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Today we are talking about real estate investments abroad and in particular downsides of doing so.
We'll point out some things that can hurt your returns, and give you tips on what to look for.

If you invest in other markets, it gives you more exposure and diversification. This is certainly good. However, there are disadvantages of entering foreign market that you wouldn't have if you were investing just in your local market.

One thing that is important to understand is that lots of value in real estate comes from financing. A good real estate purchase will get you about 8% yield. This is good, but not amazing. And if you do exceptionally well you could do 12%, but this is very rare, and possible only in certain markets.
At the same time there are markets that yield only 3%.

So if we say that average yield is 7-8% that's okay but not really attractive.
BUT if you can borrow money at 2% now you can make returns on bank's money. Cash on cash return can be quite high in that case!

If you are in a market where you can't get loans your real estate purchase won't be such a good deal anymore. Especially from ROI point of view.
As a general rule, it is harder to get loans abroad than in your home country. You can build credit, however this will take years.

This is a massive disadvantage compared to what you can get back home!

On top of this, there are tax consequences of real estate investing. Usually tax treatment of real estate is better than many other types of income, but this also depends on the country.

If you want to get a really good tax treatment you can do it via deferral and refinancing. Since financing is weak in foreign markets this strategy may not necessarily work well for you.


Who are we and what do we do?

We are Offshore Citizen team. We help people become global: get a second passport, set up a second residency, pay less taxes, do banking abroad, etc.

We have lots of interesting articles on different topics, we have relevant information up to date.


Author: Michael Rosmer

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