Investing in property overseas is a great opportunity for those who want to expand their portfolio, generate rental income, or find that perfect retirement home by the beach.
That being said, it doesn’t come stress-free. Although each property investment has its own unique set of concerns, there is plenty of overlap. So, whether you’re looking for property investment advice in Melbourne or a commercial real estate opportunity in Dubai, here are five considerations to keep in mind.
1. Consider if non-citizens are allowed to buy property
Although it may seem obvious, this is an easy thing to overlook. Not all countries allow non-citizens to purchase properties – Thailand being one of them. Furthermore, many of the countries that do allow non-citizens to purchase properties do so with certain restrictions. For example, non-citizens in Mexico can’t purchase property within 62 miles of the national borders.
Alongside doing your own research, it can be helpful to contact a local real estate agent to better understand the laws. Going through the hoops to legally own property is important if you want a (relatively) stress-free purchase. No one wants to find themselves the proud owner of an illegal property.
2. Consider how you will finance your purchase
One of the most important things to consider when buying property overseas is how you will pay for it. If you have the savings to pay for it outright, then you may skip over this section and head to taxation and money transfer considerations.
However, if you plan to take out a mortgage through a foreign bank, then you’ll most likely have to deposit a substantial down payment (up to 30% in Spain) and be prepared to pay higher interest rates than locals. Some foreign banks may also require you to take out an extra life insurance policy as a form of collateral.
3. Consider what taxes you will need to pay
Taxation changes from country to country, so it’s important to familiarize yourself with the local tax system. Alongside doing your own research, it can be helpful to contact an accountant in the area.
Generally speaking, however, there will be taxes related to the purchase itself (stamp taxes, title transfer taxes, and other taxes related to certifying legal documents), taxes to be paid during the time you own the property (property taxes and taxes on rental income), and taxes to be paid upon sale of your investment (capital gains taxes).
Taking these into consideration will help you to budget more accurately.
4. Consider how you will transfer money
Alongside figuring out how you will finance your overseas investment, it’s also important to figure out how you will transfer the money. Keep in mind that currency exchange rates fluctuate over time, so by timing it correctly and by using RemitFinder’s comparison engine, you can get more bang for your buck by getting the best currency exchange rate.
If you want to transfer a lump sum, then consider online platforms like PayPal or Wise. Alternatively, you may choose an international bank transfer (which might come with added fees). Another option is to open a foreign bank account. Some countries, like Mexico, allow non-citizens to open bank accounts once they gain residency.
5. Consider what your exit strategy will be
Even if you think you’re unlikely to sell your favorite holiday home on the beach, it’s important to develop an exit strategy in case the market or personal circumstances require you to do just that. Staying aware of the local real estate market can help you mitigate losses (or gain profits) in case you have to sell.
Keep these five considerations in mind, and you’ll be on your way to a safe overseas property investment.