• About Us
  • Contact Us
  • Privacy Policy
  • Terms
  • Unsubscribe
No Result
View All Result
Live and Invest Overseas
FREE REPORT
BEST PLACES TO RETIRE
*No spam: We will NEVER give your email address to anyone else.
  • HOME
  • COUNTRIES
    • Top Destinations
      • Portugal
      • Panama
      • Belize
      • France
      • Colombia
      • Dominican Republic
      • Thailand
      • Mexico
      • Spain
      • Argentina
    • Browse All Countries
    • Best For
      • Retire Overseas Index
      • Health Care
      • Cost of Living
      • Investing in Real Estate
      • Editor’s Picks For Retirement
      • Establishing Residency
      • Starting an Online Business
      • Single Women
      • Playing Golf
  • BUDGETS
    • Super Cheap ($)
      • Cuenca, Ecuador
      • Chiang Mai, Thailand
      • The Philippines
      • Las Tablas, Panama
      • Granada, Nicaragua
    • Cheap ($$)
      • Algarve, Portugal
      • Medellin, Colombia
      • Boquete, Panama
      • Carcassone, France
      • Buenos Aires, Argentina
    • Affordable ($$$)
      • Abruzzo, Italy
      • Barcelona, Spain
      • Las Terrenas, Dominican Republic
      • Puerto Vallarta, Mexico
      • Costa de Oro, Uruguay
    • Luxury On A Budget ($$$$)
      • Ambergris Caye, Belize
      • Paris, France
      • Panama City Beach Area
  • Real Estate
  • ARCHIVES
    • Living & Retiring Overseas
    • Raising A Family Abroad
    • Foreign Residency & Citizenship
    • Offshore Diversification
    • Our Latest On Coronavirus ⚠️
  • Making Money
    • International Real Estate
    • Banking
    • Employment
    • Investing
  • CONFERENCES
  • BOOKSTORE
Live and Invest Overseas
  • HOME
  • COUNTRIES
    • Top Destinations
      • Portugal
      • Panama
      • Belize
      • France
      • Colombia
      • Dominican Republic
      • Thailand
      • Mexico
      • Spain
      • Argentina
    • Browse All Countries
    • Best For
      • Retire Overseas Index
      • Health Care
      • Cost of Living
      • Investing in Real Estate
      • Editor’s Picks For Retirement
      • Establishing Residency
      • Starting an Online Business
      • Single Women
      • Playing Golf
  • BUDGETS
    • Super Cheap ($)
      • Cuenca, Ecuador
      • Chiang Mai, Thailand
      • The Philippines
      • Las Tablas, Panama
      • Granada, Nicaragua
    • Cheap ($$)
      • Algarve, Portugal
      • Medellin, Colombia
      • Boquete, Panama
      • Carcassone, France
      • Buenos Aires, Argentina
    • Affordable ($$$)
      • Abruzzo, Italy
      • Barcelona, Spain
      • Las Terrenas, Dominican Republic
      • Puerto Vallarta, Mexico
      • Costa de Oro, Uruguay
    • Luxury On A Budget ($$$$)
      • Ambergris Caye, Belize
      • Paris, France
      • Panama City Beach Area
  • Real Estate
  • ARCHIVES
    • Living & Retiring Overseas
    • Raising A Family Abroad
    • Foreign Residency & Citizenship
    • Offshore Diversification
    • Our Latest On Coronavirus ⚠️
  • Making Money
    • International Real Estate
    • Banking
    • Employment
    • Investing
  • CONFERENCES
  • BOOKSTORE
No Result
View All Result
Live and Invest Overseas
No Result
View All Result
Home How to

Be Aware Of These Risks Before Buying Overseas Real Estate

4 Biggest Risks Of Buying Property Overseas

Lief Simon by Lief Simon
May 31, 2019
in How to, Real Estate
0
A hand holding a key with house keyring

Image Source: iStock/undefined undefined

233
SHARES
3k
VIEWS
Share on FacebookShare on Twitter

How do I assess the potential risks of a real estate investment opportunity I’m considering making in another country?

That may be the question I’m most often asked by readers… especially by readers considering investing outside their home countries for the first time.

For reasons I’ve never understood, people buying property in another country often do less due diligence and ask fewer questions than they would back home.

They do this despite knowing they are in unfamiliar waters without the protections they count on in the United States or Canada, for example. They trust the local sales agent they’re working with almost blindly, especially if the agent is a fellow English-speaking gringo.

The ability to speak English is a guarantee of neither credibility nor expertise.

Write that down someplace you won’t forget.

To help you avoid letting this kind of margarita madness drive your real estate purchase in another country, here are the key risk assessments you should work through when considering buying a piece of real estate anywhere (including back home):

Country Risk

Country risk is important to consider and rate even if you’re already comfortable with the country where the property is located.

Political Stability

A country may be politically stable now, but real estate is a long-term investment. You want to understand what the political climate has been over the last decade or two… as well as in which political direction the country is headed.

In most cases, political stability is a medium risk in Latin America and a low to medium risk in Europe and the Caribbean. In Asia, it’s more of a country-by-country consideration, but the places in this region where you should be looking to invest right now would qualify as medium risk or lower.

Economic Stability

Economic stability can go hand in hand with political stability at times, but every country’s economy runs in cycles. Where in its cycle is the country now?

And what industries does the economy rely on? Tourism… commodities… manufacturing… agriculture?

Countries with all these sources of income and more will be more economically stable than countries whose economies depend on just one or two industries.

And a growing middle class is always a big plus.

Foreign Investment

Finally, when assessing country risk, you want to understand how foreign investors are treated under the law.

Look specifically at whether the country imposes capital controls or restrictions. These are not a deal breaker, but you need to understand them before committing to a purchase.

Most countries treat foreigners the same as locals regarding property rights, but you don’t want to end up in a legal battle over a property boundary only to find out you’ll never win in court because of some law limiting your rights as a foreigner.

Currency Risk

Currency risk is related to country risk but should be considered separately. The question to answer is:

How volatile is this country’s currency and why?

Oil-based economies have stronger currencies when oil prices are high and oil is flowing. That’s because they sell their oil in U.S. dollars then use those dollars to buy their own currencies.

Indeed, commodity-based countries in general tend to have strong currencies when commodity prices are strong.

In larger countries without hard currencies, volatility can move in more dramatic cycles. This is the case with Brazil and Colombia, for example, both of which are at lows right now versus the U.S. dollar.

One reason to buy a property in another currency is to generate local income to spend while you are in that country. That can increase your currency risk tolerance.

However, if you’re investing for yield and yield alone and intend to convert all earnings back to your home currency, consider what changes in exchange rates might ultimately mean for your net returns.

Market Risk

Market risk is different than country risk. This is about looking at the specific real estate market where you’re considering investing.

If you’re thinking about buying a rental apartment in Paris, you want to consider the country risks of France… but, as well, specific Paris market factors.

What is the size of the overall market? Who is buying? Or, more appropriately put, who would you be selling to when you decide to exit?

And who makes up the rental market?

If either or both the selling market and the rental market are made up mostly of foreigners, then you need to consider whether those foreign buyers and renters will continue at the current rate (or maybe at an improved rate) in that location during the time you intend to hold your investment.

To answer that question, look at the economies of the countries providing the majority of the buyers and the renters.

Belize is a good example of a foreign-driven rental market. If North Americans stop coming to Belize, your property values and rental income will suffer.

Also look at how much leverage is in play in the market. In a highly leveraged market, if cycles turn downward, you’ll see sellers dumping properties or walking away from their mortgages rather than continuing to make payments, creating oversupply.

In markets with little leverage, owners can afford to hold through downturns until prices stabilize.

Project/Property Risk

If you’re buying into a development or pre-construction, look at where the project is in the completion cycle. Is this the launch of a 500-unit development… or has the developer built and sold 200 units already? The latter isn’t a guarantee of reduced project risk, but it does give you an added level of confidence that the project will be completed.

Is this the developer’s first foray into this market, or is he an old hand? Has he completed this kind of project before?

How is the developer funding the project—with his own funds, bank financing, sales, or a combination of all three? If the source of needed funds is bank financing, is the bank committed or can they back out and leave the developer high and dry?

Of course, a seasoned developer can start a project that doesn’t get completed. Experience is important, but it’s not a guarantee.

I’m working with one developer in Mexico who has taken longer than expected to build out his community, but he is getting it done and I have confidence he’ll complete.

I’ve also known a developer with dozens of buildings under his belt who was not able to complete a project because the bank he had lined up backed out just as he started construction.

Consider all these risks of any purchase you consider… then size them up against your levels of tolerance and overall investment goals.

Lief Simon

Share108Tweet52
Previous Post

Should You Use An Attorney For Residency In Panama?

Next Post

Subletting A New Office In Waterford, Ireland

Lief Simon

Lief Simon

Lief Simon has lived and worked on five continents and traveled to more than 60 countries. In his long career as a global property investor, Lief has also managed multimillion-dollar portfolios of rental properties, for others and for himself. He offers advice on international diversification in his twice-weekly Offshore Living Letter and monthly Simon Letter dispatches.

Related Posts

Waterford City, Ireland
Ireland

Buying Property In Ireland Wasn’t What We Thought It’d Be

by Kathleen Peddicord
August 3, 2022
0

Real Estate Hunting With Mr. O'Shea "This one isn't old either," I whispered in Lief's ear so that Mr. O'Shea...

Read more
Sunrise on the Monte Gordo beach, Portugal

Rent Cost: Comparing U.S. Markets Vs. Overseas Markets

July 28, 2022
Senior man working on his laptop lying on deck chair on the beach during sunset

7 Easy Ways For Making Money Overseas Quickly

July 19, 2022
Luxury Cedar cabin home with Large pine tree and pond

11 High-Risk Property Investments To Avoid

July 18, 2022
Senior couple sharing a quiet day outside with two dogs

Your Plan For Retiring Overseas Can It Be Part-Time?

July 17, 2022
A quaint little town in Italy with bright blue waters and colorful buildings

Things To Consider When Buying Property With A Different Currency

July 15, 2022
Narrow historic street with old buildings in Toulouse, France

Should You Rent Before You Buy? The Pros And Cons

July 14, 2022
Next Post
selection of colorful doors in dublin

Subletting A New Office In Waterford, Ireland

Start Your New Life Today, Overseas

A world full of fun, adventure, and profit awaits! Sign up for our free daily e-letter, Overseas Opportunity Letter, and we’ll send you a FREE report on the 10 Best Places To Retire In Style Overseas Today.







LIOS Resources


  • New To LIOS
  • Ask An Expert
  • Media Center
  • Contact Us
  • FAQs

Quick Links


  • Best Places To Live
  • Best Places To Retire
  • Finding A Job Overseas
  • Real Estate

Sign up for our free daily e-letter, Overseas Opportunity Letter, and get your FREE report: The 10 Best Places To Retire Overseas In 2022

  • About Us
  • Contact Us
  • Privacy Policy
  • Terms
  • Unsubscribe

© 2008-2022 - Live and Invest Overseas - All Rights Reserved.

No Result
View All Result
  • Home
  • Countries
  • Budgets
  • Archives
  • News
  • Events
  • Bookstore
  • Newsletters
  • About Us
  • Members Area
  • Contact Us

© 2008-2022 - Live and Invest Overseas - All Rights Reserved.

The World’s Best Places To Be In 2022?

Discover Them Here…

Sign up for FREE and learn how to live the good life on a modest budget, find bargain property, and more. Plus, check out our free report on the 10 BEST PLACES TO RETIRE.

RETIRE OVERSEAS AND LIVE LIKE ROYALTY