For investors, the ultimate goal is to accumulate great wealth to secure an early retirement plan, and gain financial freedom and independence over the long haul.
Most are jumping on the investing wagon to kick start a successful real estate business and quit their mundane day job. Sure, making money passively is very alluring, but do not be misled that real estate investing is passive work. It takes a lot of time and dedication to build a real estate empire and reach a very comfortable way of living. International real estate is a tricky subject because there is a lot more risk on the line as opposed to investing locally. Nevertheless, it is a lucrative investment to say the least, and investors can materialize even greater, more diversified wealth if they invest overseas.
Related: How to Know You Are Ready for Multiple Investment Properties?
Advantages of International Real Estate Investing
1. Greater diversification with a global edge
The goal of successful real estate investing is the diversification of your risk across different investments. In other words, do not ever put all your eggs in one basket because there is too much risk to bear and you can easily lose all your money if economic conditions turn against you. The housing market is far from static, and economic conditions have drastic effects (whether negative or positive) on the housing market. Investing in international real estate is a great way to diversify your portfolio with a global edge. By investing in foreign real estate markets, you spread your investment risk around the world. International real estate markets move in different or even opposite directions, i.e., oftentimes offsetting a US decline with a foreign rise. In a nutshell, foreign markets offer more opportunity for fast growth and greater wealth.
2. Accessibility and globalization
In this day and age, technology is revolutionizing the way we communicate, live our lives, and conduct business. It is making things accessible, easier, and faster. With the help of technology and globalization, we are becoming more tech savvy and are able to access all kinds of information, acquire knowledge, and stay connected in faster and more effective ways. With this said, international real estate is possible for anyone because of the internet. You can search and find lucrative foreign markets to invest in an instant and without paying a penny. If you use technology to your advantage as a real estate investor, you can reap financial rewards beyond your wildest dreams.
Related: When are property management fees worth it for real estate investors?
3. Expand your real estate networks and expertise
Not only do you gain a more diversified real estate investment portfolio reaping greater returns, you also gain a global edge in expanding your real estate networks and overall expertise. You broaden your knowledge and get a better grasp of the micro as well as macro real estate markets (locally and internationally). You set no limitations to what you can do. As a result of international real estate investing, you will gain more confidence when and where to invest globally, without limiting your investment opportunities.
4. Materialize greater wealth and mitigate your risk
In tandem with the previous points, investing in international real estate reaps you greater financial rewards because you are not limiting yourself to one market. International real estate provides investors with the opportunity to profit from both expanding and floundering markets. That is because international markets do not move in the same direction, and if one market is doing great, the other market may be the polar opposite. Moreover, investing overseas or in foreign markets enables investors to gain more tax advantages than investors only set in US markets.
Disadvantages of International Real Estate Investing
1. Remote management
If you buy real estate in a foreign country, you must find a way to effectively manage your investment property remotely. Hiring a property manager is your best bet to guarantee happy tenants as well as maintenance and upkeep. It might be costly, but definitely worth the price.
2. Currency risk
Another big disadvantage of investing in international real estate is the currency exchange risk. Changes in the exchange rate between the US dollar and another foreign currency are inevitable and usually unpredictable. It goes without saying this risk is hard to mitigate and for investors it poses a huge threat to their potential earnings. So, if the dollar is weak, your gains will increase (get more dollars when you exchange currencies). If the dollar is strong, your gains will be smaller when you convert your earnings into dollars.
3. Dramatic changes
Understanding the foreign markets and keeping up with economic and political situation is key to a profitable international real estate investment portfolio. The housing market is very dynamic and ever changing, and this also applies to international markets. You can never be too certain or too sure of your investment opportunities because they are contingent on economic, political, and social conditions. Events such as revolutions or unstable government can have severe repercussions on a country’s economy and in turn send its market to a bottomless pit. If investing in international real estate is something you want to do, it is crucial you familiarize yourself with the economic and political situation in the country in order to make better informed decisions on your prospective investments.
Related: What You Must Know About Real Estate Investment Analysis
4. Understanding real estate laws in foreign markets
It is crucial that anyone investing in real estate overseas understands the local real estate laws in that specific market. Just like real estate laws differ city by city in the US, this also applies to foreign countries. Real estate laws can be very complex and different from what you are used to. So make sure you hire a real estate lawyer or a real estate agent to keep you informed to make smarter decisions.
Conclusion
Investing in international real estate the right way can help investors reap greater wealth and rewards. Broadening your networks and expertise is also another key asset to have. Make sure you study your investments properly and conduct proper due diligence before you close any foreign deal. The risk of investing in international real estate is much greater than investing in your local market. Moreover, make sure you choose a strategic timing and a prime location to kick start your international real estate ventures. Real estate opens doors of opportunities for all investors and the benefits continue for the long haul.
For more advice on real estate investing locally and internationally, keep reading on Mashvisor.
