Wednesday, November 3, 2010

Investing Overseas - Be Wise but Have Fun!

Buying an investment property in a foreign country can be both rewarding and challenging. It is wise to be fully aware of what you are getting into before deciding to purchase. There is nothing more exciting than owning a second home in a new country and utilization of that property for income is almost always the best way to help subsidize the mortgage. So, enjoy and explore, you’ve earned it, but be wise when shopping and always ask questions.

There are still many countries where investment properties can be had for a bargain, but more and more the price of real estate is increasing just as fast, if not faster, than the US market. Therefore, a wise investor will do his/her research to fully understand what they seek in their ideal investment home.

Often, investors are looking for the latest “hotspot.” However, this can change rapidly and be confusing for an inexperienced property investor. If you choose one of these hotspot locations, be sure and research before purchasing. And, don’t forget to consider what the region will look like in 5 – 10 years, i.e. flooding of the investment market, ownership vs. rental, etc. Some of the most recently coined hotspots are Malaysia, South Africa, Turkey, Greek Islands and Abu Dhabi. These were all chosen by a survey of over 100 seasoned overseas property investors. The factors that went into this survey were: housing market entry prices, potential capital growth, types of property available, ease of purchase for international buyers, stability of the region, accessibility by international travelers and attitude of government towards overseas buyers. These are all important factors to pay attention to when looking for your slice of paradise. Each one will affect your investment, in both the short-term and looking over a period of years.

If you are planning to keep the property as a long-term investment you will need to know what the rental potential is for that particular region. You will also want to ask yourself some very important questions. Below are some examples of things to think through as you are shopping:

* Will the rent you receive cover the mortgage payment plus all other
costs such as landscapers, cleaning crews, taxes, insurance, etc?

* What is the average days of the year that you can expect to
rent vs. times of vacancy?

*How many days of the year will you and/or your relatives and friends want to
utilize the home and will you charge them or not?

Some of the best ways to find local rental market information is through blogs and real estate agents. There are thousands of blogs on international investing. First, start to follow quite a few until you get comfortable with 2 – 3 of them, then continually watch their posts and research their archives. Finding a realtor in these areas is helpful too and will provide the most current market data. However, be upfront with the realtor to let them know you are fact finding first and investing later. A good realtor will be happy to help. The realtor who does not want to help is probably in it for short-term gain and isn’t worth working with anyway. To help get you started, I have listed some recent rental and purchase numbers in various locations around the world.

Below is a list of potential rental market rates: (data current as of 11-2010)

Daily Rental
Weekly Rental
Kauai, HI
380 sq ft
(1 bed/1bath)
Beachfront, small studio but nicely appointed
Exuma, Bahamas
1850 sq ft
(2 bed/2 bath)
Beachfront, serene and private beach cottage
Puerta Plata, Dominican Republic
650 sq ft
Beachfront, studio, well appointed and clean
St. John, US Virgin Islands
500 sq ft
(1 bed/2ba)
Beach Views, not walking distance, relaxing top level condo
Ocho Rios, Jamaica
8000 sq ft
(5 bed/5ba)
Walking distance to beach, gorgeous villa with private butlers and cooks
New South Whales, Australia
Pricing quoted as one room of this B&B.
Rent out one room of this B&B, 300 meter walk to beaches, quaint/comfortable

Below is a list of sales prices of homes: (data current as of 11-2010)

Purchase Price
Beach/Town Proximity
Tel Aviv, Israel
2 bed/2ba, brand new, no need to remodel
Near beach – walking distance
Amsterdam, The Netherlands
1 bed/1 ba, move-in ready
In heart of city, on largest canal, ground floor
Sydney, Australia
4 bed, 4 ba, family home, move-in ready
In suburb of Sydney, family location, near harbor
La Paz, Mexico
2 bed/2 ba, brand new, upgrades throughout
Ocean View, walking distance to main city and beach
San Ramon, Costa Rica
3 bed/3ba, all upgraded, beautifully furnished
On top of a mountain, overlooking the Serene Mountains
Luquillo, Puerta Rico
1 bed/1 ba studio, condo, nicely appointed
On ocean, views all around.

Remember, this is your dream and could be your next really big reality. It’s an exciting time, but don’t get caught up in all the nostalgia. Stay focused on your end result and goal, which is to find your little piece of “paradise.” If you do the research and take the time to truly understand what you can afford, rental rate returns and bottom line return on investment, the reward will be so much more satisfying.

Happy house hunting! I’ll be looking for my invitation for cocktails in your new home very soon!

No comments:

Post a Comment