One thing many investors have in common is although they might diversify their investment portfolio, they tend to concentrate their investments in their own countries. For example, a friend of mine who considers himself an expert in spotting great investment opportunities, always opts for ventures located in the States. He is focused on what he invests in rather than where. In my eyes, this is like investing all your funds in a single business or asset, because if your home country faced political uncertainty or an economic crisis, the investment portfolio wouldn’t look very healthy, regardless of how diverse it was. For this reason, I believe investing internationally is very important when building an investment portfolio today.
For example, we only need to look at the UK and Brexit.
In many cases owning a property in another country permits you to set up a second residency abroad, and sometimes even gets you a foreign passport. This affords you a stable place to go in case the economy or political situation in your country takes a turn for the worse.
The average UK citizen for example, who has all their assets invested in the UK could well be panicking now. However, many UK citizens with a second home in Spain or France are likely less worried. They know leaving the country won’t be too much of a problem should it be a preferable scenario after Brexit.
With many great opportunities in diverse markets overseas, you have plenty of choices. But for the purpose of the limited scope of this article, we will concentrate on international real estate, which is a sound way to begin an international investment portfolio.
Where to Invest?
Investing in established developed countries like Australia or the US won’t give you huge fast returns, and these markets can be cyclic, meaning if the market takes a downturn, it could take a number of years waiting for the upturn to recuperate your investment. Whereas in emerging economies, such as Cambodia, Georgia, and Colombia, investors are seeing annual returns of up to 10% – 15% on their investment portfolio, and that is only on the annual appreciation. Rental earnings bring in further revenue.
Diversify Your Portfolio and Your Life
Investing in international property won’t only diversify your investment portfolio it will also diversify your life, as you can plan to spend time there in the future or even now if your career and family situation allows it.
Should you desire to take an extended break, you don’t have to be bothered with looking for a rental property or worrying about a permit to allow you to stay for a longer period. There are a substantial number of countries where if your investment is large enough will throw in a residence permit allowing you to spend longer in the country than a regular tourist.
If you are someone who likes to spend their vacations in the same location every year, thinking about buying a property in your chosen resort there is a great idea, as not only will you have your own place to go to during the summers it’s also a ready-made retirement option. Depending on the amount of time you spend there yourself you also have the possibility of renting it out to other tourists with the help of a local estate agency. This offers not only rental income but also increases your total worth as the property increases in value.
Is it for you?
So, we have discussed the benefits of owning international real estate but is it for you?
Owning international real estate gives you an internationalized lifestyle without having to leave your family, friends, or career in your home country. It is a good way to start taking action towards relocation without having to make a firm commitment.
However, to make clever international property purchases, you will need to be prepared to travel to view properties and complete deals. In many international real estate markets, completing the process online is not a good idea, and in some countries, simply impossible.
Real estate agents abroad can be a huge help, but you possibly don’t want them to take every decision on your behalf. If you buy a property in your own country, after narrowing searches down to a few properties, you would want to see them, visit the neighborhoods they are located in, and discuss a price. When buying abroad, these actions are just as important, if not more so.
You also need to think about the cost. Buying abroad requires a higher investment than just the purchase price. You need to consider local and government taxes, travel costs, refurbishment and the upkeep of the home when you are not there to maintain it yourself. These factors need to be carefully considered before you go ahead with the purchase, and ideally, you will enlist the help of a professional to help you determine if you have adequate funds to purchase international real estate.
Before going ahead with any property purchase abroad make sure you have done your research well and always hire a recommended and reputable lawyer even when you have a real estate agent on board.
This content is brought to you by Mac McCarthy.