Buying international real estate is a complex and challenging process. You must factor in all the issues related to buying a real estate property in a foreign country, including the size and style of the property, the location, the real estate market, the legal system, as well as the price range.
Needless to say, you may find yourself seeking out guides and tips to help you out. You are probably asking yourself, “What should I do to avoid risks when buying international real estate?”
To avoid risks when buying international real estate, you need to do a lot of research and seek independent advice. Get familiar with the area where you plan to buy and study the local market. Learn about the buying process in the specific country that you choose.
You will also need to consider that the legal systems may be very different from what you have experienced in the United States. Therefore, it is important to learn all about the local legal system and hire local professionals to help guide you through all legal matters.
Weigh all of your financing options to buy in that country and learn about the different types of mortgages which would be available to you as well as any other legal fees you may need to pay.
Need more information about avoiding risks when buying international real estate? We’ve provided a little guide to help you buy real estate overseas. Keep reading!
Find the Best Location That Suits Your Requirements
When investing in real estate abroad, knowing the area that suits you and your needs best is a must. You can buy property in countries all around the globe, but the best places to invest in a property will vary according to a number of factors.
First, you need to ask yourself, “What will I use the property for?” Do you want to rent out the property and get a passive income or live in it? If you plan on renting the property, then you need to think about your target audience.
If your target is tourists, consider the most popular regions for tourists during both peak and non-peak season. If your target is families, find the best areas near central business districts and good schools. Also, consider the traffic, main motorways, airport, medical facilities, shopping, and nightlife.
Familiarize Yourself with the Local Area
Investing in real estate overseas without understanding the culture and geography can lead to a nasty surprise. When you have your eye on a location to invest in, it is recommended to spend some time in the area.
This will give you a sense of what drives local land. Staying in the area is also a great opportunity for you to get a sense of how profitable your real estate investment is likely to be in the long term.
Make sure you see the potential for future improvement and development since it can widely affect the future value of your investment and profitability.
Affordability
Besides the property price itself, there are many other costs that need to be considered when you buy investment property abroad. Remember that property ownership, especially in other countries, involves upfront and ongoing costs.
The upfront costs may include stamp duty, deposit, registration fee, legal fees, transfer fee, and real estate agent’s fee. For ongoing costs, you may need to consider regular bills, maintenance, repairs, and mortgage repayments (if you use a mortgage to finance your property investment).
Both the upfront costs and ongoing costs can add up. If you fail to consider them before you buy the property, it can be a disaster when you find out that you can’t actually afford the purchase.
Study the Local Market
Obviously, you want to invest in a profitable housing market. So get informed and immerse yourself in everything about the country’s real estate market. There are three factors in the market that you need to study before investing in international real estate, which includes:
- Market trends. Understanding the market trends will help you with negotiations. If you don’t know anything about the local market trends, then you won’t be aware of the actual value of the property. Also, certain spots in a given area make smarter investments than others. Investing in an area where property prices are declining will increase the chance of you losing money. Keep an eye on trends to find good investment opportunities. You can do your research online, but don’t hesitate to ask for help.
- Rental rents. The worth of a property can be determined by rents in the area. Performing a cash flow analysis is very important to determine the potential rent. Otherwise, you will only end up with a cash flow issue as your investment property turns into a financial burden.
- Selling price. Find out the worth of the property in a particular neighborhood. You will need to be aware of the local sales pricing as property values can change very quickly. The value of a property can fluctuate a lot, especially in the current unpredictable investment environment.
- It may be tempting to make a large investment based on a higher return rate. However, if you are a first-time buyer, less may be best. Our tip is to start small, so if you make a mistake, your loss won’t be as severe. Making smaller investments when you’re just starting out is a good way to test the waters. If your investment is successful, you then can go on to make a larger investment.
Related: How to Research Real Estate Markets: The Beginner’s Guide
Hire Local Professionals
To make sure you tick all of the boxes, hire a local attorney to guide you through all legal matters. In addition, find a trustworthy local real estate agent. A good attorney will make sure you fully understand the legal system, explain the contract, and help you read through the sales and purchase agreement.
A real estate agent who has your best interest at heart will explain the market to you, help you stay organized, and make sure you get the best deal. Also, a good real estate agent will make sure you are aware of any developers or sellers you need to avoid. Both the local attorney and agent can give local advice and recommendations so you can avoid scams.
Understand the Legal System
Each country has a different legal system. For example, foreigners are technically only allowed to buy a condominium in Thailand, but there are ways around this. One of the ways is to purchase the property through a limited Thai company. In other countries, there will be restrictions as well. Therefore, it is important that you understand the legal system of the country you want to invest in.
This article has been contributed by Stephanie Holmes.