Real estate abroad forms part of many people’s portfolios, whether it’s a buy-to-let condo in Florida, a holiday home in Spain or a residential plot in Brazil. But is overseas property a good investment?
In this article, we look at when buying overseas is a good investment and what to look out for so that you don’t add a lemon to your portfolio.
Why buy an overseas property?
But before we get into the pros and cons, let’s take a look at why you might consider purchasing real estate abroad in the first case.
Buy-to-let returns
Adding annual income is one of the foremost reasons why a large proportion of investors buy overseas. Return from buy-to-let offers a profitable way of making the most of your assets and adding to your wealth at the same time.
These returns can be from long-term rentals – these buy-to-let condos in Florida are an example. They yield between 5 and 9% a year for their owners.
Or your returns could come from holiday lettings from properties in desirable vacation spots. For instance, this 3-bedroom villa in Brazil, where owners can expect up to 9.83% ROI per annum.
Your second home
You might buy overseas property as a holiday home for you and your family and friends. Owning an apartment or villa in a desirable spot – a seaside town on the Mediterranean or a ski resort in the Alps, for example – provides opportunities for cheaper holidays at any time of the year.
Capital appreciation
In addition to regular ROI and a holiday home, buying overseas also allows you to tap into the rise in property prices through capital appreciation. Although property markets move through cycles, with their corresponding peaks and troughs, the underlying trend is always up.
As a result, the property you buy will usually be worth more when you sell it than when you bought it. For example, owners who sold in Florida in 2022 stood to gain between 58.4 and 82.4%, among the highest returns in the US.
That said, to maximise capital appreciation, you need to own the property long-term, say at least five years and preferably longer.
Portfolio diversification
Overseas real estate brings variety to your portfolio and spreads your assets. The best portfolios include bricks and mortars as well as other investments such as stocks and shares.
What makes overseas property a good investment?
If the above reasons to buy have convinced you, then here’s what to look for before you buy.
The right location
They say location is everything, so make sure the property is in the right place. In this instance, “right” could mean somewhere that’s easy to get to (for you and potential holiday let guests), an area with a buoyant tourist market (for holiday rentals) or sustained employment (for long-term rentals).
When considering a property, look at the local job and tourist market and their future potential. Research flights at any time of the year, not just high season.
The right price
Ask yourself if the overseas property is priced at or below market value. Consider buying in a new development because off-plan purchases often allow you to enter the market early since finished properties tend to be more expensive.
The right company
Tens of thousands of agents and investment companies sell overseas property, but not all are bona fide. Before you sign the cheque, do the following:
- Check the company’s website.
- Look at the information it provides.
- Read reviews from previous customers.
- Find out who owns the property.
- Ask if you can visit the property in person before you purchase.
- Enquire about the purchase process and whether you’ll get 100% when you purchase.
The right assistance
When deciding if overseas property is a good investment, consider what will happen to the property once you own it.
Who will maintain the property for you? Consider everyday maintenance (cleaning and gardening) and one-off instances such as a swimming pool or roof repair.
Who will look after rentals? Long-term lets need less supervision, but holiday lets are more labour-intensive.
If you aren’t prepared to travel frequently to your property or are too far away for it to be practical, think about a so-called armchair investment. This type of ownership is the easiest because someone else takes care of everything for you.
The right price for you
Research buying and running costs (a bona fide company will happily provide figures). Offset these with potential returns to ensure you stand to make a long-term profit.
The right exit strategy
It’s also important to think medium to long term and set up plans for your overseas property in the future. Ask yourself what you plan to do with the asset in five to ten years’ time.
Final thoughts
Buying the right real estate in the right location for the right price should ensure overseas property is a good investment. If you’d like to find out more, get in touch with our Investment Consultant team. Or take a look at the selection of real estate opportunities we currently offer in Ceará in Northeast Brazil, Florida in the US and the Costa del Sol in Spain.
For more inspiration
Find out why Brazil is Forbes’ second-best place to invest this year
