Picture this: a villa nestled on the sun-kissed shores of Sri Lanka where the waves lull you to sleep every night. A cottage in a Mediterranean village where the gentle sun rays wake you up every morning. Or perhaps a cosy alpine chalet with a spectacular view of snow-capped peaks. And if this doesn’t convince you, picturing the idea of the higher financial gains of investing in a second home overseas should do the job.
Over the past few years, the trend of purchasing houses from a foreign land has gained quite the fame.Even Though COVID-19 may have slowed it down, it did not lose its momentum.
The latest update is that investing in international real-estate is not just about spreadsheets and ROI (Return on Investments) anymore – but it is rather an intoxicating blend of financial strategy and wanderlust.
The allure of foreign sand
The rising curve of appetite that people have for investing in second homes traditionally stems from the fact that they can get higher returns when they invest in properties abroad. An extension of that thought is that purchasing real estate abroad can serve as an effective strategy for safeguarding your wealth. By acquiring property on foreign shores, you create a buffer against various curveballs that your nation may throw.
In addition to a guarantee as such, investing in an overseas home can provide one with government insurance. For example, if country A is staring at the face of economic or political instability such as currency devaluation or trade wars, the prospects of investing in the real estate markets at home are zero or below that. Even if you do invest there will be no return, except a loss. All your wealth will be washed down the drain. On occasions as such, residents of country A might seek to invest in country B which has more stability, as an insurance policy against potential problems back home. Furthermore, if things continue going haywire in your own country, you will know that you have a second residence abroad that you can retreat to.
Here is a different POV in approaching this matter of ‘government insurance’. When you invest only in your home country, you are essentially putting all your financial resources into the value of your currency. On the other hand, investing internationally allows you to also capitalise on the currency fluctuations of the foreign country. Thus broadening the scope of your investment, making it less reliant on a single currency. This resonates with the concept of diversification similar to how you manage your various investment assets.
Apart from the financial gains, engaging in global real estate investment offers a multifaceted approach to enriching your lifestyle. When you possess property abroad, you open the door to potential future residency or part-time living arrangements. Should you choose to stay in the country of your choice and not the one that was assigned by birth, you will already have a home which eliminates the requirement of paying hefty rent. The icing on the cake is that several nations allow you to acquire a residence permit through property investment.
Of course, the specifics of such investment-based residency programs will differ, but many countries grant permits that last for 10 years or more upon substantial investment. Moreover, a good percentage of these countries extend the opportunity to apply for permanent residency or even citizenship after a specified duration of stay. Permanent residency via international real-estate investment? Sounds like a golden ticket.
Purchasing a new house always comes with a great degree of excitement. However, even amidst the excitement, buying one abroad is a whole different ball game. At the onset of things, buying real estate in a foreign country can prove to be an intricate process compared to purchasing property within the boundaries of your country. Because it not only serves as a promising investment strategy but also entails a deeper significance. It is not like investing in mere stocks; rather it demands the active involvement of the homeowner in continuous property management and upkeep.
Therefore it is always better to approach such matters whilst wearing armoured gear, for safety purposes. In other words, be cautious when investing and read up on a “how to invest in a second home abroad” manual.
Investing in international real estate 101
While it is nice to wake up to gentle sun rays and the sound of waves, investing abroad requires you to put your thinking cap on. You cannot be blinded by the sun.
Primarily, it requires financial planning. Determining your budget and planning how to finance the property is of utmost importance. To do that, one must research the local real estate market to understand property prices, taxes, and any additional costs, such as maintenance fees and property management services. Have a discussion, not a mere chat, with financial advisors to explore mortgage options, currency exchange risks, and of course tax implications.
Subsequently, define your goals. A good place to start would be by clarifying your objectives. Are you on the lookout for a vacation home, a rental income property, or perhaps a retirement home? For instance, Italy would be a great choice for a vacation rental, but on other fronts, it may not be faring very well.
Identifying the purpose is crucial for location scouting, figuring out the type of property, and penning out a budget that aligns with your goals.
Once you have a clear map of your needs, research locations. The most popular real estate market might not necessarily be the ideal choice for purchasing your second home. This is when you have to consider the political and economic conditions of a country. And be well-informed about crises and market downturns.
The third and one of the most important factors to consider is legal considerations. Navigating your way through foreign property laws and regulations is important. To understand property ownership rights, inheritance laws, and any restrictions on renting out the property, it is always safe to engage local legal experts who are well-versed in real estate transactions for foreigners.
In simple terms, seek professional advice on all fronts before venturing out to invest in a second home abroad. Because once you make a well-informed decision that does not put you at a miscalculated risk, those gentle rays of the sun and the whispers of the waves can be experienced devoid of any circumscription.
(Sandunlekha Ekanayake)