BUYING PROPERTY ABROAD: HOW TO CURTAIL RISK WHEN MAKING OVERSEAS PROPERTY INVESTMENTS

Many people are buying property abroad today because of the investment potential. The price of foreign property can be especially attractive when exchange rates tip the balance in favor of a prospective buyer’s currency. Imagine buying a beachfront house in Brazil for $50,000 when you’d spend $400,000 for the same house in a place like Orange County. Buying property abroad is a way to get actively involved during retirement.

If you don’t want a hands-on management, this type of investment would still generate passive income for you, an income not depending on the US dollar, denominated in another currency. There are reputable property management companies that can help you take care of your new investment and help you make consistent rental income from your investment. The fact that many Americans are not preparing adequately (or even preparing at all) for retirement means many Americans are not living out their dreams after retirement. “About 60% of Americans have no savings in retirement accounts like 401(k)s or IRAs,” reports Business Insider. The Employee Benefit Research Institute (EBRI) estimates the shortfall in retirement savings to be at $4.13 trillion for heads-of-households aged 25 to 64.

One of the reasons why many Americans lack sufficient retirement savings is that the traditional means of saving are unreliable, according to USmoneyreserve.com. If protecting your retirement is important to you, buying property abroad can help you get the ideal retirement and offer the kind of security that other asset classes cannot provide.

Moreover, there are wasteful aspects in some markets that haven't worked themselves out yet, and those inefficiencies can work further bolstering your good fortune. For example, there are some markets in the world with restricted wellsprings of capital where people need money. Without access to easy credit, they frequently offer their property at a much lower cost to have fast access to money.

Furthermore, when you spend money on overseas property you do not just get the benefit for those market inefficiencies, you additionally have the advantage that a lot of shareholders are so concerned about risk that they create no real hazard, nor create any competition. But even though overseas properties offer a chance to diversify your investment and can help you get the retirement of your dreams, there are some risks. Here are some tips to help you curtail risk when buying property abroad.

1.     Read the books.

The key to successful property investments overseas is to do your homework and not cut corners. By all accounts, read books about the country you are considering buying an international investment property and read relevant forum posts online but do not get sucked in by the sellers and never overlook the power of local knowledge. Even a simple walk around the area can give you a great insight into the events and settings that take place on a daily basis, giving you a real feel for the place.

2.     Beware of overseas investment property in "emerging markets".

This term can be used to dress up areas of neglect. Look around for signs such as closing shops and boarded up houses, as these may suggest a struggling economy. If you come across something else that you do not feel at ease with, do not go with the property investment. Foreign buyers should feel 100% safe in the area before taking the plunge. Likewise, if you look at a series of new developments that are beginning to emerge, this could be a sign that the real estate market in the area is about to take off.

3.     Do not leave yourself at the mercy of the laws of the country when buying property abroad.

Buying investment property on foreign soil requires the advice and guidance of a local lawyer. Before you sign on the dotted line, make sure you are accredited and credited as well as fluent in English and the language of the country you wish to purchase.

4.     Don’t take the risk of using cash.

Using a bank with an office abroad to conduct large transactions is always the best. Foreign investment properties and those that sell them must be approached with caution and due diligence.

It’s normal to be apprehensive when buying property abroad for the first time or trying anything new. And yes, the risks are there but to be successful in property investing, you mustn’t let that hold you back.

The global real estate market is a dynamic and ever-evolving industry that plays a crucial role in the global economy. As we look ahead to 2023, it is essential to gain a comprehensive understanding of the current state of the real estate market and make informed projections for the future. This article delves into the intricacies of the global real estate market, providing a detailed analysis and forecasts for the year 2023.

Introduction

The global real estate market has always been a significant contributor to economic growth and development. In recent years, it has witnessed remarkable transformations driven by various factors such as economic trends, demographic shifts, technological advancements, and environmental concerns. The year 2023 presents an exciting landscape for the real estate market, characterized by new opportunities, challenges, and trends that shape the industry.

Factors Influencing the Global Real Estate Market

The global real estate market is influenced by several key factors that impact its performance and growth potential. These factors include:

Economic Conditions

Economic conditions, such as GDP growth rates, interest rates, inflation, and employment levels, significantly impact the real estate market. A robust economy fosters demand for both residential and commercial properties, attracting investors and driving market expansion.

Demographic Trends

Demographic factors, such as population growth, urbanization, and changing household structures, have a profound impact on the real estate market. Understanding the preferences and needs of different demographic groups helps shape investment strategies and market offerings.

Technological Advancements

Technological advancements have revolutionized the real estate industry, leading to improved construction techniques, smart homes, virtual property tours, and digital marketing platforms. Embracing technology is crucial for real estate companies to stay competitive and meet evolving consumer expectations.

Environmental Considerations

Increasing environmental awareness has influenced the real estate market, with sustainability and energy efficiency becoming key priorities. Green buildings, eco-friendly practices, and renewable energy integration are gaining prominence, providing opportunities for innovation and investment.

Government Policies and Regulations

Government policies and regulations play a vital role in shaping the real estate market. Policies related to taxation, land use, zoning, and urban planning influence property prices, market liquidity, and investment attractiveness.

Regional Analysis

The global real estate market exhibits significant regional variations in terms of market dynamics, trends, and investment opportunities. Let's explore the key regions and their characteristics:

North America

North America boasts a mature real estate market, with the United States and Canada leading the way. The region offers stable economic conditions, diverse investment opportunities, and a well-developed infrastructure. The residential sector remains strong, driven by population growth and urbanization trends.

Europe

Europe's real estate market is characterized by its diversity, with variations in economic conditions, regulations, and cultural factors across countries. Urban centers like London, Paris, and Berlin offer prime investment opportunities, while emerging markets in Eastern Europe show great growth potential.

Asia-Pacific

The Asia-Pacific region is witnessing rapid urbanization and economic growth, driving demand for real estate. China, India, and Japan are the key players in this market, offering vast investment potential in both residential and commercial sectors.

Latin America

Latin America presents a mixed real estate landscape, with countries like Brazil, Mexico, and Argentina showcasing diverse opportunities. Emerging middle-class populations, urbanization trends, and favorable government policies contribute to the growth of the real estate market in the region.

Middle East and Africa

The Middle East and Africa region exhibit varying real estate markets, with countries like the United Arab Emirates, Saudi Arabia, and South Africa standing out. Rapid urban development, infrastructure projects, and increasing foreign investments shape the market dynamics in these countries.

Market Segmentation

The global real estate market can be broadly segmented into several categories based on property types and usage. Let's explore these segments:

Residential Real Estate

Residential real estate encompasses properties intended for personal use, including houses, apartments, condominiums, and townhouses. Factors such as population growth, urbanization, and lifestyle preferences influence the demand for residential properties.

Commercial Real Estate

Commercial real estate refers to properties used for business purposes, such as office buildings, retail spaces, and industrial parks. Economic conditions, business expansion, and consumer trends impact the demand and profitability of commercial properties.

Industrial Real Estate

Industrial real estate includes properties used for manufacturing, warehousing, and distribution purposes. The rise of e-commerce and global supply chains has increased the demand for industrial spaces, particularly in logistics hubs and key transportation corridors.

Hospitality and Tourism Real Estate

Hospitality and tourism real estate comprises properties such as hotels, resorts, vacation rentals, and hospitality infrastructure. Global travel trends, tourist arrivals, and destination popularity influence the growth and profitability of this sector.

Emerging Trends and Technologies

The global real estate market is experiencing several emerging trends and technologies that are reshaping the industry. These include:

PropTech

PropTech, or property technology, refers to the use of technology and innovation to enhance efficiency, transparency, and convenience in the real estate sector. PropTech solutions include virtual reality tours, blockchain-based property transactions, and smart home automation systems.

Co-living and Co-working Spaces

The rising popularity of co-living and co-working spaces is transforming the way people live and work. These shared spaces provide flexibility, cost-effectiveness, and community-oriented environments that cater to the evolving needs of modern professionals.

Sustainable and Green Buildings

Sustainability has become a significant focus in the real estate industry. Green buildings, energy-efficient designs, and eco-friendly practices not only reduce environmental impact but also provide long-term cost savings and enhance property values.

Investment Opportunities

The global real estate market offers a multitude of investment opportunities for individuals and institutions seeking to diversify their portfolios. Some key investment avenues include:

Residential Properties in Emerging Markets

Investing in residential properties in emerging markets can yield substantial returns due to factors such as population growth, urbanization, and increasing middle-class populations. Careful market analysis and understanding local regulations

Spending money consistently on a cash flow negative rental isn't smart. It might be time to change your strategy.

Vacation rentals are a great way to make extra income from your property investments. Short term rental provider, HomeAway https://www.homeaway.com/info/getting-started/income reports that the run-of-the-mill vacation rental property owner nets $11,000 a year.

But if you consistently have to spend rental profits on roof repairs, vacancies, regular maintenance, bad tenants etc, you probably have a cash flow negative property on your hand. And there are two approaches to dealing with this problem. You can either wait it out and hope things will somehow change or kickstart an exit strategy to move on.

While cash flow doesn't have to be a decisive factor, especially when you have a vacation rental property in an up and coming neighborhood with strong potential appreciation rates. Many times, you might be spending more than you bargained for with your rental. And the faster you discover this, the better.

This article outlines five signs of negative cash flow vacation rentals but before we proceed let's see a simple formula for measuring cash flow on an investment property:

Cash Flow = Total Income (Application fees, Rent, etc.) - Total Expenses (Monthly mortgage (if applicable); General Maintenance, Electricity, HOA, Property Management, vacancies etc.)

As a rule of thumb when buying an investment property, it is wise to set aside an emergency fund to cover at least first six months of expenses. So let's dive right in and see some of the signs to watch for.

1. High vacancy/Low occupancy rate in a location: What's the occupancy rate for your neighborhood? An important sign of a cash flow negative property is high vacancy rate in the neighborhood. According to Turnkey VR https://blog.turnkeyvr.com/much-money-can-make-vacation-rental/ specializing in the management of turnkey vacation rental homes, "Occupancy rates for vacation rentals can be all over the map. For instance, a vacation rental home in a big city might create more demand than a rental property at a seasonal location like the beach". Location is key when buying real estate, especially for investment. Hence it's wise to spend time researching a neighborhood before taking the plunge.

2. High Maintenance property: Are you doling out high monthly fees for property maintenance? Then you might be dealing with a cash flow negative property. A 30-year-old property might offer a great deal but when you have to spend considerable time and money on maintenance and fixes monthly, you have to ask yourself if it's worth it.

3. Declining Rental Property Market: How strong is the rental property market? There is a strong correlation between a thriving property market and low vacancy rates. Many times a declining rental market is a sign of underlying economic issues, most times accompanied by high unemployment rates and slow growth. Sticking around in such a neighborhood would be unwise. Unless you're confident about a significant development in the neighborhood in coming years.

4. High Property Taxes: Did property taxes go up? Taxes can get tricky, especially when you're buying as a foreigner. However, when sudden tax changes are eating up your income, then you have a negative cash flow property.

5. Problem Tenants: Are problem tenants eating up your profits? You have two options, regarding managing your rental property. You can either hire a property management company, which means more expenses but better management. Or you can just ride it solo. While this offers you the chance to take an active role with your property, dealing with problem tenants (tenants who break things, tenants refusing to pay rent or pay promptly, tenants causing disturbance etc.) is a major headache and can eat into your profits.

Hence the importance of having a screening process that's hard to bypass. However, if you deal with problem tenants a lot, it might be time to consider setting an exit strategy in motion.

You can take advantage of short-term rental cash flow with sites like HomeAway and AirBnb. While tenant turnover rates can be high in the short term, short term rentals can be profitable, especially in a popular destination such as a ski resort or beach community.