Global Property Investment

One Key To Pocketing Global Real Estate Investment Profits

One key to making money investing in real estate around the world is remembering all associated costs of any transaction, both coming and going, in your initial figuring. Forget to factor in capital gains tax, for example, in a jurisdiction where you’re liable to pay it at a rate of 25% (as you can be in Mexico), and your overall rate of return certainly will suffer.

Here’s what you need to know.

Depending on the country, you’ll have a transfer tax (called “stamp duty” some places), which is sometimes paid by the seller and sometimes by the buyer; real estate agent fees (again, in some countries paid partially by the buyer); attorney/notaire fees; registration fees (to record the title); property taxes; income taxes on any rental income; and capital gains taxes when you sell.

If you set up a company to hold the property, you’ll have incorporation fees and annual fees associated with maintaining that corporation.

Figuring out all of these costs can be daunting. There’s no single source available that provides complete, current, and reliable data. This is why I’m putting together a report for my Marketwatch members outlining all associated fees of investing in the countries on my radar right now.

Some highlights…

You’ll pay no capital gains taxes on real estate profits in New Zealand, the U.K. (if you’re a non-resident), or Croatia (if you hold the property in your own name for at least three years). You’ll pay no capital gains taxes in Argentina if you hold the property in your own name, period.

France is one of the most burdensome tax jurisdictions in the world. Yet, if you hold a piece of property in this country for 15 years, you owe no tax on any gains you realize when you eventually sell it. From years 6 to 15, the capital gains tax in France is reduced by 10% per year.

If you don’t like to pay property taxes, look at Croatia. Ireland also imposes no property taxes on residential property. You’ll pay no tax on property held in Buenos Aires, though you will on real estate you own outside the Argentine capital. Note that you are liable for a wealth tax on the value of your property in B.A.

Panama offers a property tax exemption for up to 20 years on new construction (for the building only, not the land). Uruguay imposes a property tax, but the rate is extremely low, as is property tax in France.

For any round-trip real estate transaction, expect to pay on average 12% of the property value. That should cover transfer fees, real estate agent fees, attorney fees, etc. You’ll pay the greatest round-trip cost among countries on my radar right now in Belize, where you could pay as much as 19%. The country boasting the lowest all-in cost of investing in a piece of real estate is Panama, at around 9%.

This is not to say that I advise investing in property in New Zealand because you’d pay no capital gains taxes…or in Ireland because they don’t have property taxes. You have to analyze the investment market and any particular opportunity first. Then take into account all associated costs and taxes.

You just want to make sure you know what all those costs and taxes will be up front, while you still have time to adjust your strategy to accommodate them.

Lief Simon