Are you considering buying a piece of luxury property abroad? If so, you are about to make a smart investment. With the rapidly growing global real estate market, foreign countries are now worth more than brief visits. Both commercial and residential properties are now easily accessible, creating valuable investment opportunities.
Owning international real estate is an excellent step toward diversification and becoming a global citizen. Nonetheless, you must be wise when deciding where and how to purchase your property. Here are seven essential things to know before buying international real estate. But before we get there, let us look at the benefits of global real estate investment.
Why buy international real estate?
Investing in international real estate offers a range of benefits from higher returns, diversification, asset protection, and reduced tax burden to lifestyle benefits. Here is a detailed overview of these benefits.
Higher returns
One of the leading reasons people want to purchase international real estate is to get a higher return on investment. The global real estate market has been experiencing uninterrupted years of appreciation, meaning you can make high profits when it's time to sell your property.
Plus, the rents or accommodation fees keep increasing over time, leading to greater cash flow. Emerging markets like Los Cabos present an invaluable investment opportunity because they are likely to keep growing well in the future.
Asset protection
Investing in global real estate is a great way to protect your assets. If any instability issues arise in your country, you will likely not suffer losses elsewhere. Besides, doing this can protect you in the event that you are involved in a frivolous lawsuit.
If you have substantial wealth overseas, anyone claiming it must go to those jurisdictions. Unless their claims are legitimate, they will fail in their pursuit. That is if they will be willing to go all the way in the first place.
Diversification
Global real estate investments offer a perfect opportunity to vary and expand your assets. If you own an apartment or home in another country, you won't have to fuss with renting and paying someone else even when you stay there for extended periods of time.
Even better, some countries offer a residence permit when you purchase your property there. Getting residence or citizenship in a foreign country is highly beneficial. For instance, you can move there if you are concerned about your home country's economic and political stability.
Reduced tax burden
It's impossible to escape paying taxes in your country. Citizenship-based taxation accounts for almost all physical properties in most countries, making it difficult to lighten your tax burden.
However, if you are a resident in a country like the United States, there are specific overseas ownerships that you do not need to report to U.S. tax authorities. These include international real estate and private vaults. That means you can invest in foreign real estate and enjoy your profits without paying taxes.
Stretched retirement dollars
Residing in a country with a high cost of living can lead to a financially strained retirement. Numbeo, the world's leading cost of living database, reports that an average single person uses around $934.98 every month in the United States, and that's without rent.You can consider purchasing a home in a country with a lower cost of living to enjoy your retirement benefits longer.
Things to know before buying international real estate
So now you know the benefits of investing in global real estate. Let us look at the things you should know before purchasing your property.
1. The nation’s law
Every country has its unique laws. Some countries have specific foreign property ownership restrictions. For instance, in Thailand, non-citizens are not allowed to own land. You can only own land in the country through a corporation, with most members being Thai nationals. So, if you wish to buy a property overseas, you must be conversant with the rules that can affect your ownership.
Some will not just affect the property acquiring process but can also lead to future property rights disputes. Such conflicts are easy to avoid if you take enough time to clearly understand the laws specific to the location of your real estate.
2. Security
Find out about the protection policies for properties owned by foreign investors. In some countries, apartment buildings have doorkeepers 24/7. In Mexico, many buildings' courtyards or front doors are locked throughout. Only the building residents have the access code.
If you plan to purchase a luxury private property, ensure it is secured 24/7 at the entrance. That way, you won’t have to worry about your property when away.
3. Political and economic risks
Every time you plan to purchase a property outside your country, you subject yourself to political and economic risks. Political risk refers to any decisions or changes made by the government that may result in unanticipated losses to foreign investors. Of course, it's hard to know what political decisions a country is likely to make in the future.
But, you can do some research to find out whether there have been such cases in the past. Economic risk is the nation's ability to repay its loans and debts. An economically stable country should provide more reliable investment opportunities.
4. Location
You should not overlook the location of your international real estate. Consider the distance to the nearest shop or grocery, hospital, school, etc. In addition to making sure you can reach them easily, having clear information about the location of your property reduces fear, anxiety, and apprehension.
If your property is for business, ensure it is in a place that is attractive to potential business partners or clients. An accessible and convenient location is vital for businesses and rentals.
5. Currency
If you are familiar with foreign exchange, you know how risky a currency can be. The exchange rate of a currency can determine a country's economic state and the well-being of its citizens. That said, when purchasing international real estate, you are taking the risk of dealing with currency fluctuations within two economies.
Now, this brings in the process of acquiring your property. When paying for a property, your finances can be a problem, especially if there is a costly interest rate or high down payment. If you use a foreign bank, you might require an insurance policy to cover your mortgage. However, if you can pay the total amount in cash, your purchasing process will be straightforward. You will not go through the hassle of acquiring a loan.
6. Language barriers
Language barriers are among the primary issues associated with buying property in a foreign country. If you are not conversant with the local language of your preferred country, you might have a problem when working independently through legal documents and signing contracts.
Some places like Los Cabos have a large English-speaking population, so it is easy for Los Cabos real estate buyers to get a loan and purchase your property.
7. Real estate agents or property developers
When looking for a property overseas, chances are that you will go through an agency. Doing it independently can be daunting, and you can easily fall into the hands of fraud. The best way to acquire authentic deals is to engage with a reputable full-service real estate agent.
They have the best lists and locations of apartments and homes that have been screened for selling, verified, and approved. If it's a home or business property, you will want one that provides comfort, tranquility, and relaxation. So, getting professional help will save your time and effort.
Essential questions when buying international real estate
Here are some of the questions you might ask when purchasing international property, probably to a real estate agent or even to yourself to nail down your list.
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In which country is the property located?
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What kind of property is it? For example, is it a single-family home, vacant land, condo, or townhouse?
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What is the process of buying the property?
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Are there any restrictions for foreign investors?
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Is the property just for investment or business, or can it be a potential future residence?
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Can you rent the property when you are not around (assuming it has accommodation)?
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Does the property allow sole ownership, or will you own it jointly with a co-investor or spouse?
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What tools are you currently using for estate planning and estate protection?
Overall, the global real estate market offers a range of potential rewards and risks. Your experience may vary based on your preferred country. Some nations are easier to navigate than others. Nonetheless, a professional real estate agent will make your work easier in any country.
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