Investing in real estate has many potentials. Whether you plan to buy a house to resell for a greater price point in the future, rent out a property, or turn a property into a running commercial venture, the financial gain you can acquire from such an investment can be potentially fruitful.
What some real estate investors fail to consider, however, is the idea of investing in property in a foreign country. While acquiring and keeping real estate overseas can be a challenge compared to opting for real estate in one’s home country, it’s still an idea that investors of real estate should consider to see if it’s something that may be right for them.
It’s not just the wealthy who have the opportunity to invest in real estate overseas. Even if you have to get cash for your car or downsize your current property, making a real estate investment move in another country can be a great financial move.
Here’s why you should consider acquiring real estate in another country:
- Lower taxes on foreign income
Let’s face it, nobody enjoys paying taxes. Even for folks who feel good about putting their tax money to good use may feel at a financial loss as tax time rolls around. That’s why we try each and every little thing we can to ensure we get the most beautiful tax break as possible.
For people planning on investing in real estate overseas, they can potentially benefit from lower taxes on the foreign income they earn from their investment property.
In order to gain this benefit, you must be a current resident of a territorial tax country, which operates on a system that only taxes the portion of one’s income that has been earned within their home country’s borders. In other words, the income you’d make from your overseas real estate property wouldn’t be taxed in your own country.
- Potentially lower upfront costs
The real estate market looks different everywhere you go. While the real estate market might be smoking in the United States, in another country, it might be quite the opposite. So, while housing, commercial buildings, and land might be expensive in your own country, the slower market of another country could give you the benefit of more affordable property.
Not only might you have the opportunity to purchase more affordable property by investing in real estate in another country, but you might also benefit from more lenient loan qualification criteria. Thus, you may have an easier time buying a property in another country while saving cash in the process: a win-win situation.
- Stronger rate of return
Every investor wants to gain the most and lose the least from their investments. Of course, if they invest in the wrong thing, their rate of return won’t be too pretty. However, when it comes to investing in real estate across the borders, one’s rate of return has the potential to be greater than if they invested in property in their own country.
Why? As mentioned, the real estate market in different countries varies. The real estate market may be growing in one country, possibly giving you a better return on your investment in the long run. However, in another country, it might be constantly fluctuating or even declining.
Likewise, while beachfront properties are very expensive in most places in the United States, for example, locations like Panama have beachfront properties for a fraction of the cost. So, long-term, you have the potential to get the most bang for your buck for your property, especially if you plan to sell or rent it out as the demand for beachfront housing increases.
- Cash flow in another currency
By generating income in another currency via investing in real estate overseas, one can add diversity to their portfolio. In addition to this, earning cash in a different currency can be advantageous depending on its current value, which is partially based on its supply and demand.
However, the fluctuations of foreign currency may also be a risk, so beware. This is because a majority of the world’s foreign currencies are purchased and sold on flexible exchange rates.
- Tax-deductible mortgage interest
Do you plan on investing in a real estate property overseas for personal use? If the answer is yes, you can benefit from tax-deductible mortgage interest. Or, if you plan on using the property to reel in rental income, you can deduct not only mortgage interest but also costs for repairs and maintenance as well as liability and property insurance. Hello, tax break!
- More investment opportunities
As a real estate investor of one country, your options for investing in various real estate properties are going to be more limited than if you were to invest in real estate beyond the borders of your country. Common sense, right?
While not everyone wants more real estate investment options, remember that it’s not just about having more properties to pick from. You also have the benefit of having a wider variety of properties in numerous locations, climates, and the like. Having a plethora of options at hand can be a great thing, especially if you’re looking for something very specific.
- Gives you rich cultural experiences
One of the greatest beauties of life is the many different cultures that exist on our planet. However, for the majority of the world’s population, they may never get to experience a culture other than their own. But by experiencing the cultural differences of other countries, we can physically and mentally expand from what we know.
Simply owning property on foreign land, even if you rarely visit it in person, can help give you rich cultural experiences that you may be thirsting for. This can come in the form of learning about a foreign country’s currency, means of transportation, customs, weather and climate, religious beliefs, and overall ways of life.
While the latter may seem meaningless to some people, there are many benefits of learning about different cultures. These include increased global awareness, empathy, diverse perspectives, and respect for the general population. In fact, Build Abroad believes gaining cultural understanding can help eliminate stereotypes, hate, and ignorance.
- Greater asset protection
Owning international real estate can protect your assets if and when something goes wrong in your home country. For instance, if your home country is experiencing a recession, your property in a foreign country that’s not experiencing such will likely still be stable. In addition, overseas properties may be protected in the event that you get sued in your home country.
- Travel cost deductions
One of the disadvantages of investing in real estate in another country is the travel that might be involved in obtaining and maintaining your real estate property. Being so far from home, the costs of travel can add up quickly. Fortunately, if you’re, say, renting out property in a different country, you usually have the opportunity to deduct travel costs from your taxes.
- Adds diversity to your life and business
Many real estate investors like the idea of investing in a foreign country because it gives them greater variation in their life. Owning property overseas means they have the opportunity to live full- or part-time in another country or even use the property as a vacation home for themselves. To even have that option is a treat in itself.
Apart from diverse living arrangement potential, investing in property overseas allows investors to gain a diverse perspective on real estate. After all, no two real estate markets are exactly alike. In general, a real estate investor can gain greater knowledge and experience in investing as a whole by simply owning property overseas. You can never know too much.
- An easier time receiving a residency visa
Did you know that purchasing property in another country can potentially help you have an easier time qualifying for foreign residency in that country? It’s true. If your ultimate goal is to move overseas, even just part-time, acquiring a visa is important, and thanks to an overseas investment property, the process could be much smoother for you.
- Better shot at finding the most relevant market
If you’re planning on investing in a very specific type of property or wishing to buy commercial property to run a business, investing overseas can help you reach your most applicable market in terms of the people you’d like to possibly rent to, sell to, or provide service or products to. Thanks to more property options, you generally have more freedom to find your market.
Investing in real estate is perhaps one of the best ways to expand your assets and make a profit to date. In fact, some forms of real estate investment have the potential to help you earn passive income, generally becoming an easy and convenient way to bring in extra money on the side.
However, for real estate investors who want to reap the most potential benefits will want to consider the idea of investing in property overseas. From earning cash flow in another country to achieving rich cultural experiences, investing in real estate in a foreign country might just be the best thing an investor does for themselves and their financial situation.