Why Overseas Property Might be for You

Making money is not for everyone. If you’ve got enough money to live on, a comfortable lifestyle could be all you’ve ever wanted. Once you’ve retired, or taken an indefinite amount of time off, you want to lay back and do what you want with your life without worrying about building up a war chest just in case.

Unfortunately, money has a way of eating through itself. While your calculations told you it would last for decades, unexpected inflation, economic events, health problems, and even celebrations force you to use far more than anticipated.

This is why a wise investment is recommended. Unless you’re truly rolling in it, relying solely on your capital can lead to big problems. You need your money to grow, and with a smart investment, you can let it do the work for you.

Overseas property is one of the best markets to invest in if your goal is to save. Here is why.

It’s cheaper overseas

Property in developing countries is significantly cheaper than at home. Buying an apartment in India, for example, will cost you more than 5 times less than an apartment in London. Of course, you can ask a lot more for rent on an apartment in London. But you’ll have to risk a lot of your capital – possibly more than you can afford. You’re going to need cash available to live, remember.

Even if you can afford it, it might leave little for alternative investments, meaning all your eggs end up in one basket.

Yields and taxes

When buying property anywhere, you need to look at what the property will yield in context of property taxes. The yield in a country such as the UK or US will probably be higher than in developing countries. However, rental income tax in the US is 30%, which is much higher than you’ll pay in developing countries.

There are countries in which you’ll receive an even higher yield than the US, with a much lower tax rate. Brazil is a good examples. You’ll get significantly higher yields, while their rental income tax is at 15%. Other taxes – such as capital gains – are higher than in the US, but not high enough to offset the positive ratio.

Vacation homes

Another big advantage in investing abroad is that you can use your property as a vacation home if you are renting it out in the short term. You want the opportunity to travel and relax, and having property abroad gives you the chance to do so often at minimal cost. This should be a consideration when choosing where to invest. Invest somewhere you actually want to go, even if it costs a little more!

Challenges

There are, however, challenges to managing property overseas. Common difficulties include:

• legal barriers: you need to be aware of the country’s legalities and regulations, as they may be different from your home country
• language barriers: renting property out to foreigners who do not speak your language can be difficult, especially when agreeing terms and checking up on their treatment of your property
• scams: while you’re aware of popular scams at home, they may look very different abroad. You need to do your research and watch out for warning signs
• money transfers: you’re going to be buying and earning in a foreign currency and that comes with its own problems. Exchange rates change, and banks charge a lot for foreign exchange

Tips to ensure things go as planned

Use currency transfer companies

Currency transfer companies are going to be your best friend when investing in property abroad. Not only do they charge comparatively minor fees for transfers, they also have options to ensure your income remains stable. Options such as forward contracts allow you to fix an exchange rate for up to two years, so that your earnings don’t drop or your expenses rise because of volatility in one of the currencies.

Also, they will help you deal with all the complexities. Some transfer companies have excellent customer service, and offer one-on-one advisement on how best to transfer your money, where to take the mortgage, and much more.

Do your research

There is nothing more important than thorough research. What may seem as a safe bet on the surface might end up being a disastrous investment. Don’t take the seller’s word for the value and prospective earnings of the property. Make sure you find all the facts for yourself.

A familiar location

If possible, invest in a place you have some affiliation to, or at least good contacts in. This will help ensure you don’t make mistakes simply because you’re unfamiliar with the country.

Be frugal

Finally, even though you’re making an investment that can bring in loads of passive income, don’t go overboard. Spend only what you have planned, as the money will be sunken for a while.

Conclusion

If you have money that you want to save, or live on when you’re retired, investing in overseas property is an excellent option. Property can bring in a great passive income, that will grow your money instead of the risk of slowly running out. Overseas properties are often a better option to domestic property investments, as you can find real estate that is much cheaper, comes with lower taxes, and can be used for cheap vacations. While there are some challenges, they are easily surmountable, and should not stand in the way of a good investment.