A few weeks ago, I was asked to be a guest on the Jetsetter Show Podcast with host Jason Hartman. My mission:
To cover the top real estate markets overseas for U.S. buyers.
Ahead of the show, the producer sent me a list of potential questions for discussion.
I took time to gather my thoughts around these topics. And I made notes… lots of notes.
When I got off the phone with Jason, I looked down at the scattering of Post-its all around me. What had I been thinking? We were never going to fit everything into a 20-minute podcast slot…
There were some great topics that we just didn’t get around to.
But Jason’s listeners’ loss is your gain.
Today, I’d like to answer one of the unasked questions that I’d say is one of the most important starting points when you consider the idea of investing in real estate overseas…
That is: How can you identify a good international real estate market?
This is taking us back to basics… but it’s important to consider this question as you scout the globe for your ideal property purchase or investment.
So let’s delve right in…
Here are four top ways to identify potential markets for investment…
- Infrastructure developments
- Strong tourist growth
- A growing middle class
- Currency advantage
Let’s look at each one in turn…
Where is the investment going in a country? Where is the government putting in new highways, airports, and developing a brand? When thinking about rental returns, you want to be sure you’re investing in an area that’s easily accessible for tourists and expat renters to get to.
In Mexico, for example, it’s all been happening on the Riviera Maya (Mexican Caribbean) this past decade. Over 25 million visitors passed through Cancún airport (the gateway to the Riviera Maya) last year. When it gets its new terminal, that number is expected to reach 40 million tourists—many of whom will travel on down south to the Riviera Maya. Property values on this stretch of coast are increasing by 9% per year—2% ahead of the national average.
Strong Tourist Growth
Identifying an area with a steady tourist market is the first step. But then you need to dig deeper. Fortaleza may be the most popular tourist town in Brazil, but that doesn’t mean any old property here will produce a solid return. Tourists will want an apartment on the beach—or as near as possible to the sand.
Be sure to find out, too, what type of property is in demand. While you might think a two-bedroom apartment will have the widest appeal, often it’s a studio that gets the best return (this is the case in many European capitals).
To minimize your risk, look for areas that have a strong domestic tourist market, too. Sticking with our example of Fortaleza, it’s not dependent on international visitors and has long been attracting local Brazilian families on weekends and vacations.
Growing Middle Class
If you’re going after the long-term rental market or thinking about who might snap up that condo you got at an attractively low pre-construction price, a growing middle class is your friend.
Panama is one country where the working class is seeing better times and young people want better housing than they grew up with—think modern buildings with gym and swimming pool on-site.
I don’t recommend you get hung up on timing a property investment around exchange rates. But, when it happens that you have an attractive market (one that makes sense for your own goals) coupled with a favorable currency exchange, then it may just be time to strike.
Brazil and Colombia are two markets where U.S.-dollar-holders have especially strong buying power today. Though prices have been appreciating over the years, thanks to a deep currency discount, you’re not too late to get in. Beach villas south of Fortaleza, Brazil, start at US$97,000, for example…
Meantime, in the upmarket neighborhood of El Poblado in Medellín, Colombia—a city that offers a sophisticated lifestyle that’s not easily found in Latin America—I’ve just seen a one-bedroom apartment, 75 square meters in size, for US$123,000.