Many interested buyers ask us, is international real estate a good investment? And our answer is always the same. Owning property overseas can be an excellent addition to your portfolio, but at the same time, rush purchases without knowledge and research are the worst financial investment to make. Spotting a bargain property and buying it there and then sometimes turns into a cash drain if real estate investors do not know a country’s home buying process, property taxes or maintenance and upkeep costs. Entering another country’s housing market is not something to be taken lightly.
Additionally, suitable investments vary from country to country. Some property markets do not favour foreign buyers, while others accommodate them as if they were citizens. So, let us look at the pros and cons of owning international real estate, tips on finding a good investment and our top picks of countries with opportunities for international property investors.
Diversification: Ploughing money into one housing market is rarely a wise investment move to make. Political instability or a poor performing economy often disrupt property markets, and your investment halts and sometimes declines. On the other hand, real estate investors who diversify their international portfolio make it stronger long term.
Emerging Markets: While many countries housing markets are established, there are equally quite a few countries whose property markets are still in their infancy and considered emerging. These countries offer a higher return on investment.
Rental Income: Besides looking at capital growth, real estate investors who buy in a country with a strong tourism market can make income. Some places offer as much as 10% annually. Investors need marketing and management skills to let out the property for a lucrative income.
The Future: Buy in a country with lots of sunshine, to have a holiday home to use each year. Additionally, many people who own real estate abroad eventually move out to that country depending on their residency laws.
Tax Benefits: Every country has different tax laws dependent on your nationality, but some work in your favour. For example, in Turkey, homebuyers who owned the property for at least five years do not pay capital gains tax when selling.
Citizenship by Investment: Some countries offer a golden visa scheme. Anyone buying real estate over a certain amount can apply for citizenship to give them the same living and working rights as a local. Every system differs, so research carefully if another passport appeals.
Nothing in life is ever like utopia, and with overseas property ownership, certain obligations must be taken on.
Maintenance and Upkeep: Any property must be kept in tip-top shape to ensure a good investment. Buying in a country with an eight-hour flight means limiting visits. Alternatively, employ a management company or a key holder, but this eats into return on investment.
Currency Exchange Rates: Every country’s housing market operates in that country’s currency. Now every overseas property owner would give their right arm for a crystal ball telling them how currencies will pan out in the future. But, unfortunately, investments don’t work like that. Sometimes investors win on the currency, and sometimes they lose.
Laws: Likewise, every country has their own set of rules and regulations for paying taxes, residency, tourist visa, and property ownership. Owning property in another country means staying up to date with future laws to safeguard investments.
Be Financially Savvy: Now is the time to have an exact overall picture of finances. After all, you will be running properties in two different countries, which incurs two sets of expenses. So think ahead for the next five years, and ensure your income easily outranks outgoings.
Factor in Extra Costs: One of the worst mistakes is to consider the house price only. There are extra purchasing costs to pay. Before any of our clients' sign on the dotted line, we give them a payment plan of what is to be paid and when, so they are fully prepared for all additional costs.
Use an International Real Estate Agent: Any good overseas property agent keeps themselves informed about international property news, what countries should be avoided and what countries present good investment opportunities. We have helped hundreds of people buy property abroad and assist in your search for an overseas investment opportunity.
Ask Questions: Any real estate agent can find properties overseas, but to ensure a good investment, ask questions from your agent. We are a valuable source of information not only for buying a home abroad but also for running it and issues like residency. In addition, we like to form long-lasting relationships with all our clients and stick around until well after the purchase.
Use a Lawyer: Some countries do not require the use of a lawyer when buying property, but we strongly recommend all home buyers use one. Lawyers’ responsibilities vary from country to country. In some cases, they perform legal checks and obligations. Also check, because, in some countries, a contract is not legally binding unless notarised.
Local Knowledge: Instead of looking at which countries are the best places to buy property, look at towns and cities within those countries. Some local housing markets offer more capital growth potential than others. Go local and ask your international real estate agent about transport networks, bars, restaurants, supermarkets, banks etc.
Future Plans: By far, the best investment spots are where local councils have a clear future vision and constantly upgrade infrastructure and reinvest in themselves. Find out from your real estate agent how the local council performs and about any development plans.
Off-Plan: There is a common myth off-plan is always the best investment, but this sometimes is not the case. While investors grab discounted prices and have more opportunity for capital growth, it is essential to research the country’s laws re off-plan developments and know exactly how your investment is protected.
Once again, this will vary from buyer to buyer, and every country offers benefits, so find out which one suits. However, some countries constantly prove to be winners with overseas investors repeatedly.
Spain: Many aspects make Spain a constant favourite with overseas property buyers. Firstly, the market is used to foreigners. Hundreds of thousands of people bought a holiday home, spotted the ideal real estate investment or, in many cases, bought a property and moved out permanently. So foreigners are a constant fixture in Spain’s property market. Likewise, the country constantly reinvests in their tourism market, which is an added benefit.
France: Like any major city, Paris is a hotbed for investment, but the equal focus is on the French alps. Many ski resorts turned themselves into dual season locations; hence people use their property outside of the winter months for tourism. Likewise, to promote their year-round appeal, many ski resorts invest millions into infrastructure and real estate.
Turkey: This country is a hotbed for real estate investment mainly because they are still in their infancy for modernising their housing market. Many overseas investors turn towards European Istanbul, where the planned Istanbul council project will take place. Regardless, one major factor in Turkey’s favour is affordability. A mid to long term investment here presents good capital appreciation.
Ah, the joy of buying a bargain house, doing it up and then selling for a healthy profit. This might work in your home country, but attempting it in another where building regulations and permission differ mean entering a whole other world, likewise for renovation projects. We all heard about that Tuscany villa, traditional Spanish cottage, or a French farmhouse that turned into a cash drain. In our experience, renovation projects rarely make a healthy real estate investment and turn out to be one big ball of stress regarding workers and navigating red tape.
If you plan to make an income from overseas real estate, be fully knowledgeable about landlord and tenant laws as well as income tax. This differs from country to country. Likewise, you need clever marketing skills and someone to handle the property when you are not in the country. Before buying, also research the current holiday home market. Some towns are flooded with holiday properties, and if there isn’t demand for them, this brings potential yields down. Another aspect to consider is how much maximum occupancy rate to expect realistically. For example, if a destination’s tourism season only lasts six months, this cuts occupancy potential by 50%.
To start your overseas real estate investment endeavour, browse our portfolio of apartments and villas for sale in many countries around the world. This will give an idea of a potential place to invest in. Each listing contains everything to know, including price, location, photos, home features and contact details to find out more via telephone or arrange a viewing. Alternatively, to speak with a local agent today about overseas property investment, contact us here.
We are Spot Blue international real estate agent. We have helped hundreds of buyers invest overseas. To read more about whether international real estate is a good investment, browse our blog. Our team took all their years of local knowledge and experience to talk about buying property overseas and what it entails.