How To Buy Real Estate Overseas
An investment in a piece of property in a foreign country is the smartest thing you could do with your money right now. Like real estate anywhere, foreign property is a hard asset that, unlike stocks (and barring some act of God), can’t disappear altogether. Buy right and your real estate investment overseas, like a real estate investment anywhere, can benefit from capital appreciation over time and throw off an annual yield between now and then.
In addition, though, property overseas brings particular advantages that, in the current global financial climate, have become critically important.
A piece of property in a foreign country translates to diversification beyond U.S. markets and outside the U.S. dollar at a time when U.S. investors need this kind of diversification–of market, of currency, and of asset type–more than ever before in our history. No matter how many kinds of investments you hold, if they’re all U.S.-based or all U.S. dollar-denominated, you are not diversified. You are at the mercy of U.S. markets and events, and that’s a dangerous place to be right now.
Not all world markets are struggling or in recession. Certain places today present great opportunity, especially for the investor in search of a yield, thanks to expanding end-user markets–expanding middle classes, for example, or growing numbers of foreign retirees, international executives, foreign investors, or global entrepreneurs taking up residence. Meantime, other countries are in all-out crisis. Both scenarios present opportunity for the investor paying attention and ready to act, and I’ll introduce you to key places where both situations exist in the pages that follow.
Furthermore, foreign property holdings are one of the few remaining asset classes that can be kept private. An American is not required to report foreign property holdings to the IRS (as long as the property is held in your own name), not even on the new IRS Form 8938 (more on this later). And foreign property holdings are safe. How is a U.S. plaintiff or creditor going to seize your condo in Panama City or your beachfront lot in Belize?
An overseas real estate investment made today for diversification, safety, and an annual rental yield can evolve into your retirement residence when you’re eventually ready for that phase of life. Meantime, it can bring immediate personal enjoyment for you and your family. Your diversification and profit plan could take the form of an apartment in Paris, say, or a beach house in the Caribbean, meaning your offshore investment asset could double as your vacation getaway.
That’s why, as I see it, foreign real estate is not only the smartest way to invest your money today, it’s also the sexiest.
I didn’t set out to become an overseas property investor. It happened by accident and organically, with the purchase of the 200-year-old stone country house in Waterford, Ireland, that my family called home for six years. That purchase was the start of a now 15-year-long career investing in property overseas and, as well, again, accidentally, my first overseas property investment success story. My husband and I resold Lahardan House six years after we’d bought it for nearly three times what we’d invested in the property and took our leave of the Celtic Tiger market just before it, finally, after years of almost freakish and wholly inexplicable growth, peaked and then turned. Today, Ireland’s property market is in ruins. Meantime, in 2004, we walked away with euro profits that we invested in an asset we continue to hold today, an apartment in Paris that is worth more than twice what we have invested in it and that, for the past four years, has generated a modest annual yield from rental income.
That first experience buying real estate overseas, in Ireland, while more luck than genius, taught me many of the fundamental lessons I value most today–lessons to do with understanding your objectives before making a purchase, with navigating property markets without a Multiple Listing Service, understanding how to value real estate without the benefit of comparables, how to time a purchase, the importance of a clear exit strategy, and, perhaps most fundamental, balancing the profit and the lifestyle agendas of any buy.
While Lief and I began our overseas real estate investing careers unassumingly together in Waterford, Lief had made his first property investment before I knew him, in the States, and with a far more direct agenda: To make money. A few years before we met, Lief had taken a US$5,000 gift and turned it into US$150,000 profit through a real estate deal in Ravenswood. Ravenswood is a north-side Chicago neighborhood of middle-class office workers and first-generation Latino immigrants, a very up-and-coming working-class kind of place at the time. Here, after months of searching and negotiating to put together a deal that allowed him to make the buy with but US$5,000 cash, Lief had invested in a building configured as three two-bedroom flats. He lived in one of the apartments and rented out the other two. The rents generated a good income from the start and for more than two years to follow. After that time (just 24 months later), Lief sold the property and walked away with $150,000 after expenses. Not a bad return on US$5,000. It was that US$150,000 that made it possible for us to purchase Lahardan House in Ireland. And it was the profits from Lahardan House that later made possible our purchase in Paris…and so on.
The thing to understand right now is that overseas real estate is the smartest, sexiest way to invest your money and makes more sense in the current global climate than perhaps at any time in our lifetimes. It’s a key strategy for diversification at a time when diversification is not a sound investment approach but critical to survival. The very good news is that you can get started investing in real estate overseas with even a very modest capital budget. Lief began his career with US$5,000. The objective is much bigger than making money. Yes, you can make money this way, over time perhaps a great deal of money. But you’ll be accomplishing far more than racking up profits. At a time when it can seem like the world is spinning out of control, you’ll be putting yourself firmly in the driver’s seat of your and your family’s financial future. You’ll be positioned for profits in the immediate term (in the form of rental yields), in the mid-term (in the form of capital appreciation), and over the very long haul, building a legacy of wealth that can be enjoyed not only by you but also by your heirs.
And, all the while, purchase by purchase, you’ll be reinventing your life.
P.S. I am focused on these ideas and opportunities related to international real estate as both an investment strategy and a lifestyle as I commence work on a new book for Wiley, “How To Buy Real Estate Overseas.”
As I set out on this intensive two-month project, I must ask two things of you, dear reader.
First, please excuse my more limited presence in these dispatches. I’ll still be in touch, but less regularly than has been my habit. Rather than hearing from me each day, over the coming two months that I’ll be working to meet my Wiley deadline, you’ll hear more from other key Live and Invest Overseas contributors around the world–from Paul and Vicki Terhorst and Wendy and David Justice in Asia, from Lucy Culpepper and Lynn Mulvihill in Europe, from Lee Harrison and Phil Hahn in the Americas, and from attorney-friend Joel Nagel, who will keep us all up-to-date on important pending deadlines to do with the Busch tax cuts and FATCA.
Second, I’d like to enlist your help. For this new book, I need as many global property investing success stories as I can gather. If you have one, I’d love to hear it. Have you bought, flipped, renovated, developed, rented, built, or refurbished for positive return somewhere in the world? If you wouldn’t mind my referencing the tale in my new book, contact me with the details. You can reach me by e-mail here: Editorial@LiveandInvestOverseas.com.