidating than what you have had in mind in the starting point. Therefore, you cannot do everything on your own and must hire a reputable in-country advisor. In addition, the responsibilities regarding managing the property, and getting the rental ball rolling can be too much of a hassle, especially if you are in your homeland most of the time. It’s a good idea to manage your property through a local real estate agent, but you will need to take the commissions into account and think how much you will be involved in managing your property. There are also some cheaper marketing options available, which include online booking websites and property management systems (PMSes).
Best Countries for Real Estate Investment: Multiple-location Property Management System
A very handy tool which can help you in terms of managing properties all around the world from a single login is a multiple location property management system. A standard PMS system gives you a separate account for each location, so you have to switch between different accounts, which is very time-consuming, while a multiple-location property management system allows you to specify the countries in which your properties are located, list cities within those countries and break them up by area, within which you then add your properties, and even unit types and units.
In addition, it enables you to rent out a property both as a separate room or as an entire house. You can also set different currencies for different properties and operate across multiple countries smoothly. Moreover, your multiple-location property management system should provide calendar syncing, which lets you view your properties’ vacancies and occupancies all in one unified calendar.