Things To Consider When Investing In Luxury Real Estate Abroad
/Are you looking to expand your investment portfolio? If so, you may be considering luxury real estate and/or opportunities to invest in real estate overseas. Investing in real estate is a challenging area for anyone to master, and it has become even trickier to navigate with the COVID-19 pandemic and its impact on the global economy.
Additionally, there are plenty of risks associated with real estate investments. These include currency risks, economic distress, political risks, the tax and regulatory environment, and unforeseen challenges. With all of that said, real estate investing is a fabulous route to take to build a legacy of wealth.
Investing in real estate overseas can be appealing to some investors. Risks aside, it is an option to diversify your portfolio and hedge against an economic fallout within your country. However, you must be prepared to deal with the nuances associated with owning international real estate. You must be able to navigate the host country’s financial system which may be vastly different than in your own country.
Here are some things to consider when investing in luxury real estate abroad.
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What is your intention for purchasing abroad?
If you are looking to relocate permanently or have a vacation home, then you will need to do research around whether or not the local area is suitable to your needs. If its the former, these local amenities will be more important than if you are only there for a couple of months out of the year. If this is a rental property or you plan on selling the property, then you will need to research aspects of the local area that would be relevant to a potential buyer. Either way, being clear on your intention is the first consideration to review before investing in luxury real estate overseas.
Who will care for your property?
If you are buying a holiday home or investing in real estate in order to make a profit, as opposed to relocating permanently, then you will need to consider who will be in charge of property management. You could employ a local property management firm or a qualified individual who you can trust to take care of your property. The key is to ensure that your property is checked on a regular basis and is cleaned and/or fixed as needed. Ask that the individual or firm you hire sends you photos and videos on a periodic basis so that you can check up on your assets.
Your tax liability.
Each individual’s tax situation will be different and this is especially true in the real estate market. Every country has its own tax laws and legislation. Some may require that you pay a stamp duty, a title transfer tax, a foreign investor tax, or maybe even an inheritance tax. Property tax also varies by country and all these costs add up and will need to be factored into your budget. Otherwise, you could face hefty legal penalties.
Is the country considered a safe haven?
With any real estate investment, you will need to consider the local political and economic situation. Is there a risk of political or social unrest? If you are planning on renting out the property or selling it for a profit, can the local market sustain your asking price? Even if a country seems safe, there are pockets in any country that have undesirable neighborhoods. Be sure to conduct thorough research and talk to the locals before investing in any property.
Understand the currency exchange rates.
It is also necessary to research the value of the local currency and understand associated exchange rates. You may need to obtain a Certificate of Importation if you intend to bring money from your own country and transfer it to a local bank. This may be a step you decide to take because it is easier to pay taxes and fees if you have your funds in a local bank.
Disclaimer: the content presented in this article is for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.
